UNITED STATES STRATEGIC POSITION IN ASEAN TRADE A REVIEW OF INTERNATIONAL POLITICAL ECONOMY

UNITED STATES STRATEGIC POSITION IN ASEAN TRADE: A

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

Introduction

Entering the 20th century, the international world was marked by a remarkable

change in international issues, from political competition to regional-based international

economic competition. This change is marked by the emergence and development of

economic regionalization in various regions, including the Asia Pacific region, and the

Asean region. The main issues are related to economic and trade issues along with the

increasing global interdependence between countries and economic regionalism.

Almost in every region there are economic and trade blocs that mention their

regional identity such as the European Economic Community (EEC), Latin America Free

Trade Area (LAFTA), North America Free Trade Area (NAFTA), Asean Free Trade Area

(AFTA) Asia Pacific Economic Cooperation (APEC), and others. In addition, strengthening

the functions of international organizations or institutions that regulate the course of the

global economic system is increasingly playing an important role, among others: World

Trade Organization (WTO), International Monetary Fund (IMF), International Bank for

Reconstruction and Development (IBRD), Organization of Petroleum Exporting Countries

(OPEC), Organization for Economic and Development (OECD).

The successful economic cooperation of the international system that prioritizes

democratic governance in Western countries has managed to escape the existence of a

common threat, namely the threat and influence of the ideology of communism. The

reduction of this threat factor indicates strong economic development and cooperation,

including the handling of economic independence linkages, which is a major symptom in

almost every region.

Globalization and the international economic system reinforce the role of

neoliberalism by placing the free market as the main force. (mainstream). As a result,

countries are required to be able to accommodate the system by integrating their national

economies towards the openness of a new world economic system based on economic

liberalization. This was followed by the emergence of various international agreements in

the field of regional economics and regional and geostrategic-based trade.

Economic and trade regionalization is also characterized by competition between

regions by eliminating forms of subsidies, quotas, licenses, monopolies, and trade

arrangements. In the context of globalization and liberalization in the ASEAN region,

agreements were signed that would liberalize the domestic market significantly. This

agreement is known as the ASEAN Free trade Area (AFTA) which has been agreed by

ASEAN member countries, through the forum of the 4th ASEAN Summit in 1992.

The demands and dynamics of the regional economy prompted the 4th ASEAN

summit agreement to be revised in 2007 with the inclusion of China in 2012 to become the

ASEAN-China Free trade Area (ACFTA) and the implementation of the ASEAN Economic

Community (AEC) in 2015. This cooperation is carried out to make the ASEAN region a

competitive production base so that ASEAN products have strong competitiveness in the

global market and attract more Foreign Direct Investment (FDI) and increase trade between

ASEAN countries (intra-ASEAN Trade).

This transformation has ushered in a new era in building the economic, social, political

and cultural life of the ASEAN community. The whole community is pushed towards

international integration to further expand relations and cooperation between nations of the

world. The free market is an impact that follows the globalization of ASEAN countries,

where ASEAN communities are encouraged to interact and transact widely in various

strategic fields.

The enactment and implementation of ACFTA and AEC have an impact on the

reduction of import-export tariff costs to 0-5 percent as well as the elimination of

quantitative restrictions and other non-tariff barriers. The opening of free trade spaces in the

ASEAN region is predicted to be able to encourage positive developments for United States

economic development, including: first, encouraging state revenues through exports and

imports. Second, it opens up new industrialization opportunities in the United States region

which was sluggish due to the monetary crisis that occurred in 1998. Third, expanding

professional employment opportunities for the explosion of new young generations in

United States and providing career opportunities in various regions in ASEAN.

But at the same time, concerns about the market economy are also a frightening

specter for United States entrepreneurs, amid the weak competitiveness of local industries,

weak state protection of local industries is feared to be able to erode the potential of local

entrepreneurs and some Small and Medium Enterprises (SMEs) that are still lacking in

various economic aspects. Economically, United States is no better than Singapore,

Malaysia, Thailand and Cambodia. But the failure of the old market economy has opened up

the free market in a new perspective of a market economy built on state authorization.

The state guarantees various kinds of facilities and infrastructure to support the

sustainability of the market, such as financial stability, domestic security, and law

enforcement. If needed, the state can also use its power to keep the market running and

functioning properly. Furthermore, if there are no markets in the area that require utilities

such as land, water, electricity, education, health services, or social security, the state can

also use its power to keep the market running and functioning.

Then the state must provide the market, because in the new view of the market

economy, the role of the state will be gradually and proportionally reduced to create market

stability, so that the role of the state does not disappear as conventionally understood by the

old market economy understanding, but the role of the state is not lost. The market economy

still adheres to the principle of free competition that requires all parties to concentrate on

quality and speed in reading market trends and at the same time the state provides protection

that supports positive market dynamics.

Economic Integration as a Prerequisite

Closer economic and trade relations between countries in the ASEAN region have

led to interdependence and the desire to strengthen intra-ASEAN relations. One of the

important aspects that led to the establishment of free trade agreements among ASEAN

countries as a necessity in strengthening the ASEAN region's economy, is the economic

benefits that can be obtained jointly through economic and trade relations. The continuous

improvement of relations and economic benefits perceived as a necessity in strengthening

relations, encourages an agreement on the desire to integrate the economy by reducing

existing trade barriers.

