ASEAN INTEGRATION AND THE MARKETING COMMUNITY

Keynote address of Rodolfo C. Severino, Secretary-General
of the Association of Southeast Asian Nations
at the ASEAN Marketing 2002 Conference

ASEAN Secretariat, Jakarta, 30 October 2002

 It gives me great pleasure to welcome the ASEAN marketing community and other friends to the ASEAN Secretariat.  The ASEAN Secretariat’s hosting of the ASEAN Marketing 2002 Conference speaks of its support for the work of the Asia-Pacific Marketing Federation and the Indonesian Marketing Association.  It is also an expression of our hope that ASEAN and the marketing community will work effectively together in advancing our common purposes.

 Today, I would like to speak about the integration of the Southeast Asian economy and the marketing community’s role and interest in it.

I need not tell people in the marketing business about globalization – its reality and benefits.  In its ideal state, globalization – the freedom of goods, services and persons to move unfettered around the world – can bestow enormous benefits upon people all over the world.  Goods would be produced where they can be most efficiently produced.  Competition intensifies.  Productivity goes up.  Costs and prices go down.  Incomes go up.  Freedom expands.  Welfare improves all around.  That is the theory of market economics.  Indeed, empirically, history has shown that, over the long term, these gains have actually taken place as the flow of goods and services has been freed.  Having the whole world as a market is obviously a marketer’s dream.  It is a dream that ASEAN shares.

However, we all know that, in reality, it is in large measure still a dream.  Globalization is not one smooth process.  It has proceeded in fits and starts.  And in certain cases it has placed the poorer countries at a grave disadvantage.  For example, developed countries often try to go around the world trading rules in order to protect politically powerful industries against competition, including competition from products of developing countries.  A common device is the use and abuse of anti-dumping measures.  Sure, there is recourse under the rules of the World Trade Organization; but international litigation takes money and expertise that most developing countries cannot afford.  Or take the price-distorting subsidies that developed countries give to their farming sectors, against which the poorer countries simply cannot compete, while at the same time artificially depressing the prices of farm products in the developing world.

Globalization proceeds inexorably, but in an uneven way.  In the meantime, and in parallel, countries would find it to their advantage to coalesce in regions – in order to make use of economies of scale, increase competition among themselves within the region, expand the “domestic” market, raise efficiency and productivity, cut costs, attract investments, and generate jobs.  All around the world, economies of continental scale are surging – China, India, Brazil.  Or they are forming regional markets – NAFTA, Mercosur, the Andean Community, the Gulf Cooperation Council.  African countries are building their own groups.  The countries of Eastern Europe are moving into the European Union, in the meantime enjoying the benefits of association.  Individual nations are forming free trade areas with countries in far-flung places.

ASEAN early on recognized this imperative of economic competition and survival.  In 1992, ASEAN’s leaders decided to form a free trade area among its member-countries by cutting and eventually eliminating tariffs on and dismantling non-tariff barriers to trade among themselves according to a fixed timetable.  Countries that subsequently entered ASEAN had to join the ASEAN Free Trade Area, although with a longer timetable.

After being advanced twice, the initial tariff-cutting target has now been substantially reached, as the first six signatories to the AFTA agreement and the region’s leading trading nations – Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand – have brought down tariffs on almost all trade among them to 0-5 percent as of the beginning of this year.  They are committed to removing tariffs altogether on 60 percent of their trade by the beginning of next year and on all of it by 2010.  Average tariffs on intra-ASEAN trade are now down to the minimal level of around three percent.

AFTA Now a Reality

AFTA is now basically a reality.  However, integrating markets is not just about tariff-cutting.  Investors insist that the reduction and removal of tariffs have to be part of a comprehensive process.  Marketers know that reducing and removing tariffs alone would not effectively integrate and expand the region’s market.  Non-tariff barriers have to be brought down.  Transportation links have to be opened up and obstacles to the movement of goods removed.  The movement of people has to be made easier.  Telecommunications systems have to be interconnected and subjected to harmonized regulations.  Customs procedures have to be coordinated and made helpful to trade.  Product standards have to be harmonized and multiple testing done away with.  E-commerce has to be regionalized.  Not least, trade in services, no less than trade in goods, has to be liberalized.

