Wto Term Paper(Roll No-10)

8/8/2019 Wto Term Paper(Roll No-10)

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Term

paperON

WORLD

TRADE ORORGANIZATION

TOPIC: THE SHIFTING OF PARADIGM IN REGIONALECONOMIC INTEGERATION WITH ASEAN

PERSECTIVE

Submitted to: submitted by:

MRS RITA KUMARI AVINASH

KUMARLECTURER WTO MBA (IB)

LSB (LPU) REG NO:

10901244


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DATE OF SUBMISSION: 05/DEC/2009 LSB(LPU)

Index1. Acknowledgement.....................................

2. Table of content.......................................

3. Abstract AND OBJECTIVE OF STUDY.......

4. Introduction................................................

5. MAIN BODY AND CONTENT OF DISCUSSION.....

6. Recommendations.......................................

7. Annexure.......................................................

8. Bibliography..............................................


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Acknowledgement

This term paper is dedicated to my teachers, my parents and my

friends

Who helped me complete this term paper? I tried my best levels

to

Elaborate on the topic with help of an article.

I pay vote of thanks to the people who helped me to understand

the

The main objective of the term paper.I am thankful to the gratitude for all those sources who managed

me to

Collect the information and data.


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Table of content

1. Defination of paradigm.

2. Asean perspective view

3. Asean: a) introduction

HISTORY

ESTABLISHMENT

AIMS AND PURPOSES

FUNDAMENTAL PRINCIPLES

ASEAN COMMUNITY

b) Economic integration

ASEAN CHARTER

The preferential trade arrangements

4. Shifting of paradigm

5. Impact

6. Conclusion

7. Recommendation


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Abstract AND OBJECTIVE OF STUDY

The m a in ob jec t ive to s tudy and d i scuss the h i s to ryo f econom ic i n teg ra ti on i n ASEAN in l as t 3 yea rs .

To understand the obstacles and difficulties facing

ASEAN IN its endeavour to create a free economic zone

covering all main provisions of AFTA.

The main provision of the AFTA, the ASEAN investment

agreement and ASEAN agreement for services from the

angle of economic integration .

I have discussed current state of ASEAN economic

integration and conclude that the ASEAN vision 2020 is

mere rhetoric.

Competitive strategy adopted by ASEAN.

To understand all these we must first understand the

meaning of paradigm of economic integration.

For this I have studied on a research paper from SSRN

(social science research network) New York.


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Introduction

Paradigm Shift: Is a change from one way of thinking to another. It's a kind of

revolution, a transformation, a sort ofmetamorphosis. It just does not happening

normal way, but rather it is driven by agents of change or there may be some other

elements and factors which are responsible for the change.

(http://www.taketheleap.com/define.html)

HISTORY

ASEAN economic integration did not begin until the birth of ASEAN free trade area (AFTA)in

1992.spured by the proliferation of regional trading arrangements elsewhere in the world in the

mid-90s .

Notably NAFTA and EU, and fears that ASEAN would become an outsider in a world increasly

divided into trading blocks, ASEAN leaders created the AFTA to stimulate intra ASEAN trade.

Unfortunately, AFTA, s performance was dismal in part due o its lengthy scheduled time frame

of 15 years. The liberalization process was fortuitously given a boost in the immediate aftermath

of the 1997 Asian financial crisis.

Overview

ESTABLISHMENT

The Association of Southeast Asian Nations, or ASEAN, established on 8 August 1967 in

Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by theFounding Fathers of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand.

Brunei Darussalam had joined on 8 January 1984, Viet Nam on 28 July 1995, Lao PDR andMyanmar on 23 July 1997, and Cambodia on 30 April 1999, with ten members in ASEAN.

