Protectionism a dirty ASEAN word
By Charles McDermid
HUA HIN, Thailand - Southeast Asian leaders issued an economic rally cry for
the region on Sunday, calling for greater coordination to ensure the free flow
of goods and taking aim at the protectionist sentiment many of them fear is on
the rise in countries such as the United States.
The 10-member Association of Southeast Asian Nations (ASEAN) [1] at its 14th
summit also pledged to form a European Union-like economic bloc by 2015 and
called for an overhaul of the international finance system to better serve and
protect developing nations.
The summit meeting also endorsed a free-trade agreement with
Australia and New Zealand and measures to expand a pre-existing emergency
foreign exchange pool to bolster regional currencies that come under
speculative assault.
"We want to send a strong signal that we are anti-protectionist," Thai Deputy
Prime Minister Korbsak Sabhavasu told Asia Times Online. "We see what other
countries are doing and we want to signal that while other countries are
looking out for themselves - in ASEAN we are helping each other out."
"Regional cooperation becomes even more important as we seek to pursue joint
approaches and pool our resources to cope with difficulties that we all face,"
Asian Development Bank president Haruhiko Kuroda told reporters on Sunday.
But even as ASEAN announced its raft of feel-good policies and delivered its
unified mantra of anti-protectionism, economists were scratching their heads as
to how the lofty proclamations of togetherness will actually help the fractious
region's export-driven economies and shield its 570 million people from rising
global economic turbulence.
While ASEAN's anti-protectionism line was clear, mixed messages were rife from
individual countries. For instance, it was reported this month that Indonesian
civil servants were ordered by the Trade Ministry to buy and use domestic
products. Smaller economies such as Cambodia and Laos have long had "buy local"
campaigns in place.
It was only a little over two years ago that Thailand imposed capital controls
on foreign equity, currency and bond transactions, in a surprise market
intervention aimed at curbing the appreciation of the local currency, the baht.
In fact, ASEAN's much-touted new charter, ratified in December, includes no
mechanisms to stop or punish member countries from implementing protectionist
policies.
In an interview with local media last week, Malaysian Prime Minister Abdullah
Badawi said it was perfectly normal for countries to protect their domestic
industries during an economic slowdown. Abdullah, however, modified his stance
in the summit's press finale on Sunday, saying: "All of us are of the same
mind: we are anti-protectionist. Countries that are saying 'buy us', countries
that are engaging in protectionism - we want to engage with them."
"I think we have to pay a lot of attention, whatever measures we do, we do not
give the impression that we are becoming protectionist, that we are turning
inwards, because ASEAN depends on this global market," said Singapore Prime
Minister Lee Hsien Loong.
The Southeast Asian blitz against protectionism - defined as economic policies
restraining trade between nations by way of tariffs and quotas - was seen by
some as a thinly veiled challenge to the United States. In an interview with
Asia Times Online, US ambassador for ASEAN Affairs Scot Marciel admitted that "
... in the region, there are some people who have put the blame on us".
As the largest importer of Southeast Asian goods, the US's recently approved
stimulus package, bent on internal spending and including mandatory American
purchases from trade partners, has sent shivers through the region's
export-dependent economies.
ASEAN countries have been mired in an economic slowdown that has slashed demand
for computer chips, autos and commodities. According to figures released by
ASEAN, the region is almost twice as dependent on exports as the rest of the
world.
Singapore, Southeast Asia's most trade-reliant economy, is now technically in
recession, with two consecutive quarters of negative growth, including a -3.7%
year-on-year contraction in the fourth quarter.
Thailand, where exports usually account for over 65% of gross domestic product
(GDP), is widely expected to be the region's next recessionary domino. In US
dollar terms, Thailand's goods export growth was down 26.5% year-on-year in
January. Malaysia recorded its slowest growth in seven years in the fourth
quarter while the Philippines saw its goods exports contract over 40% in
December.
Still, the summit was bullish about its accomplishments. Attending finance
ministers agreed to boost a regional foreign currency pool from US$80 billion
to $120 billion. The 10 members of ASEAN plus Japan, China and South Korea - or
ASEAN+3 - had arranged to pool bilateral currency swap pacts under the
so-called Chiang Mai Initiative - providing a multilateral fund that could be
tapped in emergencies.
Southeast Asian currencies have slid in recent months, diminishing the ability
of countries hit with short-term liquidity shortages to borrow foreign reserves
from other countries to absorb selling pressure on their currencies. "We have
learned from previous experience that if we work together, the damage is less
when we have a currency crisis," said Malaysian Premier Abdullah, referring to
a special regional meeting to address the 1997 Asian financial crisis.
ASEAN heads of state, however, warned that any global economic recovery could
take years. "The financial crisis is worldwide. Each ASEAN country, each one of
us is affected," said Singapore's Lee. "You could easily be in for several more
years of quite slow growth worldwide. And I think it's best that we prepare for
that, and our people."
Whether committed to protectionism or free trade, ASEAN countries are in for
rocky economic times.
Note
1. The 10 members of ASEAN are Indonesia, Malaysia, the Philippines, Singapore,
Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.
Charles McDermid is an Asia Times Online correspondent based in Thailand.
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