This is in accordance with what Salvatore said, according to him economic

integration is a commercial policy that discriminatively reduces or even removes trade

barriers only to member countries of the agreement. The agreement to reduce or remove

trade barriers will only apply to countries that agree with each other, and does not apply or

apply to countries outside of it.

A similar view is also expressed by Balassa in Wang, he defines economic

integration as a measurable process and design that represents the disappearance of all forms

of economic discrimination between countries. According to Balassa, definite economic

integration is an action taken by countries, not other actors or units. Balassa also clearly

states that the removal of barriers is not only done in the trade sector but in the economic

sector as a whole.

Based on the above explanation, it can be stated that economic integration is the

removal of barriers either in the trade sector or the economy as a whole between countries

that agree with each other with the aim of none other than to increase economic integration

between these countries. It is seen that economic integration has certain levels according to

the depth of integration. The levels of economic integration are explained by Balassa and

Salvatore, they argue that economic integration is carried out in order from very loose to the

deepest. The first is a free trade area, where each member country agrees to eliminate trade

tariffs and other quantitative barriers, but each country is still entitled to set its own rules on

tariffs against non-member countries.

If the free trade area is the loosest or first stage of economic integration in Balassa's

view, then according to Salvatore the loosest stage of economic integration is preferential

trade arrangements and the free trade area is the first stage of economic integration the

second. A free trade arrangement according to Salvatore is lowering (not eliminating) trade

barriers between agreed countries, lower when compared to other countries.

Second, customs union, the elimination of barriers to trade or movement of goods

between agreed member countries (like a free trade area), coupled with the uniformity of

trade rules, such as tariffs, with non-member countries, this is commonly referred to as

common external tariffs; Third, the next higher economic level is the common market.

According to Balassa and Salvatore in this common market, what is removed or suppressed

are not only barriers to trade, but also barriers to the movement of factors of production such

as people and capital. In addition, currently, according to Wang, the so-called single market

is developing, according to him the single market has a slightly higher level of integration

than the common market, citing Peter Lloyd, the single market is the principle or law of one

price in goods, services, and also market factors in a region, so that in a single market there

is uniformity of regulations and procedures between member countries of the agreement;

Fourth, the highest level of economy, according to Balassa and Salvatore is a union or

economic union.

In the economic union, in addition to the removal of barriers to trade and factors of

production, countries that are members of the economic union agree to uniformity in

national economic policies. The uniformity will occur in the field of monetary, fiscal,

financial, and also the handling of other economic related problems. Some experts argue that

economic integration is the same as regionalism because they do not distinguish whether

integration occurs in one region or not or also that regionalism must be carried out between

countries that are in one region.

However, referring to the definition of regionalism given by the WTO, namely that

regionalism is an action taken by countries to liberalize or facilitate trade within the regional

scope, it can be concluded that regionalism is economic integration carried out by countries

that are in the same region or countries that are close in location. Regional economic

integration can be done through trade agreements, commonly known as free trade

agreements (FTAs) or regional trade agreements (RTAs). These two terms are often used

interchangeably because even in the view of the WTO, RTAs are not only limited to free

trade agreements of countries within one region.

United States strategic role in ASEAN cooperation

The ASEAN Economic Community (AEC) is a regional community that has a

common agreement to integrate the economies including markets of all ASEAN member

countries. There are 10 countries that are members of the AEC, namely Brunei Darussalam,

the Philippines, United States, Cambodia, Laos, Malaysia, Myanmar, Singapore, Thailand

and Vietnam. Knowing the profile of ASEAN countries is very important to measure the

strengths and weaknesses of each country, as well as explore opportunities for business /

business cooperation and be prepared to face labor and economic actors from these

countries. Vice versa, as a preparation if at any time you have to go, work and do business in

the AEC member countries.

Free trade as referred to in the first pillar of the AEC Blueprint is to make the

ASEAN economic region free of barriers and ASEAN as a single market and production

base. The achievements to be obtained are markets with free flow of goods, free flow of

services, free flow of investment, free flow of skilled and educated labor, and freer flow of

capital in the ASEAN region. Not only is the single market and production base agreed upon

in the AEC but the AEC also agreed upon three other pillars, namely ASEAN as a highly

competitive economic region that has competition policies, consumer protection, intellectual

property rights, infrastructure development, taxation and e-commerce.

ASEAN as a region with equitable economic development with emphasis on the

development of small and medium enterprises, as well as initiatives to reduce the

development gap in ASEAN especially for CMLV countries (Cambodia, Myanmar, Laos

and Vietnam).ASEAN as a region fully integrated with the global economy through a

coherent economic approach in ASEAN relations with its partners outside the region and

enhanced participation in global product networks.

The AEC was formed in 1997-1998, ASEAN member countries realized the

importance of increasing cooperation, especially during the economic crisis in Southeast

Asia, as a form of attitude of ASEAN member countries especially in dealing with economic

situations and conditions and global competition. At the 2nd ASEAN Summit in Kuala

Lumpur on December 15, 1997, the ASEAN Heads of State agreed on the ASEAN Vision

2020. ASEAN Vision 2020 is a long-term vision to create a stable, prosperous and highly

competitive ASEAN region with equitable economic development characterized by a

reduction in poverty and elimination of socio-economic disparities. ASEAN Leaders

prioritized and declared the concept of the ASEAN Economic Community (AEC) with the

goal of regional economic integration by 2020.