AIMS AND PURPOSES

The majors aims and objectives were as follows:

1. To accelerate the economic growth, social progress and cultural development in the regionthrough cooperation in terms of equality and partnership to strengthen the base for aprosperous ,peaceful and friendly community of Southeast Asian Nations;

2. To establish regional peace and stability by abiding respect for justice and the policy of lawin the relationship within countries of the region and adherence to the principles of theUnited Nations Charter;

3. To promote active collaboration and mutual guidance to matters of common interest ineconomic, social, cultural, technical, scientific and administrative fields;
http://oneminuteshift.com/videos/rowan_north_video/metaphormosishttp://www.aseansec.org/1212.htmhttp://oneminuteshift.com/videos/rowan_north_video/metaphormosishttp://www.aseansec.org/1212.htm


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4. To provide assistance in the form of training and research facilities in the educational,professional, technical and administrative spheres to their member countries.

5. To manage more effectively for the maximum utilization of their agriculture and industries,the expansion of the trade, including study of the issues of international commodity trade,improvement of transportation and communications facilities and increasing the livingstandards of their citizen;

6. To boost and promote Southeast Asian studies; and7. To standardize close and beneficial cooperation present international and regional

organizations with similar kind o objectives, and explore all resources for even closercooperation.

FUNDAMENTAL PRINCIPLES

ASEAN Member States have adopted the following fundamental principles, as contained in theTreaty of Amity and Cooperation in Southeast Asia (TAC) of 1976:

Respect for the independence, sovereignty, equality, territorial integrity, and nationalidentity among all nations;

Right to every State to lead its national presence for free from external interference,subversion.

Non-interference with internal affairs of each other; Settlement of discrimination or disputes in a peaceful manner;

Renunciation for threat or use of force; and

Effective cooperation among their members.

ASEAN COMMUNITY

The ASEAN Vision 2020, ASEAN Leadersof ASEAN on the 30th Anniversary, accepted avision of ASEAN as a concert of Southeast Asian nations, outward and forward looking, livingwith peace, stability along with prosperity, bonded together in partnership for dynamicdevelopment and a community of caring societies.

9th ASEAN Summit in 2003, the ASEAN Leaders resolved to a conclusion that ASEAN

Community shall be established.

And finally at 12th ASEAN Summit in January 2007, the Leaders with their strong commitmentcame into movement and planned to establish an ASEAN Community by 2015 and signed theCebu Declaration on the Acceleration of the Establishment of an ASEAN Community by 2015.


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The ASEAN Community is based on basic three pillars:

ASEAN Political-Security Community, ASEAN Economic Community

ASEAN Socio-Cultural Community.

Each pillar has a unique Blueprint, and, together on a platform with an Initiative forASEAN Integration (IAI) Strategic Framework & IAI Work Plan Phase II (2009-2015),they form the Roadmap for and ASEAN Community 2009-2015.

Economic integrationASEAN CHARTER

The ASEAN Charter foundation in the ASEAN Community by guiding legal status and

framework for ASEAN. It defines ASEAN norms, rules and values; set targets for ASEAN; andrepresents accountability and compliance.

The ASEAN Charter entered in 15 December 2008. A meeting of ASEAN Foreign Ministerswas held at the ASEAN Secretariat in Jakarta to make important this very historic occasion forASEAN.

With the entry of ASEAN Charter, ASEAN will regulate under a new legal framework andestablish a number of new elements to develop its community-building process.

In effect, the ASEAN Charter has become a legally binding agreement among the 10 ASEAN

Member States.

ASEAN has came through the regional economic integration by means of sudden globalization

and liberalization in mid of some 2000-2003.pore.

Following the collapse of the non communist activities of Cambodia and Vietnam (south) in

1975 , the rising communist that threaten to spread down to Malaysia and Singapore

This was only the point when ASEAN felt an urgent need to expand activities an co operation

beyond its original standards.

At Bali summit in 1976, ASEAN leaders adopted two landmark treaties which boosted for theeconomic integration.

