Ne­go­ti­at­ing for a new re­gional or­der in eco­nomics and pol­i­tics

The China Post - - COMMENTARY - BY WOO JUN JIE AND SUVI DO­GRA

As the first quar­ter of 2015 comes to a close, am­bi­tions for re­gional eco­nomic in­te­gra­tion are run­ning high in Asia. Three ma­jor frame­works for eco­nomic in­te­gra­tion are slated for com­ple­tion this year.

The ASEAN Eco­nomic Com­mu­nity (AEC) is ex­pected to be in place by De­cem­ber 2015.

While sub­stan­tive ne­go­ti­a­tions over the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP) are ex­pected to con­clude by the end of the year, the U.S.-led Trans Pa­cific Part­ner­ship (TPP) is ex­pected to be com­pleted within 2015.

Given the strains in the po­lit­i­cal land­scape in­ter­spersed with ques­tions re­gard­ing the suc­cess of democ­racy it­self, the eu­pho­ria about the ASEAN cen­tury is be­ing ques­tioned.

Some ob­servers view such at­tempts at re­gional in­te­gra­tion with pes­simism terming ASEAN in­te­gra­tion an “illusion.”

Com­mu­nity-build­ing ef­forts have been ham­pered by its mem­bers’ lack of unity, and more re­cently, the po­lit­i­cal chal­lenges at home for some of the mem­ber na­tions, such as Thai­land and Myan­mar.

More op­ti­mistic as­sess­ments have la­beled it a “work in progress.” It is ev­i­dent that ASEAN in­te­gra­tion has not en­tirely ma­te­ri­al­ized.

Sim­i­larly, ne­go­ti­a­tions over the RCEP are yet to yield any sig­nif­i­cant break­throughs. The only so­lace for Asian pow­ers is that even the U.S.-led TPP has not made head­way.

In or­der to en­able the in­te­gra­tion process, ne­go­ti­at­ing par­ties need to muster the po­lit­i­cal will for ei­ther the AEC or RCEP. As a cen­tral player in re­gional sta­bil­ity, ASEAN has an im­por­tant role to play.

Crit­ics of the AEC and RCEP should also con­sider the po­lit­i­cal gains from both the frame­works, rather than fo­cus­ing on eco­nomic costs alone.

In th­ese strained times, Asian coun­tries par­tic­i­pat­ing in the in­te­gra­tion process need to re­it­er­ate their po­lit­i­cal po­si­tion more than be­fore.

The eco­nomic gains of con­clud­ing the AEC and RCEP are clear. The ASEAN gross do­mes­tic prod­uct is US$2.3 tril­lion, while the RCEP is ex­pected to cover 28 per­cent of the world econ­omy. The AEC prom­ises to stim­u­late eco­nomic growth fur­ther by cre­at­ing a sin­gle mar­ket and con­sol­i­dat­ing ASEAN as a global eco­nomic player. The re­gion’s com­bined econ­omy would be the world’s sev­enth largest.

Sim­i­larly, the RCEP prom­ises to ease flows of goods, ser­vices, in­vest­ment, and la­bor among its mem­bers.

Ac­cord­ing to Asian Devel­op­ment Bank es­ti­mates, im­ple­men­ta­tion of the RCEP will bring in­come gains of US$240-644 bil­lion to the world econ­omy in a decade or so.

More im­por­tantly, the RCEP will help con­sol­i­date ex­ist­ing bi­lat­eral trade agree­ments and har­mo­nize cus­toms pro­ce­dures.

How­ever, se­cu­rity, mar­itime con­flicts and do­mes­tic un­rest are threat­en­ing to undo this eco­nomic boon. China, Tai­wan, Malaysia, Brunei, Viet­nam and the Philip­pines re­main em­broiled in ter­ri­to­rial dis­putes over the Spratly Is­lands in the South China Sea.

Piracy is also on the rise in Southeast Asia’s wa­ters, with or­ga­nized pirate net­works tar­get­ing fuel tankers.

The AEC will con­sol­i­date ASEAN co­op­er­a­tion in eco­nomic mat­ters; it will also foster closer se­cu­rity co­op­er­a­tion among ASEAN mem­bers.

With the RCEP and TPP en­cour­ag­ing greater in­volve­ment in the re­gion by China and the U.S. re­spec­tively, there is also scope for th­ese pow­ers to con­trib­ute to re­gional sta­bil­ity.

From be­ing over­shad­owed by the Chi­nese econ­omy to rec­on­cil­ing with the U.S. pivot, ASEAN’s ef­fi­cacy and cred­i­bil­ity have been ques­tioned in the re­cent years.

With po­lit­i­cal ten­sions un­der­scor­ing the progress of the AEC, it is es­sen­tial for in­di­vid­ual mem­ber coun­tries to pri­or­i­tize the AEC’s vi­sion and look be­yond in­ter­nal obligations.

Ef­fec­tive co­op­er­a­tion can pro­vide an­swers to many do­mes­tic prob­lems in­clud­ing is­sues, such as food and en­ergy se­cu­rity to em­ploy­ment gen­er­a­tion.

