AEC Can Learn from EU

Manila Bulletin, July 31, 2016 | Go to article overview

AEC Can Learn from EU


BREXIT need not lead to the complete disintegration of the European Union (EU). One can be certain, though, that there will be a significant slowdown of growth in most of the member nations of the EU, including Germany. The incipient recovery in some of the countries of the EU will be further delayed. The great economic powers of the twentieth century, sometimes referred to as the American Century, can no longer be expected to be engines of growth of the global economy. The United States, Japan and the EU will have to take a back seat to the three economic powers that will propel the Asian Century, i.e. China, India, and the ASEAN Economic Community (AEC) which can continue to grow at annual average rates of 5 to 6 percent as the advanced countries of the West (cum Japan) will languish at less than 2 percent per year.

Both China and India have very large populations and can increasingly depend on domestic consumption for their economic growth. At least two countries in the AEC, Indonesia and the Philippines, are also achieving above-average rates of GDP growth because of their large domestic markets which are increasingly peopled by middle class families. These two emerging markets in the ASEAN are the least dependent on exports to grow their GDP. Vietnam, the only other ASEAN country included in the list of the Next Eleven among the emerging markets (the first four used to be the BRIC countries), is still highly export dependent but can also, like China, stimulate more its domestic consumption for attaining high growth. The seven other countries in the ASEAN Economic Community (Thailand, Malaysia, Singapore, Brunei, Myanmar, Cambodia and Laos) can shift more and more of their trade with their fellow ASEAN economies and with China and India (without decoupling with the rest of the world) in order to lessen the impact of the slowdown in the EU, the US, and Japan as a result of BREXIT and the ensuing crisis in the EU.

Sometime in 2012, the late Singaporean leader Lee Kuan Yew, already foresaw BREXIT when he said in an interview that he expected the EU to face serious problems of disunity because EU was growing too fast and was in too much of a hurry to attain, not only economic integration but also socio-political unity. The way I would interpret the words of Lee Kuan Yew is that because of sharing a common cultural background (Greco-Roman civilization and the Christian religion), the leaders of the European nations entertained an understandable dream of arriving one day at some sort of a United States of Europe. They were not satisfied with just having a common market and a economic free trade area. They had hopes of arriving at common policies about fiscal discipline, human rights, immigration, climate change, and other non-strictly economic objectives. In fact, their deciding to have a common currency, the Euro, implied that they could agree on such issues as the prudent limit to government deficit spending and other politically charged decisions. It was obvious during the Great Recession that it was very difficult to have a common currency if, just to cite a concrete example, Germany and Greece could not agree on what level of austerity is politically acceptable to their respective constituencies. In other words, a common monetary policy can only work in the long run if there is a common fiscal policy, which in turn would depend on a common political philosophy.

The ASEAN Economic Community (AEC), which is still a work in process, need not face the same obstacles because from the very beginning the member nations have never entertained the possibility of a United States of the ASEAN. They have very different cultural and religious backgrounds. …

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