Gains from Trade and AFTA Membership
In the case of a specific and major ASEAN member country, namely Vietnam, within the ASEAN-3 RTA (regional trade agreements), substantial gains from enhanced trade and investment have been reported. The rising growth of Vietnam trade with 5 major ASEAN countries (namely, Indonesia, Malaysia, the Philippines, Singapore and Thailand) over the past 2 decades especially since its ASEAN membership in 1995 can be seen clearly. For example, Vietnam total trade with the 5 major ASEAN was US$4558m in 1996 as compared to US$3267m in 1995, posting a rise of 39.51 per cent. In the last decade 1996-2005 however, the rise in this total trade averaged about 43.3 per cent per year.
It is interesting to note that Australia, a member of the WTO but not the ASEAN or AFTA(ASEAN Free Trade Area ), has posted a very strong trade relations with Vietnam especially in the past 10 years or so . While this trade is biased against Australia in the sense that Vietnam’s exports to Australia far exceed its imports from Australia, the prospects of the Australia-Vietnam trade are promising in terms of its sheer growth rate.
With its WTO membership in effect late in 2006 , Vietnam, with its huge market and fast rising income per head in south east Asia, is seen as an important trade partner with Australia for mutual benefits in the medium and long term.
A number of conclusions can be ascertained. First, from an outcome perspective, the RTAs in Asia that have been created to meet the aims and objectives of the ASEAN and their subsequent Vision agendas have achieved what the WTO has not been able to achieve itself even for WTO member countries in Asia. The gains in trade and development from AFTA for non-WTO members in Asia (such as Vietnam) have been found to be substantial. Second, from a scope and coverage perspective, the AFTA is also more comprehensive than what the WTO can offer at this stage of its evolution. Third, while the gains or impact of the WTO on its member countries in Asia are ambiguous, the benefits from the AFTA have been quantitatively more substantive. Fourth, while the main players in the WTO have traditionally been the USA and the EU who have shown a benign neglect of Asia recent crises and turmoil in part to their mild contagion to their economies and in part to the preoccupation with their national or regional issues, an AFTA within an ASEAN spirit and intention and appropriate to their recent recovery and fast growth achievements appears to be a good regional development for regional mutual benefits.
Thus, fifth, while the neo-realists would argue that an AFTA should be a more rules-based institutional form with a specific shift to the CEPT scheme in the mould of for example the WTO, the social-constructivists would argue that an AFTA should involve an emphasis on an appropriate development of identity-building. It is reasonable in this context to accept the view that an AFTA can fulfil these two purposes simultaneously and more (eg, economic and political co-operation). Sixth, an enlarged ASEAN and ASEAN RTA where the enlargement means the engagement of other economies outside the ASEAN region can be strongly supported on these perspectives and is consistent with the evolutionary development of the ASEAN in the years to come.
Challenges and Opportunities of WTO and RTA Memberships
RTA (regional trade agreements) in Asia especially an enlarged ASEAN RTA appear to be useful and important developments in the foreseeable future in the region. As observed by Kofi Annan, the current (2006) Secretary-General of the United Nations, about the ASEAN, ‘Today, ASEAN is not only a well-functioning, indispensable reality in the region. It is a real force to be reckoned with far beyond the region. It is also a trusted partner of the United Nations in the field of development’ (ASEAN, 2006, /64.htm). The AFTA and its planned enlargement simply make use of this increasing global status and the substantial gains and experience of ASEAN that have been made over the last decade to promote further economic co-operation and growth and poverty reduction in the region and beyond. These are the opportunities for regional economic integration in Asia and especially for the ASEAN and their additional new members. These opportunities are also beset however with the challenges or risks that may arise in a number of areas.
First, while an AFTA has to deal with the problem of diverse histories, religions, cultures, political structures, languages, and the different stages of economic development for its member countries, an enlarged ASEAN and RTA has in addition to address the issue of great diversity between for example large (eg, India and China) and small (Cambodia and Laos) trading partners, Western, Asian and subcontinental nations, and high and low trade economies, to name a few. The risk to trade and economic co-operation arising from the current (that is, 2006) political tension between the three East Asian countries (eg, China, Korea and Japan) over the interpretation of their recent histories in the 1940s is an example.
Second, the challenges to fast developing countries and their growing economic power such as China are how to avoid or, if not possible, accommodate regional rivalry from their traditional but recently stagnant neighbours such as Japan or from their new and fast-growth RTA partners such as India and Russia. The cause of concern of China’s high growth and growing economic and political power as perceived by the USA that led to its tri-partite ministerial China-containment discussion with Australia and Japan early in 2006 is another example of the risks to trade and economic benefits expected by RTA members.
Third, the proposed ASEAN-US or ASEAN-EU RTA for example can still cultivate the trade and economic co-operation between these three trading blocs in the sense that technology transfer may take place from a developed country (that is, the USA or EU) to the ASEAN region. However, a reduction in import quotas or a rise in countervailing or non-tariff measures from the USA and the EU on ASEAN exports to them (as noted recently in the cases of Thailand’s prawn exports to the USA, Vietnam’s exports of basa fish to the USA, and Vietnam’s shoe exports to the EU) are some challenges that ASEAN may have to bear and to find solutions for.
Fourth, in a global context when the major trading blocs such as NAFTA ( the North American Free Trade Agreement- the US and Canada) and the EU are perceived as seemingly heading more towards regional self-interest or even economic isolationism, an enlarged ASEAN RTA may not be able to reduce the impact of this situation. Fifth, with the current swelling dissatisfaction with globalisation which were supported vehemently mainly by US transnational corporations and which were beset at the same time with corporate corruption and accounting scandals and even with the prediction of the end of globalism by some analysts, RTAs especially an enlarged ASEAN may inherit some of these pitfalls of their engagement. Finally, an RTA or a closer ASEAN relation would put the member countries in a closer framework to promote trade and growth (DFAT, 2004) and to deal better with crises such as the economic and financial turmoil or terrorist attacks that, on recent experience, have wrought havoc on the ‘once miracle’ economies in the region in the form of economic slow-down and deep recession, political and social unrest, welfare deterioration, and regional instability.
However, the risks that gradual or sudden economic and financial crises or man-made and natural disasters may outweigh the benefits or gains from an RTA or even WTO membership , more trade and FDI, or a closer economic relation have been proved to be resilient and substantial in ASEAN and East Asia in recent years , we note that both free-market and transition developing economies in Asia have not escaped the impact of the risks in recent years. Admittedly, the impact is lower in the cases of China and Vietnam especially from the 1997 Asia crisis that had created an additional 200mln poor, turned the once ‘miracle’ economies in Asia into the ‘needy’ ones, and demonstrated once for the absurdity and ineffectiveness of the remedial policies demanded by the International Monetary Fund and the World Bank to solve this crisis. The implications of this low impact on centrally planned but with free-market orientation have often been used by some authors for debates on the costs and benefits of the globalisation of the world’s economies. These aspects and issues are, we believe, crucial for good development and appropriate development strategic studies in Vietnam as well as in the Asian region or its enlargement in the form of an AFTA Plus and the WTO in the medium and long term.
Tran Van Hoa
Vietnamese
