Benefiting from AEC

Just when we had all begun to put more focus and energies on regional trade pacts, the recent World Trade Organization (WTO) meeting in Bali, Indonesia, kept hopes alive that a general multilateral trade agreement could still be made to work. There had been wide expectations beforehand that the Bali meeting was merely going to drive the last nail into the coffin of the Doha Development Round—the current round of WTO negotiations that collapsed in 2008 and had been stalled since. While the “Bali Package” is now hailed as the first global trade agreement in 20 years (that is, since WTO formally came into being), there are divergent views on what was really achieved, or not achieved, in Bali.

For one thing, little was actually achieved in the Doha Round’s most important agenda item—agriculture. The developed countries’ massive and highly distortive agricultural subsidies reportedly remain untouched, thus negating whatever agreements reached on improved market access. It is in trade facilitation where the most success is claimed, giving more teeth to agreements committed under the World Customs Organization’s Revised Kyoto Convention, and in the Asean Economic Community (AEC) Blueprint by its member states. Is it time to refocus more of our energies back to the global forum, and less on the AEC and emerging wider regional trade pacts like the Trans Pacific Partnership and the Regional Comprehensive Economic Partnership? Not really. The regional and global trade agreements have their own proper places, and can usefully complement one another toward maximizing and widening benefits from freer trade. But it does make sense to fix our own neighborhood first so that we can approach the larger groupings and the global one in a more strategically unified way.

That is why the AEC is very important to us, as it is for every other Asean member-economy. We’ve been hearing, to my mind, too many loud voices expressing alarmist fears such as “we cannot compete,” “we are not ready,” “we will be overcome by a tsunami of Asean imports,” and so on. If it’s any comfort, one hears the same fears expressed in the other Asean member-countries. In recent weeks, I have met and been inspired by a number of Filipino entrepreneurs who, rather than recoil in fear of competition from Southeast Asian counterparts, actually jockeyed their businesses to take advantage of the wider opportunities that the AEC has already opened for them. There’s that quiet and unassuming livestock businessman I met in General Santos City, who turned out to be exporting a substantial amount of pork meat to our neighboring countries, while some of his local counterparts are whining about unfair competition and inadequate government support. There’s this woman running an airline catering firm that serves a Malaysian-owned budget carrier, raving about how the partnership has given her access to efficient and cost-cutting business technologies and process layouts developed and shared with her by her Malaysian client. There’s a fruit processing company that just recently established a presence in Vietnam, after having already gained a foothold in Malaysia and Thailand. And then there’s this Baguio-based manufacturer of sophisticated servo-mechanical systems that control aircraft wing flaps; he supplies the world’s top aircraft manufacturers, and is now eyeing Indonesia’s nascent aircraft industry as a potential business opportunity. I’ve met more and more of such Filipino entrepreneurs who have overcome the odds and have already been cashing in on the AEC rather than retreat defensively from it.

All these highlight a key point: AEC, contrary to popular impression, is not something that will take effect on the last day of 2015. It is already here. Those who predict a “tsunami” of Asean products sweeping our domestic markets in 2016 may not realize that 99 percent of committed import tariff reductions (to the level of within zero to five percent) already took effect back in 2010—and no such “tsunami” has come. And they perhaps don’t know that based on scorecards kept by the Asean Secretariat, the member-countries have already complied with 84-88 percent of their AEC Blueprint commitments. Dec. 31, 2015 was never meant to be a day of reckoning when a cataclysmic change would take effect in the Asean economies, as in the way the Y2K bug was feared to crash computer systems worldwide—but didn’t. End-2015 is merely an agreed reference date for completing the achievement of AEC which has actually been already with us for at least three years now.

Another important point to stress about AEC, along with other trade agreements we have taken or will still take part in, is that it is forcing us to do the right things. Many of our failures in the economy, especially in agriculture, trace to government’s inability to undertake meaningful and fundamental reforms that build inherent competitiveness, in favor of palliative and politically popular measures that fail us in the long run. It is only now that government is finally mustering the political will to undertake long-needed measures with truly broad benefits, such as open skies, trade facilitation via improved customs procedures, and a strong competition policy, among others—all because our collective commitment in AEC demands it. The political will that our government could not muster on its own is now derived from the need to adhere to our commitments with our Asean neighbors—in effect, a “borrowed” political will.

I really think we ought to welcome AEC, not dread it. And like I said earlier in this piece, it’s not just about to come in 2015. It’s already here.

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