Global Trends and Regional Economic Interdependence

To sustain its rapid economic growth and development into the decade of the 1990s, the Association of Southeast Asian Nations (ASEAN) has to respond to the external challenges of maintaining strong economic relations with its major trading partners, thereby ensuring its market access to the United States, Japan, and Europe. ASEAN, as a whole and for its constituent member countries, also has to sustain international competitiveness in terms of attracting the flows of foreign direct investment and to maintain production costs and other advantages. The ASEAN Free Trade Area (AFTA) is such a collective strategic response to pursue ASEAN's goals of stimulating intra- and extra- regional trade, improving the investment climate and enhancing the competitiveness of industrial performance of its member countries. This introductory overview attempts to provide a substantive background on the global and regional trends and issues concerning the rapidly changing international economic environment as well as highlight the increasing international economic interdependence, particularly in the Asia-Pacific region. Then, recent developments pertaining to AFTA are discussed from the perspective of policy concerns with regard to regional trade co-operation in the broader context of economic co-operation beyond tariff issues to cover non-tariff issues and trade- related concerns. After these, the summaries of the various chapters will be presented.

AFTA as an international entity was formulated in January 1992 at the Fourth ASEAN Summit in Singapore. ASEAN declared then that it would establish a free trade area in fifteen years (by the year 2008), beginning on 1 January 1993, by means of the Common Effective Preferential Tariff (CEPT) scheme. In the years prior to 1992, there were a number of fundamental changes in the global and regional economic environment which stimulated the formation of AFTA.