Both the treaties were called for the promotion and co-operation in the field of economic

development.
http://www.aseansec.org/18770.htmhttp://www.aseansec.org/18770.htm


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E.g.: the establishment of ASEAN industrial plants to meet the regional requirements for

essential commodities, the ASEAN preferential trading arrangements and the

complementation.

ASEAN INDUSTRIAL PROJECTS SCHEME (AIPS)

ASEAN INDUSTRIAL COMPLEMENTATION SCHEME(AICS)

ASEAN INDUSTRIAL JOINT VENTURE

All the objective was encourage the investments into and within the country.

But many these programmes were in operational and however failed due to lack of

established gaols and guidelines for the negotiations over choice of the products, investment,

and market access.

The preferential trade arrangements (PTA) was launched in 1977 to jointly

release the trade barriers .In the beginning the margin was only 10% and were negotiated on

a voluntary, product-by-product basis. The ASEAN government were not too keen to

stimulate and accelerate ASEAN into a free trade area because their economies were not

complementary and they had to protect their domestic markets.

But this also fails because of some political reasons.

New Regionalism in ASEAN

Although the 1987 ASEAN Summit rejected the creation of a regional common market or

free trade area and expressly underlined the role of ASEAN as a facilitator of closer policy

co-ordination and economic co-operation among the member countries, by the early 1990s

the tide had abruptly changed course.

Growing consternation over the stalemated Uruguay Round and the onslaught of

protectionist trade blocs forming in Europe and North America pushed the ASEAN

governments toward wider and deeper economic integration.

Firstly, ASEAN feared that it would become an outsider in a world increasingly

divided into trading blocs.

Secondly, ASEAN sensed the need to create a fallback position should the Uruguay

Round collapse.


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Thirdly, the members desperately hoped to sustain the high growth rates experienced

by them in the late 1980s, and thus created the ASEAN Free Trade Area or AFTA in

part to stimulate intra-ASEAN trade.

Lastly, the ASEAN members also worry that their markets might begin to look less

attractive to foreign investors.

AFTA: the ASEAN Free Trade Area

The Singapore Declaration of 1992 and the Framework Agreement on Enhancing ASEAN

Economic Co-operation, 1992 established AFTA. The primary motive of AFTA is to

intensify co-operation among the members of ASEAN to increase their international

competitiveness and integration with the world. In other words, the ultimate objective of

AFTA is to increase ASEANs competitive edge as a production base geared for world.

AFTA is implemented through the Common Effective Preferential Tariff (CEPT) Scheme.

Unlike the product-by-product approach of the PTA, CEPT adopts a sect oral approach.

Fifteen product groups were immediately selected for accelerated tariff reductions.

The CEPT covered all manufactured products including capital goods, and agricultural

products. Tariffs reduction was planned along two lines, namely the normal track and fast

track. Products in the normal Track will have tariffs reduced to the 0-5 per cent margin

by January 2003 while those in the fast track and will be reduced to the 0-5 per cent

margin by January 2000.

The 1997 Asian financial crisis again accelerated the CEPT scheme by one year to 2002 for

the ASEAN-6 countries; 2003 for Vietnam; 2005 for Laos and Myanmar; and 2010 for

Cambodia.

The fast-changing external environment had precipitated AFTAs acceleration into a free

trade area.

Under the CEPT, products that are slated for immediate liberalisation through tariff

reduction are put into an Inclusion List (IL). The 2001 CEPT Package shows that 92.58

per cent of the ASEAN-6s tariff lines are in the 0-5 per cent category.

NOTE: Zero tariff rates will be achieved by 2010 for the ASEAN-6 members and 2015 for

the newer members.


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Based on the latest data, about 47.86 per cent of the IL of the ASEAN-6 would have zero per

cent tariffs by 2003. ASEAN members have the option of excluding products from the

CEPT in three cases:

Temporary exclusion;

Sensitive agricultural products;

General exception.

