EXECUTIVE SUMMARY
- Establishing a comprehensive regulatory framework to build trust in data sharing between stakeholders and to enhance domestic data flows in ASEAN countries are urgent concerns. This is a precondition for enhancing cross-border data flows and promoting e-commerce in the region.
- An analysis of 14 regulatory elements using data from the World Bank’s Global Data Regulation Diagnostic Survey in 2021 reveals that regulatory frameworks to enable domestic data flows are unevenly developed across different enablers and ASEAN countries. These divergences may be exacerbated by different degrees of enforcement of laws and regulations.
- E-commerce and e-transactions-related laws and regulations are the only area in which all ASEAN countries are doing relatively well. Enabling reuse of public intent data is moderately developed, while enabling reuse of private intent data is the weakest area of performance in most ASEAN countries.
- Limited reuse of public and private intent data means that e-commerce firms and consumers in ASEAN have not yet reaped the full benefits of data flows. Unlocking domestic data flows requires a two-pronged approach, i.e. enabling reuse of public intent data and enabling reuse of private intent data.
- The reuse of public intent data should be enhanced by adopting regulatory frameworks of common technical standards and open licensing regime for data; allowing individuals and firms to access public sector data that have not been published on an open data platform; and establishing policies on open data and data classification.
- The reuse of private intent data should be enhanced by encouraging open data licenses among private firms, promoting data portability right for individuals, and strengthening public-private partnership to utilize the digital identification system.
* Sithanonxay Suvannaphakdy is Lead Researcher at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute, where he undertakes policy-oriented research on ASEAN’s economic integration. He is grateful to valuable comments and suggestions from Tham Siew Yean and Sharon Seah. All remaining errors are his own.
ISEAS Perspective 2022/32, 4 April 2022
* Sithanonxay Suvannaphakdy is Lead Researcher at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute, where he undertakes policy-oriented research on ASEAN’s economic integration. He is grateful to valuable comments and suggestions from Tham Siew Yean and Sharon Seah. All remaining errors are his own.
INTRODUCTION
The rapid growth of electronic commerce (e-commerce) and availability of digital platforms (e.g. social networks, e-commerce marketplaces) present an opportunity for small and medium-sized enterprises (SMEs) in ASEAN to increase their participation in domestic and international markets. E-commerce is defined as the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders.[1] Global retail e-commerce sales have been estimated to grow by 14.3 percent, from US$4.28 trillion in 2020 to about US$4.89 trillion in 2021.[2] About 50 million SMEs use Facebook to find customers; 70 percent of their fans are domestic, and 30 percent are from outside the country.[3] Retail e-commerce sales in ASEAN are estimated to grow faster than those in the world, with a growth rate of 26.1 percent from US$59 billion in 2020 to US$74.4 billion in 2021.[4]
One key towards enabling e-commerce is the enhancement of data flows. The free flow of data reduces transaction costs, accelerates the spread of ideas, and allows users to make use of new research and technologies. This is particularly important for ASEAN, where the e-commerce chapter under the Regional Comprehensive Economic Partnership (RCEP) Agreement aims to create a conducive environment for e-commerce through protection of online consumers and online personal data as well as facilitating cross-border data flows. However, ASEAN countries tend to allow different degrees of domestic data flows, which restrict cross-border data flows in the region. Data flow restrictions can impose costs on local firms as they are not free to use the most convenient data processing provider, and may have to pay for more expensive services when transferring data.
The present study investigates the extent to which regulatory frameworks in ASEAN countries have allowed the use, reuse or sharing of domestic data by the government, e-commerce firms, and e-commerce consumers. Domestic regulatory frameworks serve as a basis to promote regional regulatory cooperation on data. The RCEP provisions on e-commerce may offer an important signal to ASEAN’s e-commerce markets on the future of cross-border data flows. Yet, until policy makers have the confidence that allowing data to leave their borders will not undermine domestic regulatory goals, there will remain a strong incentive to restrict cross-border data flows.
Following the World Bank (2021),[5] regulatory frameworks for data sharing are assessed against three enablers, namely electronic transactions (e-transactions), public intent data, and private intent data. Public intent data refers to data collected with the intent of serving the public good by informing the design, execution, monitoring, and evaluation of public programmes and policies. Such data include administrative, census and survey data produced by government agencies, citizen-generated data produced by individuals, and machine-generated data produced without human interactions.[6] Private intent data refers to data collected by the private sector as part of routine business processes. Such data include transaction and browsing histories, mode of payments, internet protocol (IP) addresses, and smartphone app logs. These three enablers aim to capture policies, laws, regulations, and standards that facilitate the use, reuse, and sharing of data within and between stakeholder groups through openness, interoperability, and portability.
The enablers of domestic data flows are further broken down into 14 regulatory elements. Enabling e-transactions involves four elements, namely legal basis for e-commerce or e-transactions, legal equivalence, legal recognition of electronic signatures, and digital identification (ID) system for online service access. Enabling public intent data consists of six elements, namely mandatory use of common technical standards for data, open data policies, data classification policy, mandatory use of common data classification, individuals’ right to access government data, and adoption of open licensing regime. Enabling private intent data consists of four elements, namely individuals’ right for data portability, individuals’ right to obtain machine-readable data, private sector’s ability to digitally verify ID, and mandatory licensing of essential data.
This study focuses on nine ASEAN countries, namely Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, and utilizes the World Bank’s Global Data Regulation Diagnostic Survey in 2021.[7] The survey collected information on attributes of the regulatory framework in 80 countries, which provides details on regulatory status of data-related laws and regulations in sample countries as of June 1, 2020. This study does not include Brunei because of data unavailability; that country was not included in the survey.
Findings in this study reveal that regulatory frameworks to enable data flows in ASEAN are unevenly developed across different enablers and countries. These divergences may be exacerbated by different degrees of enforcement of laws and regulations. E-commerce and e-transactions-related laws and regulations are the only area in which all ASEAN countries are doing relatively well. Enabling reuse of public intent data is moderately developed. Enabling reuse of private intent data is the weakest area of performance in ASEAN countries, except in Malaysia and the Philippines (Table 1).
ENABLING ELECTRONIC TRANSACTIONS
Data are used or transferred via electronic transactions. Laws and regulations governing e-commerce and e-transactions create trust in both public and private sectors that engage in online data transactions. Adoption of e-commerce and related legislation is widespread across ASEAN countries. Indonesia, Malaysia, Singapore and Thailand have constituted all e-commerce and related legislation. Cambodia, Laos, Myanmar, and Vietnam have not yet established government-recognized digital ID systems that enable people to remotely authenticate themselves to access online services. The Philippines have not yet established the government-recognized digital ID system and legal recognition of e-signatures (Table 2).
Establishing e-commerce laws and legal equivalence of paper-based and electronic communications
All nine ASEAN countries in this study have constituted their e-commerce laws, which is an essential condition to enable e-commerce. They have also established legal equivalence of paper-based and electronic communications (Table 2). Such legal equivalence allows the online transaction, contract, or communication to have the same legal value to physical transactions such as a signature on a paper contract or physical evidence.
Establishing legal recognition of electronic signatures
E-signatures are signatures that are expressed in an electronic form. Fully recognized and enforced e-signatures are essential to allow for remote electronic contracts and transactions as businesses engaged in e-commerce expand their network of clients and suppliers both within and across borders. Some examples of e-signatures include clicking the ‘Agree’ button of a website’s Terms and Conditions, a scanned image of a handwritten signature, a tick-box at the end of an online form, and a drawn signature using mobile device.[8] Except for the Philippines, ASEAN countries have established the legal recognition of e-signatures (Table 2).
Introducing digital identification system
The digital ID system provides reliable authentication and enables delivery of a range of services via web or mobile applications that require proof of identity. It collects and validates attributes to establish a person’s identity, which can be used by identity-holders to prove their identity, for example to employers, financial institutions or government agencies.
Four of nine ASEAN countries included in the survey have established government-recognized digital ID systems that enable people to remotely authenticate themselves to access online services. They are Indonesia, Malaysia, Singapore, and Thailand. The remaining five countries, namely Cambodia, Laos, Myanmar, the Philippines, and Vietnam, do not have such systems (Table 2).
In e-commerce, the use of digital ID reduces time and costs for business transactions by securing digital payments and streamlining processes of registration, authentication, corporate registrations, permits, and authorizations. An empirical study by McKinsey Global Institute[9] reveals that countries implementing full digital ID coverage, namely Brazil, China, Ethiopia, India, Nigeria, the United Kingdom and the United States, could create economic value equivalent to 3 to 6 percent of GDP by 2030. ASEAN countries should also gain from the digital ID system if they fully implement and interoperate it across private and public service providers both within and across countries.
ENABLING REUSE OF PUBLIC INTENT DATA
Regulations enabling access and reuse of public intent data are unevenly developed across ASEAN countries. Indonesia and Thailand have established all necessary regulations to enhance access and reuse of public intent data, while Cambodia and Laos have not yet established any of them. The Philippines needs to constitute the mandatory use of common technical standards for exchanging data across governments’ entities. Malaysia needs to introduce regulatory frameworks on the mandatory use of common data classification and individuals’ right to access government data. Singapore needs to establish regulatory frameworks on data classification, mandatory use of common technical standards, and individuals’ right to access government data. Vietnam needs to constitute regulatory frameworks on open data, mandatory use of common technical standards, and open licensing regime for data (Table 3).
Establishing open data policies
A country’s public sector data being prepared for publication can be classified on a spectrum from closed to open. The degree of data openness depends on four factors, namely accessibility, machine readability, cost and rights for reuse and redistribution.[10] According to Open Knowledge Foundation,[11] a piece of data is open if anyone is free to use, reuse, or redistribute it – subject only, at most, to the requirement to attribute and share-alike. Using this definition, five out of nine ASEAN countries have established an open data act or open data policy applicable across the entire public sector. They are Indonesia, Malaysia, the Philippines, Singapore, and Thailand. The remaining four countries, namely Cambodia, Laos, Myanmar, and Vietnam, have not yet done so (Table 3).
Establishing open data policies serve as a stepping stone to enable value creation for boosting economic growth. Such value benefits governments, firms and consumers in three channels, including decision making, new products and services, and transparency. Open data enables decision makers to use a fact base for making more informed and objective choices using information that is often available in real time. It also enables firms to better understand potential markets and to design new data-driven products. Moreover, it enables citizens to monitor government activities such as tracking public expenditures and impacts. An empirical study by McKinsey Global Institute[12] reveals that the combination of three value channels of open data – decision making, new products and services, and transparency – can generate more than US$3 trillion annually for the global economy.
Ensuring unified data classification standards
Data classification policies typically require the classification of data based on their sensitivity such as classified, confidential, or business use only. In ASEAN, six out of nine countries have established policies or directives on government data classification. These include Indonesia, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam. The practical effect of data classification policies in some countries such as Malaysia tends to be limited because it is not mandatory to use the common data classification categories across all government database applications or document management systems. The remaining three countries, namely Cambodia, Laos and Singapore, have not yet established data classification policies (Table 3).
Allowing access to information
Access to information (ATI) legislation enables individuals or firms to access public sector data that have not been published on an open data platform. The degree of the ATI legislation for enabling public data access depends on the scope of the exemption categories for disclosure. Greater scope of the exemption categories reduces the degree of public data access.
In ASEAN, four out of nine countries have established ATI legislation that grants individuals the right to access government records or data. These include Indonesia, the Philippines, Thailand, and Vietnam. However, these countries have placed significant exceptions on an individual’s rights to access public information under such legislation. These exceptions include sensitive information on national security, defence, or foreign policy grounds; trade secrets or other commercial interests; personal data; law enforcement; and privileged information. The remaining five countries, namely Cambodia, Laos, Malaysia, Myanmar, and Singapore, have not yet established ATI legislation to allow public data access (Table 3).
Adopting an open licensing regime for data
An open license for data grants rights to anyone and is subject to certain minimal conditions like attribution of the data’s owner. If data is not licensed legally, it cannot be used by anyone else. In ASEAN, five out of nine countries have adopted some forms of open licensing regime for public intent data. They are Indonesia, Malaysia, the Philippines, Singapore, and Thailand (Table 3).
The Government of Singapore, for example, launched the one-stop portal called ‘data.gov.sg’ in 2011 to communicate government data and analysis through visualizations and articles, and to facilitate analysis and research. Such a portal contains publicly-available datasets from 70 public agencies and more than 100 apps created by the use of government’s open data.[13] By accepting the license, users can use, access, download, copy, distribute, transmit, modify and adapt the datasets, or any derived analyses or applications.
Adopting a legal framework of common technical standards for data
According to the Federal Enterprise Data Resources of the United States,[14] a technical standard for data refers to a specification that describes the way in which data should be stored or exchanged for the consistent collection and interoperability of that data across different systems, sources and users. The legal framework of common technical standards for data aims to ensure that all government entities connect to and use the government’s interoperability platform as a vehicle for exchanging data.
In ASEAN, three out of nine countries have adopted a full range of common technical standards, such as the principles of FAIR (findable, accessible, interoperable, and reusable), that enable the interoperability of systems, registries, and databases. These include Indonesia, Malaysia, and Thailand (Table 3). Malaysia and Thailand have established standards for open application programming interfaces (APIs) for government to government (G2G), government to business (G2B), and government to consumer (G2C) services; standardized communications protocols for accessing metadata; and developed semantic catalogues for data and metadata. Indonesia has standardized communications protocols for accessing metadata; and developed semantic catalogues for data and metadata.
ENABLING REUSE OF PRIVATE INTENT DATA
Regulations enabling access and reuse of private intent data are lagging those for public intent data across ASEAN countries. Four out of nine ASEAN countries have not yet established any necessary regulations to enable access and reuse of private intent data. These include Cambodia, Laos, Myanmar, and Thailand. Malaysia has not yet established a regulatory framework to allow individuals to access data portability, while the Philippines needs to constitute a regulatory framework on mandatory licensing of essential data. Indonesia, Singapore and Vietnam need to establish regulatory frameworks on mandatory licensing of essential data, individuals’ right for data portability, and individuals’ right to obtain portable data in a machine-readable format (Table 4).
Mandatory licensing of essential data
Open data licenses allow users to freely share, modify, and use a database without regard to copyright or other intellectual property rights (IPR) or limitations around data ownership. Open licenses of non-personal data could be done voluntarily by IPR holders, or implemented on a compulsory basis by regulators to avoid market distortions. In ASEAN, only Malaysia (e.g. standard-setting organizations) has mandated IPR holders to provide voluntary licensing access to critical data or applications based on FRAND (fair, reasonable, and non-discriminatory) terms. Other ASEAN countries have not yet done so (Table 4).
Promoting open data licenses based on FRAND terms can be a useful mechanism in enhancing technological innovation such as development of e-commerce platforms or websites in ASEAN. IPR holders do not necessarily share their data or applications for free, but they should offer them on reasonable and non-discriminatory terms. This means that they can control access to licensed products and receive returns on their investments. This should reduce costs of access to licensed products of dominant platforms incurred by micro, small, and medium-sized enterprises (MSMEs), and hence promote more inclusive growth of e-commerce in the region.
Promoting data portability right for individuals
According to the Information Commissioner’s Office of the United Kingdom,[15] the right to data portability allows individuals to obtain and reuse their personal data provided to data controllers (e.g. e-commerce stores) for their own purposes across different services. This facilitates the movement or transfer of personal data from one e-commerce store to another in a safe and secure way. In ASEAN, only the Philippines has allowed individuals to request the transfer of their personal data from one data controller to another service or product provider. The remaining ASEAN countries have not yet done so (Table 4).
Accessing a machine-readable format of data portability
Transferring personal or nonpersonal data from one e-commerce firm to another requires the use of a standard machine-readable format. In ASEAN, only Malaysia and the Philippines have granted the right of individuals to access their data processed by data controllers in a machine-readable format. The remaining seven ASEAN countries have not yet done so (Table 4). The lack of standard data format restricts the potential benefits of data portability right for individuals as data provided in one e-commerce firm may not be compatible with those of other firms.
Strengthening public-private partnership to utilize the digital ID system
Digital ID systems play an important role in promoting e-commerce development. Firms — including banking and financial services, mobile operators and e-commerce platforms — must verify and authenticate the identities of their users at various points in the customer lifecycle. The key data source to validate customer identity is typically a government-provided or recognized credential, such as national ID or passport. Lack of authoritative proof of identity reduces customer pools and increases administrative overhead and risks of fraud for e-commerce firms.
In ASEAN, only four out of nine countries have allowed private sector service providers to digitally verify or authenticate the identity of a person against data stored in the ID system. These include Indonesia, Malaysia, Singapore, and Vietnam. The remaining five countries have not yet done so (Table 4).
CONCLUSION AND POLICY IMPLICATIONS
The findings in this study confirm that establishing a comprehensive regulatory framework to increase trust on data sharing between stakeholders is an urgent priority to enhance domestic data flows in ASEAN countries. This is a precondition to enhance cross-border data flows and to promote e-commerce in the region. Regulatory frameworks to enable data flows are unevenly developed across different enablers and countries. These divergences may be exacerbated by different degrees of enforcement of laws and regulations. E-commerce and e-transactions-related laws and regulations are the only area in which all ASEAN countries are doing relatively well. Enabling reuse of public intent data is moderately developed, while enabling reuse of private intent data is the weakest area of performance in most ASEAN countries.
At the domestic level, limited reuse of public and private intent data means that e-commerce firms and consumers in ASEAN countries have not yet reaped full benefits of data flows. Unlocking potential benefits of data flows requires a two-pronged approach, including enabling reuse of public intent data on the one hand and enabling reuse of private intent data on the other. Reuse of public intent data should be enhanced by adopting a legal framework of common technical standards and an open licensing regime for data; allowing individuals or firms access to public sector data that have not been published on an open data platform; and establishing open data policies as well as policies or directives on government data classification. Reuse of private intent data should be improved by encouraging open data licenses between private firms, promoting data portability right for individuals, and strengthening public-private partnership to utilize the digital ID system.
At the regional level, there are a number of multilateral arrangements to facilitate cross-border data flows. These include the RCEP provisions on e-commerce and the ASEAN e-Commerce Agreement. The effectiveness of these arrangements depends on the extent to which regulatory frameworks on data sharing are coherent across countries. Regulatory divergence reduces cross-border data flows, while regulatory convergence increases them. Since ASEAN countries are in the early stage of developing their regulatory frameworks for sharing public and private intent data, policymakers and regulators should embed international best practices into their domestic rule-making procedures and prevent regulations creating unnecessary barriers to cross-border data flows in the future. Meanwhile, ASEAN countries should explore the possibility to establish mutual recognition arrangements and/or harmonize their data-related regulations both within and outside the region. Greater coherent data-related policies should boost e-commerce in regional and international markets.
A key limitation in the present study is that it focuses only on the regulatory frameworks of data enablers to promote trust on data sharing between stakeholders. There are other factors that affect trust on data sharing such as regulatory frameworks of data safeguards. Data safeguards promote trust in the data governance and data management ecosystem by avoiding and limiting harm arising from the misuse of data or breaches affecting their security and integrity. Building safeguards for trusted data use in ASEAN will be a subject for future research.
ENDNOTES
[1] OECD, Glossary of Statistical Terms: https://bit.ly/3qZZRQF. Accessed February 25, 2022.