The suc­cess of the AEC will also in turn feed the RCEP. ASEAN has played a cen­tral role in the re­gion’s ef­forts at eco­nomic in­te­gra­tion.

The ASEAN Free Trade Agree­ment forms the cen­ter­piece around which other agree­ments and fo­rums, such as the ASEAN+3 FTA or the East Asian Sum­mit con­va­lesce (of­ten dubbed as “ASEAN Cen­tral­ity”).

As a con­sen­sus-driven or­ga­ni­za­tion that does not pose any threat to other ma­jor pow­ers, ASEAN is in a unique po­si­tion to drive re­gional sta­bil­ity by pro­vid­ing a neu­tral mid­dle­ground upon which other pow­ers can work to­gether and iron out their dif­fer­ences.

Rather than be­ing a stum­bling block to re­gional in­te­gra­tion, the “ASEAN way” of con­sen­sual de­ci­sion-mak­ing pro­vides a means through which the in­ter­ests of mul­ti­ple na­tions can be ne­go­ti­ated and even­tu­ally brought to a con­ver­gence.

With the AEC in place, ASEAN can fur­ther con­sol­i­date its eco­nomic po­si­tion, pro­vid­ing other larger economies with a greater in­cen­tive to en­gage the re­gion.

More im­por­tantly, con­certed ef­forts at tar­iff re­duc­tion and cus­toms har­mo­niza­tion will lay the foun­da­tions for fur­ther eco­nomic in­te­gra­tion of the Asia-Pa­cific re­gion.

ASEAN’s eco­nomic con­sol­i­da­tion will pro­vide it with a good foun­da­tion for its role in en­gag­ing other ma­jor pow­ers, such as China, the U.S. and In­dia. This will serve to ex­tend the peace div­i­dend from ASEAN bor­ders to the broader Asia-Pa­cific re­gion.

But first, ASEAN will need to put its own house in or­der. This means greater ef­forts at com­plet­ing the AEC by its dead­line of De­cem­ber 2015. Such ef­forts will re­quire strong po­lit­i­cal will among ASEAN mem­bers.

There is no doubt that the AEC and RCEP will even­tu­ally ben­e­fit all its mem­bers and bring forth greater busi­ness and in­vest­ment op­por­tu­ni­ties for the re­gion. The po­lit­i­cal gains of re­gional sta­bil­ity and stronger bi­lat­eral ties are equally, if not more, im­por­tant.

As the world’s most suc­cess­ful eco­nomic and po­lit­i­cal union, the EU is a good ex­am­ple. The eco­nomic and po­lit­i­cal suc­cess of the EU shows that re­gional in­te­gra­tion is not sim­ply a mat­ter of eco­nomics, it is also a po­lit­i­cal is­sue.

There is thus a need for greater po­lit­i­cal will and col­lec­tive ac­tion on the part of ne­go­ti­at­ing par­ties. ASEAN mem­bers will need to ad­dress do­mes­tic po­lit­i­cal is­sues be­fore re­gional level con­sol­i­da­tion can com­mence.

Re­gional in­te­gra­tion may en­tail short-term costs, es­pe­cially when pro­tected in­dus­tries are lib­er­al­ized.

Do­mes­tic con­stituents will need to un­der­stand that the short-term pain of lib­er­al­iza­tion and tar­iff re­duc­tions is nec­es­sary for longterm eco­nomic gains.

Po­lit­i­cal lead­er­ship will play a key role in help­ing busi­ness and pri­vate sec­tor un­der­stand and rec­on­cile with the ini­tial dif­fer­ences in gains for in­di­vid­ual mem­ber na­tions and also ad­dress the con­tentious is­sues of devel­op­ment divide among the mem­ber coun­tries.

A cru­cial step would be to es­tab­lish a strong reg­u­la­tory and mon­i­tory mech­a­nism, and build ad­min­is­tra­tive ca­pac­ity in tan­dem with a stronger ASEAN sec­re­tariat to en­sure an en­abling en­vi­ron­ment for the LDCs.

Such an en­tity can only ex­ist by po­lit­i­cal con­sen­sus of the mem­ber na­tions.

Ul­ti­mately, the po­lit­i­cal and bu­reau­cratic com­mit­ment of mem­ber states to push to­ward the com­mon eco­nomic agenda will de­ter­mine the re­al­iza­tion of AEC goals.

Re­gional in­te­gra­tion is in­her­ently a po­lit­i­cal en­deavor rep­re­sent­ing vi­sions for a new eco­nomic and po­lit­i­cal or­der within which na­tions can flour­ish amidst re­gional sta­bil­ity.

This will first re­quire recog­ni­tion of the po­lit­i­cal na­ture of re­gional in­te­gra­tion and the po­lit­i­cal will re­quired for its suc­cess, be­fore we can fully reap the eco­nomic gains and peace div­i­dend as­so­ci­ated with re­gional in­te­gra­tion. Woo Jun Jie is a re­searcher at the Sin­ga­pore Uni­ver­sity of Tech­nol­ogy and De­sign and Suvi Do­gra is an in­de­pen­dent an­a­lyst.

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