Will ASEAN Lose Out From The Trilateral FTA Between China, Japan and Korea?

Sometime ago, China, Japan and Korea finally agreed to kick-start talks that would lead to a Free Trade Agreement (FTA) between them. This move brings about two contrasting views. For the optimists, it shows that the 3 countries are finally ready to put behind their historical enmity in the name of economic growth. For the pessimists, particularly those that believe in ASEAN centrality, it is the beginning of the end of ASEAN’s role in providing neutral ground for the 3 countries to negotiate and engage one another, especially if bilateral communications on some matters are close to impossible.

On the economic front, the pessimists fear that the expanded market size of this FTA would reduce ASEAN’s competitiveness when it comes into being. I would like to argue the opposite. China is such a huge market that it does not really need to add Japan and Korea’s population to its investment attraction strategies in order to attract more investments. In other words, firms that find China as a prospective investment location would not have waited until now before making their moves. They would have done so long time ago. There is certainly a value for Japan and Korea use the expanded market size to attract more investments but given the high labor costs in both countries, I doubt expanded market size is a strong pull factor by itself.

Then, there are those who said that ASEAN may be left out of the East Asian fortress since the FTA does not involve them. But this is an unlikely event since ASEAN has arguably pre-empt this by having FTA with each of them. I will also argue that the regional production networks that have been developed and nurtured over the years is not something that can be altered overnight, more so if there is no basis to do so at all.

Last but not least, the talk is only about to start and most definitely has not yielded anything tangible. For all the commotion, it may end up being another FTA that is trade-light and more driven by politics rather than economics.

Is Plurilateral the Way Forward?

Many trade experts have suggested ways to move forward following the deadlock in the Doha Round. Chiefly among them is for smaller groups of countries to negotiate and implement policies that they can then extend to other WTO members as and when they are ready. The simple argument behind this proposal is that agreement can be reached faster and easier among smaller number of negotiating countries. The question is: can multilateralization really be achieved at faster rate via this proposal, as is suggested, or is it going to further burden the already complex environment? In other words, is this a building or stumbling block?

Let me give a negative perspective of this proposal. When countries negotiate, they do so from their own perspectives, taking into account their own interests. One can argue that although agreement can be reached more efficiently, the contents are probably narrower in a sense that it takes into account only the interests of the negotiating countries. If this agreement is to be eventually extended to other WTO members, will they take it at face value? Well, perhaps not since their interests have most likely not been included in the first place. When the time comes, these members will want to amend some parts of the agreement before they will subscribe to it. However, will the original negotiating countries agree since they will have to concede on some points.

Guarded Optimism for Post-Election Myanmar

The final tally of the by-election in Myanmar is out! The National League for Democracy (NLD) led by Aung San Suu Kyi won 43 out of the 44 seats that were contested. But is this the end by itself? Well, I would think of it as a step in the right direction but definitely not an end because a lot of uncertainties remain despite the historic event.

Firstly, while there is no doubt in her ability to inspire people, a lot of questions on Aung San Suu Kyi’s capabilities to run a country or rather contribute to the running of the country have been raised. This is not surprising considering that she is untested and spent a considerable time under house arrest.

Secondly, even if she is highly capable, critics have questioned her ability to influence key decisions made by the government since the NLD only holds approximately 5% of the parliamentary seats.

Thirdly, while President Thein Sein seems to be highly supportive of the political reform in Myanmar, there have been questions on how much influence he has over the Union Solidarity and Development Party (USDP) and how much power still resides with the military. There is always a possibility of a coup if he cannot convince them that he is right; Myanmar is afterall no stranger to coups.

Although the result of the by-election certainly deserves applause, the path ahead is far from smooth.

The Importance of Aung San Suu Kyi

The opening of Myanmar has been on the news for several weeks, if not months now. Slowly, the world will know more than Aung San Suu Kyi. But for now, let us talk about this lady who is the embodiment of Myanmar itself. I may be wrong in making this conjecture but many people seem to have this question: “If Aung San Suu Kyi was such a threat to the military junta, why did the military never consider eliminating her?” I am sure the military considered this option but never really got to the path of executing it. Why?