[2] eMarketer, Global E-commerce Update 2021: https://www.emarketer.com/content/global-ecommerce-update-2021. Accessed February 25, 2022.
[3] McKinsey Global Institute. 2016. Digital Globalization: The New Era of Global Flows. McKinsey & Company.
[4] eMarketer: https://www.emarketer.com/content/southeast-asia-ecommerce-forecast-2022. Accessed March 3, 2022.
[5] World Development Report. 2021. World Development Report 2021: Data for Better Lives. Washington, DC: World Bank.
[6] World Bank, Data as a Force for Public Good: https://wdr2021.worldbank.org/stories/data-as-a-force-for-public-good. Accessed March 6, 2022.
[7] World Bank, Global Data Regulation Diagnostic Survey Dataset 2021: https://microdata.worldbank.org/index.php/catalog/3866. Accessed February 20, 2022.
[8] Sleek: https://sleek.com/sg/resources/electronic-signatures-are-legal-in-singapore. Accessed February 20, 2022.
[9] McKinsey Global Institute. 2019. Digital Identification: A Key to Inclusive Growth. https://www.mckinsey.com/~/media/mckinsey/business%20functions/mckinsey%20digital/our%20insights/digital%20identification%20a%20key%20to%20inclusive%20growth/mgi-digital-identification-executive-summary.pdf
[10] Chui, M., Farrell, D., Jackson, K. 2014. How Government Can Promote Open Data. McKinsey Global Institute. https://www.mckinsey.com/~/media/mckinsey/industries/public%20and%20social%20sector/our%20insights/how%20government%20can%20promote%20open%20data/how_govt_can_promote_open_data_and_help_unleash_over_$3_trillion_in_economic_value.pdf
[11] Open Knowledge Foundation, Open Data Handbook: http://opendatahandbook.org/guide/en/what-is-open-data. Accessed February 20, 2022.
[12] Chui, M., Farrell, D., Jackson, K. 2014. How Government Can Promote Open Data. McKinsey Global Institute. https://www.mckinsey.com/~/media/mckinsey/industries/public%20and%20social%20sector/our%20insights/how%20government%20can%20promote%20open%20data/how_govt_can_promote_open_data_and_help_unleash_over_$3_trillion_in_economic_value.pdf
[13] Government of Singapore: https://data.gov.sg/about. Accessed February 20, 2022.
[14] Federal Enterprise Data Resources of the United States: https://resources.data.gov/standards/concepts/. Accessed on February 23, 2022.
[15] Information Commissioner’s Office of the United Kingdom, Right to Data Portability: https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/individual-rights/right-to-data-portability. Accessed on February 23, 2022.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support/get-involved-with-iseas/ | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha. Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- The European Council reached agreement on an EU Strategy for Cooperation in the Indo-Pacific in April 2021, and in September, it presented a Joint Communication providing further rationale for its strategy. This paves the way for the EU to join the other long-standing advocates of the Indo-Pacific strategy.
- This paper looks into the various dimensions of the EU’s Indo-Pacific strategy and examines the similarity of its approach with the ASEAN Outlook on the Indo-Pacific (AOIP) and how the two regional blocs may find synergy in implementing their respective guiding documents.
- The EU’s Indo-Pacific strategy can add a strong normative dimension to the Indo-Pacific region to allow it to work closely with like-minded Indo-Pacific partners. As is the case with ASEAN, the EU places importance on building partnerships and reinforcing multilateral cooperation.
- The presence of the EU may help dilute major power rivalries in the region. ASEAN was mentioned 31 times in the EU’s Joint communication on its strategy, including a specific section on the “Centrality of ASEAN”. ASEAN appears to be at the core of the EU’s Indo-Pacific strategy.
* Joanne Lin is Lead Researcher in Political-Security Affairs at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute.
ISEAS Perspective 2021/164, 16 December 2021
INTRODUCTION
On 19 April 2021, The European Council agreed on an EU Strategy for Cooperation in the Indo-Pacific.[1] A Joint Communication was subsequently presented by the High Representative of the Union for Foreign Affairs and Security Policy on 16 September 2021,[2] providing further rationale for its approach and to its strategy.
This paves the way for the EU to join the other long-standing advocates of the Indo-Pacific region, predominantly the members of the Quadrilateral Security Dialogue (QUAD), i.e. Australia, India, Japan and the United States (U.S.), and other countries that have a lesser degree of Indo-Pacific commitment such as ASEAN member states, as well as New Zealand, the Republic of Korea and the United Kingdom – all of which are ASEAN’s dialogue partners.
This paper looks briefly into various dimensions of the EU’s Indo-Pacific strategy. Specifically, it examines the similarity of its approach to the ASEAN Outlook on the Indo-Pacific (AOIP) and how the two regional blocs may find synergy in implementing their respective guiding documents.
WHY EU, WHY NOW
France, Germany and the Netherlands – countries of considerable economic and diplomatic influence in the Indo-Pacific region – first announced their policies on Indo-Pacific at the national level,[3] and these then provided the push for an EU-wide strategy on that strategic region.
Even though several of the EU member states remain ambivalent and have no real foreign policy interest in the Indo-Pacific arena, the EU had realised that it could not afford not taking a position. This was because “the world’s centre of gravity is moving towards the Indo-Pacific, both in geo-economic and geo-political terms. The futures of the EU and the Indo-Pacific are interlinked”, according to EU’s High Representative/Vice-President Josep Borrell.[4]
The EU felt compelled to deepen its engagement with partners in the Indo-Pacific to respond to emerging dynamics in a region rich in trade and resources. It realised the importance of access to the open markets and the need to strengthen its supply chains. Equally important is its need to bolster its strategic reach and relevance.
Thus, the key tenet of the EU’s Indo-Pacific strategy is to shape a rules-based international order to better address global challenges, including climate change and the COVID-19 pandemic. The Indo-Pacific region also holds potential for the EU to reinforce its priorities such as the promotion of the 2030 Agenda, the Sustainable Development Goals[5] and of a multilateral rules-based international order.
Another compelling reason is the need for the EU to offer a rules-based alternative to China’s Belt and Road Initiative (BRI).[6] In this aspect, the EU is also standing on the same side as Australia, Japan and the U.S. in the promotion of quality and transparent infrastructure cooperation.[7]
A development running parallel to this was the adoption in 2019 of the ASEAN Outlook on the Indo-Pacific (AOIP). ASEAN had also been gearing itself towards a new understanding of the Indo-Pacific.[8] However, due to ambivalence among its member states, ASEAN’s approach to the Indo-Pacific did not develop into a strategy but remains an outlook, as the name of AOIP implies. It was ASEAN’s effort at coming up with its collective leadership to maintain its central role in the region which prompted the EU to ponder over its own hesitancy over the Indo-Pacific construct.
PREMISE OF THE EU’S INDO-PACIFIC STRATEGY IN THE REGION
Despite the “Free and Open Indo-Pacific (FOIP)” concept originating from the Trump’s Administration,[9] the EU clearly does not have an outright intention to join a U.S.-led containment strategy[10] directed against China,[11] neither does it exhibit any zero-sum mentality when it comes to the Indo-Pacific construct.
Although the EU is cautious of developments in China, including human rights violations and Beijing’s military build-up in the Indo-Pacific, the EU stays clear of the rivalry between China and the U.S. Instead, it has explicitly stated that its approach to the region encourages cooperation, and not confrontation[12] and it would like to see an Indo-Pacific that is less securitised and politicised. In fact, the EU intends to encourage China to play a constructive role in the Indo-Pacific region. Some degree of balancing China may be acceptable, but economically, it does not wish to dissociate itself from China.
The EU’s strategy also promotes a rules-based international order and other principles such as democracy, human rights, the rule of law, freedom of navigation, and international commitments. This has led some scholars to reason that the ‘rules-based order’ and ‘Indo-Pacific strategy’ may sometimes be used as omnibus terms for these high principles.[13]
Similar to the objectives of all other Indo-Pacific partners, the EU would like to keep ASEAN at the centre of the regional architecture. This is not only due to the geographical location of ASEAN, between the Indian Ocean and the Pacific Ocean, but also because all Indo-Pacific partners are also dialogue partners of ASEAN. They are all a part of one or more ASEAN-led mechanisms, such as the East Asia Summit (EAS), ASEAN Regional Forum (ARF) and the ADMM-Plus, and therefore have vested strategic commitments to ASEAN.
What is positive for the EU is the fact that the Indo-Pacific is still a relatively young concept. There is no clear and single definition of its geographical scope, strategic objectives, or specific areas of cooperation. As such, it does not restrict the EU from defining its own strategy in accordance with its own normative interest in the Indo-Pacific region, and does not impose its alignment to any groupings, including the QUAD. The EU has a free hand in determining what it wants to bring to the Indo-Pacific region and how it wants to do it.
WHAT IS THE EU BRINGING TO THE INDO-PACIFIC?
While it may be hard to reconcile the diverse interests and aspirations of the various Indo-Pacific partners, some pragmatic cooperation among the partners may help shape some norms geared towards collaboration.
The EU is certain that its engagement in the Indo-Pacific region will be principled and long-term, and places emphasis on partnership, trade, and maritime security at the core of its Indo-Pacific strategy. It has identified seven priority areas, namely sustainable and inclusive prosperity; green transition; ocean governance; digital governance and partnerships; connectivity; security and defence; and human security.
These are in line with some of the priority areas found in the approaches taken by France, Germany and the Netherlands in relation to the Indo-Pacific.
Concretely, the EU has plans to (i) conclude Partnership and Cooperation Agreements (PCA) with several countries, including Malaysia and Thailand; (ii) complete or resume trade negotiations with several countries including a region-to-region trade agreement with ASEAN; (iii) forge green alliances in the fight against climate change; (iv) strengthen ocean governance; (v) establish Digital Partnership Agreements; (vi) implement connectivity partnerships including with India and Japan; (vii) enhance naval deployment in the Indo-Pacific and ensure maritime security; (viii) strengthen cooperation on research and innovation with like-minded partners; and (ix) reinforce support to healthcare systems and pandemic preparedness.[14]
Strategically, the EU has vested interests in the waterways of the Indo-Pacific; 40% of its foreign trade passes through the South China Sea.[15] Hence, maritime security and governance is a key tenet of its strategy. Apart from the EU’s support for Indo-Pacific countries’ fisheries management and the fight against Illegal, Unreported and Unregulated (IUU) fishing, it may have other security objectives.
The EU has plans to enhance the naval presence of its member states in the Indo-Pacific. Furthermore, it seeks to conduct more joint exercises and port calls with Indo-Pacific partners, including multilateral exercises, to protect freedom of navigation in the region.[16] These could well align with the EU’s principles of ensuring a rules-based maritime order, including the 1982 UN Convention on the Law of the Sea (UNCLOS), but could also be deemed as adding ‘fuel’ to a sea that is already packed with military vessels.
There is no doubt that the EU’s Indo-Pacific strategy can add a strong normative dimension[17] to the region. It also affords the EU to work closely with like-minded Indo-Pacific partners in addressing common challenges, build trust, set standards, and promote good regulatory practices in the region. Like ASEAN, partnership and reinforcing multilateral cooperation are at the core of the EU’s Indo-Pacific strategy.
THE EU STRATEGY AND THE ASEAN OUTLOOK ON THE INDO-PACIFIC
The EU, being a regional organisation and sharing key similarities[18] with ASEAN in its approach to the Indo-Pacific, affords some possibility of synergy. In addition, its presence may help dilute major power rivalries in the region.[19]
ASEAN and the EU are often seen as natural partners in integration. Both organisations are recognised for being successful regional organisations in their respective regions. A key premise for the ASEAN-EU strategic partnership is the shared values concerning effective and sustainable multilateralism, a rules-based international order, as well as free and fair trade.[20]
Where ASEAN and the EU will strongly converge is really the strong values underpinning the Indo-Pacific order. In addition, there is also the strong focus they have on establishing partnership, working with like-minded partners in addressing common challenges and building trust – including with China.
As such, in the EU’s Joint Communication on its strategy,[21] ASEAN was mentioned 31 times. It also has a specific section on the “Centrality of ASEAN”. The EU emphasised the dynamism and breath of its partnership with ASEAN and underscored its support of ASEAN centrality and other ASEAN-led processes.
Similar to the EU Indo-Pacific strategy, The ASEAN Outlook on the Indo-Pacific (AOIP)[22] was envisioned to be inclusive, and to promote key principles.[23] Four key areas of cooperation were identified, namely: (i) maritime cooperation; (ii) connectivity; (iii) UN Sustainable Development Goals (SDGs) 2030; and (iv) economic and other possible areas of cooperation.
The Outlook recognises the complementarity of existing cooperation frameworks such as the EAS, ARF and the ADMM-Plus. Hence, the establishment of new mechanisms or infrastructure is not necessary. ASEAN is currently working on how to further mainstream cooperation within the framework of the AOIP with its external partners. The EU has on several occasions, including at the ASEAN’s Post-Ministerial Conference with the EU in August 2021, expressed its support for the AOIP. Furthermore, it has also indicated its interest in exploring synergy between the EU Indo-Pacific strategy and the AOIP.
There are several areas of potential convergence between the AOIP and the EU Strategy for Cooperation in the Indo-Pacific. This includes broadly the following:
(i) Working towards universally agreed commitments such as the 2030 Agenda and its Sustainable Development Goals, as well as the Paris Agreement on Climate Change including through high-level dialogues.
(ii) Fostering inclusive economic growth and working towards a region-to-region trade agreement. This includes bridging the level of ambition between the two regions and finding common areas of focus.
(iii) Further promoting connectivity including through the recently concluded ASEAN-EU Comprehensive Air Transport Agreement (CATA) encompassing 37 countries (the first region-to-region agreement), as well as EU’s support for the Master Plan on ASEAN Connectivity 2025. This is worth noting that connectivity is a core component of ASEAN-EU relations.
(iv) Enhancing dialogues on maritime security as well as other areas of security such as transnational crime, piracy, counterterrorism, cybersecurity, non-proliferation, and disarmament.
(v) Accelerating green and digital transition, including support of the ASEAN Digital Masterplan 2025 and the development of standards in emerging technologies. This will help promote convergence between data protection regimes to ensure safe and free data flows.
Another potential area of cooperation is in strengthening both regions’ preparedness and capacity to respond to the current and future health emergencies. The importance of jointly combating the COVID-19 pandemic and “build back better”[24] has been emphasised in all meetings between the ASEAN and the EU. EU’s strong support for the ASEAN Comprehensive Recovery Framework will also be welcomed by ASEAN.
Strategically, the EU has also indicated its wish to establish maritime areas of interest in the Indo-Pacific and possibly for other Indo-Pacific partners to join in the initiative as well. It is also seeking a stronger role in the ASEAN security architecture through the request to participate in the ASEAN Defence Ministers’ Meeting Plus (ADMM-Plus) or at least in its Expert Working Groups (EWG). The EU’s interest to join the East Asia Summit has also been noted by ASEAN. However, while recognising the EU’s wish to play a stronger role in the region through ASEAN-led mechanisms, ASEAN is also mindful that the EU as a regional grouping (versus a sovereign state) brings with it other factors worthy of consideration.
According to a speech by Singapore’s Minister of Education, Chan Chun Sing,[25] “Europe is neither the U.S. or China. It will have to develop shared perspective on its role in global affairs beyond European-centric issues. It will need new mechanisms to project its collective interests without being circumscribed by the lowest common denominator”. As such, ASEAN and the EU will need to calibrate its cooperation in the Indo-Pacific and consider the diverse interests of its member states.
ASEAN and the EU will be celebrating the 45th anniversary of dialogue relations next year in Brussels. The occasion will present an opportunity for ASEAN and the EU to further discuss alignments in the Indo-Pacific, and to underscore the strong values of both blocs.
ENDNOTES
[1] Council of the European Union, Council conclusions on an EU strategy for cooperation in the Indo-Pacific, 16 April 2021, https://data.consilium.europa.eu/doc/document/ST-7914-2021-INIT/en/pdf (accessed on 23 November 2021).
[2] Joint Communication to the European Parliament and the Council, The EU strategy for cooperation in the Ind-Pacific, 16 September 2021, https://eeas.europa.eu/sites/default/files/jointcommunication_2021_24_1_en.pdf (accessed on 23 November 2021).
[3] Rahul Mishra, The EU’s Indo-Pacific Strategy is Good News for ASEAN, 4 August 2021, https://rusi.org/explore-our-research/publications/commentary/eus-indo-pacific-strategy-good-news-asean (accessed on 24 November 2021).
[4] EU, EU and Indo-Pacific: natural partners, Press Release, 16 September 2021, https://ec.europa.eu/commission/presscorner/detail/en/IP_21_4704 (accessed on 25 November 2021)
[5] Ibid.
[6] Rahul Mishra, The EU’s Indo-Pacific Strategy is Good News for ASEAN, 4 August 2021, https://rusi.org/explore-our-research/publications/commentary/eus-indo-pacific-strategy-good-news-asean (accessed on 24 November 2021).
[7] Dr Jeffrey Wilson, Diversifying Australia’s Indo-Pacific Infrastructure Diplomacy, 16 April 2019, https://www.internationalaffairs.org.au/australianoutlook/diversifying-australias-indo-pacific-infrastructure-diplomacy/
[8] Rahul Mishra, The EU’s Indo-Pacific Strategy is Good News for ASEAN, 4 August 2021, https://rusi.org/explore-our-research/publications/commentary/eus-indo-pacific-strategy-good-news-asean (accessed on 24 November 2021).
[9] The Biden Administration has yet to release a new strategy on the Indo-Pacific. Secretary of State Antony Blinken has informed ASEAN Foreign Ministers that a new comprehensive strategy for the wider Indo-Pacific region will be released soon, https://www.reuters.com/world/us/blinken-says-us-soon-will-release-new-strategy-indo-pacific-region-2021-09-23/ (accessed on 25 November 2021).
[10] According to a speech made by former Vice President Mike Pence, the U.S. “will continue to assert American interests across the Indo-Pacific.”, Vice President Mike Pence’s Remarks on the Administration’s Policy Towards China, 4 October 2018, https://www.hudson.org/events/1610-vice-president-mike-pence-s-remarks-on-the-administration-s-policy-towards-china102018
[11] Felix Heiduk, Gudrun Wacker, From Asia-Pacific to Indo-Pacific, Significance, Implementation and Challenges, Stiftung Wissenschaft und Politik (SWP) Research Paper 2020/RP 09, 01.07.2020, 43 Seiten, (English Version of SWP-Studie 9/2020) September 2020, https://www.swp-berlin.org/10.18449/2020RP09/ (accessed on 23 November 2021).
[12] EU, Questions and Answers: EU Strategy for Cooperation in the Indo-Pacific, 16 September 2021, https://ec.europa.eu/commission/presscorner/detail/en/QANDA_21_4709 (accessed on 25 November 2021)
[13] William Choong, The Quad and the Indo-Pacific: Going Slow to Go Further, FULCRUM, 4 October 2021, https://fulcrum.sg/the-quad-and-the-indo-pacific-going-slow-to-go-further/ (accessed on 25 November 2021).
