ASEAN Trade Pact Starts Later Than Many Might Think

September 12, 2012
By James Hookway
The Wall Street Journal

Countries across Southeast Asia are already building up to the launch of the region’s free trade zone in 2015 with television specials and other events to publicize the approach of the trade pact, but it has never been exactly clear when it is supposed to take effect—until now.

Instead of January 1, as many observers were assuming, the Association of Southeast Asian Nations Secretary-General Surin Pitsuwan Wednesday said the target date is in fact Dec. 31 2015, meaning that the trade pact doesn’t really start until a couple of days into 2016.

Asean officials say an official launch date has never been specified, and the trade group has in any case been working towards the launch of the Asean Economic Community, or AEC, through a series of tariff cuts. “There was never an agreed, exact date to ‘when’ in 2015 we should all work towards—should it be 1st of January? Mid-year? Or year-end 2015,” Mr. Surin said after meeting regional energy ministers in Cambodia Asean’s economic ministers, he said, agreed on Dec. 31.

This date—as late in the year as possible—gives some of Asean’s less well-developed nations a little more time to prepare for the coming changes. Among other things the AEC provides for the free movement manufactured goods, services and labor across the 10-member zone, turning the 600 million person region into something approaching a free trade zone with a combined economy of some $2 trillion.

The region is tremendously diverse, though. It includes wealthy Singapore alongside middle income countries such as Malaysia and Thailand. The region also has much poorer nations such as Laos, Cambodia and Myanmar. The composition of the group has led to some observers to speculate that the Asean could become a two-tier structure, with the smaller nations missing out on the trade opportunities provided by the larger nations.

With a few extra months in hand, some of the smaller countries will have a little more wriggle room, especially Myanmar, which is just now opening up its financial system to the rest of the world after years of sanctions and economic isolation.

There also is a precedent elsewhere for pushing back the creation of a trade bloc, although not necessarily an auspicious one.

The Maastricht Treaty which enabled the creation of the European Union and the Euro was originally supposed to have been ratified by member states on Jan. 1 1993. A series of fraught referendums, though, meant that it only came into force 11 months later on Nov. 1 that year.