First was the domestic consideration. Aung San Suu Kyi is the daughter of General Aung San, who became a strong symbol of opposition to the military after he was assassinated. The military was afraid that if something untoward was to happen to Aung San Suu Kyi as well, it would galvanize the opposition to such a level that even they would not be able to handle despite having the advantage of firepower.

Second was the international consideration. Through the sheer effort of Michael Aris, the late husband of Aung San Suu Kyi, she became and still is the face of Myanmar to the world. As such, the policies of the external powers, notably the Western world, were very much tied to their assessments of how Aung San Suu Kyi was treated by the regime. If they carried things too far, the international pressure could be so strong that their existence itself could not be guaranteed.

Although power has been transferred to the nominally civilian government, there is no doubt that the military still lurks in the background. The chances of them reading this entry is very slim but if they do, I hope they will consider the implications of their action if the thought of eliminating Aung San Suu Kyi ever comes again.   

How Many Amina Filali(s) Are Out There?

The recent case of Amina Filali brings to the public attention practices that supposedly should not have been around in the current state of the world. It is surprising that people in parts of Morocco still think that it is a dishonour for her and her family if a girl/woman is raped. This is tantamount to saying it is her fault for being raped. So, you have a situation whereby instead of consoling and providing support, people around her are actually blaming and perhaps scolding her for her predicament.

What is more surprising is the law allowing the rapist to marry the girl/woman. This brings the question on the state of mind of the girl/woman to be sharing the same bed with someone who has just inflicted some kind of pain or trauma on her. I wonder how many such similar practices or even worse go unreported.

Is Race To The Bottom a Valid Reason for Standard Harmonization?

Just as there are many valid reasons against standard harmonization, there are also many credible reasons for it. But there is one reason for standard harmonization that I just can’t get around: the idea of preventing race to the bottom. The argument goes that in the current globalized world where it is so much easier for firms to relocate their production plants to low-cost locations, firms with existing plants in countries with higher standards (higher cost) can easily shift them to countries with lower standards (lower cost), resulting in job losses. To prevent such a move, countries with higher standards will revise down their requirements and spark a race to the bottom, causing lower standards across the world.

My gripe is driven by the fact that there is no clear evidence where countries have lowered their standards in order to prevent job losses. On the other hand, most countries benefiting from FDI appear to have raised their standards, partly driven by the more demanding middle class whose population share has increased. A point of note is a recent article about how Apple has raised the labour standards in China. Although critics may say that it is a one-off event caused by the widespread negative publicity, it is also correct to say that China has come a long way with regards to how it treats its labour force. Among them, the 2008 labour contract law should ring a bell to most people, not to mention the latest promise by China’s Cabinet to raise minimum wage by 13 percent a year until 2015.

The Intrique of Achieving an ASEAN Community: The Middle Countries

Dr. Surin Pitsuwan, the current ASEAN Secretary General once said that it is countries in the middle that impede the progress towards building an ASEAN community. Why did he make such a remark?

Countries at the top are more than willing to take part in the establishment of community, in particular economic community because they are already highly competitive. A community will allow them better access to the neighboring market and they are certainly not worried that they will lose out in terms of efficiency if they open their borders to freer trade among ASEAN member economies.

Similarly, countries at the bottom are also more than willing to take part in this endeavor because after having been isolated for periods of time, they want to plug themselves into the globalized world and joining the ASEAN community is certainly a good starting point for doing so.

Countries in the middle view things rather differently. Opening their markets to freer trade is bound to benefit some groups but at the same time, is going to hurt some groups and these are not weak groups. Having been protected by their governments, they have grown into strong interest groups capable of influencing government policies. They would definitely prefer to maintain the status quo so as to maintain their current level of wealth and benefits.