[14] EU, Questions and Answers: EU Strategy for Cooperation in the Indo-Pacific, 16 September 2021, https://ec.europa.eu/commission/presscorner/detail/en/QANDA_21_4709 (accessed on 25 November 2021)
[15] EU, Factsheet of the EU Strategy for Cooperation in the Indo-Pacific, September 2021, https://eeas.europa.eu/sites/default/files/eu-indo-pacific_factsheet_2021-09_final.pdf (accessed on 25 November 2021).
[16] EU, Questions and Answers: EU Strategy for Cooperation in the Indo-Pacific, 16 September 2021, https://ec.europa.eu/commission/presscorner/detail/en/QANDA_21_4709 (accessed on 25 November 2021)
[17] Rahul Mishra, The EU’s Indo-Pacific Strategy is Good News for ASEAN, 4 August 2021, https://rusi.org/explore-our-research/publications/commentary/eus-indo-pacific-strategy-good-news-asean (accessed on 24 November 2021).
[18] Ambivalence among ASEAN and EU member states will mean that the two partners can safely use a flexible approach and focus on soft issues. It can afford both partners the advantage of contributing to the region without being seen as a threat.
[19] Gregory Tiberghien-Romer, Aadil Sud and Walter Brenno-Colnaghi, Enter EU: The Challenges and Cooperation Potential of the Indo-Pacific Strategy, EIAS Policy Brief, 19 October 2021, https://eias.org/policy-briefs/enter-eu-the-challenges-and-cooperation-potential-of-the-indo-pacific-strategy/ (accessed on 25 November 2021).
[20] EU Mission to ASEAN, EU ASEAN Strategic Partners Blue Book 2021, https://euinasean.eu/wp-content/uploads/2021/04/Blue-Book-2021.pdf (accessed on 30 November 2021)
[21] Joint Communication to the European Parliament and the Council, The EU strategy for cooperation in the Ind-Pacific, 16 September 2021, https://eeas.europa.eu/sites/default/files/jointcommunication_2021_24_1_en.pdf (accessed on 23 November 2021).
[22] ASEAN, “ASEAN Outlook on the Indo-Pacific”, 23 June 2019, https://asean.org/asean2020/wp-content/uploads/2021/01/ASEAN-Outlook-on-the-Indo-Pacific_FINAL_22062019.pdf
[23] These principles include openness, transparency, inclusivity, a rules-based framework, good governance, respect for sovereignty, and respect for international laws such as the UN Charter and the 1982 UNCLOS, among others.
[24] ASEAN and EU, Co-Chairs’ Press Release of the 23rd ASEAN-EU Ministerial Meeting, 1 December 2021, https://asean.org/co-chairs-press-release-of-the-23rd-asean-eu-ministerial-meeting/ (accessed on 30 November 2021).
[25] Chan Chun Sing, Speech by Minister for Education, Mr Chan Chun Sing, at the 41st IISS-Asia Fullerton Lecture, “Singapore Amid Great Power Rivalry”, Ministry of Education Singapore, 9 November 2021, https://www.moe.gov.sg/news/speeches/20211109-speech-by-minister-for-education-mr-chan-chun-sing-at-the-41st-iiss-asia-fullerton-lecture-singapore-amid-great-power-rivalry (accessed on 24 November 2021).
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- Digital commitments in trade agreements have evolved over time to include market access, and rules and regulations that seek to govern the movement of digital goods and services across borders as well as to facilitate trade.
- ASEAN’s commitments in terms of the number of provisions in e-commerce have increased over time, but the expansion in coverage may not necessarily mean deeper commitments.
- The disparity within ASEAN member states (AMS), alongside national policies and ambitions to develop the domestic digital economy, have contributed to the slower pace of attaining binding commitments in trade agreements.
- Moving forward, upgrades in e-commerce commitments in the AANZFTA can be expanded, guided by the RCEP commitments.
- However, advancing towards a framework for an ASEAN Digital Economy, which requires committing to even more provisions, will require more and better empirical evidence on the impact of digital commitments on the domestic economies of AMS for decision-making in each country’s cost-benefit analysis of these commitments to be properly informed.
* Tham Siew Yean is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute and Professor Emeritus, Universiti Kebangsaan Malaysia. The author thanks Sharon Seah, Cassey Lee, Siwage Dharma Negara, Jay Menon and Aidonna Jan Ayub for their useful comments and suggestions. The usual caveat applies.
ISEAS Perspective 2021/163, 15 December 2021
INTRODUCTION
The growing importance of, and interest in the digital economy has led to an increasing inclusion of digital provisions in free trade agreements, be it at the multilateral, regional or bilateral level. At the multilateral level, 86 members including six from ASEAN, are currently engaged in World Trade Organization (WTO) negotiations on a Joint Statement Initiative (JSI) on trade-related aspects of e-commerce. The JSI is a plurilateral negotiating tool which aims to have a substantive agreement on these aspects at the WTO’s 12th Ministerial Conference (MC12) scheduled to take place from 30 November to 3 December 2021 but which has been postponed indefinitely due to the announcements of travel restrictions and quarantine requirements in Switzerland and many European countries.[1]
Digital provisions can be traced back to the inclusion of paperless trading in the early part of 2000 and the subsequent emergence of e-commerce chapters in trade agreements in 2003.[2] This pattern has escalated over time; 69 Regional Trade Agreements (RTAs) were identified with a standalone e-commerce chapter or article(s) between 2001 and 2016.[3] There were also 21 other RTAs that had provisions addressing paperless trading, digital rights management or general promotion, but without a dedicated e-commerce chapter.
Digital commitments can be divided into three types, namely market access (MA), Rules and Regulations (R&R) and Facilitation (F). Provisions or commitments on MA cover a wide range of issues such as customs duties, valuation issues, movement of natural persons (as service providers), and access to data.[4] R&R cover different issues including intellectual property rights (IPRs), protection of personal information and consumer protection competition. Finally, facilitation commitments include paperless trade, e-signatures and digital authentication.
This paper maps the digital commitments of ASEAN in relevant agreements on e-commerce to show the evolving nature of these commitments. It covers the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA), ASEAN Agreement on Electronic Commerce, Regional Comprehensive Economic Partnership Agreement (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It also seeks to explain why these commitments vary and list the challenges that ASEAN will face as it moves towards negotiating an ASEAN Digital Economy Framework by 2025, as announced in the 53rd ASEAN Economic Ministers (AEM) in September 2021.[5]
ASEAN COMMITMENTS IN E-COMMERCE
AMS have made commitments in four agreements that have e-commerce provisions (see Table A1 in Appendix for the details).[6] The AANZFTA, ratified in 2010, is the first agreement with a Dialogue partner to have an e-commerce chapter. The next agreement on e-commerce is the ASEAN Agreement on Electronic Commerce, which was signed in 2019 and expected to enter into force in 2021. The RCEP is the latest agreement with AMS as parties, which has an e-commerce chapter. It was signed in 2020 and will enter into force on 1 January 2022. Lastly, the Comprehensive and Progressive Treatment for Trans-Pacific Partnership (CPTPP), which has four AMS as parties to the agreement, entered into force in 2018.[7]
Figure 1 shows the e-commerce commitments in each of these agreements and the similarities and differences from each other.
AANZFTA (2010) and ASEAN Agreement on Electronic Commerce (2019)
It is not surprising that the AANZFTA has the smallest number of provisions, being the oldest agreement; a government’s ability to address the various issues that emerge from the rapidly changing digital environment usually lags behind the innovative changes happening in the real world. Thus while the AANZFTA and the subsequent ASEAN Agreement on Electronic Commerce contain provisions that address cooperation, paperless trading, electronic authentication and electronic signatures, online consumer protection, online personal information, the domestic regulatory environment and dispute settlement, the newer ASEAN agreement has six additional provisions. These are the scope of the agreement, cross-border transfer of information, location of computing facilities, cyber-security, electronic payment and logistics. While this may demonstrate an expansion of ASEAN’s commitments to include other pertinent issues that are critical for e-commerce, a closer investigation of the additional commitments indicate that except for the provision on data localisation (which is inapplicable to financial services), the use of best-endeavour clauses such “encourage” the use of safe and secure, efficient and interoperable e-payment systems and “endeavour” to lower the cost of logistics, indicate that these are weak provisions. Likewise, member states are “working towards eliminating or minimising barriers to the flow of information across borders” while the provision on cybersecurity merely focus on building on the capabilities of national entities and the use of existing collaboration mechanisms to cooperate on matters related to cybersecurity.
RCEP and CPTPP
Moving on to the RCEP, the commitments expanded to include provisions on customs duties, unsolicited commercial electronic messages, and non-discrimination of digital products. The CPTPP, though an older agreement, has four more provisions compared to the RCEP, namely, non-discrimination of digital products, source code, principles on access and use of the internet for electronic commerce and internet interconnection charge sharing. Further analysis reveals that the provisions in RCEP, though similar, are much weaker than those in the CPTPP.[8] Take for example, customs duties. In the RCEP, the maintenance of the current practice of not imposing customs duties on electronic transmissions between Parties (Article 12:11) is linked to the WTO’s moratorium on customs duties. Should the moratorium be discontinued, a RCEP party may unilaterally adjust its practice. Thus, while the CPTPP states that the exclusion of customs duties shall not preclude a Party from imposing “internal” taxes, fees and other charges on content transmitted electronically, provided that such taxes, fees, or charges are imposed in a manner consistent with the agreement, the same clause in the RCEP has excluded the term “internal” from the text, thereby implicitly allowing external taxes or duties to be imposed should the WTO moratorium be discontinued.
This is unlike the CPTPP (Article 14.3) which states clearly that no party shall impose customs duties on electronic transmissions, including content transmitted electronically, between a person of one Party and a person of another Party.
Another example is the use of the dispute settlement mechanisms (DSM). RCEP’s Article 12.17 on DSM, specifically excludes the use of Chapter 19 of the agreement for the settlement of disputes on e-commerce so that DS in e-commerce is confined to consultations; and if that fails to resolve the differences, then the matter may be referred to the RCEP Joint Committee in accordance with Article 18.3, but not to the DSM of the agreement. The DSM in the CPTPP, on the other hand, states only the exceptions given to Malaysia and Vietnam.
It should be noted that besides the provisions in the CPTPP, other agreements with e-commerce commitments have included additional provisions specifically on barriers to trade, private sector participation, and the liability of intermediary service providers.[9]
In summary, the digital commitments of AMS have expanded over time, in keeping with changes in the digital realm and increasing commitments in other agreements. But the expansion in coverage may not necessarily mean deeper commitments, as seen in the specific examples illustrated above.
CHALLENGES TO DIGITAL COMMITMENTS
Generally, ASEAN’s economic integration is affected by the different stages of development within ASEAN and the need to balance national ambitions and regional integration. Thus the pace of integration is often determined by the lowest common denominator or the slowest member.[10] Likewise, ASEAN has to constantly find a balance between national and regional priorities, through consensus-seeking.[11]
This is also found to prevail in the e-commerce space, as shown below, indicating that these two factors can also be used to explain the slower pace of digital commitments within ASEAN.
Disparity within ASEAN: ASEAN Digital Integration Index
In August 2021, ASEAN launched its own ASEAN Integration Index to ascertain the status of digital integration in its member countries. The Index is constructed as a weighted index of six pillars of digital integration, namely digital trade and logistics, data protection and cybersecurity, digital payments and identities, digital skills and talent, innovation and entrepreneurship and institutional infrastructural readiness. Of the six pillars, ASEAN’s average score is highest in institutional and infrastructural readiness, and lowest for digital skills and talents.
In Figure 2, comparing the older AMS and the CLMV countries with the ASEAN average clearly shows the disparity across these two groups of countries. Brunei, Malaysia and Singapore have scores above the ASEAN average for all six of these dimensions. Thailand is above the ASEAN average for all but one of the dimensions (namely, digital skills and talent). Indonesia is below the ASEAN average for digital trade and logistics and digital skills and talent, while the Philippines is below the ASEAN average for digital payments and identities and innovation and entrepreneurship.
On the other hand, Cambodia, Laos PDR and Myanmar are below the ASEAN average for all six dimensions while Vietnam is below the ASEAN average for digital skills and talent, innovation and entrepreneurship and institutional infrastructural readiness (Figure 2).
The disparity within the AMS reflects the different stages in their development and implies that the pace and willingness of each member country to make binding commitments will differ as well.
National Initiatives
The importance accorded to digital developments is reflected in the numerous digital economy plans in all ten AMS (Table 1). AMS are keen to develop their info-structure by improving on broadband provision and costs. The interest on getting micro, small and medium enterprises (MSMEs) in ASEAN member states to make use of digital initiatives is due to the prevalence of these enterprises in ASEAN as well as the need for enhancing inclusiveness. Likewise, there are concerns to develop digital entrepreneurship and start-ups, which has the second lowest score for ASEAN in the Digital Integration Index. There is also a specific focus on e-commerce for four of the AMS.
Table 1. Common Themes in Digital Plans in ASEAN Member States
| Themes | BN | CAM | IND | LAO | M | MYR | PHL | SG | TH | VN |
| Infrastructure: Broadband | X | X | X | X | X | X | X | X | ||
| MSMEs, including their digital transformation | X | X | X | X | X | X | ||||
| Digital Entrepreneurship and Start-ups | X | X | X | X | X | X | X | |||
| E-commerce | X | X | X | X |
Notes: BN: Brunei, CAM: Cambodia, IND: Indonesia, M: Malaysia, MYR: Myanmar, PHL: Philippines, SG: Sinapore, TH: Thailand, VN: Vietnam
Source: Compiled from World Bank 2019[12], Erh 2021[13]
The interest in developing their respective national digital economies contribute towards the preference for building national capacities before digital integration. Enabling clauses that emphasise cooperation for capacity building and technical assistance are preferred, compared to hard commitments on market access, rules and regulations and even facilitation.
GOING FORWARD: DEEPENING DIGITAL COMMITMENTS IN ASEAN
Upgrading of ASEAN-Plus Agreements
ASEAN is in the midst of negotiating upgrades in several of its agreements with its Dialogue partners, including the AANZFTA, as announced at the 53rd ASEAN Economic Ministers’ Meeting (AEM) in September 2021.[14] E-commerce is one of the eight key trading areas that will be focussed in the upgrading negotiations for the AANZFTA.[15] This is not surprising given the increasing importance of e-commerce and the fact that Australia and New Zealand have achieved higher scores for their digital integration index compared to the ASEAN average, as shown in Figure 4; this indicates that they will be more willing to embrace more and deeper digital commitments in trade agreements.
Figure 4. ASEAN Digital Integration Index, ASEAN, Australia and New Zealand, 2021
Moreover, the existing commitments as shown in Figure 1 fall far behind the current commitments of ASEAN, as at 2021. Since Australia and New Zealand are also members of the RCEP, an upgrading in e-commerce commitments can certainly strengthen digital trade ties if it aims to go beyond the current RCEP commitments. It may however be difficult to achieve the same degree of commitments as in the CPTPP since not all AMS are parties to that agreement, although some AMS have expressed an interest in joining the agreement.[16]
Likewise, should ASEAN FTAs with other Dialogue partners move towards upgrading, adding e-commerce provisions, similar or close to the RCEP commitments, is unlikely to meet resistance.
Towards an ASEAN Digital Economy Framework
The shift towards an ASEAN Digital Economy Framework will constitute a big shift since so far among the AMS, only Singapore has signed a Digital Economy Partnership Agreement (DEPA) with Chile and New Zealand, and a Digital Economy Agreement with Australia (SADEA), both in 2020.[17]
Analysis in the World Economic Forum in 2020[18] clearly shows that the digital provisions in both the DEPA and SADEA far exceed that of the CPTPP (See Appendix 2). The 11 additional provisions are electronic invoicing, electronic payments, cooperation on competition policy, submarine telecommunications cable, location of computing facilities for financial services, data innovation, open government data, digital identities, standards and conformity assessment for digital trade, artificial intelligence, and fintech cooperation. Given the current disparity and focus of AMS on developing their respective national digital economies, adding more and importantly, meaningful provisions can be an uphill task.
While the provision of empirical evidence may help nudge AMS towards making more and deeper commitments, there are in fact very few studies on the impact of digital commitments, primarily because such commitments are relatively new and the data needed for robust testing are sparse. A recent study indicates that Preferential Trading Arrangements (PTAs) with robust e-commerce chapters, and chapters in goods and services can increase trade in goods, services and digital services among member countries. However, the number of comprehensive agreements in the dataset is small while the time series is short. Hence, the evidence must be deemed to be preliminary.[19]
Empirical work tends to focus on the impact of data restrictions, mainly in developed countries and in large developing countries such as China, India and Indonesia. These do indicate that data restriction policies can affect the local economy negatively through its impact on the productivity levels of local companies, while the policies are neither able to create the new jobs expected nor develop the local industry in data-intensive sectors.[20] The construction of the data restrictiveness index for 46 OECD countries in a 2021 study and the use of this to measure its impact also shows that data restrictions can reduce trade, reduce productivity and increase prices for affected industries.[21]
What is needed to move forward is for ASEAN to build up a body of evidence that can help AMS make more informed decisions on more digital trade commitments. In particular, what is needed is a cost-benefit analysis of the impact of such commitments. For example, on the issue of customs duties, the WTO Programme on Electronic Commerce shows that while the removal of the moratorium may increase tax revenues, as argued by some developing countries, the costs in terms of gains foregone on consumer welfare and export competitiveness may outweigh the gains in tax revenues. At the same time, there are other options for raising domestic taxes internally.[22]
CONCLUSION
Digital commitments in trade agreements have evolved over time as in other types of trade commitments. As in the case of trade in goods and services, digital commitments do not just cover market access but also rules and regulations governing the movement of digital goods and services across borders, as well as trade facilitation measures.
ASEAN’s commitments in terms of the number of provisions in e-commerce have increased over time but this does not necessarily mean that the provisions have deepened. The disparity within ASEAN, alongside national policies and ambitions to develop the individual AMS’s domestic digital economy, have contributed towards the slow pace of commitments.
Upgrades in the e-commerce commitments in the AANZFTA can be expanded, guided by the RCEP. However, in advancing towards negotiating a framework for an ASEAN Digital Economy, additional provisions are needed. This requires a greater focus on gaining better empirical evidence so that AMS can make reliable cost benefit analyses on these commitments.
