Why Asean should start looking at greater integration with East Asia

MANILA, Philippines - While Filipino exporters are expected to reap the benefits of the Association of Southeast Asian Nations economic integration, they should not just concentrate on intra-Asean markets but pursue other destinations outside the subregion as well.

Regional trade expert Pushpanathan Sundram said that Asean economies should continue to look at trade beyond their regional border, especially with East Asia, even as the countdown to the formal launch of the Asean Economic Community (AEC) at the end of this year continues.

“Our trade with the (rest of the) world is about 75 percent, so we cannot build a Fortress Asean,” Sundram said, adding that this makes trade among Southeast Asian peers only about one-fourth of the association’s overall international trade.

“If you look at East Asia as a whole, East Asia is a more natural trading region because 60 percent of (intra-trading) is done in East Asia. But within Asean, it’s only 25 percent. If you really try your best, probably you’ll make another 10 percent.”

He also compared intra-Asean trade with the European Union bloc’s trade. Pointing to such factors as Southeast Asia’s geography and trade links, he said it is impossible for intra-Asean trade to reach trade levels within the European Union of 50 percent to 60 percent.

Sundram, who flew to the Philippines to speak on Asean integration at a recent forum in Makati City, said that while intra-Asean trade is important, “extra-Asean trade,” particularly with East Asian economies, should not be overlooked.

He pointed out that powerhouse China is now the number one trading partner of Asean, with Japan and South Korea also key trading partners. East Asian economies are interested in further engaging Southeast Asian economies because “Asean is helping them to also integrate,” Sundram explained.

“If Asean is to grow, then we will have to start looking at East Asia as part of the integration process, so Asean integration is not about the Asean economic community alone, but also about East Asia, including the Regional Comprehensive Economic Partnership (RCEP), which will form the biggest East Asia free trade agreement… where 27 percent of the global GDP will be."

The RCEP is a proposed free trade agreement between the 10-member ASEAN countries and the East Asian group of Australia, China, India, Japan, South Korea, and New Zealand. RCEP negotiations were formally launched in November 2012.