Introduction

While the Uruguay Round will result in substantial reductions in barriers to trade in goods and services on a multilateral basis, the expansion of regional trading arrangements continues unabated in all parts of the world. The ASEAN Free Trade Area (AFTA) and the Closer Economic Relations (CER) Agreement between Australia and New Zealand are the only two regional trading arrangements in the East Asia/West Pacific region. Changes in trading relationships among countries in the rest of the world will force both areas to reconsider their trade policies. One important possibility is a link between these two areas.

The possibility of a link between AFTA and CER was raised by Thailand with Australian and New Zealand Ministers in 1993. Subsequently it has been promoted by the Australian Prime Minister during his visit to Thailand in early 1994 and Indonesia in June 1994 and by the New Zealand Prime Minister in discussions with the leaders of these countries and Singapore (see Holmes [1995] for a New Zealand view). The initial response from the ASEAN countries has encouraged the development of the concept. Malaysia, however, favours the expansion of ASEAN into the East Asian Economic Caucus which would not include Australia and New Zealand. At the first meeting of Trade Ministers from ASEAN and CER countries in September 1995, it was agreed that the Trade Ministers should meet annually and the first substantive agreement on co-operation on standards conformance and the sharing of information on trade and investment was reached.

AFTA and CER are geographically close. Both AFTA and CER are outward-looking regional trading arrangements which have lowered external trade barriers vis-à-vis outside countries during the period of regional trade liberalization. For more than a decade Australia has placed primary emphasis in trade policy on relations with Asia and the Pacific and New Zealand now similarly considers that its best economic prospects are in Asia (Ministry of External Relations and Trade, New Zealand 1992).