Appendix
Table A1. E-commerce Provisions in ASEAN Agreements
| E-commerce Provisions | AANZFTA (2010) | ASEAN Agreement on E-commerce (2021) | RCEP (2022) | CPTPP (2018) |
| Objectives of Chapter | Art. 10.1 | Art. 1 | Art. 12.2 | None |
| Scope of chapter | None | Art. 3 | Art. 12.3 | Art. 14.2 |
| Definitions | Art. 10.2 | Art. 1 | Art. 12.1 | Art. 14.1 |
| Relation to the FTAs other chapters | None | Art. 4 | Art. 12.3 | Art. 14.2 |
| Cooperation | Art. 10.9 | Art. 6 | Art. 12.4 | Art. 14.15; 14.16 |
| Transparency | Art. 10.3 | Art. 13 | Art. 12.12 | None |
| Stakeholder Engagement | Art. 10.10 | Art. 11 | Art.12.16 | None |
| Paperless trading | Art. 10.8 | Art. 7.1 | Art. 12.5 | Art. 14.9 |
| Electronic authentication and electronic signatures | Art.10.5 | Art.7.2 | Art. 12.6 | Art. 14.6 |
| Online consumer protection | Art. 10.6 | Art. 7.3 | Art.12.7 | Art. 14.7 |
| Online personal information protection | Art.10.7 | Art. 7.5 | Art. 12.8 | Art. 14.8 |
| Domestic Regulatory Framework | Art. 10.4 | Art. 12 | Art. 12.10 | Art. 14.5 |
| Dispute Settlement | Art. 10 | Art. 15 | Art. 12.17 | Art. 14.18 |
| Electronic Payment | None | Art. 9 | None | None |
| Logistics | None | Art. 10 | None | None |
| Cross-border transfer of information | None | Art. 7.4 | Art. 12.15 | Art.14.11 |
| Location of Computing Facilities | None | Art. 6 | Art. 12.14 | Art. 14.13 |
| Cybersecurity | None | Art. 8 | Art. 12.13 | Art.14.16 |
| Customs Duties | None | None | Art.12.10 | Art. 14.3 |
| Unsolicited Commercial Electronic Messages | None | None | Art. 12.9 | Art. 14.14 |
| Non-discrimination of digital products | None | None | None | Art. 14.4 |
| Source Code | None | None | None | |
| Principles on Access to and Use of the Internet for Electronic Commerce | None | None | None | Art. 14.10 |
| Internet Interconnection Charge Sharing | None | None | None | Art. 14.12 |
Source: Author
Table A2. Key Digital Trade Provisions in Selected Trade Agreements
| Key issues | CPTPP | DEPA | SADEA |
| Elimination of customs duties | Y | Y | Y |
| Non-discriminatory treatment of digital products | Y | Y | Y |
| Electronic authentication | Y | Y | Y |
| Paperless trading | Y | Y | Y |
| Domestic e-transactions | Y | Y | Y |
| Online consumer protection | Y | Y | Y |
| Personal information protection | Y | Y | Y |
| Measures against spam | Y | Y | Y |
| Cybersecurity | Y | Y | Y |
| Cross-border transfer of information | Y | Y | Y |
| Prohibition of data localization | Y | Y | Y |
| Cross-border transfer & localization for financial services | N | NM | Y |
| Liability of intermediary service providers | N | NM | NM |
| Non-disclosure of software source code | P | NM | Y |
| Open government data | N | Y | Y |
Notes: Y = included; P = partially included; N = not included; NM = not mentioned.
Sources: Lovelock (2020, 31-52)[23] and Asian Trade Centre (2020).[24]
ENDNOTES
[1] See https://www.wto.org/english/news_e/news21_e/mc12_26nov21_e.htm <Accessed 1 December 2021>.
[2] See Weber (2015) as cited in Lee (2020), “E-commerce and Trade Policy”, Chapter 4 in Lee, C. and Lee, E. (eds.), E-commerce, Competition and ASEAN Economic Integration. Singapore: ISEAS.
[3] Wu, Mark. 2017. Digital Trade-Related Provisions in Regional Trade Agreements: Existing Models and Lessons for the Multilateral Trade System. RTA Exchange. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and the Inter-American Development Bank (IDB). www.rtaexchange.org/ <Accessed 22 November 2021>
[4] Ibid, 12.
[5] See https://asean.org/wp-content/uploads/2021/09/AEM-53-JMS_FINAL_ADOPTED.pdf <Accessed 22 November 2021>.
[6] It should be noted that e-commerce provisions can also be found in specific and non-specific articles, annexes and side letters in some FTAs. However these are relatively small compared to the provisions in a standalone e-commerce Chapter. For further discussions, see José-Antonio Monteiro and Robert Teh (2017). “Provisions on Electronic Commerce in Regional Trade Agreements”. WTO Working Paper ERSD-2017-11. https://www.wto.org/english/res_e/reser_e/ersd201711_e.htm <Accessed 23 November 2021>.
[7] Note that Malaysia has yet to ratify the agreement as at November 2021.
[8] See https://www.bilaterals.org/?important-differences-between-the and Leblond, P. (2020). “Is RCEP WTO’s Future?” https://www.cigionline.org/articles/digital-trade-rcep-wtos-future/ <Accessed 22 November 2021>.
[9] Ibid Monteiro and Teh (2017), p. 14.
[10] See Hill, H. and Menon, J. 2010. “ASEAN Economic Integration: Features, Fulfillments, Failures and the Future”. ADB Working Paper Series on Regional Economic Integration, No.69, December. https://www.adb.org/sites/default/files/publication/28551/wp69-hill-menon-asean-economic-integration.pdf <Accessed 1 December 2021>.
[11] See Kurus, Bilson, 1995. “The ASEAN Triad: National Interest, Consensus-seeking, and Economic Cooperation”, Contemporary Southeast Asia, 16(4): 404-420.
[12] The World Bank 2019. The Digital Economy in South-east Asia: Strengthening the Foundations for Future Growth. https://openknowledge.worldbank.org/bitstream/handle/10986/31803/The-Digital-Economy-in-Southeast-Asia-Strengthening-the-Foundations-for-Future-Growth.pdf?sequence=1&isAllowed=y <Accessed 23 November 2021>.
[13] Erh, Joey 2021. Assessing Digital Economy Policies in Six Southeast Asian Countries. Perspective. ISSUE: 2021 No. 50. /wp-content/uploads/2021/03/ISEAS_Perspective_2021_50.pdf <Accessed 23 November 2021>.
[14] See https://asean.org/wp-content/uploads/2021/09/AEM-53-JMS_FINAL_ADOPTED.pdf <Accessed 23 November 2021>.
[15] See https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/asean-australia-new-zealand-free-trade-agreement-aanzfta/upgrading-aanzfta/ <Accessed 23 November 2021>.
[16] These are reportedly Indonesia, and the Philippines. See https://www.bangkokpost.com/opinion/opinion/2203475/coming-clean-on-cptpp <Accessed 23 November 2021>.
[17] See https://www.mti.gov.sg/Improving-Trade/Digital-Economy-Agreements/The-Digital-Economy-Partnership-Agreement and https://www.mti.gov.sg/Improving-Trade/Digital-Economy-Agreements/The-Singapore-Australia-Digital-Economy-Agreement <Accessed 23 November 2021>.
[18] See WEF 2020. Advancing Digital Trade in Asia: Community Paper. https://www3.weforum.org/docs/WEF_GFC_Advancing_Digital_Trade_in_Asia_2020.pdf <Accessed 23 November 2021>.
[19] See Suominen, Kati 2021. “Do CPTPP-Style Digital Trade Rules Add New Value?” https://www.csis.org/analysis/do-cptpp-style-digital-trade-rules-add-new-value <Accessed 23 November 2021>
[20] Ferracane, Martina, F. 2021. “The Costs of Data Protectionism”, In M. Burri (ed). Big Data and Global Trade Law (pp.63-82). Cambridge: Cambridge University Press. https://www.cambridge.org/core/books/big-data-and-global-trade-law/costs-of-data-protectionism/A97AC3D1E4EAD2A8B90F33EEF605D672 <Accessed 23 November 2021>
[21] Cory, Nigel and Dascoli, Luke 2021. “How Barriers to Cross-Border Data Flows Are Spreading Globally, What They Cost, and How to Address Them”. https://itif.org/publications/2021/07/19/how-barriers-cross-border-data-flows-are-spreading-globally-what-they-cost <Accessed 23 November 2021>
[22] See https://sdg.iisd.org/news/wto-members-highlight-benefits-and-drawbacks-of-e-commerce-moratorium/ <Accessed 23 November 2021>
[23] Lovelock, Peter 2020. Chapter 2: The New Generation of ‘Digital’ Trade Agreements: Fit for Purpose? https://www.pecc.org/state-of-the-region-reports/287-2020-2021/888-chapter-2-the-new-generation-of-digital-trade-agreements-fit-for-purpose <Accessed 1 December 2021>.
[24] ATC 2020. Unpacking the Digital Economy Partnership Agreement. (DEPA). http://asiantradecentre.org/talkingtrade/unpacking-the-digital-economy-partnership-agreement-depa <Accessed 1 December 2021>.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- China’s proposal to ‘upgrade’ its relations with ASEAN to ‘comprehensive strategic partnership’ (CSP) is part of Beijing’s active neighbourhood diplomacy, which is given added emphasis and urgency by Sino-US tensions and China’s estrangement from the West.
- The CSP proposal signals a calibrated and invested Chinese strategy to actively reshape its relations with ASEAN in China’s own image, promoting China’s status as primus inter pares among ASEAN Dialogue Partners and consolidating the centrality of Chinese leadership and influence in the regional order.
- ASEAN does not view its CSP with China as signifying an elevated status compared to other dialogue relations. Its decision to establish CSP with both China and Australia demonstrates the grouping’s desire to maintain a state of equilibrium in its relations with all major powers and foster an inclusive multi-polar regional order.
- Since ASEAN-China relations are defined not by its label but by its content which has both positive and contentious aspects, its future depends on both sides’ ability to bridge the dichotomy between the robust expansion of their economic-functional cooperation and the continuing lack of mutual trust.
*Hoang Thi Ha is Fellow and Lead Researcher (Political-Security) at the ASEAN Studies Centre (ASC) and Co-coordinator of the Regional Strategic and Political Studies Programme (RSPS), ISEAS – Yusof Ishak Institute.
ISEAS Perspective 2021/157, 24 November 2021
INTRODUCTION
The 24th ASEAN-China summit in October 2021 announced the establishment of the ASEAN-China Comprehensive Strategic Partnership (CSP), adding a new nomenclature but not necessarily a new category in ASEAN’s dialogue relations.[1] The ASEAN-China CSP was formally launched at the Commemorative Summit to celebrate the 30th anniversary of ASEAN-China dialogue relations, with Chinese leader Xi Jinping in attendance.[2] Before the CSP, both sides had maintained a strategic partnership since 2003 – the most longstanding strategic partnership among all ASEAN Dialogue Partners. Does the CSP mean anything new for ASEAN-China relations and does it mean the same thing for both sides? This article unpacks the term ‘CSP’ and examines the perspectives of China and ASEAN in the establishment of an ASEAN-China CSP.
THE ASEAN-CHINA COMPREHENSIVE STRATEGIC PARTNERSHIP – WHAT’S IN A NAME?
‘CSP’ is a recent nomenclature in modern international relations. It is often associated with China’s partnership diplomacy which is defined as entailing “closer ties between states” and adhering to “a goal-driven rationale of alignment … without targeting any third party”.[3] Through this global network of partnerships, China differentiates itself from and competes with the US’ alliance system (even though Washington has also increasingly leveraged partnership diplomacy with its non-allied partners).[4] Unlike the US’ treaty-based, threat-driven and security-centric alliance system, China’s partnership diplomacy places greater emphasis on cultivating political relationships and promoting economic cooperation. It is essentially an exercise of Chinese statecraft, with ample room for diplomatic manoeuvring and semantic innovation. According to Georg Strüver, the “strong emphasis placed on partnership diplomacy in recent official discourse is unprecedented and leads to the assumption that partnerships might play an even bigger role in the structuring of China’s external relations in the years to come.”[5]
There are different levels in China’s partnership system, corresponding to the importance that Beijing attaches to each partner, the substance of China’s relations with that country/organisation and other contextual peculiarities. ‘CSP’ is considered the second-highest level of bilateral ties, above ‘strategic partnership’ and below ‘comprehensive strategic cooperative partnership’.[6] However, one should not read these terms in a strictly hierarchical order. As shown in Table 1, there are various titles describing China’s relations with the ten ASEAN member states, but they do not necessarily connote a hierarchy of importance or substance. For example, China’s “all-round cooperative partnership” with Singapore does not necessarily rank lower than its “strategic cooperative partnership” with Brunei or “comprehensive strategic cooperation” with The Philippines.
Table 1: China’s bilateral partnerships with ASEAN member states[7]
| Title of China’s bilateral ties with… | ASEAN member states |
| Strategic cooperative partnership | Brunei |
| Comprehensive strategic partnership | Cambodia, Indonesia, Malaysia |
| Comprehensive strategic partnership of cooperation | Vietnam, Laos |
| Comprehensive strategic cooperative partnership | Myanmar, Thailand |
| All-round cooperative partnership | Singapore |
| Comprehensive strategic cooperation | The Philippines |
A speech by then-Premier Wen Jiabao on the EU-China comprehensive strategic partnership in 2004 provides a reference for China’s broad understanding of CSP: “comprehensive” means all-dimensional, wide-ranging and multi-layered cooperation; “strategic” means long-term and stable relations that transcend differences in ideology and social system, bearing the large picture of the overall relationship; and “partnership” means equal-footed, mutually beneficial and win-win cooperation.[8] These general characteristics are, however, hard to measure and open to highly subjective application. China also does not set clear criteria for the dozens of CSP that it has established with various foreign partners. What ‘CSP’ stands for is not always clear in China’s relationship with a particular country, and it becomes even more elusive when analysed comparatively with other relations. According to a research paper on China’s partnership diplomacy, “the practice of strategic partnerships has escaped tight criteria or definitions.”[9]
Generally speaking, ‘CSP’ signifies a high level of maturity in the relationship as reflected in the breadth and depth of cooperation, shared normative frameworks and institutionalised cooperative mechanisms, and high-level political commitment and priority that both sides attach to each other. All these elements can be found in China’s relations with ASEAN as well as with its ten member states. The breadth and depth of their cooperation and exchanges at multi-levels – governmental, business and people-to-people, bilateral and multilateral – are not merely a function of geography but also the outcome of decades of diplomatic and economic relationship building, through regular high-level visits, dialogue and cooperation mechanisms in various sectors, extensive free trade agreements and deep participation in the regional production networks driven by the global supply chains.
China’s Perspective on CSP with ASEAN
China’s push to ‘upgrade’ its strategic partnership with ASEAN to CSP is part of Beijing’s active neighbourhood diplomacy, which is further emphasised during Xi Jinping’s leadership. In a foreign policy address in 2014, Xi said “we should promote neighbourhood diplomacy, turn China’s neighbourhood areas into a community of common destiny” and “conduct diplomacy with a salient Chinese feature and a Chinese vision.”[10] This activism in periphery diplomacy – befitting China’s newfound confidence as a great power and leveraging its economic gravity in the region – seeks to reshape the power relationships and renegotiate the normative content of the regional order towards a more China-centric one. China’s neighbourhood diplomacy is gaining even more prominence and urgency with the rise of Sino-US strategic tensions and China’s increased estrangement from the West.
According high priority to ASEAN in its neighbourhood diplomacy, China has been calibrating a holistic and invested strategy for the long-term development of ASEAN-China relations that fits into the Chinese vision of the regional order.[11] China’s proposal of a CSP with ASEAN is but the latest manifestation of this strategy, signalling “higher priority in foreign affairs and more extensive cooperation across multiple sectors”.[12] Speaking at an event commemorating the 30th anniversary of ASEAN-China relations in October 2021, Chinese Foreign Minister Wang Yi stressed the importance to “draw up a new blueprint and set a new benchmark for the long-term development of bilateral relations”.[13] A CSP with ASEAN would signal such a new benchmark and set the stage for a new blueprint for the relations.
During his speech, Wang Yi proposed five points as the key thrusts of ASEAN-China CSP: (i) upholding good neighbourliness and enhancing mutual strategic trust; (ii) deepening Covid-19 response cooperation; (iii) focusing on development and fostering new growth drivers; (iv) safeguarding peace and stability, bearing in mind the larger picture; and (v) upholding solidarity and coordination in the UN system and defending justice and fairness in the global governance. Put together, they demonstrate China’s deliberate approach to not only deepen but also actively reshape relations with ASEAN and its member states in China’s own image, from a position of strength and confidence. Notably, for example, point (v) seeks to position ASEAN and its member states on the same side with Beijing in the regional and international multilateral systems.
Another underlying factor of China’s push for CSP with ASEAN is its keen attention to form and status, especially in relations with neighbouring countries over whom China’s sense of hierarchy and entitlement is more pronounced. By proposing the CSP, China was aiming to score another “first” in its relations with ASEAN – after being the first Dialogue Partner to sign the Treaty of Amity and Cooperation in Southeast Asia (2003), the first to establish a strategic partnership and launch FTA negotiations with ASEAN, and the first and only nuclear weapon state willing to sign on to the Southeast Asia Nuclear Weapons-Free Zone Treaty (SEANWFZ) with no reservations. The establishment of the CSP would further consolidate China’s status as the most advanced, most committed and most substantial Dialogue Partner in all ASEAN’s dialogue relations.
Before the CSP proposal, China since 2013 had invested its diplomatic capital in promoting the ASEAN-China Community of Common Destiny (CCD) proposal. While China has successfully socialised the CCD concept with some mainland Southeast Asian countries, the response of ASEAN as a whole has been lukewarm because the concept is ill-defined and has deterministic and exclusionary connotations.[14] Similar to the CCD, the CSP proposal seeks to enhance China’s image as primus inter pares compared to other ASEAN Dialogue Partners and consolidate China’s stature as the predominant power in its Southeast Asian periphery.
The push for CSP with ASEAN can also be seen as part of China’s efforts to strengthen its discourse power. According to a report by the Atlantic Council in 2020, one of the designated narratives for Chinese government institutions to promote China’s discourse power is “the country’s leadership prospect among developing countries” and one of the means towards this end is through “popular proposals for multilateral and bilateral cooperation”.[15] A CSP with ASEAN would serve as a propaganda instrument to amplify the positive narrative about China, especially its development and connectivity-focused diplomacy with the developing countries. The imperative for Beijing to foster this positive narrative has intensified as China’s international image in the developed world has taken sharp downturns following the Covid-19 pandemic outbreak, according to many public polls worldwide.[16]
ASEAN’s Perspective on CSP with China
ASEAN had had extensive internal debate throughout 2021 before consensus was reached on establishing CSP with China. The debate focused on two key questions.
First, what are the parameters to set CSP apart as a new nomenclature in ASEAN’s dialogue relations system? If it is meant as an upgrade from the existing ASEAN-China strategic partnership, what would be the new offerings and/or substantive concessions that China would bring to the table? Only unveiled at the last minute by Xi Jinping at the Commemorative Summit, China’s pledged support was substantial indeed, including an additional donation of 150m Covid-19 vaccine doses, additional US$5 million contribution to the Covid-19 ASEAN Response Fund, vaccine joint production and technology transfer, US$1.5 billion development assistance in the next three years and purchase of US$150 billion of agricultural products from ASEAN in the next five years.[17] These offerings are very much attuned to the top priorities of all ASEAN member states at the moment, namely effective pandemic control and accelerated post-pandemic economic rebound.
