ANTALYA, TURKEY – NOVEMBER 15: Malaysian Prime Minister Najib Razak holds a press conference within the G20 Turkey Leaders Summit on November 15, 2015 in Antalya, Turkey. Cem Genco / Anadolu Agency
The global “trade gold rush” we analysed last week doesn’t seem to be limited to the European Union solely, but indeed it’s expanding on a larger scale around the globe. Already on 16 November during G20 Leaders Summit, where the Sting was the only Brussels-based EU media to attend and cover extensively the top world summit in Antalya Turkey, the President of the European Commission Jean-Claude Juncker announced that the EU is determined to begin negotiations towards a Free Trade Agreement with Australia.
Similarly, one week later, at the other side of the world, the leaders of the 10-member Association of Southeast Asian Nations (ASEAN) signed a declaration last weekend establishing a formal economic, political, security and socio-cultural community. The ASEAN Community finally saw the light.
Freer movement and exchanges
The declaration that was signed last weekend in Kuala Lumpur, this year’s host of the group’s annual summit, formally concludes a process of twelve years of meticulous work. The brand-new ASEAN Community now attempts to create freer movement of trade and capital in an area of 625 million people with a powerful combined economic output of $2.6 trillion.
Many tariff barriers have already been eliminated among the 10 ASEAN countries, which now aim to better harmonise economic strategies and entwine macroeconomic policies and financial textures throughout the region.
Involvement of the private sector
Among the hottest points that were discussed last weekend in Malaysia, which are destined to be the key points for a comprehensive cooperation of the Community, was the improvement of the connectivity of their transportation infrastructure and communications, the integration of the industries to promote regional sourcing and the involvement of the private-sector in the economy, as stated after the event.
All 10 ASEAN countries seem to be convinced to invest on the latter especially in order to trigger real competitiveness. ASEAN grouping now includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
An important case-study
That the matter is interesting also from a Western perspective is actually more than clear. The birth of an EU-style regional economic bloc, a single market with a free flow of goods, capital and skilled labour in the region is definitely a phenomenon that deserves careful analysis.
Indeed the ASEAN community now offers to its members an upgrade of the former treaty, and thus a solid opportunity to create a region with a combined gross domestic product (GDP) that would make it the world’s seventh-largest economy. The combined GDP of the ASEAN economies is expected to grow up to US $4.7 trillion by 2020, stressed the Malaysian Prime Minister Najib Razak, the summit host, at the signing ceremony, and could become the world’s fourth-largest economy as a bloc as early as 2030.
Moreover, other first-rate players in the global trade fields already have a strong connection with the ASEAN. India, for instance, already has several ministerial groups that cover key-areas of the dialogue with the ASEAN such as foreign affairs, commerce, telecommunications and renewable energy.
China’s vision
Also China, which has become ASEAN’s largest trading partner through the years, is definitely regarding the creation of the ASEAN Community with keen interest. Indeed China’s objective post last weekend’s agreement is to upgrade the already existing ASEAN-China Free Trade Area (ACFTA), which came into effect more than 5 years ago.
In 2013, Chinese Premier Li Keqiang called for an “upgraded version” of the ACFTA, speaking of a trade cooperation of “a greater scope and higher quality”, in order to ensure growth and meet the demand of a restructured trade model. That moment might have finally come for China.
With the completion of a renewed ACFTA, China aims now to have tariffs reduced to zero on 7,880+ product categories, or 90 percent of imported goods. The ACFTA is the largest free trade area in the world in terms of population and the third largest in terms of nominal GDP, ranked right after the EU and the US.
All eyes on trade
The EU should definitely not let the ASEAN Community “train” pass without even requesting a stop, and thus without paying the due attention to the birth of a wannabe-giant of the global trade. The opportunities within this brand new deal could be vast, in a moment in which trade, again, seems to be the strongest of all responses for a quick recovery from the global financial crisis.
Several unexplored opportunities join the excitement around this new economic and political construct.
Still a tough match
Of course, enthusiasm alone is certainly not enough. At the closing news conference the Malaysian Prime Minister Najib Razak underscored that ASEAN had still no specific deadline for the zero-tariffs goal completion, but would aim for “meaningful deliverables that can be done every year when we meet at the ASEAN summit”.
Moreover, although as we said many barriers have already been lowered or eliminated, many politically sensitive sectors reportedly remain protected, such as agriculture, auto production and steel. Not so surprisingly though, building up a real community turns out to be no piece of cake either for that part of the world.
The European Sting will keep monitoring the evolutions of the ASEAN Community and the ACFTA very closely as well as the EU’s trade involvement with the new Asian powerful bloc.
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