It is part of a global trend that is reshaping the multilateral trading system
Proliferating trade and investment agreements in the Asia-Pacific are ushering in a “new Asian regionalism” that represents a paradigm shift in the multilateral trading system. New Asian regionalism can be understood as a normative integration process that is centered on the 10-member Association of Southeast Asian Nations (ASEAN). Moreover, my research finds that new Asian regionalism is part of a global trend that is reinvigorating the role of developing countries in shaping global trade norms in rejection of both the Washington Consensus and Beijing Consensus.
Third Regionalism
It is essential to place new Asian regionalism in a global context. There have been three waves of global regionalism in the post-World War II era. The first wave of global regionalism during the 1950s and 1960s coincided with the founding of ASEAN, which marked the inception of Asian regionalism. However, the aim of the bloc was to form a loose security alliance against communist expansion rather than economic integration. The second wave of global regionalism occurred in the 1980s and 1990s. Its limited success was evidenced by the European Union (EU) and the North American Free Trade Agreement, the precursor to today’s US-Mexico-Canada Agreement. Confronting these Western models and the rise of China, ASEAN expedited internal integration by establishing a free trade area, the ASEAN Economic Community. ASEAN and Asia-Pacific Economic Cooperation (APEC) have functioned as twin engines for Asian regionalism. Despite APEC’s non-binding nature, its Bogor Goals to achieve “free and open trade and investment in the Asia-Pacific” and the objective to establish a Free Trade Area of the Asia-Pacific (FTAAP) have guided Asian integration.
The latest wave of global regionalism, which I call the Third Regionalism, has evolved since the 2000s in tandem with the World Trade Organization (WTO) Doha Round. The “new” aspects of Asian regionalism are intertwined with global changes. The impasse of WTO negotiations has propelled states to turn to bilateralism and pluralism. Growing populist nationalism has undermined the hegemonic stability premised on dominant US power. Similarly, the European debt crisis and the Brexit saga, as well as the EU’s decreasing share of global trade for two decades, have endangered its normative power. In the meantime, China’s mercantilist-Leninist policy and its new assertive strategy via programs such as the Belt and Road Initiative have posed potent challenges to the neoliberal world order. Moreover, the COVID-19 pandemic has significantly disrupted global supply chains and caused a worldwide economic recession.
South-South FTAs outpaced North-South FTAs in the 1990s and now represent two-thirds of global trade pacts.
New Regional Economic Order
Against this backdrop, four characteristics of free trade agreements (FTAs) mark the new normative features of the Third Regionalism. First, South-South FTAs outpaced North-South FTAs in the 1990s and now represent two-thirds of global trade pacts. This trend reflects developing countries’ FTA activism and their preferences for South-based trade pacts. Second, mega-regional trade agreements emerged. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) were concluded in 2018 and 2020, respectively. The United Kingdom, China, Taiwan, and South Korea have applied to join the CPTPP. The United States is neither a party to, nor intends to join, the CPTPP and the RCEP.
Third, inter-regionalism brought outside influences to Asian agreements. ASEAN members Singapore and Vietnam entered into trade and investment agreements with the EU, which in turn served as building blocks for the EU-ASEAN FTA. These agreements contained provisions on sustainable development and the Investment Court System and will serve as models for future EU pacts with Asian countries. Finally, comprehensive FTAs became the norm. Beyond tariffs and services trade, new agreements also include WTO-extra and plus components ranging from e-commerce to sustainable development.
These developments have shaped new Asian regionalism and contributed to the emergence of a New Regional Economic Order (NREO), which is distinct from the New International Economic Order (NIEO) movement in the 1970s. The NIEO crystalized the South’s call for nonreciprocal preferences essential for development under the United Nations and the General Agreement on Tariffs and Trade. Yet the NIEO failed as developing countries took divergent stances in the face of debt crises and the Thatcher-Reagan alliance rejected their additional demands. The Bretton Woods institutions set golden rules for economic reforms and free trade.
The New Regional Economic Order allows Asian countries to utilize their collective power to request a trade-development model other than the Washington Consensus.
Different from the NIEO, the NREO seeks to transform rather than cut dependent ties with the North. The NREO allows Asian countries to utilize their collective power to request a trade-development model other than the Washington Consensus. The Beijing Consensus has been proposed as an alternative. The Chinese model relies heavily on state-owned enterprises and features vast infrastructure-focused investment. However, increasing concerns about Beijing’s “debt-trap diplomacy” and military expansion have cast a shadow over the Beijing Consensus.
ASEAN-Centered Regime
Central to the NREO, the ASEAN Plus Six framework based on ASEAN’s agreements with other Asia-Pacific economies resulted in a new ASEAN Consensus that represents a policy balance between the Washington and Beijing Consensuses. The ASEAN Consensus converged on the positions of ASEAN Plus Six countries including Australia, China, and Japan. In contrast with European integration premised on cooperation between France and Germany, the China-Japan rivalry enabled ASEAN to advance new Asian regionalism by compelling both rivals to join in regional initiatives if they wanted to expand influence in ASEAN.
ASEAN’s legal approach to integration can be viewed as pragmatic incrementalism. The ASEAN-centered framework has evolved on the basis of ASEAN Plus Six FTAs and emphasizes the dimension of development by providing extra special and differential treatment to the least-developed countries (Cambodia, Laos, Myanmar and Vietnam). The Indo-Pacific policies of Washington and Brussels also recognize “ASEAN centrality” and support ASEAN-led mechanisms in the evolving regional architecture.
I do not claim that the ASEAN approach is the perfect integration model, but it has proved to be feasible in Asia. The ASEAN Consensus has expanded acceptance of and reformed the conventional ASEAN Way, which embodied the Indonesian notions of musyawarah and mufakat, consultations and consensus. It is no longer true to characterize the ASEAN Way as a purely political or soft-law concept. The legalization of the ASEAN Way through the ASEAN Economic Community and ASEAN’s external FTAs demonstrates hard-law obligations with structured flexibility for developing nations.
As the world’s largest FTA by economic scale, the RCEP is a testament to the ASEAN approach of pragmatic incrementalism. Viewed through the narrow lens of the US-China trade tensions, the RCEP has been inaccurately portrayed as a China-dominated pact. In fact, RCEP negotiations have been initiated and led by ASEAN. Despite India’s withdrawal, the RCEP is the culmination of the existing ASEAN Plus Six framework. The argument that the RCEP represents a low-level agreement in comparison with the CPTPP similarly ignores the evolution of ASEAN’s agreements.
Along with ASEAN and APEC, the CPTPP and the RCEP are complementary. Through them, Asian economies are reshaping the global order by altering the trade and investment rules for more than half of the world’s population and strengthening the power of developing countries. The two-mega regional trade agreements will collectively contribute to an even larger FTAAP, extending new Asian regionalism into the future.
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Pasha L. Hsieh is an associate professor at the Singapore Management University Yong Pung How School of Law and the author of New Asian Regionalism in International Economic Law, published by the Cambridge University Press.
Suggested Citation:
Pasha L. Hsieh, “What is New Asian Regionalism?” in USALI Perspectives, 2, No. 12, Jan. 20, 2022, https://usali.org/usali-perspectives-blog/what-is-new-asian-regionalism.
The views expressed in USALI Perspectives are those of the authors, and do not represent those of USALI or NYU.
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