There was also a motion within ASEAN to link CSP establishment with China’s express support for the ASEAN Outlook on the Indo-Pacific (AOIP).[18] This may not be straightforward given China’s steadfast opposition to anything ‘Indo-Pacific’ which Beijing associates with a strategy by Washington and its allies/partners to counter and contain China. However, the launch of the ASEAN-China CSP saw China overcome its visceral aversion to the term ‘Indo-Pacific’ and embrace the AOIP in the most explicit manner. The Joint Statement of the Commemorative Summit reaffirmed “the principles of the AOIP while recognising that it is ASEAN’s independent initiative” and agreed to “advance cooperation in the relevant areas identified in the AOIP to develop enhanced strategic trust and win-win cooperation”. In his speech, Xi Jinping spoke of a “prosperous home together” that includes cooperation between the Belt and Road Initiative (BRI) and the AOIP.[19] By embracing the AOIP, China has exercised a pragmatic flexibility that both pleases ASEAN and serves China’s enlightened self-interest. The Outlook indeed offers the most inclusive and China-friendly vision of the Indo-Pacific. It also contains practical pathways for economic-functional cooperation which are amenable to China’s development-based approach.[20]
Second, how is ASEAN to situate the ASEAN-China CSP in the larger picture of its external relations with other Dialogue Partners, with an eye on keeping a state of equilibrium among them? There is no denial of the fact that China is among if not the most substantive and substantial partner of ASEAN, leading the pack in many measures. ASEAN’s dialogue relations with China span across around 50 sectoral cooperation mechanisms, compared to about 20 with the US.[21] China has been ASEAN’s largest trading partner since 2009 and ASEAN became China’s top trading partner in 2020.[22] China is viewed by the majority of Southeast Asian foreign policy elites as the most influential power in the region in both political-strategic and economic terms, according to the State of Southeast Asia survey from 2019 to 2021.[23] It is exactly because of China’s growing and predominant regional influence that ASEAN has been prudent to avoid any designation that may lend the primus inter pares quality to its relations with China.
China has scored first-mover advantage in various foreign policy initiatives towards ASEAN, including establishing strategic partnership, negotiating the FTA, and signing the TAC. But ASEAN also has a track record of proliferating these initiatives to other Dialogue Partners. For example, the club of ASEAN’s “strategic partners” started first with China in 2003, followed by Japan (2005), the ROK (2010), India (2012), Australia (2014), New Zealand and the US (2015), Russia (2018) and most recently the EU (2020). Save for Canada (and the UK who just became the 11th ASEAN Dialogue Partner in August 2021), ‘strategic partnership’ has been applied to all Dialogue Partners despite the different degrees of their regional engagement and cooperation with ASEAN. Once proliferated, the term started to lose its special shine.
Keeping to this inclusive nature of ASEAN’s external relations – and considering the merits of Australia’s engagement with the region – ASEAN also agreed to establish CSP with Australia at the first annual ASEAN-Australia Summit in October 2021. The ASEAN-Australia CSP has the same characteristics – “meaningful, substantive and mutually beneficial” – as with China. It is also noteworthy that despite concerns expressed by some ASEAN states on the recent Australia-UK-US (AUKUS) trilateral security pact, ASEAN’s decision to establish the CSP with Australia appeared to be more straightforward and less contentious than the CSP with China.[24] Canberra’s swoop for the same designation has somewhat stolen the limelight of the ASEAN-China CSP, triggering a commentary on Global Times that berated Australia’s initiative as “geopolitical backbiting” and belittled the AU$154 million package that Canberra brought to its new ASEAN initiatives.[25]
The decision to establish [emphasis added] the CSP with both Australia and China – even as Beijing-Canberra relations have hit new lows this year due to a range of political, strategic and trade tensions – is an ASEAN masterstroke of hedging and soft balancing among the major powers. It is an act of embracing and defying the gravity of Chinese influence at the same time. By doing so, ASEAN continues to follow the pathways of “omni-enmeshment of major powers and complex balance of influence”.[26] ASEAN intentionally did not use the words “elevate” or “upgrade” so as to avoid giving the impression that its relationship with China and Australia by virtue of the CSP now stands above those with other Dialogue Partners. This calibrated response indicates that ASEAN member states have conscientiously exercised their agency by leveraging this diplomatic tug-of-war among the contending partners in the ASEAN setting for their own benefit.
CONCLUSION
With the ASEAN-China CSP, China can now claim another title in its partnership system and a new achievement in its active neighbourhood diplomacy. Yet, the significance of the CSP should be put in perspective. ASEAN has adopted this new and open-ended nomenclature without giving it an elevated status compared to other Dialogue Partners. China’s CSP initiative and ASEAN’s nuanced response unveil their different visions of the regional order. ASEAN remains faithful to an inclusive multi-polar order where all major powers co-exist and compete so that regional states can diversify their options and maximise their autonomy. For Beijing, it should be an exclusionary and hierarchical order where China’s centrality in regional leadership is restored and external powers’ influence relegated to the margins. Intriguingly, in his speech, Xi Jinping spoke highly of “inclusiveness” and “open regionalism” as common values of both ASEAN and China.[27] Xi’s emphasis on “inclusiveness” and “open regionalism” can be interpreted in two ways. First, these values – which Xi said “draw[ing] wisdom from East Asian civilisation” – are framed in the narrower context of ASEAN-China relations. Second, this could be China’s tacit criticism of the more exclusionary minilateral groupings led by Washington, especially the Quadrilateral Security Dialogue (QUAD) and the recent security pact between Australia, the United Kingdom and the US (AUKUS).
The future of the ASEAN-China partnership is defined not by its label but by its content and how both sides are going to shape it. At this, it is important to acknowledge both positive and problematic aspects of the relations. China tends to amplify only the positive elements, especially in economic cooperation and “new growth drivers” such as digital and green technologies, connectivity and pandemic response, which are much welcomed and embraced by ASEAN member states. However, emphasis on the positive content alone will not remove contentious security issues that continue to undermine mutual trust.[28] These include, among others, the territorial and maritime disputes in the South China Sea where China’s assertive behaviour continues unabated regardless of its push towards early conclusion of a code of conduct in the SCS, threatening the maritime rights and interests of other Southeast Asian claimant states.[29] Going forward, a key measure of maturity in ASEAN-China relationship is the ability to bridge the emerging dichotomy between the persistent trust deficit driven by this security dilemma and the robust expansion of bilateral economic-functional cooperation.
ENDNOTES
[1] Chairman’s Statement of the 24th ASEAN-China Summit, 26 October 2021, https://asean.org/wp-content/uploads/2021/10/63.-Final-Chairmans-Statement-of-the-24th-ASEAN-China-Summit.pdf.
[2] Joint Statement of the ASEAN-China Special Summit to Commemorate the 30th Anniversary of ASEAN-China Dialogue Relations: Comprehensive Strategic Partnership for Peace, Security, Prosperity and Sustainable Development, 22 November 2021, https://asean.org/joint-statement-of-the-asean-china-special-summit-to-commemorate-the-30th-anniversary-of-asean-china-dialogue-relations-comprehensive-strategic-partnership-for-peace-security-prosperity-and-sustain.
[3] Georg Strüver, “International Alignment between Interests and Ideology: The Case of China’s Partnership Diplomacy”, German Institute of Global and Area Studies (GIGA), March 2016.
[4] See “Full Text of Foreign Minister Wang Yi’s Speech on China’s Diplomacy in 2014”, China Daily, 26 December 2014. Wang Yi said: “[W]hat makes such a partnership different from a military alliance is that it does not have any hypothetical enemy nor is it targeted at any third party, thus keeping relations between countries unaffected by military factors. It aims to handle state-to-state relations with a cooperative rather than confrontational, and a win-win rather than zero-sum approach.” At the Commemorative Summit on 22 November 2021, Xi Jinping also said: “We need to pursue dialogue instead of confrontation, build partnerships instead of alliances, and make concerted efforts to address the various negative factors that might threaten or undermine peace.”
[5] Georg Strüver, op. cit.
[6] SCMP Reporter, “Quick guide to China’s diplomatic levels”, South China Morning Post, 20 January 2016, https://www.scmp.com/news/china/diplomacy-defence/article/1903455/quick-guide-chinas-diplomatic-levels.
[7] Author’s compilation based on public sources.
[8] Speech by H.E. Wen Jiabao, Premier of the State Council of the People’s Republic of China: “Vigorously Promoting Comprehensive Strategic Partnership Between China and the European Union, 6 May 2004, http://webcache.googleusercontent.com/search?q=cache:pwWRUXFH_AIJ:www.chinamission.be/eng/zt/t101949.htm+&cd=1&hl=en&ct=clnk&gl=sg.
[9] Feng Zhongping and Huang Jing, “China’s Strategic Partnership Diplomacy”, ESPO Working Paper No. 8, 29 Jun 2014, China Institutes of Contemporary International Relations (CICIR), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2459948.
[10] Ministry of Foreign Affairs of the People’s Republic of China, “The Central Conference on Work Relating to Foreign Affairs was held in Beijing”, 29 November 2014, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1215680.shtml.
[11] Hoang Thi Ha, “Understanding China’s Proposal for an ASEAN-China Community of Common Destiny and ASEAN’s Ambivalent Response”, Contemporary Southeast Asia 41, No. 2 (2019), pp. 223–54 .
[12] Farah Nadine Seth and Sharon Seah, “The ASEAN-China Partnership: Balancing Merits and Demerits”, ISEAS Perspective 2021/120, 10 September 2021, /articles-commentaries/iseas-perspective/2021-120-the-asean-china-partnership-balancing-merits-and-demerits-by-farah-nadine-seth-and-sharon-seah.
[13] Ministry of Foreign Affairs of the People’s Republic of China, “Wang Yi Attends and Addresses the Opening Ceremony of the Conference on Celebrating the 30th Anniversary of ASEAN-China Dialogue Relations”, 28 July 2021, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1895951.shtml.
[14] Hoang Thi Ha, op. cit.
[15] “China’s Shift Toward Discourse Power”, Atlantic Council, 2020, https://www.jstor.org/stable/pdf/resrep27615.5.pdf.
[16] See: Laura Silver, Kat Devlin and Christine Huang, “Unfavorable Views of China Reach Historic Highs in Many Countries”, Pew Research Centre, 6 October 2020, https://www.pewresearch.org/global/2020/10/06/unfavorable-views-of-china-reach-historic-highs-in-many-countries; Laura Silver, China’s international image remains broadly negative as views of the U.S. rebound, Pew Research Centre, 30 June 2021, https://www.pewresearch.org/fact-tank/2021/06/30/chinas-international-image-remains-broadly-negative-as-views-of-the-u-s-rebound; Richard Q. Turcsányi, Matej Šimalčík, Kristína Kironská, Renáta Sedláková, et al., European Public Opinion on China in the Age of COVID-19, Central European Institute of Asian Studies (CEIAS) and partners, https://ceias.eu/wp-content/uploads/2020/11/COMP-poll-report_3.pdf; Lowy Institute Poll 2020, China, The Lowy Institute, https://poll.lowyinstitute.org/themes/china.
[17] Ministry of Foreign Affairs of the People’s Republic of China, For a Shared Future and Our Common Home, Speech by Xi Jinping at the Special Summit to Commemorate the 30th Anniversary of China-ASEAN Dialogue Relations, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1919473.shtml.
[18] Author’s interviews with ASEAN member states’ officials.
[19] Ministry of Foreign Affairs of the People’s Republic of China, op. cit.
[20] Hoang Thi Ha, “ASEAN Outlook on the Indo-Pacific: Old Wine in New Bottle?”, ISEAS Perspective 2019 No. 51, 25 June 2019, /images/pdf/ISEAS_Perspective_2019_51.pdf.
[21] Author’s estimation, based on the Plan of Action to Implement the ASEAN-U.S. Strategic Partnership.
(2021-2025), https://asean.org/asean2020/wp-content/uploads/2021/03/15.-ASEAN-US-Plan-of-Action-2021-2025-Final.pdf; and the Plan of Action to Implement the ASEAN-China Strategic Partnership for Peace and Prosperity (2021 – 2025), https://asean.org/wp-content/uploads/2012/05/ASEAN-China-POA-2021-2025.pdf.
[22] Chairman’s Statement of the 24th ASEAN-China Summit, op. cit.
[23] State of Southeast Asia Survey Reports, ISEAS-Yusof Ishak Institute, 2019-2021, /category/articles-commentaries/state-of-southeast-asia-survey.
[24] Author’s interviews with ASEAN member states’ officials.
[25] “GT Voice: Australia’s empty gestures won’t hinder China-ASEAN ties”, Global Times, 28 October 2021, https://www.globaltimes.cn/page/202110/1237565.shtml.
[26] Evelyn Goh, “Great Powers and Hierarchical Order in Southeast Asia: Analyzing Regional Security Strategies”, International Security, Vol. 32, No. 3 (Winter 2007/08), pp. 113-157.
[27] Ministry of Foreign Affairs of the People’s Republic of China, op. cit.
[28] Hoang Thi Ha, “Southeast Asians’ Declining Trust in China”, ISEAS Perspective 2021/15, 18 February 2021, /articles-commentaries/iseas-perspective/iseas-perspective-2021-15-southeast-asians-declining-trust-in-china-by-hoang-thi-ha.
[29] See “Beijing rattles oil companies in South China Sea off Vietnam”, Energy Voice, 13 August 2020, https://www.energyvoice.com/oilandgas/asia/258490/beijing-oil-china-vietnam; Samir Puri, “What the Whitsun Reef incident tells us about China’s future operations at sea”, IISS, 9 April 2021,https://www.iiss.org/blogs/analysis/2021/04/whitsun-reef-incident-china; Aristyo Rizka Darmawan, “China’s Recent Foray into the North Natuna Sea is Problematic”, Fulcrum, 22 September 2021, https://fulcrum.sg/chinas-recent-foray-into-the-north-natuna-sea-is-problematic; Amy Chew, “China harasses Malaysian oil and gas vessels on a ‘daily’ basis, Asia Maritime Transparency Initiative says”, SCMP, 25 October 2021, https://www.scmp.com/week-asia/politics/article/3153648/china-harassing-malaysian-oil-and-gas-vessels-daily-basis-asia.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
The ASEAN Studies Centre at the ISEAS-Yusof Ishak Institute is pleased to invite you to participate in its annual The State of Southeast Asia: 2022 Survey. The Survey seeks to understand the perceptions of Southeast Asians on regional affairs, ASEAN’s engagements with its Dialogue Partners, and ASEAN member states’ positions on regional political, economic, and social issues. As an Opinion Leader, your timely participation will contribute greatly to our survey findings.
This is the fourth time the Survey is administered. In the last three years, the Survey’s findings have been cited in numerous regional and international media outlets including Foreign Policy, Japan Times, The Australian, Asia Times, The Diplomat, amongst others.
The survey can be taken in Bahasa Indonesia, Khmer, Lao and Vietnamese by clicking the language option at the top right-hand corner. Your individual responses are anonymous and will not be made public, shared with other parties, or used in any identifiable manner. We sincerely hope that you will agree to participate in the survey which will take only 30 minutes of your time.
Please click here to participate by 31 December 2021: https://www.research.net/r/ISEASGRMC
Thank you for your time and support. Should you have any questions, please contact asc_survey@iseas.edu.sg.
EXECUTIVE SUMMARY
- An ASEAN-China Comprehensive Strategic Partnership (AC-CSP) may be on the cards, but ASEAN fears that adopting it may be construed as taking sides.
- While a pragmatic analysis of what an AC-CSP would bring to the table across its three pillars of cooperation is needed, ASEAN should also consider the implications for the bloc’s strategic autonomy, given the political and institutional upgrading of ties involved.
- While ASEAN may find it difficult to rebuff China’s overtures for an AC-CSP given Beijing’s expanding hegemony and the structurally asymmetrical relationship, the common challenges and aspirations shared by both parties nevertheless encourage functional cooperation. On the flip side, there is also the danger of certain presently relished benefits in the relationship being lost.
- Thus, ASEAN must be mindful of the method and pace with which AC-CSP negotiations are conducted, and focus on expanding cooperation in mutual ‘bright spots’ in the socio-cultural realm, and allow for an implicit wait-and-see approach.
- China and Australia’s requests for an upgrade presents an opportune window for ASEAN to calibrate its guiding principles for future upgrading of partnerships.
* Farah Nadine Seth is Research Officer at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute. Sharon Seah is ISEAS Senior Fellow and Coordinator of the ASEAN Studies Centre and the Climate Change in Southeast Asia Programme.
INTRODUCTION
ASEAN’s relationship with China follows closely the latter’s exponential rise in importance globally in the last 30 years. China’s first official engagement with the bloc was in 1991, and it was accorded full Dialogue Partner (DP) status five years later.[1] Despite joining later than other countries,[2] China accelerated its engagement with ASEAN rapidly thereafter with China-ASEAN ties being upgraded to a strategic partnership in 2003, earlier than for other DPs.[3] Since then, China has embarked on a plethora of collaborations across ASEAN’s three sectoral pillars.
Continuing earlier calls for strengthening of ties,[4] China has been pushing for an ASEAN-China Comprehensive Strategic Partnership (AC-CSP) with the advent of the 30th Anniversary of ASEAN-China dialogue relations this year. It was Chen Xiaodong, China’s Assistant Minister of Foreign Affairs, who proposed establishing an AC-CSP in 2021.[5] This was met with a polite muted response from the bloc as seen in the Chairman’s Statement of the 23rd ASEAN-China Summit.[6] China’s desire to upgrade bilateral relations reflects ASEAN’s long-standing economic and strategic importance to Beijing, with top Chinese diplomats repeatedly emphasising that “China will always take ASEAN as a priority in its neighbourhood diplomacy”.[7] At the point of writing, discussions on a potential AC-CSP, along with Australia’s request to upgrade its relations to a CSP,[8] are ongoing.
This Perspective examines ASEAN-China cooperation across ASEAN’s three sectoral pillars before analysing the opportunities and concerns of a potential AC-CSP. We argue that while ASEAN must carefully consider the conditions for an AC-CSP, including concerns of exacerbated structural inequalities in the political-security and economic realms, the bloc might be hard-pressed to ignore China’s overtures given Beijing’s expanding regional influence and the structurally asymmetrical relationship. Nevertheless, the common challenges and aspirations shared by both parties point to potential mutually beneficial areas of functional cooperation. As such, ASEAN must be mindful of the method and pace in which AC-CSP negotiations are conducted, and focus on expanding cooperation in mutual ‘bright spots’ in the socio-cultural realm, and allow for an implicit wait-and-see approach.
MULTIFACETED COOPERATION THROUGH THE YEARS
China’s key pillar of cooperation with ASEAN is arguably economic. China was the first major power to conclude a Free Trade Agreement (FTA) with ASEAN,[9] and trade and investment between both parties has grown rapidly as a result. China has been ASEAN’s top trading partner since 2009.[10] In 2020, the bloc surpassed the EU to be China’s top trading partner.[11] Two-way trade in 2020 was valued at US$731.9 billion while foreign direct investment inflows into the region topped US$7.6 billion.[12] From their wide-ranging cooperation – spanning production capacity, communication and science technologies, transport cooperation and smart cities – connectivity has emerged as a key cooperation sector with both parties working to synergise common strategies in the Master Plan on ASEAN Connectivity 2025 and China’s Belt and Road Initiative.[13] Through the latter, China has invested significantly in various infrastructure projects region-wide, especially in the mainland ASEAN states.
