How (and Why) the US Should Help Build an ASEAN Economic Community

By Michael Plummer

The Association of Southeast Asian Nations’ agreement to create a unified market by 2015 is an extremely ambitious project, going well beyond anything that ASEAN has ever done in the past. The ASEAN Economic Community (AEC) would establish free flows of goods, services and foreign direct investment, as well as freer skilled labor and cross-border capital flows.

To be successful, it will require a tremendous amount of political backing from both internal and external sources. It is clearly in the interest of the United States to support this process for at least three major reasons.

First, the AEC will enhance US-ASEAN commercial ties. US economic interactions with ASEAN countries are significant and rising. For example, the value of US exports to ASEAN nations is approximately the same as those to China and almost four times those to India, despite the publicity that these two Asian giants receive. The ASEAN region is also a favorite location for US multinationals. Their direct investment in this region was US$99 billion in 2006, fourfold that of China and tenfold that of India. Given ASEAN’s focus on trade and investment liberalization, it will no doubt become increasingly important to the United States.

Second, ASEAN economic integration will favor strategic interests of the United States. ASEAN countries are critical allies in the “war on terror,” and some have long-standing (albeit low-level) insurgencies. US assistance in confronting these problems can be accomplished at both the local and regional levels. A strong AEC will also increase ASEAN’s potential leverage – and willingness to exercise that leverage – over Myanmar. In addition, integration will make the region safer by reducing development gaps and associated tensions within ASEAN, a stated priority in the integration agenda.

Third, ASEAN integration will help balance the economic power of China and India. Individually, ASEAN countries are, perhaps, too small to be important players in the economic and security game, but as an integrated group of a half-billion people they would be in the “major league.” The rise of ASEAN as an economic power – with similar advantages in production and scale to those of China and India – will help to bring greater symmetry and balance to managing this important period of transition. ASEAN can be particularly effective, given its central role in regional organizations such as the Asia Pacific Economic Cooperation forum, ASEAN+3 (ASEAN plus China, Japan and Korea), and the East Asian Summit.

How can the United States support the integration process? The foundations for an ASEAN-US partnership are in place. The Enhanced Partnership Plan of Action of 2006 envisions cooperation in the political/security, economic, and social and educational areas. The creation of the post of US Ambassador to ASEAN was a major step signalling US recognition of ASEAN’s significance. The Enterprise for ASEAN Initiative of 2002 sets out terms for possible bilateral free-trade areas between the United States and ASEAN. And the US-ASEAN Trade and Investment Framework Agreement of 2006 provides a means for discussing trade and investment links. But so far, the United States has free trade agreement only with Singapore. Its negotiations with Malaysia and Thailand are stalled, and there are no immediate plans for negotiations with other ASEAN countries.

Effective free trade agreements with ASEAN need to be a US priority. China, Japan, South Korea and India have negotiated such arrangements with ASEAN, and the European Union has recently announced intentions to do so. At the moment, Southeast Asian policies are too varied for a serious US-ASEAN free trade agreement to be feasible. Nevertheless, several countries are ready for effective agreements, and once the ASEAN Economic Community has been in place for a few years, a modern, comprehensive arrangement will be feasible. It is therefore advisable that the United States take a two-step approach: (1) begin negotiations with all remaining ASEAN countries by the end of 2010 and (2) plan for the creation of an ASEAN-US Economic Space by 2020.

In addition, the US government should intensify cooperation on global economic issues. As a stable, prosperous and friendly region, Southeast Asia has received less attention than many others. As a united region, it will have much more influence than now. Squeaky wheels need oil, but well-running machines likewise need lubrication. The United States and ASEAN countries should hold a regular summit–perhaps consisting of senior ministers in some years–to confirm the importance of their partnership and to coordinate positions in the World Trade Organization, APEC, and other regional organizations.

Finally, the United States can improve US-ASEAN relationships through “soft power.” A solid US-ASEAN relationship will require the full engagement of civil society. The Enhanced Partnership agreement envisions such cooperation in social and educational affairs. But much more can and should be done across all dimensions of society, from science and engineering to sports. Activities should target people-to-people connections to build relationships and trust throughout society. Thus, ASEAN and the United States should establish a substantial US-ASEAN Partnership Fund, providing support for a wide range of programs, projects and activities. The fund should be managed–independently of governments–by an international committee of distinguished citizens.

Over the last four decades, Southeast Asia has been transformed from a region of strife and poverty to one of progress and democracy. Much still remains to be done, but ASEAN’s “coming of age” is a historic milestone. The region’s extraordinary achievements deserve praise and celebration, and a forceful commitment of US support for ASEAN’s new mission.

Michael G. Plummer is a Senior Fellow in Economics at the East-West Center and a professor at SAIS Johns Hopkins in Bologna, Italy. Prof. Plummer can be reached at

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