The Temporary Exclusion List (TEL) covers products for which members are not

prepared to begin lowering tariffs. Members are, however, required to transfer products

from the TEL to the IL by annual instalments to reach a target of only 8,660 tariff linesin the TEL (i.e. 13.4 per cent) by 2001.

A Protocol was, however, signed on 23 November 2000 to temporarily delay the transfer of

these TEL products or suspend concessions on those TEL products already transferred into

the IL to give flexibility to countries facing real difficulties in transferring their last tranche

of manufactured TEL products.

The sensitive list (SL) covers unprocessed agricultural goods which are given a longer

period for integration into the free trade area. The commitment to liberalise this sector wasextended to the year 2010. The newer members have up to 2013 (Vietnam), 2015 (Laos and

Myanmar) and 2017 (Cambodia) to meet the targets.

The General Exception List (GEL) refers to products that are permanently excluded from the

CEPT scheme for reasons of national security, moral and health hazards and articles of

artistic & historic

They are vegetable oils, cement, chemicals, pharmaceuticals, fertilisers, plastics, rubber

products, leather products, pulp, textiles, ceramics and glass products, gems and jewellery,

copper cathodes, electronics and wooden and rattan furniture. These products were of

considerable commercial importance and account for roughly US$9.3 billion or 37 per cent

of total intra-ASEAN trade. Protocol in 1995 amended the CEPT to include raw and


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unprocessed agricultural goods. The same 1995 Protocol accelerated AFTA by five years to

be realised on 1 January 2003.

With this in mind, the Fifth ASEAN Summit in December 1995 heralded the creation of theASEAN Investment Area.

AIA: the ASEAN Investment Area

The AIA Framework Agreement was signed on 7 October 1998. The declared intent of AIA

can be stated as follows: Together with the AFTA programme, the AIA will give investors,

existing and new, a framework highly conducive to regional integrated production activities,

procurement, manufacturing and resources based investment activities.

In tandem with the AIA, ASEAN decided to enhance their industrial competitiveness By

implementing the ASEAN Industrial Co-operation Scheme (AICO) on 1 November 1996. This

scheme is intended to benefit the private sector, particularly vertically integrated multi-national

enterprises that used ASEAN as a production platform.

An AICO arrangement is a co-operative arrangement consisting of a minimum o f two

participating companies from two different countries. The output of the arrangement (referred to

as approved AICO product have. Unlimited access into the markets of the participating

countries.

As stated above, the AFTA, AIA and AICO are endeavours by ASEAN to create a single

production platform, market and investment area with a freer flow of goods, capital, skilled

labour, professional expertise, technology and services. As such, it is important to ensure that

the future direction of economic integration in ASEAN will be in synch with this imperative. To

fulfil this objective, the economic realities in ASEAN cannot be ignored. We thus turn to look at

the trade and investment patterns in ASEAN

Current status of economic integration

Balassas five stages of economic integration are as follows:

Free Trade Area- tariffs and quotas are eliminated within members of the integration,

but members retain national tariffs (and quotas) against third countries. No positive

integration here.


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Customs Union- No discrimination among members in products markets, with a

common external tariff structure against non-members. No positive integration n is

present.

Common Market- a customs union which abolished restrictions in factor movements.

No positive integration here.

Economic union- a common market that practises some degree of harmonisation of

national economic policies in order to remove discrimination that resulted from

disparities in these policies. Positive integration is introduced here.

Total economic integration- unification of monetary, fiscal, social and counter

cyclical policies. A supranational authority is set up where decisions are binding for

the member states. A vision of a centralist and unitary state is contemplated here.

Impact

Theories of economic integration are, thus, not useful frameworks toassess ASEAN economicintegration. It would be tantamount to putting the proverbial new wine inold wineskin. Theparadigm has shifted. The underlying motives for economic integration in the 50sand 60s arevery different from those in the present day. Unlike in the 50s and 60s, current initiatives

involving developing countries are part of a strategy to liberalise and open their economies to

implement export- and foreign investment-led policies rather than to promote import sub

situation.Current initiatives represent efforts to facilitate their members participation in theworld economyrather than their withdrawal from it. In other words, regionalism in the presentday is, by and large, not responses to thwart globalisation. On the contrary, they are attempts to

meet the needs arising from globalisation.

