Trade
ASEAN economic integration under Cambodia’s chairmanship
Author: Stepan Golovin, Institute of World Economy and International Relations
The economic component of Cambodia’s ASEAN chairmanship in 2022 was less visible against the background of US–China tensions and the Ukraine and Myanmar crises. But promoting prosperity, deepening economic integration and bridging the region’s development gaps remain key ASEAN goals.
It is important that ASEAN follows this track, especially as Phnom Penh’s priorities build on ASEAN’s previous initiatives to bring important deliverables in strengthening the ASEAN Economic Community (AEC).
ASEAN member states showed good results in their post-COVID-19 economic recovery. According to ASEAN data, the association’s nominal GDP in 2021 surpassed its pre-pandemic levels and reached US$3.3 trillion, while in 2022 it is projected to grow by 5 per cent. This prognosis is echoed by both the Asian Development Bank and the IMF’s outlooks.
ASEAN in 2022 further underscored that recovery should be people-centred and climate-resilient. The member states decided to prolong the validity of the Memorandum of Understanding on the Implementation of Non-Tariff Measures on Essential Goods until November 2024. This document, adopted in 2020, ensured the unhampered flow of agricultural and food products, as well as goods relating to the manufacture and distribution of vaccines, medicines, medical supplies and equipment. It now consists of 351 tariff lines (up from 152 initially).
Reflecting the considerable share of tourism in ASEAN economies, the association adopted several documents aimed at facilitating mutual recognition arrangements for industry professionals and the development of sustainable tourism.
In 2021 ASEAN’s trade in goods reached US$3.34 trillion, up from US$2.67 trillion in 2020, and FDI inflows into ASEAN jumped to US$174.1 billion from US$122.4 billion in 2020. But to stay relevant amid global supply chain disruptions, technological shifts and climate challenges, ASEAN needs to modernise its policy arrangements.
In March, negotiations were launched for upgrading the ASEAN Trade in Goods Agreement. Since trade liberalisation is arguably the most visible achievement of the AEC — duties for 98.6 per cent of tariff lines were eliminated — further efforts in this sphere are crucial. The agreement notably plans to include provisions surrounding paperless trade, the digital and circular economy and sustainable development.
ASEAN is also working on upgrading free trade agreements (FTAs) with its dialogue partners. A positive result is the conclusion of negotiations for the ASEAN–Australia–New Zealand FTA to make it more business-friendly. It improves transparency measures, lowers costs and time for trade, includes digital technology and education services and smooths the flow of essential goods during crises. Chapters encouraging the increased participation of micro, small, and medium enterprises (MSMEs) in economic activities — including government procurement —and trade and sustainable development were also added.
Another achievement is the launch of negotiations for upgrading the ASEAN–China Free Trade Area, ASEAN’s oldest FTA with its dialogue partners. It should become more future-oriented by including the digital and green economy, supply chain connectivity, competition, consumer protection and support for MSMEs. Considering the volume of trade and investment between China and ASEAN (trade with China amounts for 20 per cent of the overall association’s turnover), the results will be important for both sides. Big hopes in the region for the post-pandemic recovery and inclusive development are placed on the Regional Comprehensive Economic Partnership (RCEP), which entered into force on 1 January 2022. As was discussed during summits, the key issue is to encourage businesses to utilise the RCEP agreement, as well as to ensure greater trade efficiency among ASEAN members.
Connectivity was highlighted through a leaders’ statement on the post-2025 regional connectivity agenda. The idea is to take a comprehensive, cross-sectoral approach to promote people-to-people exchanges, innovation and industrial transformation, MSMEs and female entrepreneurship. It also aims to bridge gaps in development.
Due to changing political and economic landscapes, experts were anticipating further developments with the ASEAN Outlook on the Indo-Pacific (AOIP), particularly regarding the role of the association’s external partners. This document is often considered ASEAN’s attempt to propose a new architecture of regional…
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
Trade
WTO ministerial trading in low expectations and high stakes
The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.
The World Trade Organisation’s 13th Ministerial Conference
The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.
Challenges in Dispute Settlement and Agricultural Trade Reform
However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.
Geopolitical Tensions and the Future of Trade Relations
The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.
Source : WTO ministerial trading in low expectations and high stakes
Trade
Getting Vietnam’s economic growth back on track
Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.
Vietnam’s Economic Roller Coaster
After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.
Trade Performance and Monetary Policy
Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.
Challenges and Prospects
Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.
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