In other words, the ASEAN market has to approach the level of integration of, say, China’s market if the ASEAN economy is to have a chance of competing for investments and for markets in terms of efficiency, productivity and cost.

Clearly, the region’s marketing community has a large stake in the integration and regionalization of the ASEAN economy.  This stake increases as the scope of regionalization expands.  In five days, the leaders of ASEAN and China will sign a framework agreement to “liberalize and promote trade in goods and services” and “create a transparent and liberal investment regime.”  Specifically, the agreement would call for the creation of an ASEAN-China free trade area within ten years and otherwise strengthen cooperation by several means – the elimination of tariffs and non-tariff barriers on trade in goods, the liberalization of trade in services, an open and competitive investment regime, and the simplification of customs procedures, mutual recognition arrangements and other measures to facilitate trade and investments.

The agreement would commit ASEAN and China to negotiate the opening up of trade in services between them, liberalize investment regimes, and protect investments.  Part of the draft agreement is the so-called “early harvest” provision involving the relatively quick reduction of tariffs on a number of goods.  “Early” in this case means about three years.  Negotiations are to start in 2003.

With a deepened AFTA and the creation of the ASEAN-China free trade area, companies operating in ASEAN would have 1.7 billion consumers, with a combined gross domestic product of US$1.5 trillion to US$2 trillion, as their potential market.  In the same spirit and with the same purpose, ASEAN is working with Japan on effective measures to strengthen its already strong economic links with that country, with “elements” of a free trade area under consideration.  ASEAN is working with Australia and New Zealand to overcome obstacles to and facilitate trade between them.

Just four days ago, in a meeting in Mexico with seven ASEAN leaders, which I also attended, President George W. Bush proposed his Enterprise for ASEAN Initiative, in which he called for several things:

? U. S. cooperation with Cambodia, Laos and Vietnam in their bid to enter the World Trade Organization;

? The conclusion of bilateral trade and investment agreements between the U. S. and individual ASEAN countries, which the U. S. already has with Indonesia, the Philippines, and, most recently, Thailand; and

? Within those frameworks, regular consultations on trade and investments and the launching of negotiations at an appropriate time of bilateral free trade agreements to form a network of US-ASEAN FTAs.

The Imperative of ASEAN Integration

In the meantime, ASEAN has to deepen its own regional economic integration.  A hard road lies ahead, with political obstacles as well as economic pitfalls in the way; but we do not have the luxury of time.  Competitor countries and groups of countries are fast opening their markets and using their natural and human endowments to make themselves more attractive to investors.  The world is rapidly changing.  Globalization waits for no one.

If the process is handled right, there is much to gain for the marketing community.  It would, therefore, be in the interest of the Asia-Pacific Marketing Federation and ASEAN marketing associations to support this process.  The significant expansion of trade within ASEAN indicates that people in ASEAN must be benefiting, even if only in terms of employment, from the progress of AFTA.  Unfortunately, we do not hear from those ASEAN companies that gain from AFTA and stand to benefit further from the process of integration.  The pressure for deeper integration is coming largely from American and Japanese companies that operate in ASEAN or plan to invest in it.

We need to hear the voice of the marketing community if only to counteract the powerful forces of protectionism that continue to influence policy in ASEAN as well as in the developed world.  If the ASEAN Marketing 2002 Conference helps to give greater coherence to that voice, it will be a substantial contribution to the cause of regionalism, to the prosperity of our peoples, and to the interests of the marketing community itself.  So, I say to you: speak up.  Lobby your governments.  Apply democratic pressure on the legislative process.  Make your voice heard – in public and in the media.  Speak up for the cause of integration, for regionalism, for the progress of our region and its people, and for your own interest.