The AEC concept progressed at the 10th ASEAN Summit in Laos, 2004, with the

development of strategies and work programs to realize ASEAN Vision 2020.ASEAN

leaders strengthened efforts towards AEC at the 12th Summit in the Philippines, January 13,

2007, by agreeing on the "Cebu Declaration on the Acceleration of the Establishment of an

ASEAN Community by 2015".It was also agreed to accelerate the implementation of the

AEC blueprint from 2020 to 2015. To be precise, the ASEAN economic community (AEC)

was fully implemented on December 31, 2015 / January 1, 2016 to strengthen ASEAN's

competitiveness in global competition in order to compete with other free trade areas

including in order to compete with the economic progress of its free trade partners such as

China, India, Japan, as well as in the European Union and American markets. In addition, to

improve the bargaining position in the context of ASEAN Plus 1 negotiations (China, Korea,

Japan, Australia-New Zealand, India, EU), and in response to the trend towards regionalism.

Acceleration was also made for the following reasons:

 Potential 10-20% reduction in ASEAN production costs for consumer goods as a

result of economic integration

 The potential for increased regional capabilities with the implementation of

international standards and practices, intellectual property rights (IPR) and

competition.

The main goal of establishing the AEC is to make ASEAN a prosperous and

competitive region with equitable economic development, and to reduce poverty and socio-

economic disparities in the ASEAN region. The regional community also aims to make the

ASEAN community more dynamic and competitive. This can be achieved with new

measures and mechanisms to facilitate the implementation of agreed economic initiatives to

accelerate integration in priority sectors; facilitate the movement of businesses, skilled and

talented labor; and strengthen ASEAN institutional mechanisms.

The expectation of the implementation of AEC is that the rolling of AEC is expected

to provide positive benefits to the economy of its member countries as well as an effort by

ASEAN member countries to adjust their perspective among fellow Southeast Asian

countries to be more open in discussing domestic issues that have an impact on the region.

This openness is certainly without leaving the main principles of ASEAN, namely, mutual

respect, non-interference, consensus, dialogue and consultation.

The AEC has four main characteristics, namely:

 Single market and production base;

 Highly competitive economic zones;

 Regions with equitable economic development;

 A region that is fully integrated with the global economy.

The four characteristics are closely related and reinforce each other. This is

necessary, given the importance of ASEAN trade with other countries outside the region. It

is also a necessity for AEC to remain outward-looking.

United States cooperation with Intra Asean countries

United States-Singapore relations

United States exports with ASEAN member countries have increased from year to

year. United States largest export volumes are with Singapore, Malaysia, and then followed

by Thailand. United States exports with Singapore in 2011 amounted to US$ 18.4, a year

increase compared to the previous year 2010 which was only S$ 13.7 with a share of

43.81%. The large role is dominated by crude oil, natural gas, tin, rubber, copra and

electronics (to meet the needs of the industry in Singapore. Meanwhile, the products that

Singapore exports to United States include petroleum distillates, ships, apparel, textiles, iron

and steel pipes and chemicals. However, in the year 2012 (18.4 billion) United States

exports to Singapore decreased from the previous year which was only 17.1 billion.

Meanwhile, imports from Singapore to United States for 2008 to 2010 fluctuated and

stabilized in 2011 to 2012. The United States-Singapore trade balance for the last 5 years

(2008-2012) shows a deficit position with all three countries and the largest deficit is

experienced with Singapore.

United States-Malaysia

Malaysia is also the second ASEAN country that is ready to face AFTA. United

States exports to Malaysia in 2010 increased, recorded at US$ 19.36 billion, an increase of

27.66% compared to 2009 (US$ 6.81 billion). United States exports to Malaysia in 2009

only increased 3% from the previous year, but until 2012 exports continued to increase.

United States trade trend with Malaysia for 5 years (2008-2012) was positive 15%. United

States leading products exported to Malaysia include palm oil, natural rubber, paper, and

textiles. United States imports from Malaysia in 2009 amounted to US$ 5.68 billion, down

from US$ 8.99 billion in the previous year. This decrease in imports was recorded in refined

petroleum products, electronics & Electrical products, crude petroleum, manufactures of

metal and chemicals and chemical products12 .Trend for 5 years (2008-2012) positive 8%.

The United States-Malaysia trade balance in 2012 showed a deficit position for

United States of US$ 12.2 billion, an increase compared to the deficit in 2011 (10.9 billion).

During the last 5 years (2008-2012), the trade balance showed a surplus position for

Malaysia. In the period 2010-2011, the trade balance showed a surplus position for United

States of US$ 9.36 billion and US$ 10.9 billion.

United States-Thailand

The third country that dominates trade in the ASEAN region is Thailand. From the

graph, United States exports to Thailand from 2009-2012 have increased although the

increase from year to year is not significant. The trend for 5 years (2008 - 2012) is positive

16%. United States exports to Thailand include plywood and petroleum, while imports from

Thailand to United States increased slightly from 2008-2012 with a share of 15.5% in 2008

and a share of 21.3% in 2012. Thai imported products that flooded United States include rice

and sugar. United States dependence on Thai rice imports is due to United States national

food security crisis. From some literature, Thailand is now able to export 2.3 million units of

cars per year in the ASEAN region, indicating that the industry in Thailand is quite

advanced. The United States-Thailand trade balance in 2012 showed a deficit for United

States of US$ 6.63 billion, an increase from the previous year.

