Written by Kaewkamol Karen Pitakdumrongkit.

ASEAN celebrated its 50th birthday last month. Addressing this landmark, some observers have praised the organisation for its role in fostering economic cooperation, helping its members boost their economic growth and prosperity. Since the formation of the ASEAN Free Trade Area in 1992, the entity has played a significant role in shaping regional economic architectures. For example, in 2003 its leaders agreed to establish the ASEAN Economic Community (AEC) by 2020. In 2007, the states agreed to move the deadline forward to 2015 and adopted the first AEC blueprint containing priority actions to attain its objectives. AEC was officially launched on 31st December 2015. The current AEC blueprint envisages AEC by 2025 to be “highly integrated and cohesive; competitive, innovative and dynamic; with enhanced connectivity and sectoral cooperation; and a more resilient, inclusive, and people-oriented, people-centred community, integrated with the global economy.” The Consolidated Strategic Action Plan (CSAP) adopted in February 2017 serves to complement the 2025 blueprint by outlining specific policy actions and implementation timelines to fully accomplish AEC.

Using ASEAN’s Dispute Settlement Mechanism is crucial to increase future regional economic integration.

AEC: Too Soon to Rejoice

Given the above, it looks like Southeast Asia is making progress toward regional economic integration. However, a closer examination paints a different picture. As the 2025 blueprint recognises, ASEAN members fell short of fully achieving several initiatives. They had by 2015 implemented 475 out of 506 measures listed in the original blueprint. Unsurprisingly, one of the current goals is to implement the unaccomplished aspects of AEC.

Among the unfinished elements, the most challenging ones include non-tariff barriers (NTBs), services liberalization, labour movement, competition policy, and E-Commerce. Illustratively, the 2016 ERIA-UNCTAD report reveals that the number of non-tariff measures imposed by ASEAN states rose from 1,634 in 2000 to 5,975 in 2015. These measures appear to have been rolled out to replace the reduced tariffs over the period. Concerning labour movement, AEC has so far touched only on the mobility of skilled workers, ignoring unskilled labour. Among those with skills, the ASEAN nations have so far agreed on eight Mutual Recognition Agreements (MRAs), allowing free mobility of engineers, nursing, architects, surveyors, doctors, dentists, accountants, and tourism personnel. However, such workforce constitutes a minute 1.5% of entire ASEAN’s labour.

Addressing the Remaining Challenges

To better advance AEC, remaining challenges need to be tackled on a technical front. For example, NTBs and foreign equity ownership restrictions should be lowered if not eliminated. Additional MRAs should be reached to improve cross-border flows of ASEAN’s workforce. Moreover, the regional states should together forge E-Commerce rules that effectively govern online business activities in several sectors. The rules must neither be too lax to jeopardise data protection and privacy, nor too strict to cripple innovation.

Compliance Matters

Beyond technicalities, compliance from the ASEAN nations is also required to accomplish AEC. All states need to adjust domestic rules and regulations to align with the agreements. Admittedly, achieving compliance is challenging because every government faces a tension between a desire to pursue international cooperation and an incentive to fulfil certain domestic needs and interests.

Such tension begs the questions: “how to extract compliance from the ASEAN countries?”, and “what are mechanisms to enforce the AEC rules on them?” Compliance can be increased by: (1) raising the governments’ awareness of AEC’s benefits on their economies, and (2) encouraging the use of the ASEAN Dispute Settlement Mechanism (DSM) to resolve international economic conflicts. Think-tanks, academics, and civil societies should more actively lobby the public authorities that the fragmented implementation of AEC will ultimately generate adverse effects on their respective economies. The remaining barriers to international trade and investment undermine the chance for their businesses to thrive, undercutting the states’ opportunities for future economic growth and prosperity.

Promoting the utilisation of the ASEAN DSM is another way to extract compliance. The 2004 ASEAN Protocol on Enhanced Dispute Settlement Mechanism provides the legal infrastructure which members states can use to resolve economic conflicts. According to Article 24.3 of the ASEAN Charter, “where not otherwise specifically provided, disputes which concern the interpretation or application of ASEAN economic agreements shall be settled in accordance with the ASEAN Protocol on Enhanced Dispute Settlement Mechanism.” In short, Southeast Asian nations can challenge one another though litigation if their actions do not comply with the AEC framework. However, the ASEAN DSM has never been activated.

Using ASEAN DSM is crucial to increase future regional economic integration. For one thing, it creates transparency regarding the participants’ preferences. Engaging the legal processes reveals information about the countries’ priorities. This is because cases brought to courts usually involve issues which are politically important to them. Consequently, with such data, ASEAN members know more about one another’s main concerns which can be used to improve cooperation. Another benefit of using this DSM lies in the mechanism’s deterrent effect. A court’s verdict can shape countries’ policy behaviour. Illustratively, fearing that they would end up guilty as previous defendants, the other states not involved in the litigation could examine the judges’ decisions and adjust their domestic laws and regulations accordingly, raising their compliance with AEC.

Encouraging Southeast Asian countries to activate the regional DSM may be easier said than done because of their strong adherence to the “ASEAN Way.” Their inclination to use consultation and peer pressure for conflict resolution partly explains why the DSM has never been utilised. Hence, the jury is still out on how often, if at all, this mechanism will be used.

To make headway in AEC, all stakeholders must step up their efforts to implement initiatives. Persisting technical obstacles must be more effectively addressed and more amendments to domestic rules and regulations must be undertaken. The extent to which the organisation can raise its participants’ compliance remains to be seen. If regional states continue to allow their domestic interests to undermine regional economic integration, ASEAN’s ability to transform itself into a rules-based organisation will be called into question.

Kaewkamol Karen Pitakdumrongkit is Deputy Head & Assistant Professor at the Centre for Multilateralism Studies, at S. Rajaratnam School of International Studies (RSIS) of Nanyang Technological University, Singapore. Image Credit: CC U.S. State Department/Flickr.

 

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