Furthermore, they are not arrangements to exclude outsiders but instead they areinclusivearrangements to allow outsiders to join them.

In fact, the new wave o f regional integration is viewed less in terms of gains from trade

creation/diversion and more in terms of scale economies, product differentiation, efficiency gains

and policy co -ordination. There is also increasing emphasis on the role of foreign investment in

regional integration and globalisation and a genuine drive towards trade liberalisation with the

ultimate aim of creating free trade areas. Such free trade areas are viewed as a means of

attracting FDI and achieving global competitiveness in trade. This new paradigm fits the patternof ASEAN economic integration.

CONCLUSION:

As per the ASEAN is concerned the regional economic integration has brought paradigm in the

trade system. But ASEAN has changed so much of stages to achieve the free trade system among


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their member countries by means of AFTA, AIA and AICO which were some not that much

success because of lack of planning and implementation.

RECOMMENDATION.

I as my point of view the ASEAN must first understand the current norms of the globalizationand liberalization and then should make a body to universalise the free trade among the member

of the ASEAN and the most important to understand the paradigm means the ongoing revolution

due to the change in economic integration all around the word and they should make a body who

can have a control over the trading system.

But every failure gives learning for the future, and off course ASEAN as a strong unity as

performing good the vision 2020 and the objectives.

ANNEXURE

ARTICLE 1

The Shifting Paradigm in Regional EconomicIntegration: The ASEAN Perspective

Lay Hong TanNan yang Technological University (NTU) - Business Law Series

Anil SamtaniNan yang Technological University (NTU) - Division of Business Law

August 22, 2002

TLH02/02Abstract:ASEAN economic integration did not begin in earnest until the birth of ASEAN Free Trade Area (AFTA) in1992. Spurred by the proliferation of regional trading arrangements elsewhere in the world in the mid-90's,

notably NAFTA and the EU, and fears that ASEAN would become an outsider in a world increasinglydivided into trading blocs, the ASEAN leaders created the AFTA to stimulate intra-ASEAN trade.

Unfortunately, AFTA's performance was dismal, in part due to its lengthy scheduled time-frame of 15years. The liberalisation process was fortuitously given a boost in the immediate aftermath of the 1997

Asian financial crisis; and by 2003 the ASEAN region will become a free trade zone with very low tariffs ofzero to five per cent. ASEAN economic integration also expanded to other areas, notably services; and theASEAN Vision 2020 was hatched. This paper first outlines the history of economic integration in ASEAN in

the last 30 years. Secondly, it examines the obstacles and difficulties facing ASEAN in its endeavour tocreate a free economic zone of goods, services, capital and investments. Thirdly, it discusses the main

provisions of AFTA, the ASEAN Investment Agreement and the ASEAN Agreement for Services from theangle of economic integration. Fourthly, it assesses the state of ASEAN economic integration and
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=333533http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=331625http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=333533http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=331625


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concludes that the ASEAN Vision 2020 is mere rhetoric. Lastly, it explores the strategy that ASEANadopts to combat stiff competition from its neighbours and how this strategy impacts upon the future

direction of ASEAN economic integration.

JEL Classifications: F-F02

Working Paper Series

Date posted: March 04, 2003 ; Last revised: March 04, 2003

Suggested CitationTan, Lay Hong and Samtani, Anil , The Shifting Paradigm in Regional Economic Integration: The ASEAN Perspective(August 22, 2002). TLH02/02. Available at SSRN: http://ssrn.com/abstract=325484 or doi:10.2139/ssrn.325484

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file=/general/ads1992/agr_aec_92.htm
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Wto Term Paper(Roll No-10)