Recently, collaboration under the socio-cultural pillar has gained traction and earned China more soft power. China and ASEAN have increased cooperation in public health, environmental protection, disaster management, and rural development. Furthermore, China’s COVID-19-related assistance[14] and its extensive vaccine diplomacy in the region,[15] were noteworthy, with the region recognising China as the DP that provided the most help during the pandemic, according to The State of Southeast Asia: 2021 Survey (SSEA2021).[16] Within the environmental realm, there have been growing interactions in environmental protection, climate action and eco-friendly cities.[17] The increased socio-cultural interlinkages are perhaps best encapsulated in the 30th year of ASEAN-China Dialogue Relations’ theme, “Year of Sustainable Development Cooperation”, which focused on non-traditional security and sustainable development issues.[18]
Their political and security cooperation, however, is subject to changing push-and-pull tensions. Beijing’s law enforcement-driven security collaborative efforts centre on drug trafficking, transnational crime and non-traditional security issues. Regarding defence security, China has participated in various fora within ASEAN-led mechanisms such as the ASEAN Defence Ministers Meeting Plus, ASEAN Regional Forum and the East Asia Summit. However, their political discussions largely focus on the contentious issue of territorial sovereignty in the South China Sea (SCS). Various measures to manage these increasingly tense relations have been initiated including the Declaration on the Conduct of Parties in the South China Sea (DOC) signed in 2002, and the ongoing Code of Conduct (COC) negotiations that have been underway since 2017. Progress on the COC has been slow-moving, and military incursions in the SCS are straining relations and belying the agreements made to mitigate tensions.
An AC-CSP would signal higher priority in foreign affairs and more extensive cooperation across multiple sectors. Referencing Premier Wen Jiabao’s authoritative definition on a CSP, the term ‘Comprehensive’ denotes that the partnership would involve “cooperation in the economic, technological, cultural and political fields” with multi-level diplomatic cooperation at the government and people-to-people level to deal with both bilateral and multilateral issues.[19] Beijing’s Five-Point Proposal on the future of ASEAN-China cooperation serves as a reference point for the possible areas that an AC-CSP would focus on (refer to Table 1).
Table 1: China’s Five-Point Proposal for China-ASEAN Relations
Source: Ministry of Foreign Affairs of the People’s Republic of China[20]
OPPORTUNITIES AND CONCERNS OF AN AC-CSP
Considering the longstanding cooperation between ASEAN and China, their increasingly inter-connected economies, and the crucial geopolitical space within which the ASEAN bloc resides, it is not surprising that China is pushing for a closer strategic partnership. The changing global geopolitical landscape with a stridently growing counter-China narrative and regional architecture[21] led by an assertive Biden Administration, is also a factor in driving China to strengthen its remaining bright spot in diplomatic relations.[22] China has been engaging in a charm offensive with the region with reciprocal bilateral visits between China and ASEAN countries in the last year, despite pandemic travel restrictions.[23] The series of 30th Anniversary commemorative events[24] have also allowed Beijing to repeatedly highlight enduring China-ASEAN bonds and press for an AC-CSP.
However, regional trust in China is low despite Beijing’s COVID-19 diplomacy. According to SSEA2021, China[25] recorded the lowest trust ratings of 16.5% and the highest distrust ratings of 63.0% amongst regional respondents. The top-cited concern was that China’s economic and military might may be used to threaten ASEAN states’ interest and sovereignty.[26] A potential AC-CSP would enhance fears of ASEAN’s loss of strategic autonomy given closer economic and security ties and likely increased Chinese hegemony.
Moreover, Southeast Asia is shaping into a geopolitical battleground, with the US and its allies re-focusing their attention to the region. In contrast to the previous administration’s disinterest, the Biden Administration views Southeast Asia and ASEAN as being integral to security interests in the Indo-Pacific and in countering Chinese strategic and economic influence in the region.[27] A recent ramp up in American diplomatic visits to Southeast Asia[28] with the most recent being Vice-President Kamala Harris’ visit to Singapore and Vietnam, point to US intention to revitalise their engagement with the region.
Against this backdrop, an AC-CSP may heighten ASEAN’s fears of being forced to take sides in the major power rivalry. Such a CSP would be the first between ASEAN and one of its DPs, sending an implicit signal of ASEAN tilting towards China despite its position thus far of neutrality. The traditional risk-averse ASEAN approach would be to continue hedging and to employ a wait-and-see strategy. This mode was already exhibited in the watered-down version of the final Co-Chair’s Statement on the Special ASEAN-China Foreign Ministers’ Meeting in Celebration of the 30th Anniversary of the Dialogue Relations despite China’s initial optimistic projections.[29] It is unclear, though, how long ASEAN can continue to hedge and if prolonged delay would be viewed as a rebuff to the Chinese. However, noting the glacial pace at which consensus-driven ASEAN tends to operate, especially during pandemic times, such a delay – or hedging – would not be unusual and could be a convenient excuse.
ASEAN must embark on a pragmatic analysis of what an AC-CSP would bring to the table. Closer economic ties with China have certainly benefited the region. It is unclear whether closer political-security cooperation would be a boon or bane. In areas of mutual alignment such as combatting drug trafficking and transnational crime, there are opportunities for closer functional cooperation, though mainland states may worry about the expansion of Chinese influence in sub-regional security.[30] In the SCS disputes, some supporters may see an AC-CSP as an opportunity for ASEAN claimant states to seek to resolve contested boundaries. In their Five-Point Proposal, Beijing indicated its willingness to step up resolution-driven dialogue with claimant states and to speed up negotiations on a COC that complies with international law.[31] These would be promising signs of more effective cooperation in an AC-CSP. However, China’s track record of coercive fait accompli building of artificial islands and military outposts to stake its territorial claim as well as its blatant disregard of the 2016 Tribunal ruling not in its favour[32], makes it unlikely that Beijing can be persuaded to depart from its thus far China-first doctrine even within an AC-CSP. Strengthened regional ties through an AC-CSP could put claimant states under greater pressure to resolve SCS disputes bilaterally, an avenue that China has long preferred. Similarly, non-SCS claimant states may be reluctant to include the matter of SCS concessions, those not being of concern to them in an institutional agreement.
The AC-CSP may appear to be a revival of China’s proposed ASEAN-China Treaty of Good Neighbourliness, Friendship and Cooperation, an idea that China put forward in 2013 to frame the strategic partnership. The idea of a treaty was politely and quietly shelved on concerns that it would duplicate and undermine the Treaty of Amity and Cooperation.[33] The promotion of “multilateralism with Asian characteristics” in Beijing’s Proposal suggests a desire to create a China-centred multilateral order but one which is undefined and ill-articulated. The Sino-centric world idea threatens to contradict the global international legal order which can be problematic to both sides’ stated adherence to international law, particularly in the SCS disputes. This raises a greater concern of whether strengthened ties would exacerbate the asymmetrical China-ASEAN relationship and force ASEAN to take a more China-amenable stance on other contested issues such as the Indo-Pacific or the Mekong sub-region. In essence, would an upgrade put ASEAN in danger of becoming a proxy region prone to do China’s bidding?
From an economic standpoint, an AC-CSP could enhance both the advantages and disadvantages stemming from the current relationship. For example, while trade and investment volumes may have room for expansion, existing trade deficits and negative impacts on ASEAN states’ local economies may consequently be exacerbated. Increased Chinese investment in connectivity projects, mostly in the Mekong region, while benefitting infrastructure needs, may heighten fears of increased economic dependence on China and subsequent decreased strategic autonomy.[34] These scenarios are no doubt dependent on the actual terms of the AC-CSP, but were ASEAN to decide not to accede to a CSP, it is likely that a rebuffed China would impose retaliatory punitive measures as it had done with Australia, a situation that most countries would rather avoid.[35]
The socio-cultural pillarmay perhaps be the bright spot in an AC-CSP. This year’s “Sustainable Development Cooperation” theme with its focus on expertise sharing on climate change, biodiversity, marine environment preservation, sustainable cities and clean energy, points to increased future cooperation on pressing environment-related issues. Beijing has indicated its readiness to implement the latest ASEAN-China environmental cooperation strategy.[36] Moreover, their commitment to environmental protection and innovation is underscored in the third thrust of their Five-Point Proposal on developing partnerships based on new growth drivers such as the blue and green economies. The other growth area of public health, as seen in the Proposal’s second thrust, suggests much-needed pandemic-related cooperation, moving forward. This includes joint vaccine production in ASEAN states, initial steps of which are seen in China and Indonesia’s recent cooperation pledge.[37] Functional cooperation holds promises of a “feel-good” factor and an ability to conduct arms-length cooperation without sacrificing strategic autonomy.
From an institutional standpoint, upgrading ties holds both opportunities and risks, given China’s existing bilateral relations with ASEAN states. Following Li & Ye’s categorisation of China’s partnerships into three broad categories – regular partnership, strategic partnership and comprehensive strategic partnership,[38] it is worth noting that most of China’s bilateral relations with ASEAN member states are more comprehensive than those with ASEAN as a whole, with most of them falling under the CSP grouping (Refer to Table 2). In particular, the Mekong countries of Cambodia, Laos, Myanmar, Vietnam and Thailand all have a higher level of bilateral partnerships that entered into force earlier than for those China has with their maritime counterparts.
Table 2: Status of Bilateral Relations of ASEAN Member States with China
Source: Various Sources (Ministries of Foreign Affairs of ASEAN states and China, The Brookings Institute[39], Li &Ye, and various press releases)
These raise important considerations. Is this a critical juncture for ASEAN to upgrade its relationship with China to reflect the strengthened ties which most ASEAN states already have with Beijing? As noted in NIDS China Security Report 2019, the framework between ASEAN and China serves as a “protective wall that prevents the direct exertion of China’s massive influence on the small and medium-sized countries of ASEAN”.[40] Similarly, an upgraded relationship could provide ASEAN greater leverage and a unified voice when dealing with China on contested sub-regional matters – such as the Mekong issues – which individual states may have less authority to act on. However, critics could argue that the converse is just as important – ASEAN as an institution should resist upgrading relations as a last ballast of regional hedging against expanding Chinese hegemony, maintain “pushback” against being drawn more into China’s orbit and attempt to preserve its strategic autonomy. These possible scenarios depend on the bloc’s objectives in an AC-CSP and critical operationalisation details.
The EU-China Comprehensive Strategic Partnership (EU-China CSP) provides a point of comparison for a potential AC-CSP. Announced in 2003, the EU-China CSP was heralded as the coming together of two “natural partners”[41] to go beyond trade and investment ties and strive towards greater “convergence around long-term economic, political and strategic attitudes and objectives”. The EU’s strategic motivations for entering into this partnership were manifold,[42] one being the desire to counteract the US’ then rapidly spreading hegemony. However, the upgraded partnership eventually amounted to merely strengthening trade and investment relations. Analysts have attributed the lacklustre strategic partnership to fundamental differences in political values, geopolitical spheres of interest as well as conceptions of world order. China’s declining strategic interest in EU, given the former’s meteoric global rise in the last two decades, also played a role.[43]
While the EU-China CSP raises the possibility that an AC-CSP could similarly amount to enhanced economic cooperation, realists would point to vital differences in the ball game between ASEAN and China: the geo-proximity of Southeast Asia, the region’s strategic space for Beijing to extend its influence vis-à-vis major power rivalry, and the greater structural asymmetry in the ASEAN-China relationship. These all suggest not only the longevity of a potential AC-CSP but also the risk of loss of ASEAN centrality in the regional architecture and a backslide in international rule of law if China’s vision of “multilateralism with Asian characteristics” were realised.
MOVING FORWARD
As discussed above, while an AC-CSP affords ASEAN some opportunities, there are areas of concern which the bloc must carefully consider. In assessing and negotiating the terms of a possible AC-CSP, the timing and operationalisation of the details of the multi-sectoral cooperation are crucial. Beijing also needs to provide more clarity on what they want to achieve in a CSP.
From a realist’s perspective, however, ASEAN may find it hard to rebuff China’s overtures for a CSP. Given Beijing’s unspoken determination to increase its economic and strategic influence in the region, as well as its well-known tit-for-tat modus operandi of punishing countries that rebuff it, the bloc may have little choice but to eventually accede. Moreover, the fact that a sizeable number of ASEAN states are dependent on China’s economic purse and political support for development projects and regime legitimation points to potential internal willingness for upgraded ties. In this regard, Cambodia recently voiced its public support for an AC-CSP at the ASEAN Post Ministerial Conference with China.[44] Furthermore, it could be argued that China is perhaps already engaging in a pseudo-CSP with ASEAN given the already broad-based and active collaborations already underway, and an AC-CSP would be but a mere repackaging exercise.
Nevertheless, a defeatist power-driven perspective presents only a limited analysis of the relationship. Despite Beijing’s oft-cited dismissal of the bloc’s small size[45], ASEAN states and China have a shared future given their overlapping spheres of economic and geographic existence. Common challenges such as public health, climate action, post-pandemic recovery as well as common aspirations such as development-driven connectivity, highlight their semi-symbiotic relationship and point to potential areas of mutually beneficial functional cooperation.
Taking these factors into consideration, ASEAN must therefore be mindful of the method and pace with which negotiations on an AC-CSP are conducted. The bloc could consider focusing on the expansion of cooperation in mutual ‘bright spots’ in the socio-cultural realm that have room for growth, such as environmental collaboration or pandemic-related assistance. The pace at which negotiations are conducted should also be managed, allowing ASEAN to take an implicit wait-and-see approach to see how external powers react to ongoing negotiations and to potentially extract more concessions from a China eager to finalise the partnership. Australia’s request for ASEAN to consider a CSP could well provide a good cover for ASEAN to delay a decision on the matter, although many will say that the tenor of the two relationships is vastly different. However, the case can nevertheless give ASEAN some space to consider what its guiding principles should be when upgrading partnerships.
At this point of preliminary negotiations, ASEAN should focus on the potential gains and the concerns of upgraded ties, including reconciling the different world views on both sides. It should take this valuable opportunity to calibrate its guiding principles for upgrading partnerships, moving forward, and perhaps most importantly, as the EU’s experience suggests, whether or not both sides share common multilateral values.
ISEAS Perspective 2021/120, 10 September 2021
ENDNOTES
[1] ASEAN Secretariat. (April 2020). Overview of ASEAN-China Dialogue Relations. ASEAN Secretariat Information Paper. https://asean.org/storage/2012/05/Overview-of-ASEAN-China-Relations-22-Apr-2020-00000002.pdf.
[2] Countries such as Japan, Australia, the US, Canada and the EU had already established dialogue relations with the bloc in the 1970s. Source: ASEAN Secretariat. (2021). Overview of Dialogue Relations of ASEAN with the abovementioned countries. ASEAN Secretariat Information Papers. https://asean.org/asean/external-relations/.
[3] Other DPs which reached a strategic partnership with the bloc years later include the Republic of Korea (2010), Australia (2014), the US (2015), Russia (2018), the EU (2020). Source: ibid.
[4] China had previously proposed the development of an ASEAN-China Treaty of Good Neighbourliness, Friendship and Cooperation as well as a vision of an ASEAN-China Community of Common Destiny in 2013. Source: ASEAN Secretariat (9 October 2013). Chairman’s Statement of the 16th ASEAN-China Summit. Paragraph 10. https://asean.org/wp-content/uploads/images/archive/23rdASEANSummit/chairmans%20statementfor%20the%2016th%20asean-china%20summit%20-%20final%203.pdf; Hoang, T.H. (August 2019). Understanding China’s Proposal for an ASEAN-China Community of Common Destiny and ASEAN’s Ambivalent Response. Contemporary Southeast Asia: A Journal of International and Strategic Affairs, Volume 41, Number 2, pp. 223-254.
[5] National ASEAN 2020 Committee – The Sub-Committee on Communications and Culture. (1 July 2020). ASEAN, Chinese senior officials meet online. ASEAN Vietnam 2020 Online. https://www.asean2020.vn/xem-chi-tiet1/-/asset_publisher/ynfWm23dDfpd/content/asean-chinese-senior-officials-meet-online.
[6] The bloc stated that it “agreed to undertake consultations on the proposed establishment of a Comprehensive Strategic Partnership between ASEAN and China”. Source: ASEAN Secretariat. (12 November 2020). Chairman’s Statement of the 23rd ASEAN-China Summit. https://asean.org/storage/47-Final-Chairmans-Statement-of-the-23rd-ASEAN-China-Summit.pdf.
[7] This was mentioned in the Vice Foreign Minister’s speech at the opening ceremony of the 30th Anniversary of China-ASEAN dialogue relations. Source: Ministry of Foreign Affairs of the People’s Republic of China. (9 March 2021). Vice Foreign Minister Luo Zhaohui Talks about China-ASEAN Relations: Brighter Prospects after 30 Years of Thriving Development. https://www.fmprc.gov.cn/mfa_eng/wjb_663304/zygy_663314/gyhd_663338/t1859992.shtml. This was also reiterated by Foreign Minister Wang Yi during his speech at the Opening Ceremony of the Conference on Celebrating the 30th Anniversary of ASEAN-China Dialogue Relations. Source: Ministry of Foreign Affairs of the Republic of China. (28 July 2021). Wang Yi Attends and Addresses the Opening Ceremony of the Conference on Celebrating the 30th Anniversary of ASEAN-China Dialogue Relations. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1895951.shtml.
[8] ASEAN Secretariat. (March 2021) Co-Chairs’ Summary of the 33rd ASEAN-Australia Forum – Paragraph 38. https://asean.org/wp-content/uploads/33rd-ASEAN-Australia-Forum-Co-Chairs-Summary-FINAL1.pdf.
[9] The ASEAN-China FTA took full effect in January 2015.
[10] CGTN (11 September 2018). China-ASEAN in numbers: Trade ties. https://news.cgtn.com/news/3d3d414e3145544d7a457a6333566d54/share_p.html.
[11] The State Council Information Office of The People’s Republic of China. (14 July 2020). ASEAN becomes China’s largest trading partner in H1. http://english.scio.gov.cn/pressroom/2020-07/14/content_76271598.htm.
[12] Global Times. (14 Jan 2021). ASEAN becomes China’s largest trading partner in 2020, with 7% growth. https://www.globaltimes.cn/page/202101/1212785.shtml; Foreign Direct Investment Statistics (2020). ASEANStatsDataPortal. https://data.aseanstats.org/.
[13] ASEAN Secretariat. (April 2020). Overview of ASEAN-China Dialogue Relations. ASEAN Secretariat Information Paper. https://asean.org/storage/2012/05/Overview-of-ASEAN-China-Relations-22-Apr-2020-00000002.pdf.
[14] These include information and best practice sharing on epidemiological data and guidelines for epidemic control, as well as capacity building on emergency response.
[15] Zaini, K. (24 June 2021). China’s Vaccine Diplomacy in Southeast Asia – A Mixed Record. ISEAS Perspective. /wp-content/uploads/2021/06/ISEAS_Perspective_2021_86.pdf.
[16] Seah, S., et al. (2021). The State of Southeast Asia: 2021. (Singapore: ISEAS – Yusof Ishak Institute, 2021).
[17] Regarding climate change, China currently provides technical capacity-building to key ASEAN personnel on climate-related topics. It has also bilateral agreements with Myanmar, Vietnam and The Philippines on climate adaption. Source: Seah, S. (9 June 2021). ASEAN’s Climate Cooperation with China and the US: Challenges and Prospects. ISEAS Perspective. /articles-commentaries/iseas-perspective/2021-77-aseans-climate-cooperation-with-china-and-the-us-challenges-and-prospects-by-sharon-seah/.