Meanwhile, the trade balance shows a surplus position for Thailand, so it can be said

that the United States-Thailand trade balance has been in deficit for 5 years. The geopolitical

conflict that Thailand has been facing in recent months has had both positive and negative

impacts on United States and Thailand. ASEAN member countries. Positive impacts for

United States and surrounding ASEAN countries are such as shifting foreign tourist

destinations and encouraging some businesses to move their production base to the

Philippines, Vietnam, or United States. For United States itself, the most noticeable impact

is that electronics and automotive exports to Thailand have decreased. Meanwhile, imports

from Thailand to United States have also decreased.

ASEAN cooperation with strategic partner countries ASEAN - Japan

ASEAN-Japan cooperation, which initially emphasized economic cooperation,

formally began with the establishment of the ASEAN-Japan Forum in March 1977. This

was followed by the establishment of the Trade, Investment and Tourism Promotion Center,

now known as the ASEAN-Japan Center (AJC).

ASEAN-Japan cooperation prioritizes counter-terrorism, environment, natural

disaster management, health and welfare, maritime security, including sea piracy, and

youth/community exchanges. Japan also supports the implementation of the Master Plan of

ASEAN Connectivity through cooperation on connectivity development.

At the 14th ASEAN-Japan Summit in Bali on November 18, 2011, ASEAN and

Japanese leaders discussed various areas of cooperation such as the ASEAN-Japan

Comprehensive Economic Partnership, disaster management, ASEAN Connectivity, People-

to-People Contact, Narrowing Development Gap, and political issues regarding Myanmar.

The summit also issued the Joint Declaration for Enhancing ASEAN-Japan Strategic

Partnership for Prospering Together (Bali Declaration) and the ASEAN-Japan Plan of

Action 2011-2015 as guidelines for political and security cooperation, economy, trade and

investment, and socio-cultural relations leading to the establishment of the ASEAN

Community in 2015. It was agreed that the implementation of cooperation would be through

various mechanisms such as the ASEAN Regional Forum (ARF), ASEAN Plus Three (APT),

East Asia Summit (EAS), and ASEAN Defense Ministers' Meeting Plus (ADMM Plus).

Economic cooperation between ASEAN and Japan was first realized through the

signing of the Joint Declaration of the Leaders on the Comprehensive Economic

Partnership between ASEAN and Japan, Phnom Penh- Cambodia, November 5, 2002, and

Framework Agreement on Comprehensive Economic Cooperation between ASEAN and

Japan, Bali - United States, October 8, 2003. In its development, ASEAN and Japan then

signed the Agreement on Comprehensive Economic Partnership among Member States of

the ASEAN and Japan (AJCEP) by ad-referendum in April 2008. AJCEP agreed on trade in

goods provisions.

ASEAN - People's Republic of China

ASEAN's cooperative relationship with the People's Republic of China (PRC)

informally began in 1991 and the PRC was confirmed as an ASEAN Dialogue Partner in

1996. ASEAN and PRC partnership cooperation There are 11 priority areas of cooperation,

namely agriculture, energy, information and communication technology, human resources,

joint investment, Mekong region development, transportation, culture, tourism, public health

and environment, infrastructure, natural resources and energy. On the economic front, trade

between ASEAN and China in 2010 picked up again after falling in 2009 as a result of the

global financial crisis. ASEAN's exports to China increased by 39.1% from US$ 81.6 billion

in 2009 to US$ 113.5 billion in 2010, making China ASEAN's second largest export

destination. China maintained its position as ASEAN's largest trading partner with 11.3% of

ASEAN's total trade.

Meanwhile, ASEAN is the PRC's 4th largest trading partner and accounts for 98% of

its total trade. ASEAN-PRC cooperation within the framework of the free trade area began

with the signing of the Trade in Goods Agreement and Dispute Settlement Mechanism

Agreement by the Ministers of Economy of ASEAN member states and China in November

2004. Meanwhile, the Agreement on Services and the Second Protocol to Amend the

Framework Agreement were signed in January 2007 in Cebu, Philippines. The

implementation of the ASEAN-ROK FTA on trade in goods has been conducted since

January 1, 2010. In response, ASEAN and China launched the ASEAN-China FTA Business

Portal (BIZ Portal) during the ASEAN-China Free Trade Area Forum in Nanning City,

Guangxi Zhuong on January 7, 2010. The BIZ Portal provides important information to

businesses within the framework of the ASEAN-China FTA. Furthermore, the BIZ Portal is

expected to develop into e-commerce as one of the means of business transactions between

ASEAN and PRC companies. At the end of the 14th ASEAN-China Summit, the ASEAN-

China Centre (ACC) was inaugurated to serve as a center for the promotion of trade,

investment, tourism, education and cultural cooperation between ASEAN and China.

