US commits to ASEAN integration

At the 2012 United States–ASEAN Leaders Meeting in Cambodia, President Barack Obama and leaders from the 10 members of ASEANlaunched the US–ASEAN Expanded Economic Engagement (E3) initiative.

This is a new framework for economic cooperation designed to facilitate commerce between the United States and ASEAN and another signal of America’s economic pivot towards Asia.

The initiative will begin with a United States–ASEAN trade facilitation agreement, which aims to simplify customs procedures and improve the transparency of customs administration. It includes the development of information and communications technology principles that policy makers can use to guide action on cross-border information flows, localisation requirements and the role of regulatory bodies. It will also include the development of principles governing investment policies, with a particular focus on market access, non-discrimination, investor protections, transparency and responsible business conduct. The fourth major work program relates to standards development and practices.

The E3 initiative recognises that these are the kinds of issues that most concern businesspeople involved in international commerce in the region. ASEAN is already dealing with all of these matters as part of its drive toward an ASEAN Economic Community (AEC). And the United States has now found a way to deal directly into this practical 21st-century agenda for economic integration.

ASEAN’s early experience of implementing the AEC suggests that agreements on basic principles, codes of conduct or disciplines are useful, but not sufficient ingredients of economic integration. They need to be backed up by a willingness to share the information, expertise and technology that allow institutions based on agreedprinciples to work in practice. For example, the AEC Blueprint sets outthe many ingredients needed to facilitate customs clearance through an ASEAN single window, including the ‘Standardisation of data elements based on World Customs Organization data model, the WCO data set and United Nation Trade Data Elements Directory (UNTDED) and acceleration of introduction of information, communication and technology (ICT) for digitalised processing and exchange’.

The first part can be negotiated, but effective implementation will need capacity building, with some members of ASEAN helping others to acquire the necessary expertise. Mutual recognition agreements (MRAs) on standards can also be negotiated. But to maximise their value to business, MRAs need to be complemented by an agreement that economies will accept each other’s testing procedures. That will only be possible, in ASEAN countries or across the Pacific, after the institutions to allow that to happen are put in place.

Joint work under E3 will be supported by USAID’s trade facilitation capacity-building assistance to ASEAN member states. In that way, the E3 is designed to help ASEAN countries integrate their markets as they build the AEC. Some of the principles, disciplines and codes of conduct can be based on those contained in the model chapters on regional trading arrangements developed by APEC’s Committee on Trade and Investment. These models can be foundations for closer economic integration among any group of economies, whether or not they are parties to preferential trade deals.

A significant advantage of the E3 over old-fashioned trade negotiations is the prospect of rapid progress on arrangements that make trade and investment cheaper, easier and faster. Unlike the Trans-Pacific Partnership (TPP) negotiations, the benefits from work on trade facilitation and investment can be gained without having to wait for progress on the 20th-century issue of residual border barriers on agricultural commodities and low-technology manufactures. While the E3 initiative might be perceived as a wedge into ASEAN on the TPP negotiations, it can proceed independently of participation in TPP negotiations.

The E3 deals with issues that benefit everyone like improved trade logistics or communications that create more opportunities for international commerce. It is better to deal with these issues on their own merits, rather than making them conditional on trade-restricting chapters on intellectual property rights or labour standards, such as those the US trade representative is seeking to insert into the draft TPP.

Perhaps the most important advantage of the E3 initiative is that it can be readily expanded in depth, breadth and coverage.

The E3 now covers 11 economies, but others could participate. For example, all of the economies that are involved in the newly launched Regional Comprehensive Economic Partnership could work together on practical ways to promote economic integration. All APEC economies could consider participating in a wider APEC E3 initiative that could include the four work programs for the United States–ASEAN arrangement and perhaps other ideas to promote economic integration drawn from the AEC Blueprint. An APEC-wide initiative along these lines could be a worthwhile objective for APEC in 2013, towards the agreed vision of promoting a seamless regional economy in the Asia Pacific.

November 25, 2012

Source: East Asia Forum