ASEAN plans to create an economic community similar to that of the EU by 2020. This effort by the 10 ASEAN nations comes in response to the global integration and establishment of free-trade zones around the world. If the "ASEAN plus three" economy takes shape, it will be the world's largest and will have a massive impact on the Asia-Pacific region's political and economic framework. It may replace APEC and greatly stimulate the economies of Europe and the Americas.
ASEAN's internal integration will facilitate trade in the region. It will reduce tariffs, monetary obstacles and barriers to tourism. To create an economic union by 2020, however, will be very difficult to achieve. There are very wide disparities in the development of ASEAN's member nations. But most of their industries rely on the basic and raw materials sectors. This overlap makes them competitors and increases the difficulties in building free-trade areas.
Political differences are also very large and there are many conflicts between them. Their political establishments range from free, democratic systems to military regimes. Each country faces different internal problems. It will be difficult to find any one solution that can be applied to all members. Lowering preferential tariffs to zero will be difficult, not to mention achieving the goal of capital and personnel integration.
To push for a free trade area, ASEAN nations will lower effective preferential tariffs in two stages. The first stage will see tariffs cut to 5 percent. There are still tariffs problems regarding a large number of sensitive products, such as Malaysia's automotive sector.
Integration is not easy. Even though the EU has been in existence for many years, France's desire to cut taxes has triggered a dispute with other members. One can imagine how difficult it will be for ASEAN to integrate.
Including China, Japan and South Korea into the ASEAN free-trade area -- countries with very different levels of technological expertise and economic scale -- will not help. The "ASEAN plus three," if it becomes reality, might be the world largest free-trade zone, but China and Japan will inevitably vie for the leadership role, thereby adding to the conflicts of interests within the region.
The economic and trade structures of ASEAN countries are different from Taiwan's. They still need to trade with Taiwan and partake in a vertical division of labor with this county. According to surveys, most ASEAN member states believe Taiwan is the most complementary nation and therefore its participation will not create a crowding-out effect any time soon. Taiwan's exclusion from the ASEAN free-trade zone would marginalize its economic status. The government and business circles must face up to these regional and global trends.
The government should formulate a global economic strategy, plan on how Taiwan can develop in between the ASEAN and cross-strait trade zones. Taiwan is now holding free-trade talks with Singapore in order to open a new way out. The government should also guide and help businesses to invest in Southeast Asia. Because the political and economic situation in many ASEAN members remains unstable, the government should adopt a collective investment strategy and give priority to Vietnam as an investment destination in order to pre-empt the trade marginalization effect in the region.
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