[18] Focus areas include climate change impact mitigation, biodiversity preservation, tackling marine plastic debris, sustainable cities and clean energy promotion. ASEAN Secretariat. (5 March 2021). ASEAN, China reaffirm commitment to strong partnership. https://asean.org/asean-china-reaffirm-commitment-strong-partnership/.
[19] Premier Wen Jiabao’s speech at the EU’s Brussels office in 2004 is seen by analysts as the most authoritative definition of what a Comprehensive Strategic partnership entails. In addition to his elucidation of the term “Comprehensive”, he further explained that the term “Strategic” connotes the importance of the cooperation to both parties and that it is “stable and long-term, overcoming the differences in ideology and political systems”. Lastly, the word “Partnership” implied that both parties strove towards a “win-win relationship” based on “mutual respect, mutual trust and equality”. Source: Li, Q. and Ye, M. (2019). China’s emerging partnership network: what, who, where, when and why. International Trade, Politics and Development, Vol. 3 No. 2, pp. 66-81. https://doi.org/10.1108/ITPD-05-2019-0004.
[20] Ministry of Foreign Affairs of the People’s Republic of China. (28 July 2021). Wang Yi Attends and Addresses the Opening Ceremony of the Conference on Celebrating the 30th Anniversary of ASEAN-China Dialogue Relations. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1895951.shtml.
[21] These include Western-led alliances, such as the G7 and the resurrected Quadrilateral Dialogue, which through their joint statements, sanctions and alternative infrastructure programmes (such as the Build Back Better World) have sought to counteract and chastise Chinese-led infrastructure projects as well as their incursions and abuses in various territories.
[22] Hoang, T. H. (11 June 2021). A New Height of ASEAN-China Relations? Not Quite, Not Yet. ISEAS Fulcrum. https://fulcrum.sg/a-new-height-of-asean-china-relations-not-quite-not-yet/.
[23] Foreign Minister Wang Yi paid official visits to most ASEAN states in October 2020 and January 2021, which some countries reciprocated in April 2021 with bilateral meetings in Fujian. Sources: Chen, J. (February 2021). Resources for China–ASEAN Relations: October 2020 to December 2020. China: An International Journal, Volume 19, Number 1, pp. 204-210; Chen, J. (May 2021). China–ASEAN Relations January 2021 to March 2021: Chronology of Events. China: An International Journal, Volume 19, Number 2, pp. 178-182.
[24] These include the opening ceremony in celebration of the 30th Anniversary of China-ASEAN Dialogue Relations in March 2021, the Special ASEAN-China Foreign Ministers’ Meeting in Celebration of the 30th Anniversary of the Dialogue Relations held in Chongqing in June 2021, as well as the recent Opening Ceremony of the Conference on Celebrating the 30th Anniversary of ASEAN-China Dialogue Relations held on 28 July 2021.
[25] Perceptions of trust towards China, the US, EU, Japan and India were measured in this survey.
[26] Seah, S., et al. (2021). The State of Southeast Asia: 2021. (Singapore: ISEAS-Yusof Ishak Institute, 2021).
[27] Moriyasu, K. (7 July 2021). US does not support Taiwan independence: Kurt Campbell. Nikkei Asia. https://asia.nikkei.com/Politics/International-relations/Biden-s-Asia-policy/US-does-not-support-Taiwan-independence-Kurt-Campbell.
[28] Deputy Secretary of State Wendy Sherman’s visit to Indonesia, Cambodia and Thailand in May 2021; Defense Secretary Lloyd Austin’s visit to Singapore, Vietnam and The Philippines in July 2021, as well as the behind-doors introductory meeting between Secretary of State Antony Blinken and ASEAN Foreign Ministers in July 2021 as well.
[29] Despite Beijing’s call to explore elevating ties to a Comprehensive Strategic Partnership, the final Co-Chair’s Statement was formulated more obliquely as “Advance ASEAN-China Strategic Partnership to new heights by forging closer cooperation”. Source: Zhou, L. (12 June 2021). Why Asean is wary about stronger ties with China. South China Morning Post. https://www.scmp.com/news/china/diplomacy/article/3137025/why-asean-wary-about-stronger-ties-china. Also see: ASEAN Secretariat. (n.d.) Co-Chairs’ Statement on the Special ASEAN-China Foreign Ministers’ Meeting in Celebration of the 30th Anniversary of the Dialogue Relations. https://asean.org/storage/Co-Chairs-Statement-on-the-Special-ASEAN-China-Foreign-Ministers-Meetin….pdf
[30] China, Thailand, Laos and Myanmar have been engaging in joint patrols of parts of the Mekong River, following the 2011 attack on Chinese sailors by drug dealers in the Thai section of the river. However, Thailand has so far resisted Beijing’s pressure to allow Chinese patrol boats to go past the Thai northern border of the Mekong River, due to concerns of encroaching Chinese strategic reach into mainland Southeast Asia. Source: Hiebert, M. (22 March 2021). Upstream Dams Threaten the Economy and the Security of the Mekong Region. ISEAS Perspective. /articles-commentaries/iseas-perspective/2021-34-upstream-dams-threaten-the-economy-and-the-security-of-the-mekong-region-by-murray-hiebert/.
[31] Ministry of Foreign Affairs of the People’s Republic of China. (28 July 2021). Wang Yi Attends and Addresses the Opening Ceremony of the Conference on Celebrating the 30th Anniversary of ASEAN-China Dialogue Relations. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1895951.shtml.
[32] Zheng, S., & Zhang, R. (25 July 2021). South China Sea: calls to honour Hague ruling 5 years on, but Beijing digs in. South China Morning Post. https://www.scmp.com/news/china/diplomacy/article/3142456/south-china-sea-calls-honour-hague-ruling-5-years-beijing-digs.
[33] Hoang, T. H. (December 2018). ASEAN’s Ambivalence towards a “Common Destiny” with China. ASEAN Focus, Issue 6/2018. /images/pdf/ASEANFocus_December2018_Final.pdf.
[34] Das, S. B. (21 June 2018). Do the Economic Ties between ASEAN and China Affect Their Strategic Partnership? ISEAS Perspective. /images/pdf/ISEAS_Perspective_2018_32%4050.pdf.
[35] China engaged in economic and trade reprisals against Australia following policies that were perceived to target Beijing. Source: Meijer, E. (25 May 2021). Australia pressed to dispense ‘bitter pill’ Xinjiang sanctions. Nikkei Asia. https://asia.nikkei.com/Spotlight/Asia-Insight/Australia-pressed-to-dispense-bitter-pill-Xinjiang-sanctions.
[36] ASEAN-China Centre (28 May 2021). ACC Representatives Attended the Inauguration of 2021 ASEAN-China Year of Sustainable Development Cooperation. http://www.asean-china-center.org/english/2021-05/7942.html.
[37] Zheng, S. (7 June 2021). China pledges joint Covid-19 vaccine production plan with Indonesia. South China Morning Post. https://www.scmp.com/news/china/diplomacy/article/3136315/china-pledges-joint-covid-19-vaccine-production-plan-indonesia.
[38] Li, Q. and Ye, M. (2019). China’s emerging partnership network: what, who, where, when and why. International Trade, Politics and Development, Vol. 3 No. 2, pp. 66-81. https://doi.org/10.1108/ITPD-05-2019-0004.
[39] Ford, L. W. (September 2020). Network Power: China’s Effort to Reshape Asia’s Regional Security Architecture. The Brookings Institute. https://www.brookings.edu/wp-content/uploads/2020/09/FP_20200914_china_network_power_ford.pdf.
[40] The National Institute for Defence Studies. (2019). NIDS China Security Report 2019: China’s Strategy For Reshaping the Asian Order and its Ramifications.
[41] Solana, J. (17 September 2013). Europe’s Smart Asian Pivot. Project Syndicate. https://www.project-syndicate.org/commentary/the-eu-s-startegic-advantages-in-asia-by-javier-solana
[42] The other key motivations included instigating social and political change in China, as well as for the EU to show its geopolitical global leadership in corralling together rising powers.
[43] Maher, R. (2016). The Elusive EU-China Strategic Partnership. International Affairs. 92. 10.1111/1468-2346.12659.
[44] Khmer Times. (5 August 2021). Cambodia supports elevation of ASEAN-China ties to Comprehensive Strategic Partnership. Khmer Times. https://www.khmertimeskh.com/50908932/cambodia-supports-elevation-of-asean-china-ties-to-comprehensive-strategic-partnership/
[45] Then-Foreign Minister Yang Jiechi infamously stated at the 2010 ASEAN Regional Forum that “China is a big country and other countries are small countries, and that’s just a fact.” Source: Chang, F. K. (17 June 2021). ASEAN’s Search for a Third Way: Southeast Asia’s Relations with China and the United States. Foreign Policy Research Institute. https://www.fpri.org/article/2021/06/aseans-search-for-a-third-way-southeast-asias-relations-with-china-and-the-united-states/.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- The participation of China and its suppliers in the Global Value Chains has shaped a new North-South model of trade where exports from a developing economy (China) to advanced economies are affected by the trade it has with other developing countries.
- Due to this pattern of trade, a real appreciation in the Renminbi (RMB) decreases China’s imports from its trading partners, instead of increasing imports, which is commonly accepted in conventional wisdom.
- For ASEAN, a real appreciation in the RMB by 1% decreases China’s imports from the region by 0.35%, whereas in its traditional trade with the US as importer, a stronger USD by 1% induces an increase by 1.06% in the US’s imports from ASEAN.
- China’s policy of product diversification along with a policy of commercial partnership and cooperation with its regional partners (particularly focused on standardising tariffs in Developing Asia) is part of a premeditated strategy of resilience in the face of the real appreciation of its currency.
- Export diversification by ASEAN economies has proven to affect the responsiveness of China’s imports from these countries to the change in the RMB. The more ASEAN economies diversify their exports, the more China’s imports from these countries (or their exports to China) become resilient to changes in the relative price.
* Phi Minh Hong is ASEAN Graduate Fellow at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute and Lecturer, University of Rouen Normandie (France) and Foreign Trade University Hanoi (Vietnam).
INTRODUCTION
In the traditional trade model, the leading economy is an advanced country, and final goods are exported directly to it from developing economies. However, the growth of Global Value Chains (GVCs) has shaped a new model of North-South trade involving “Factory Asia”. This model is shaped by how the exports to advanced economies by a developing country—China—are based on South-South trade. In this pattern of trade, the effect of a change in the Chinese currency (the Renminbi, hereafter, RMB) on the exports of its suppliers deviates from popular thinking. In this regard, in addition to examining the impact of RMB fluctuations on China’s trade relations with ASEAN, this Perspective highlights the importance of export diversification carried in ASEAN economies in ensuring the resilience of China’s imports in the face of RMB fluctuations.
THE RMB AND ASEAN-CHINA TRADE
With growing participation in the GVCs, ASEAN, a part of “Factory Asia”, has become an important player in international trade. Indeed, ASEAN, as a group, is the US’s fourth largest trading partner (after Canada, Mexico and China) and the EU’s third largest trading partner outside Europe.[1] The most recent statistics point to ASEAN having surpassed the EU to become China’s largest trading partner in 2020.[2] China has in fact been ASEAN’s largest export market since 2009. That year, the value of ASEAN’s exports to China was US$195.7 billion, accounting for 14% of ASEAN’s total exports. The US was ASEAN’s second largest export destination in 2019, involving a value of US$182.6 billion which accounted for 13% of ASEAN’s total exports.[3]
China and the US are thus ASEAN’s two largest trading partners, but they follow two different patterns of North-South trade. In the traditional North-South trade pattern, ASEAN exports directly to the North (the US). The new North-South trade pattern, however, is based on South-South trade; which means that intermediate goods are exported from ASEAN to China to be processed and then exported to the rest of the world.
As shown in Figure 1, intermediate goods exports accounted for a large part of total exports from ASEAN to China (more than 80%) over the period 2012-2018. This ratio was about 55% of the exports from ASEAN to the US.
Despite their extensive exports of intermediate goods to China, export structures vary across countries depending on the processing category. Figure 2 depicts the shift in ASEAN countries’ bilateral exports to China broken down into processing and end-use categories.[4] During the period 2012-2018, there was a transition in intermediate goods exports from primary to processed goods from ASEAN economies. Some countries in the bloc recorded a significant increase in the share of exports of intermediate goods. Among them, the proportion of Vietnam’s intermediate products in overall exports increased the most, rising from 36.9% in 2012 to 72.8% in 2018 and the country accounted for the largest exports of processed intermediate goods in the bloc (39 billion USD in 2018). The second largest rise in the share of processed intermediate goods exports belonged to Cambodia, up 20% in the given period (from 22% to 42%). Although there were changes in the export structure of intermediate goods, Laos’ and Brunei’s shares of primary intermediate goods in exports remained the highest in the bloc (69.5% for Brunei, 62% for Laos). Their increasing reliance on intermediate goods implies that ASEAN countries, particularly developing economies, are deeply integrated into a complex subcontracting network. Hence, exports from those countries can be seen to be complementary to, rather than in competition with, those of China (Hooy et al., 2015).[5]
The new triangular trade structure, with China serving as an intermediary, may have repercussions on the factors affecting these participant countries’ export performance. One of them has been the impact of the Chinese currency on these economies’ exports. Through the GVCs, changes in the RMB, which affects China’s trade performance, also influence the trade performance of its suppliers.
A quick investigation gives us a broad picture of the bilateral real exchange rate and bilateral trade between China and ASEAN economies. Figure 3 depicts real RMB appreciation against the currencies of the region’s most advanced economies (Brunei, Singapore) and upper middle-income economies (Indonesia, Malaysia, The Philippines and Thailand).[6] The RMB has depreciated versus the Lao Kip but remains relatively constant against the Vietnamese Dong and the Cambodian Riel over this period. Since 2000, Vietnam’s exports to China have increased more steadily than those of other ASEAN economies (Figure 4), with the nation being the second largest exporter to China after Malaysia in 2019 (Figure 5). While bilateral exports from the least developed nations have been gradually increasing since 2010, bilateral export growth from more advanced economies appears to have been constrained.
Several studies show the conventional impact of a rising RMB on China’s exports, namely that a real appreciation in the currency implies a decrease in China’s exports. However, the impact on the import side is still being debated. From a theoretical standpoint, a strong domestic currency increases the country’s imports because of improved domestic purchasing power.
But since a large part of China’s imports is further processed into finished goods that are then exported, the conventional impact of a rising RMB on China’s imports may not be robust. Given that an appreciation of the RMB decreases China’s exports, since the latter contain value added of imported parts and components, China’s imports from its supply chain partners would decrease as well.
Phi and Tran (2020) in their work highlight the difference in the impact of importers’ exchange rates on their imports between the two North-South trade models mentioned above.[7] In the long run, while conventional wisdom persistently holds for the US (an appreciation in the real effective exchange rate of the US dollar increases the US’ imports), the reverse impact is reported in the case of China. This result coincides with previous studies that confirm this negative impact of the RMB’s appreciation on China’s imports, regardless of the fact that those imports are ordinary or processed (Garcia-Herrero and Koivu (2008), Cheung, Chinn and Fujii (2010)).[8]
For ASEAN alone, a quick regression following the work of Phi and Tran (2020) confirms the difference between the two patterns of trade. While the US’s imports from ASEAN respond highly to a change in the USD, there is only a slight change in China’s imports following a change in the RMB. Accordingly, a USD strengthened by 1% induces an increase of 1.06% in the US’s imports from ASEAN, whereas a real appreciation in the RMB by 1% decreases China’s imports from the region only by 0.35%. The latter result supports the finding of Hooy, Law and Chan (2015) on the negative impact of an appreciation of the RMB on ASEAN’s exports to China. The authors also divide disaggregated exports into categories based on usage (basic products, parts, and components) and technological levels (high-tech, medium-tech, low-tech, resource-based, primary products). According to their calculations, a positive reaction to RMB depreciation is mostly attributable to the dominance of ASEAN high-tech and medium-tech finished products exports, as well as low-tech and resource-based exports of parts and components to China. However, the degree to which ASEAN’s exports to China respond to a change in the RMB varies across disaggregated exports categories. For instance, the impact of the change in RMB value on medium-tech exports is lower than on high-tech exports. A depreciation of 1% of the RMB raises medium-tech exports by 0.66% and high-tech exports by 1.53%. At the same time, changes in the RMB appear to have little influence on ASEAN’s low-tech manufacturing, resource-based manufacturing and primary product exports.
WHEN EXPORT DIVERSIFICATION MATTERS
The results from Hooy et al. (2015) suggest that spreading suppliers’ exports across different categories of goods may affect the sensitivity of China’s imports to changes in the RMB. In other words, export diversification may affect China’s import price elasticities (the volume of imports’ response to the change in prices). As discussed above, imports from China which employ Asian-made parts and components decline as the real exchange rate rises. The impact of an RMB appreciation on Chinese commerce has been noticed in the context of GVCs. Currency appreciation diminishes China’s demand for imports from other Asian economies by decreasing China’s export production. As a result, an appreciation of the RMB might harm Asian producers of intermediate goods. Therefore, China’s policy of product diversification along with a policy of commercial partnership and cooperation with its regional partners (particularly focused on standardising tariffs in Developing Asia) is part of a premeditated strategy of resilience in the face of a real appreciation of its currency. For China’s partner economies, including ASEAN, the diversification of exports, especially bilateral exports to China, keeps these economies’ exports to China less volatile than the rate of change in the RMB. This is because each type of imported products has a different response to the change in the RMB: a high response to a real change in the RMB of high technology goods imported, for example, will be offset by the low one of medium- or low-tech manufacturing goods imported, as shown in Hooy et al. (2015)’s work.
This intuition is confirmed in the empirical analysis by Phi and Tran (2020). For lower- and middle-income countries in the Pacific Rim, including the developing ASEAN economies, China’s imports from them become less sensitive to changes in the RMB when they have a higher degree in either export diversification in destinations or bilateral export diversification with China. More specifically, the more China’s suppliers diversify their exports, the less China’s imports from those countries decrease following an appreciation of the RMB.
Most ASEAN countries maintain a high degree of export diversification, as reflected in the lower value of the Herfindhal-Hirschman index (hereafter, HHI).[9] From 1995 to 2019, the HHI of those countries ranged from 0.008 to 0.52 for products and from 0.046 to 0.45 for partners. Following the reasoning in Phi and Tran (2020), we replicate the effect of the change in the RMB on China’s imports response to the change in the RMB (China’s import price elasticities) in ASEAN countries for the given period; the results are illustrated in Figure 4. The blue areas correspond to the HHI range for ASEAN (Table A1).[10]
Overall, the response of ASEAN’s exports to a change in the RMB is minor, ranging from 0.2% to 0.4% (in absolute value) for 1% of change in the RMB. Besides, the more an ASEAN country diversifies its exports (either bilateral with China or global), the less their exports to China change following a change in the RMB. However, there is a turning point in HHI through which the effect direction would change from positive to negative. At this level of export diversification, ASEAN’s exports to China become the most “resilient” to the change in the RMB. For instance, for countries that have a bilateral HHI greater than 0.19, an appreciation in the RMB raises China’s imports from the country. This pattern follows the conventional wisdom discussed above. In most ASEAN economies (except Brunei and Laos) where the average bilateral HHI is lower than 0.19, a stronger RMB will slightly decrease ASEAN’s exports to China instead. For the HHI in products and in partners, the turning points are 0.21 and 0.38 respectively. In sum, the results highlight the importance of the export diversification strategies of ASEAN economies in making China’s imports from the region more resilient to changes in the relative price.
