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Global Trade

March 2012 - Posts

  • ASEAN and Economic Progress in Southeast Asia

    Similar to the structure and practice of the European Union, the organization known as ASEAN (the Association of Southeast Asian Nations) has worked for decades to encourage cultural and economic development among the lesser nations in this region, as well as forge fair free trade agreements with neighboring countries. Moreover, a commitment to international peace and prosperity remains a goal as emphasized by recent statements from ASEAN, as the countries look toward improvement in the next decade.


    About the ASEAN Nations

    Membership in ASEAN has expanded since its inception in 1967 to include ten Southeast Asian countries:

    • Brunei - As one of the more oil-rich nations in the regions, Brunei has grown economically in the last decade. Despite periodic dips in the GDP over the last years, Brunei remains one of the top oil producers in Asia.
    • Cambodia - While one of the poorer nations of ASEAN, Cambodia benefits from strong agricultural production, especially rice, and growth in labor industries like construction.
    • Indonesia - In the last few years, Indonesia has enjoyed a steady decrease in inflation coupled with growth in their GDP. The majority of their exports come from oil and byproducts.
    • Laos - The only totally landlocked nation among ASEAN members, Laos also has one of the poorest economies. As such, they are very dependent on foreign aid.
    • Malaysia - Malaysia is one of the larger nations in ASEAN in terms of economy and GDP. A long standing status as a prime trade nation continues to this day.
    • Mynamar - Also known as Burma, this nation is challenged by economic sanctions and various financial problems. Nonetheless, they have shown slight growth in the last few years.
    • Philippines - This island nation is primarily a service industry, known for assembly of products shipped throughout the world.  GDP growth has been steady but slowing in recent years.
    • Singapore - In 2010, Singapore claimed the fastest growing economy, due in part to their status as a banking power in Asia and prominent trade hub.
    • Thailand - Natural disasters, in particular the recent flooding of the area, have challenged the Thai economy, but growth is nonetheless projected for the industrial sector at a rate of 4-5%.
    • Vietnam - Recent plans for economic reform in Vietnam  designed to combat challenges brought on by decreased foreign exchange reserves and dependency on foreign aid.


    ASEAN +3

    It is significant to note that while the prominent trade powers of Asia - namely China, Japan, and South Korea - are not ASEAN members, each is involved in a free trade agreement with ASEAN and are known as the Plus Three.  These treaties have proven beneficial to the lesser economies in that billions of dollars in direct investment (almost $15 billion US in 2010) is invested here by the Plus Three countries.

    The union of ASEAN +3 has also proven to improve political relations between nations in the region, particularly those with concerns of becoming marginalized. China's presence in ASEAN, for example, and subsequent positive inroads with member nations is believed to have helped improved relations elsewhere. China's 2010 trade agreement with Taiwan, the Economic Cooperation Framework Agreement (ECFA) is arguably one result of participation in ASEAN.

    China, Japan, and South Korea in turn benefit by using the ASEAN nations as a collective conduit of trade with each other . These three countries presently do not have trade agreements with one or two of the other three, so the relationships with ASEAN may help forge inroads in trade.

    The Future of ASEAN

    ASEAN Vision 2020, as established by the organization around 1997, set goals to improve peaceful relations not only between member nations but outside countries. The commitment to allow member nations to handle internal affairs without the threat of outside force or other interference will hopefully permit economic and cultural growth. Associations with other nations in free trade agreements, notably the AANZFTA treaty with Australia and New Zealand, seek to benefit those members with lesser GDPs.

    With recent problems related to the weather and natural disasters, ASEAN has in recent years also sought to place environmental concerns at the forefront of discussion. Attempts to control haze pollution, for one, may hopefully transfer to additional economic health, especially when the ASEAN nations collectively bid on a future FIFA World Cup. What success comes of this endeavor will surely demonstrate the influence and power ASEAN possesses as an organization.

  • The AANZFTA Treaty – Development of Trade and Relations Throughout Southeast Asia

    For a number of island nations, the perceived notion of isolation implies that trade with other nations can prove challenging. In Southeast Asia, for example, resident nations have come to rely upon each other for goods, therefore it stands to reason that a trade agreement can benefit all involved. Nearly fifty years ago, the Association of Southeast Asian Nations was formed to improve the overall economic health of the region through joint participation in trade and development. Only recently have the ASEAN nations come together to expand relations with larger economies, namely Australia and New Zealand.


    In early 2010, the ASEAN, Australia, New Zealand Free Trade Agreement was ratified by the following nations:

    • Australia - Australia is perhaps one of the largest countries in the southern hemisphere where mining is a primary industry. This nation exports coal and iron ores, in addition to livestock and beef. Their proximity to China and Japan afford these nations status as important trade partners.

    • Brunei Darussalam - An oil-rich nation, oil and natural gas rank among the country's largest export commodities. Japan, Indonesia, and Australia benefit from Brunei's petroleum production, which is one of the highest in the world.

    • Malaysia - One of Malaysia's top industries, computers and electronics, accounts for a good percentage of exports to the United States. The country also trades a variety of products with treaty partners Singapore and Thailand, including wood and petroleum and rubber.

    • Myanmar - Of the AANZFTA nations, Myanmar (Burma) has one of the smallest economies. The country relies heavily on trade with treaty partners, including Thailand, and exports mainly natural gas and wood products, seafood and rice.

    • New Zealand - New Zealand trades primarily with Australia, imports and exports. Largely agricultural in terms of outgoing commodities, New Zealand exports an average of $26 billion in dairy, meat, and fish.

    • The Philippines - This island nation maintains good trade relations with several countries, including the United States and Japan. Copper, electronics, and textiles are among the products exported.

    • Singapore - Like fellow AANZFTA members, Singapore also exports computers and accessories, and some petroleum products. Most of their trade, with the exception of the United States, is concentrated in Southeast Asia.

    • Vietnam - Vietnam is known for textile production, especially shoes and related athletic clothing. The country also exports some oil, wood products, and rice.

    Subsequent entries into AANZFTA since the initial establishment have included:
    • Cambodia - Following years of internal conflict, Cambodia has worked in the early 21st century to improve trade. Agricultural commodities like timber, rubber, and seafood are popular exports, especially to the United States.

    • Indonesia - Most of Indonesia's outgoing trade is concentrated in Southeast Asia, with trade partners receiving the country's supply of natural gas, rubber, and textiles.

    • Laos - Laos produces timber products, coffee, and textiles to major export partners, which include AANZFTA members Thailand and Vietnam.

    • Thailand - While tourism is a major income generator for Thailand, the country ranks as a top exporter of rice. Other exports include fish and seafood, and textiles.

    Goals of the treaty, aside from improving economies and trade across member borders, include protection of intellectual property and eCommerce interests. As we move deeper into the digital age, such concerns have become important as technology comes to the region. This may prove essential in 2015, when a proposed ASEAN Economic Community is established. This community is designed to unify the ASEAN nations involved in this trade agreement and create a single market and production base to meet the growing needs of member nations. A unified economy is also important in improving relations with outside economic powers.

    With AANZFTA in force, the practice of lower tariffs in trade among member nations should assist those countries with smaller GDPs in obtaining needed goods and improving internal production. Modernization of business practices and the hope of extending relations beyond Southeast Asia may also benefit these smaller economies and eventually reduce the isolation of this region.