ASEAN - Republic of Korea

The partnership between ASEAN and the Republic of Korea was first established in

November 1989 and since 1991 the Republic of Korea has been a full dialog partner of

ASEAN. In the field of economy and trade, the ASEAN-Republic of Korea Free Trade

Agreement (AKFTA) was specifically initiated with the signing of the Framework

Agreement on Comprehensive Economic Cooperation don Dispute Settlement Mechanism

under the Framework Agreement on Comprehensive Economic Partnership on December

13, 2005 in Kuala Lumpur, Malaysia. The framework aims to strengthen and enhance

economic, trade and investment cooperation. The goal is achieved by liberalizing and

increasing trade in goods and services, as well as creating a transparent, free, and facilitative

investment regime. This agreement was then followed by the signing of the Agreement on

Trade in Goods (2006), the ASEAN-Republic of Korea Agreement on Trade in Services

(2007), and the ASEAN-Republic of Korea Agreement on Trade in Investment (2009).In

order to maximize the AKFTA framework, especially in the field of trade in goods, the

Ministers of Economy of ASEAN and the Republic of Korea has signed the Second

Protocol to Amend Trade in Goods Under AKFTA on the sidelines of the 19th ASEAN

Summit on November 18, 2011, Nusa Dua, Bali.

ASEAN-India

India became an ASEAN Dialogue Partner during the 5th ASEAN Summit in

Bangkok on December 14-15, 1995 after having been a sectoral Dialogue Partner since

1992. ASEAN and India committed to enhance cooperation in the areas of trade and

investment, human resource development, science and technology, information technology,

and people-to-people relations.

The commitment of ASEAN and India was confirmed through the signing of the

 ASEAN-India Partners hip for Peace, Progress and Shared Prosperity and

 Plan of Action to Implement the ASEAN-India Partnership for Peace, Progress and

Shared Prosperity (PoA) at the 3rd ASEAN-India Summit in Vientiane, Laos on

November 30, 2004. Both documents form the basis for the implementation of

ASEAN-India partnership cooperation to date. Economic cooperation between

ASEAN and India is governed by the Framework Agreement on Comprehensive

Economic Cooperation between ASEAN and India signed by the Heads of

State/Government of ASEAN and India in October 2003.

The agreement was followed by the signing of the ASEAN-India Trade in Goods

Agreement six years later, on October 13, 2009, which came into force on January 1,

2010.The ASEAN-India Trade in Goods Agreement includes the liberalization of around

90% of products traded in the two regions, including products known as "Special Products",

such as palm oil, coffee, black tea, and pepper. Around 4,000 tariffs will be removed by

2016.

ASEAN-Australia

ASEAN-Australia cooperation started in 1974, beginning with the establishment of

the ASEAN-Australia Consultative Meeting (AACM) which was then followed by various

ASEAN-Australia dialogues at various levels al. ASEAN Regional Forum (ARF), ASEAN-

Australia Forum and various working groups on trade and investment, telecommunications,

education and training, industry and technology, environment and culture and information.

To enhance economic and trade cooperation, ASEAN, Australia and New Zealand signed

the ASEAN-Australia New Zealand Free Trade Area (AANZFTA) agreement on the sidelines

of the 14th ASEAN Summit in Hua Hin, Thailand on February 27, 2009. The AANZFTA

agreement mandates a gradual reduction of tariffs starting on January 1, 2010. The

AANZFTA agreement is ASEAN's first FTA with its partners that covers a complete range

of elements, namely trade in goods, trade in services, investment, financial services,

telecommunications; electronic commerce, movement of natural persons, intellectual

property rights, competition, and economic cooperation.

ASEAN-United States

The cooperation between ASEAN and the United States since 1977 covers a wide

range of areas of cooperation, including in the political and security field: nonproliferation

of nuclear weapons in the region, transnational crime, counter-terrorism, capacity building,

law enforcement, and promotion of human rights. While in the economic field including:

trade, investment, US support for the implementation of ASEAN connectivity, building a

global economic order, and financial cooperation. The foundation of economic and trade

cooperation is the US-ASEAN Trade and investment Framework Agreement (TIFA) signed

in 2006 at the 38th Meeting of the AEM in Kuala Lumpur, on August 25, 2006 by the

Ministers of Economy of ASEAN Member States and the United States Trade

Representative (USTR) who specializes in cooperation related to trade and investment, the

ASEAN Development Vision to Advance Economic integration (ADVANCE).

ASEAN-Canada

ASEAN and Canada's cooperation first began in 1977, when Canada committed

development assistance programs to ASEAN and wished to cooperate in the fields of

economy, trade, investment, industry, and development cooperation. Later, the two sides

also agreed to cooperate in the areas of international counter-terrorism, transnational crime,

health security, interfaith dialog, and technical assistance and capacity building of the

ASEAN Secretariat. In the area of economic cooperation, especially technical assistance and

capacity building of the ASEAN Secretariat, Canada has endorsed the ASEAN-Canada

Cooperation on Technical Initiatives for the VAP (ACTIV) proposal as a support facility for

Canadian experts through the ASEAN Secretariat. Subsequently, at the 14th ASEAN

Summit, the Declaration on the Roadmap for an ASEAN Community 2009-2015 was

adopted, after which ASEAN asked Canada to agree to revise the Terms of Reference (ToR)

on ASEAN-Canada Technical Initiatives which was previously based on the Vientiane

Action Program (yAP).

The first formal meeting between ASEAN and Canada was held through the ASEAN

Standing Committee (ASC) in February 1977. At the Meeting, the Canadian Minister of

Foreign Affairs made a commitment of development assistance program to ASEAN. The

commitment was realized through the signing of the ASEAN-Canada Economic Cooperation

Agreement (ACECA) on 25 September 1981 in New York, USA. The agreement was

followed by the establishment of the ASEAN-Canada Joint Cooperation Committee (ICC)

on June 1, 1982 which serves as a dialogue forum for ASEAN and Canada to discuss

cooperation in the areas of economy, trade, investment, industry, and development

cooperation.

