INTRODUCTION

Free Trade Agreements (FTAs) have been the centrepiece of trade policy in Southeast Asia over the last decade, for individual countries and for ASEAN collectively.

This chapter focuses on “ASEAN+1” FTAs, i.e., FTAs that ASEAN has negotiated collectively with other countries (the PRC, Japan, Republic of Korea, India and Australia-New Zealand). The big question this chapter addresses is whether, and to what extent, ASEAN FTAs further ASEAN's goals of regional and global economic integration.

BENCHMARKS: AFTA, AEC AND BILATERAL FTAs

On paper AFTA and its offshoots are strong agreements — exemplars of strong regional economic cooperation. AFTA has some of the simplest rules of origin in the world — 40% of regional value content (RVC) across the board, save for product-specific rules in textiles and clothing. The next advance was the blueprint for the ASEAN Economic Community (AEC). Then followed the ASEAN Charter, in force since 2008.

All this looks good on paper, but the track record indicates otherwise. More importantly, AFTA has made scant progress on non-tariff and regulatory barriers, far bigger obstacles to intra-ASEAN trade than tariffs. Implementation is the biggest deficit.

To the realist, these developments are predictable. Political, economic, cultural and institutional gaps in Southeast Asia are historically large, larger than they are in Europe. Hence ASEAN's method of loose intergovernmentalism — the “ASEAN Way” — is understandable.

As of July 2011, the ASEAN countries have 88 FTAs in total that are signed and in effect. If common plurilateral FTAs (mainly AFTA, ASEAN+1 FTAs and the P4 FTA involving Singapore and Brunei Darussalam) are stripped out, they are left with a total of 25 bilateral (country-to-country) FTAs.

At the weaker end of the spectrum are most bilateral FTAs involving ASEAN countries except Singapore. Even the stronger ones, advertised as WTO-plus, are weak in reality. They hardly go beyond tariff elimination; their commitments in services, investment, government procurement and other areas are modest to non-existent. They hardly make a dent in non-tariff and regulatory barriers.

The exceptions to the rule are some of Singapore's FTAs, especially the US-Singapore FTA. In the middle of the spectrum is AFTA. It has been a paper success on tariffs, including relatively simple ROOs (rules of origin). At the stronger end of the spectrum are the three US and EU FTAs in East Asia.