Intra-Asean, open trade vital to Asean’s post-Covid-19 recovery
KUALA LUMPUR: Intra-Asean and open trade is vital to Asean’s post-Covid-19 recovery, CIMB Asean Research Institute (CARI) Briefings reveal, and the European Union (EU) experience may offer a path forward for boosting the growth of intra-regional trade.
CARI recently hosted a CARI Briefings webinar under its Covid-19 Economic Recovery Plan Series, titled ‘How Can Asean Bounce Back: An EU Perspective’.
The session featured CARI senior fellow and FratiniVergano - European Lawyers partner Paolo R. Vergano, key expert for trade facilitation in the ARISE Plus project of the Asean Regional Integration Support by the EU.
Moderated by CARI chairman Tan Sri Dr Munir Majid, the discussion centred on Asean’s post-Covid-19 economic recovery through a trade and institutional perspective, and how Asean can draw lessons from the EU’s experience in fostering internal trade.
Vergano observed that even before many Asean countries underwent lockdowns to combat the spread of Covid-19, many already suffered from supply chain disruptions caused by China’s earlier lockdown in January 2020.
According to IHS Markit’s Purchasing Managers’ Index (PMI) data, the disruption of raw materials, labour, and subassembly components caused Asean manufacturers to see their worst month on record in March 2020, with the headline PMI falling from 50.2 in February to a record low of 43.4 in March.
Vergano cited April 2020 data from the World Trade Organization which projected world merchandise trade would drop by between 13 per cent and 32 per cent in 2020 due to Covid-19.
He argued that for the open economies of Asean, a significant drop in global trade may provide the impetus for policymakers to re-evaluate the bloc’s current over-reliance on external export markets.
Vergano stressed there is much room for improvement with intra-Asean merchandise trade constituting 23 per cent of total trade in the region in 2018, and points out that intra-regional trade could provide a hedge against future external trade shocks.
He also drew comparisons with the EU, observing that intraEuropean trade accounted for 69 per cent of their total trade in 2018.
Noting that EU and Asean are structurally different, there are certain EU practices that are in line with those that Asean has already committed.
As an example, EU’s trade policies and Preferential Trade Agreements, generally take transparency, enforcement mechanisms and stakeholder engagement (primarily from the private sector and nongovernmental organisations) into stronger account.
“Regulatory transparency, for example, will be one of the key factors in facilitating greater regional economic integration, just as it has been for the EU,” Vergano observed.
“Traders wishing to engage in cross-border trade must first be aware of the existing rules and opportunities, and understand their rights.”
There are also existing mechanisms that require greater utilisation to boost intra-Asean trade.