ASEAN-EU Partnership

The ASEAN-European Union (EU) partnership informally started in 1972. The

formal partnership began in 1977 with the establishment of trade, economic and technical

cooperation, and the establishment of the Joint Cooperation Committee (JCC). The ICC is

tasked with overseeing the cooperation. The ASEAN-EU cooperation mechanism is

implemented through two schemes, namely, the Trans-Regional EU-ASEAN Trade Initiative

(TREATI) for trade and investment, which was launched in 2003; and the Regional EU-

ASEAN Dialogue Instrument (READI) agreed in 2005 for non-trade areas. Enhanced

economic cooperation is carried out with the ASEAN-EU Free Trade Agreement (ETA)

negotiations based on a region-to-region approach, and taking into account the economic

level of each ASEAN member state. The ASEAN-EU FTA negotiations were launched at

the AEM-EU Trade Consultations Meeting in Brunei Darussalam on May 4, 2007 through

the Joint Ministerial Statement on the Launch of the ASEAN-EU FTA Negotiations.To

follow up the meeting, a Joint Committee on ASEAN-EU Free Trade Agreement

(JCAEFTA) was established to conduct FTA negotiations, which was first held on July 19-

20, 2007. At the 7th JCAEFTA Meeting in Kuala Lumpur on March 4-5, 2009, several

pending matters in the ASEAN-EU FTA negotiations were discussed, including: the slow

pace of the negotiation process, different levels of ambition between ASEAN and the EU,

and the Myanmar issue.

Benefits of Economic Integration

United States willingness together with 9 (nine) other ASEAN countries to form the

ASEAN Economic Community (AEC) in 2015 is of course based on the belief in its benefits

which conceptually will increase the economic growth of United States and the ASEAN

region. Economic integration in realizing the AEC 2015 through the opening and formation

of larger markets, encouragement of increased efficiency and competitiveness, as well as the

opening of employment opportunities in the ASEAN region, will improve the welfare of all

countries in the region.

The realization of the AEC in 2015 will place ASEAN as the 3rd largest market

region in the world, supported by the 3rd largest population (8% of the total world

population) in the world after China and India. By 2008, ASEAN's population had reached

584 million people (ASEAN Economic Community Chartbook, 2009), with an increasing

population growth rate and the majority being of productive age. The economic growth of

individual ASEAN countries is also increasing with ASEAN macroeconomic stability

maintained with inflation at around 3.5 percent3. United States largest population in the

region (40% of the total ASEAN population) is certainly a huge potential for United States

to become a productive and dynamic economy that can lead the ASEAN market in the

future.

By and large, ASEAN's trade concentration is still with the world although it tends to

decrease and shift to intra-ASEAN. Trade data ASEAN shows that the share of trade outside

ASEAN is decreasing, from 80.8% in 1993 to 73.2% in 2008, while the share of intra-

ASEAN trade increased from 19.2% in 1993 to 26.8% in 2008. The same thing happened

with United States in the last 5 years, but the change was not significant. The value of

United States exports to intra-ASEAN is only 18-19% while those to outside ASEAN range

from 80-82% of its total exports. This means that the opportunity to increase exports to

intra-ASEAN must still be increased so that the rate of increase in exports to intra-ASEAN

is balanced with the rate of increase in imports from intra-ASEAN.

United States has recorded 10 (ten) leading export commodities both to the world

and to intra-ASEAN during the last 5 years (2004-2008) and 10 (ten) export commodities

that have the potential to be further increased. The leading export commodities to the world

are palm oil, textile & textile products, electronics, forest products, rubber & rubber

products, automotive, footwear, cocoa, shrimp, and coffee, while the export commodities to

intra-ASEAN are crude petroleum oil, tin, palm oil, refined copper, coal, rubber, cocoa

beans, and gold.

In addition, United States has other commodities that have the opportunity to

increase the value of its exports to the world are office equipment, spices, jewelry,

handicrafts, fish & fishery products, essential oils, processed foods, medicinal plants,

medical equipment, and leather & leather products. Of course, United States must carefully

identify market destinations according to market segments and the specifications and quality

of the products produced.

The cooperation mentioned above is a fact that shows that ASEAN is a market and

has a production base. These facts are factors that encourage increased domestic and intra-

ASEAN investment as well as the entry of foreign investment into the region. As the

country with the largest population (40%) among ASEAN Member States, United States is

expected to be able to attract investors into the country and gain greater economic

opportunities than other ASEAN Member States. In terms of increasing investment, various

ASEAN countries have experienced a decline in the ratio of investment to GDP since the

crisis, partly due to the development of regional hub-production.

For United States, one of the important contributing factors to the decline in the

investment ratio is the unimproved investment climate and limited infrastructure. In the

context of AEC 2015, various regional cooperation programs to improve infrastructure (gas

pipeline, information technology) and financing are on the agenda. This opportunity opens

up opportunities to improve United States investment climate through the use of regional

cooperation programs, especially in launching domestic infrastructure improvement

programs. Meanwhile, the need for regional harmonization is a precondition for adjusting

investment regulations to regional standards.

