ASEAN Keeps Moving Toward Freer Trade


While the Doha Round of WTO trade policy talks idles along and the U.S. lacks Trade Promotion Authority to negotiate free trade agreements (FTAs), the ten countries of the Association of Southeast Asian Nations (ASEAN) are moving ahead with increased intra-ASEAN trade and FTAs. The Economic Ministers of the ten countries meeting in Makati City, the Philippines, on August 24 prepared for a seven year effort to create the ASEAN Economic Community by 2015 and continued their support for the Doha talks.

The countries of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) have a combined population of 570 million people, GDP of $1.1 trillion and per capita GDP of $1,900 ($5,200 on a purchasing power parity basis). They had 2006 exports of $751 billion, imports of $654 billion and foreign direct investment of $52.4 billion, up 27 percent from 2005. The countries range from small, affluent Singapore, to prosperous Malaysia with 27 million people, to Indonesia with 222 million people to emerging economies of Laos, Vietnam and Cambodia.

Since October of 2002 the U.S. has had the Enterprise for ASEAN Initiative for countries committed to economic reforms and openness. The U.S. has a FTA with Singapore and has negotiations with Malaysia and Thailand. The U.S. also has Trade and Investment Framework Agreements with Indonesia, Philippines, Thailand, Brunei, Malaysia and Cambodia. In 2006 the two-way trade was $168 billion, the fifth largest trading group for the U.S.

ASEAN has an aggressive agenda for expanding FTAs with six key countries. Just prior to the Economic Ministers’ meeting major steps were taken for an FTA with Japan that could be signed in November. An FTA with Korea is scheduled for 2008 followed by Australia and New Zealand in 2009. An FTA with China is planned for 2010 and one with India in 2011. The EU may be added to the mix. They believe now is the time to work out agreements before China and India become dominant economic powers in the region. This urgency is in contrast with the U.S. where the Administration lacks the authority to negotiate new FTAs and has difficulties getting Congress to pass the already negotiated Peru, Columbia, Panama and Korea agreements.

An Associated Press story in the Wall Street Journal noted that a confidential report from the ASEAN Secretary General Ong Keng Yong outlined the difficulties in some countries in adhering to existing agreements among the ASEAN countries. The Secretary General said that countries must learn to comply with free-trade obligations to avoid the impression of “agree fast, act slow.” He recommended that the Economics Ministers “institute compensatory measures or denial of benefits for delay in implementation.” ASEAN countries have many of the same problems as the U.S. and other developed countries in negotiating and implementing FTAs. Working on several agreements simultaneously stretches resources. Some industries use political pressure to slow down the implementation process. Countries want to take a timeout from the process for fear that free trade is not to their advantage. The national leaders recognize they must catch up with the open trade policies of more developed countries while also staying ahead of major competitors for direct foreign investment and market access in the region.

U.S. agriculture has much to gain from the free trade activities of ASEAN. Their population of 570 million people, 8.6 percent of the world total, is growing about 1.5 percent per year. Their average per capita GDP of $1,900 is at a level where consumers seek out a more varied diet. While Malaysia and Indonesia are known for palm oil and other tropical products, much of the region is not suited for growing grains for food and feed use.

In calendar 2006 these countries were a $3.6 billion market for U.S. agricultural exports. That was up $320 million from 2005 and the highest on record. Bulk commodities accounted for $1.7 billion of exports, 47 percent of the total, with wheat, soybean and cotton each at about $490 million. The soybean market has been flat, but wheat and cotton are growing markets. The course grains market was $116 million, but larger than in recent years. That market may continue to grow if China is less active in the corn market.

Intermediate agricultural exports were $733 million, 20 percent of total exports. Feeds and fodders were the leader at $225 million, followed by soybean meal at $145 million and hides and skins at $86 million. The soybean meal market has been declining, while feeds and fodders and hides and skins sales have been growing.

The other 33 percent of agricultural exports were consumer-oriented at $1.191 billion. Fruits and vegetables led with $378 million, growing by $85 million over four years. Dairy products were a close second at $353 million, almost four times the exports of three years ago. Red meat exports were $49 million with no growth. Poultry meats had $42 million with little growth.

U.S. agricultural imports from the ASEAN countries were $5.4 billion in 2006, but that is somewhat misleading because $1.8 billion of the total was rubber and allied products, almost triple the level of four years ago. Another $726 million was tropical oils, $433 million was unroasted coffee and $392 million was cocoa beans, paste and butter. Imports that compete more directly with U.S. production included fruits and vegetables at $623 million, tree nuts at $233 million, rice at $188 million and sugar at $108 million.

ASEAN is moving toward a more open trading system with intra-ASEAN trade and the rest of the world. They have growing economies where consumers can afford to eat more food and a more varied diet. The U.S. once had a lead in trade negotiations, but now is being left behind.

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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