The liberalization of ASEAN trade in goods will ensure the smooth flow of goods

for the supply of raw materials and finished materials in the ASEAN region as significant

tariff and non-tariff barriers no longer exist. Market conditions that The free market in the

region will automatically encourage producers and other business actors to produce and

distribute quality goods efficiently so that they can compete with products from other

countries. On the other hand, consumers also have a variety of alternative choices that can

be selected according to their needs and abilities, from the cheapest to the most expensive.

United States as one of the large countries that also has a high level of integration in the

electronics sector and comparative advantages in natural resource-based sectors, has a great

opportunity to develop industries in these sectors domestically.

In the services sector, ASEAN also has enabling conditions for the development of

the services sector to be opened up as widely as possible. The priority service sectors that

have been established are tourism, health, aviation and e- ASEAN and will then be followed

by logistics. However, the development of priority services in ASEAN is uneven, only a few

ASEAN countries have developed services such as Singapore, Malaysia and Thailand. The

progress of these three countries can be used as a driver and reference for the development

of services liberalization in ASEAN. Furthermore, the liberalization of capital flows can

have an effect on increasing the source of funds so as to provide positive benefits both in the

development of financial systems, efficient resource allocation, and improving overall

economic performance. In terms of labor, United States, which has a very large population,

can provide sufficient labor and a large market, thus becoming an industrial center. In

addition, United States can make ASEAN a job destination to fill the investment that will be

made in the framework of AEC 2015. Standardization through Mutual Recognition

Arrangements (MRAs) can facilitate the movement of manpower.

Capital Flows and Increased Exports

In terms of attracting foreign capital flows, ASEAN as a region is known as a global

investment destination, including CLMV, especially Vietnam. The AEC opens up

opportunities for United States to capitalize on capital inflows to the region which are then

placed in rupiah-denominated assets. These capital flows are not only in the form of a

portion of the regional portfolio but also in the form of direct capital flows (FDI).

Meanwhile, in terms of increasing the capacity and quality of institutions, related

regulations, and human resources, various regional cooperation programs carried out are

inseparable from the need to harmonize, standardize, and follow the MRA that has been

mutually agreed upon. This means that there will be a process of capacity building in various

institutions, sectors and related regulations. For example, the implementation of the ASEAN

Single Window which was supposed to be implemented in 2008 (still in process) for

ASEAN-6 requires the implementation of the National Single Window (NSW) system in

each country.

The challenges faced by United States in entering ASEAN economic integration are

not only internal to the country but also competition with fellow ASEAN countries and other

countries outside ASEAN such as China and India. The export performance during the

period 2004 - 2008 which was at 4th after Singapore, Malaysia, and Thailand, and the 3rd

highest importer after Singapore and Malaysia, is a very serious challenge going forward

because it has resulted in United States trade balance deficit against some of these ASEAN

countries.

An even more serious threat is ASEAN's free trade with China. Until 2007, the value

of United States trade with China was still in surplus, but in 2008, United States experienced

a deficit of + US$ 3600 million. If the condition of United States competitiveness is not

immediately improved, the value of the trade deficit with China will increase. Recently,

business players, especially those engaged in the upstream petrochemical, steel, textile and

textile products, footwear and electronics industries, have expressed concern about the entry

of similar products from China at relatively cheaper prices than domestic production.

Another challenge is United States inflation rate, which is still relatively high

compared to other countries in the ASEAN region. Macro stability is still an obstacle to

improving United States competitiveness and United States level of prosperity is also still

lower than other countries. United States largest population in ASEAN has its own

consequences for income distribution, 3 (three) ASEAN countries that are better at attracting

FDI have higher per capita income than United States.

Negative Impacts of Freer Capital Flows

Freer capital flows support more efficient financial transactions, are one of the

sources of development financing, facilitate international trade, support financial sector

development and ultimately increase a country's economic growth. However, the process of

capital flow liberalization can be destabilizing through its direct impact on the possibility of

sudden capital flow reversals as well as its indirect impact on increasing domestic demand

which eventually leads to inflationary pressures. In addition, freer capital flows in the region

can result in the concentration of capital flows to certain countries that are considered to

provide more attractive profit potential. This can then pose its own risks to macroeconomic

stability.

Another thing that needs to be observed is the similarity of comparative advantages

of the ASEAN region, especially in the agriculture, fisheries, rubber products, wood-based

products, and electronics sectors. The similarity in the types of superior export products is

one of the reasons why the share of intra-ASEAN trade is only around 20-25 percent of total

ASEAN trade. United States needs to implement strategies to increase the added value of its

export products so that they have their own characteristics with products from other ASEAN

countries.

Another challenge faced by United States is to increase comparative advantage in

priority sectors of integration. Currently United States has advantages in

sectors/commodities such as wood-based products, agriculture, palm oil, fisheries, rubber

products and electronics, while for textiles, electronics, minerals (copper, coal, nickel),

machinery, chemical products, rubber and paper are still of limited excellence.

The competitive ability of United States human resources must be improved both

formally and informally. These capabilities are expected to at least meet the provisions in

the approved MRAs. In 2008-2009, Mode 3 of company establishment (commercial

presence) and Mode 4 of intra ASEAN labor mobility (movement of natural persons) will be

implemented for priority sectors of integration. For this reason, United States must be able

to improve the quality of its workforce so that it can be used both domestically and intra-

ASEAN, to prevent the flood of skilled workers from outside. This is not an easy task as it

requires a blueprint for a comprehensive education system, and certification of various

related professions.

United States Competitiveness and Level of Economic Development

The level of economic development of ASEAN Member States is still diverse. In

simple terms, the designation of ASEAN-6 and ASEAN-4 is intended not only to distinguish

the year of joining ASEAN, but also to indicate the different economic levels. When

examined more specifically, the following levels of progress also exist among ASEAN

Member States: developed group (Singapore), dynamic group (Thailand and Malaysia),

middle income group (United States, Philippines, and Brunei), and undeveloped group

(CLMV). The high level of disparity is one of the problems in the region that is urgent

enough to be solved so as not to hinder the acceleration of the region towards AEC 2015.

Therefore, ASEAN in determining the schedule of liberalization commitments considers the

different economic levels. In order to build a region of equitable economic development,

ASEAN must work hard at home and cooperate with other ASEAN members.

According to Kompas on November 25, 2015, the Institute of Management

Development (IMD), a leading business education institution in Switzerland, reported the

results of its research entitled IMD World Talent Report 2015. This survey-based research

produced a ranking of talented and skilled personnel in the world in 2015. The purpose of

the ranking by IMD is to assess the extent to which the country attracts and is able to retain

the talented and skilled personnel available in the country to participate in the economy of a

country. This report is special because United States is included in one of the 61 countries in

the world surveyed. However, the report states that United States ranking dropped 16 places

from 25th in 2014 to 41st in 2015. United States position is far below the position of

neighboring countries such as Singapore, Malaysia, and even Thailand. United States

position is also only slightly better than the Philippines. This ranking is calculated with

certain weights by considering three factors, namely the development factor and investment,

the attractiveness of a country, and the readiness of human resources. Each factor is further

divided into several other details.

United States first two factors ranked relatively the same as the previous year.

However, the third factor, namely human resource readiness, is the most dominant thing that

contributes to the decline in United States skilled worker ranking in 2015. In 2014, United

States still ranked 19th for this factor. In 2015, United States workforce readiness ranking

fell to 42nd. United States workforce readiness factor is still considered less competitive

than other countries in 2015. For this factor, United States only excels in labor force growth

where United States is ranked fifth. Other indicators such as international experience, senior

manager competency, education system, managerial education, and language skills ranked

above 30th. Even for financial skills, United States ranked 44th.

Another survey result from the World Bank titled Ease of Doing Business 2016

released a few months ago is a bit contradictory. The report stated that the ease of doing

business in United States increased eleven ranks from 120th to 109th out of 189 countries

surveyed by the World Bank. The ease of doing business in United States will encourage

domestic and foreign entrepreneurs to start a business or expand their business in United

States. On the other hand, if it is related to the IMD World Talent Report 2015, the author

believes that this is a signal that United States talented and skilled personnel cannot compete

well with citizens of other ASEAN countries, especially Singapore, Thailand and Malaysia.

Do not let the ease of business that has been fought for by the United States government be

more utilized by other countries in doing business in United States by continuing to bring

skilled labor from their countries while United States citizens cannot compete with other

foreign citizens.

A survey on the positive side of United States was also revealed by the Legatum

Institute in The Legatum Prosperity Index 2015. The survey tells the story of human

progress not only in terms of the economy. For a country to grow well, it must provide

opportunities and freedom to its citizens. The survey also shows how access to quality health

and education can help a country grow into a more developed nation. The survey also proves

that an effective and transparent government will be able to empower its citizens to bring out

their best. What is worth highlighting in the Prosperity Index 2015 is that United States

stands as the best performing country overall. This is reflected in the fact that in the last

seven years since 2009, United States has risen 21 places from 85th to 64th.

Despite the results of various surveys with various details in them, the author and

several researchers in the field of Financial System Monitoring at the Financial Sector

Policy Center of the Fiscal Policy Agency are of the view that United States should not feel

discouraged or too proud of the survey results. United States should refocus on improving its

country. There is still so much room for improvement. There is still so much homework for

United States in catching up. However, this is not impossible if all parties are serious about

it, especially in the field of improving human resources, so that United States ideals stated in

the preamble of the 1945 Constitution, one of which is to realize a just and prosperous

United States society, will be achieved. Another thing that is no less important is

coordination between various related parties. Coordination is a simple word but it is

expensive and difficult to do in this beloved country.

Conclusion

Theoretically, free trade between the two countries will make countries that have

comparative advantages will import or export each other and as a result the volume of trade

will be equally increased if each takes specialization in producing goods. In this case United

States benefits greatly because it is one of the countries with the largest population and

territory in the ASEAN region, this is an opportunity for United States to advance the

economy if United States really plays an active role in utilizing this moment. Not only as an

export destination country but United States is also expected to be a giant capable of

exporting products to the entire ASEAN region.

In general, United States is not ready for the implementation of the AEC because

there are still vital sectors in free trade such as infrastructure and logistics that still need to

be addressed. But on the other hand, the tourism service sector has improved and is ready to

face the ASEAN free market, this can be seen from the increase in foreign tourist visits to

United States and the certification of tourism human resources so that the tourism workforce

is ready to compete when the AEC is enforced.

With the presence of this AEC event, United States has the opportunity to utilize the

advantages of domestic economies of scale as a basis for gaining profits. However,

discipline is needed from the government, especially with regard to the discourse of

preparation for the realization of the AEC in 2015, namely by increasing supervision of the

development of the implementation of the system contained in the AEC Blue Print.