With the goal of promoting trade and economic growth throughout Asia and the Pacific, the Regional Comprehensive Economic Partnership (RCEP) assembles leaders from 16 countries, namely the 10 ASEAN countries as well as the six countries in the region that currently have bilateral FTAs with ASEAN. It has been argued that the RCEP will help China to consolidate its resilience in the face of a real appreciation of the RMB. Indeed, Phi and Tran (2020) find that trading with RCEP members lessens China’s import sensitivity to any change in the RER. When the Chinese currency appreciates by 1%, imports from RCEP members would decline by 0.113%, lower than imports from non-RCEP economies in the Pacific Rim area. As China plays an intermediate role in the Global Value Chains, the RCEP will make export flows from ASEAN developing economies to China and then to the final destinations smoother. On the other hand, the Covid-19 pandemic highlights the need for diversifying sourcing to help reduce supply chain volatility. This will be an opportunity for ASEAN countries to diversify not only their bilateral exports to China but also their exports to other RCEP member countries, and hence lower the impact of changes in the RMB on ASEAN’s exports.
Considering the US as an importer for comparison, we observe that the response of ASEAN’s exports to changes in the USD is higher than for China as importer, even with a higher degree of export diversification (or low HHI) of ASEAN economies (Figure 7). Spreading ASEAN’s exports across products when trading with the US helps to decrease the response of their exports to a change in the USD. However, neither ASEAN’s export diversification in products nor in partners has an impact on the US’s import price elasticities.
CONCLUSION
The expansion of product fragmentation trade in Asia has prompted a re-examination of the influence of China’s currency on the exports of its suppliers, especially from ASEAN member states (particularly the newer members) that have actively engaged in GVCs. Because a real RMB appreciation reduces Chinese exports, it lowers imports from ASEAN, rather than increase them, as conventional wisdom would suggest. When considering the United States as an importer, this effect is much smaller than the reaction of bilateral ASEAN exports to USD changes.
Besides, ASEAN’s export diversification policies have been shown to have impact on the responsiveness of their exports to RMB appreciation. Keeping a high degree of export diversification creates greater resilience to changes in relative prices for ASEAN countries’ exports to China.
ISEAS Perspective 2021/111, 20 August 2021
APPENDIX
ENDNOTES
[1] https://ustr.gov/countries-regions/southeast-asia-pacific/association-southeast-asian-nations-asean,
https://www.csis.org/analysis/us-southeast-asia-trade-relations-age-disruption,
https://ec.europa.eu/trade/policy/countries-and-regions/regions/asean/
[2] https://www.globaltimes.cn/page/202101/1212785.shtml
[3] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=ASEAN-EU_-_international_trade_in_goods_statistics#ASEAN_countries_trade_in_goods_with_main_partners
[4] We use the BEC Rev. 5 classification to distinguish product categories.
[5] Hooy, C. W., Siong-Hook, L., & Tze-Haw, C. (2015). The impact of the Renminbi real exchange rate on ASEAN disaggregated exports to China. Economic Modelling, 47, 253-259.
[6] An increase in the bilateral RER indicates an appreciation in the Renminbi. In Figure 3, we excluded Myanmar’s currency for better scale. The RER of Myanmar kyat is represented in Figure A1. The kyat was devalued largely in 2012, when the foreign exchange rate reforms occurred. The official pegging of Myanmar’s currency to the special drawing right (SDR) was annulled in April 2012. The Central Bank of Myanmar then introduced a managed floating exchange rate system. The previous peg is the reason why the kyat was overvalued before 2012 (https://www.imf.org/external/pubs/ft/scr/2013/cr1313.pdf).
[7] Minh Hong, P., & Thi Anh-Dao, T. (2020). Should I stay or should I go? The role of the renminbi in trade partnerships in the Asia-Pacific region. Post-Communist Economies, 32(8), 1062-1088.
[8] Herrero, A. G., & Koivu, T. (2008). China’s exchange rate policy and Asian trade. Économie internationale, (4), 53-92.
Cheung, Y. W., Chinn, M. D., Fujii, E., & Frankel, J. (2010). 7. China’s Current Account and Exchange Rate (pp. 231-278). University of Chicago Press.
[9] /articles-commentaries/iseas-perspective/2021-80-the-importance-of-export-diversification-for-developing-asean-economies-by-phi-minh-hong/
[10] For bilateral export diversification, we represent the HHI range from 0.02 to 0.6 instead of from 0.02 to 1 because only in the case of Brunei does bilateral HHI approximate to 1 while other ASEAN economies have relatively low bilateral HHI.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- While the global merchandise trade shrank by 5.3% as a result of the Covid-19 pandemic, bilateral trade between China and ASEAN increased in the meantime by 6.7%, thanks not only to a steady increase in bilateral trade but also to the relative decline of trade between China with its other major trading partners. Since January 2020, cumulative trade between China and ASEAN has maintained positive year-on-year growth, while cumulative trade between China and the European Union, the United States and Japan contracted for the first three quarters of last year.
- The increase in bilateral trade was largely driven by the ASEAN-6 countries, which accounted for the lion’s share of both imports and exports with China. The negative impacts of pandemic-induced measures on bilateral trade were temporary. Countries relatively unscathed by the pandemic such as Thailand and Vietnam recorded positive year-to-date changes in trade with China for nearly every month of the year. Most other ASEAN member states saw either imports or exports with China dip in the first half of 2020 but rebound in the second half. Laos was the only country whose imports and exports with China both shrank.
- The pandemic expanded the extensive margins of China’s exports (i.e., the range of traded goods) to ASEAN with substantial increases in products related to medical supplies and ‘work-from-home’ as well as capital goods. In the meantime, intra-industry trade between China and ASEAN declined due to the disruption of global production networks and lower demand, while China’s exports with high foreign value added decreased.
* Xiaojun Li is Associate Professor of Political Science at the University of British Columbia. He was a Wang Gungwu Visiting Scholar at ISEAS – Yusof Ishak Institute from 1 March 2021 to 30 June 2021.
INTRODUCTION
The Covid-19 pandemic since early 2019 has drastically disrupted economic activities throughout the world. According to the World Trade Organization, global merchandise trade flows decreased by 5.3% in 2020.[1] Against this backdrop, however, bilateral trade between China and ASEAN bucked the trend and reached $684.6 billion, a 6.7 percent increase from 2019. This propelled ASEAN to dethrone the European Union as China’s largest trading partner for the first time, while making China ASEAN’s largest trading partner for 12 years in a row.[2]
But there is more going on beneath the surface. The purpose of this Perspective is to move beyond the aggregate trade measures to uncover additional patterns in China’s trade with ASEAN countries during the global pandemic. Using monthly export and import data disaggregated by country and commodity, released by the General Administration of Customs (GAC) of China,[3] this Perspective seeks answers to the following questions: (a) What factors contributed to ASEAN becoming China’s number one trading partner? (b) How did the pandemic and related measures imposed by governments affect bilateral trade between China and ASEAN member countries? (c) What has or has not changed in the trade pattern between China and ASEAN as a result of the global pandemic?
CHINA’S TRADE WITH ASEAN VERSUS OTHER MAJOR ECONOMIES
We start by looking at overall trade between China and its top four trading partners—the European Union (EU), ASEAN, the United States and Japan.[4] The EU took the honour of being China’s top trading partner in 2019 with $707 billion in total imports and exports, narrowly edging out ASEAN at $644 billion. That same year, ASEAN also overtook the United States for the first time, after being China’s third trading partner for the previous eight years.
In 2020, ASEAN passed the EU to take the number one spot right off the bat. As can be seen in the top panel in Figure 1, in eleven of twelve months, bilateral trade between China and ASEAN was higher than that between China and the EU. The only exception was in May when EU logged about $2.5 billion more trade with China than ASEAN.
Figure 1: China’s Overall Trade with Top 4 Partners in 2020
Note: The top panel plots overall trade in billion USD and the bottom panel plots the year-to-date percent change in percentage points, which are calculated using cumulative trade from January up to that month. The data for the first two months are customarily combined due to the Chinese New Year. Source: GAC of China.
From the top panel in Figure 1, it appears that the pandemic did not hugely impact China’s trade as situations in the country were quickly contained. After a big dip in March, trade rebounded for the EU and the United States and later for ASEAN and Japan as well. However, if we look at year-on-year change in the bottom panel in Figure 1, it is apparent that ASEAN is the only one that has maintained a positive year-to-date change every month. In contrast, EU’s trade with China in the first eight months decreased from a year ago. The United States and Japan took even longer to post a year-to-date increase. In other words, ASEAN’s emergence as China’s top trading partner is a combination of the steady increase in bilateral trade and the relative rather than absolute decline of other major trading partners.
Figure 2: China’s Import and Export with Top 4 Partners in 2020
Note: This figure plots China’s monthly exports and imports in billion USD with its top four trading partners in 2020. The data for the first two months are customarily combined due to the Chinese New Year. Source: GAC of China.
Additional patterns emerge when total trade is broken down into exports and imports in Figure 2. China’s imports follow a similar, slightly increasing trend and the ranking remains the same—ASEAN, the EU, Japan and the United States. This is in contrast to exports where the ranking of the top three trading partners changes from month to month, with the U.S. taking the overall top spot of the year with $452 billion, followed by the EU ($392 billion) and ASEAN ($385 billion).
Using data from Figure 2, we can additionally calculate the differences between imports and exports (see data appendix A), which show that China ran a trade surplus against its top three trading partners (i.e., ASEAN, EU, and US), though the sizes of the surplus varied over time. Strikingly, China’s surplus with the United States remained large despite ongoing economic and political tensions between the two countries.
CHINA’S TRADE WITH ASEAN MEMBER COUNTRIES
While ASEAN as a whole became China’s top trading partner during the pandemic, there is a wide range of variations across ASEAN member countries. Figure 3 ranks the ten ASEAN member countries according to their imports, exports, and total trade with China in 2020. The ASEAN-6 countries (Vietnam, Malaysia, Thailand, Singapore, Indonesia and The Philippines) accounted for the lion’s share (94.8%) of ASEAN’s total trade with China. In particular, Vietnam surpassed Australia for the first time to become China’s seventh largest trading partner. On the other hand, the trade volumes between China and the four smaller ASEAN economies—Brunei, Laos, Cambodia and Myanmar—were substantially smaller.
Figure 3: China’s Trade with ASEAN Countries in 2020
Note: Export and import values (in billion USD) may not add up to total trade values due to rounding. Source: GAC of China.
The rankings of countries are similar when we look at imports and exports separately. One notable exception is Singapore, which ranked second for exports and fifth for imports. This resulted in a trade deficit of $26.4 billion with China, second to Vietnam’s deficit of $35.3 billion. Only three out of the ten ASEAN member countries’ exports to China exceeded their imports from China—Brunei, Laos, and Malaysia. While trade surpluses were small for Brunei ($1 billion) and Laos ($0.6 billion), Malaysia’s trade surplus with China reached $17.8 billion, mostly driven by exports in electrical and electronics products, rubber products, and palm oil and palm oil-based agriculture products, all of which were important raw materials and intermediate goods that saw a surge in demand as production capacities returned to pre-pandemic levels in China.[5]
Comparing trade figures in 2020 with just a year ago reveals that the pandemic has had divergent impacts on ASEAN member countries. Figure 4 displays cumulative year-on-year changes in both exports and imports and shows how pandemic-induced government measures such as lockdowns and circuit breaks affected trade negatively. In particular, China’s exports to almost all ASEAN countries were negatively affected in the beginning of 2020 when China entered into lockdown. Despite the pandemic, China’s imports from Indonesia, Malaysia, and Vietnam grew stronger (driven mostly by integrated circuits), which likely contributed to the overall positive growth observed in Figure 1.
Figure 4: Monthly Year-to-Date Percentage Change in China’s Exports and Imports with ASEAN Member Countries
Note: This figure plots the monthly YTD percent changes in China’s exports (top panel) and imports (bottom panel) with ASEAN countries. Underlying data for the figure can be found in Data Appendix B. Source: GAC of China.
In the second quarter of the year, many ASEAN member countries such as Cambodia, Myanmar, The Philippines, and Singapore implemented lockdown measures of varying intensity, and coincidently, their trade with China suffered consequently (as represented by the “V” shape in Figure 4). When such measures were gradually eased in the second half of the year, bilateral trade rebounded for most ASEAN member countries, with positive year-on-year changes in both imports and exports being recorded for Cambodia, Malaysia, Thailand, and Vietnam by the end of the year. Not all countries were able to fully recover though. China’s exports to Brunei, Indonesia and Laos and its imports from Laos, The Philippines and Singapore contracted from a year ago. Laos was the only country that saw both its imports and exports with China shrink by 4.3% and 15.2%, respectively.
SHIFTING TRADE STRUCTURE IN THE PANDEMIC
Did the global pandemic affect what was being traded between China and ASEAN? Table 1 shows China’s top 20 export and import products in terms of value (in billion USD) and percentages (of total imports and exports) with ASEAN in 2020 and 2019 (see Data Appendix C for the descriptions for all product chapters).[6]
On the import side, there are remarkable similarities before and after the pandemic. Only one product category (HS code 3) in the top 20 list of 2019 failed to make it to the same list of 2020. In addition, the value and percentage of these imports are comparable between the two years, resulting in a similar ranking with just a few exceptions (HS code 71, 72, and 98).[7] On the whole, the pandemic did not affect China’s imports from ASEAN in terms of both the type (i.e. extensive margin) and value (i.e. intensive margin) of goods—the top 20 product categories accounted for 91.7% and 91.1% of total imports in 2019 and 2020, respectively.
The picture is dramatically different on the export side with significant reshuffling of the top 20 list.[8] Half of the product categories in the 2019 list were replaced by new ones in 2020. Not surprisingly, these included products related to medical supplies (e.g. surgical masks and protective gears under HS 62 and 63), products with a higher ‘work-from-home’ share such as “furniture; bedding; stuffed furnishings; lamps and lighting fittings” (HS 94), and capital goods such as “iron and steel articles” (HS 73), for which long-term planning implies a different reaction to the temporary shock due to the pandemic.[9]
Furthermore, unlike the imports where the top 20 list before and after the pandemic added up to roughly the same level, China’s top 20 exports to ASEAN in 2020 accounted for 78.3% of all exports, compared to 91.8% in 2019. In other words, China exported a wider range of products to ASEAN, suggesting that the negative effects of the pandemic were concentrated on the “intensive margin”, i.e. the value of traded goods; a pattern that mirrors what happened during the “great trade collapse” following the Global Financial Crisis of 2008.[10]
Examining imports and exports in the same year exhibits another major change between the two years. Over the last few decades, bilateral trade between China and A $SEAN saw steady increase in intra-industry trade through which China and ASEAN are linked to the larger global production networks.[11] One prime example of this is electronic integrated circuits under HS code 85 (“electrical machinery and parts”), the top product category whose combined imports and exports make up over half of the bilateral trade in both years. In 2019, the top 20 import list largely mirrors the top 20 export list, suggesting a high degree of intra-industry trade. In 2020, as the pandemic disrupted global supply chains, intra-industry trade between China and ASEAN declined substantially, which is indicated by the divergence of the top 20 lists for imports and exports.
The impact of the global pandemic on the structure of bilateral trade is also evident in the changes of foreign value added in China’s exports to ASEAN.[121] Foreign value added (FVA) is the foreign content such as raw materials and intermediate goods imported from other countries that is embodied in exports. As such, FVA is a measure of vertical specialization as it captures the extent to which a country is integrated into global production networks through the use of imported intermediates.[13]
Figure 5 plots the foreign value added embodied in China’s exports to ASEAN for 97 HS-2 digit product categories against the export value on the logarithmic scale.[14] Each dot in the figure represents one product category. The dashed lines are the locally weighted regression smoothing curves. In 2019, FVA values were positively correlated with exports, suggesting that China’s exports to ASEAN were highly integrated in the global production networks. In 2020, when global supply chains were disrupted and demands were suppressed in countries heavily hit by the pandemic, there was virtually no relationship between FVA and export values for products with higher foreign value added (> 20%). As a matter of fact, exports in 2020 decreased from 2019 for eight of the ten product categories with the highest FVA in 2020.
Figure 5: Foreign Value Added in China’s Exports to ASEAN in 2020 and 2019
Source: GAC of China.
CONCLUSION
A deeper dive into the disaggregated bilateral trade data between China and ASEAN countries in 2020 reveals a number of new patterns. They suggest that the repercussions of the pandemic on other trading partners of a country, and on its own demand for imports from a specific country, will depend not only on pandemic-related measures in the respective countries, but also on the demand and supply of third countries in the global production networks.
In the first quarter of 2021, ASEAN remained China’s top trading partner,[15] but the gap has been narrowing, and may soon be edged out by the EU again, as many ASEAN countries are now struggling with new waves of Covid-19 variants.[16] What’s more interesting and potentially will be of greater significance is the shifting trade structure and the drop in intra-industry trade. Some of these changes certainly can be attributed to the pandemic, but it remains to be seen whether or not these new patterns will persist as firms reorganize and relocate their supply chains in the post-pandemic world.
Note: Trade values in billion USD. A positive trade difference indicates China running a surplus with the partner. All changes are year-to-date percent changes ending at the specific month. Source: GAC of China.
Note: Trade values in billion USD. A positive trade difference indicates China running a surplus with the partner. All changes are year-to-date percent changes ending at the specific month. Source: GAC of China.
ISEAS Perspective 2021/93, 15 July 2021
ENDNOTES
[1] https://www.wto.org/english/news_e/pres21_e/pr876_e.htm.
[2] http://asean2.mofcom.gov.cn/article/chinanews/202101/20210103031104.shtml.
[3] The advantage of using the GAC data is that they are available for all ASEAN member countries at the product and month levels. Such disaggregate data are not available for Brunei, Laos, Myanmar and Vietnam in commonly used databases such as the International Trade Centre (ITC). It should be noted that trade data reported by China may not align with those reported by its partner countries. Such statistical discrepancies are well documented and difficult to overcome. See, for example, Javorsek, Marko. Asymmetries in international merchandise trade statistics: A case study of selected countries in Asia and the Pacific. No. 156. ARTNeT Working Paper Series, 2016. Thus, results reported in this Perspective should be interpreted with this caveat in mind.
[4] All data on trade in merchandise goods used in this paper are obtained from the GAC. http://english.customs.gov.cn/statics/report/preliminary.html.
[5] As mentioned above, these results are based on China’s trade data and the conclusion may be different if we use data from the trading partner. For example, according to data from the ITC, Malaysia has a trade deficit of about $3 billion with China in 2020 (down from $8.7 billion in 2019).
[6] Exports in 2019 only cover the first eleven months of the year due to errors in the data released by the GAC. The product codes are based on the Harmonized System (HS), a standardized numerical method of classifying traded products arranged in 99 2-digit product categories. See UN Trade Statistics, “Harmonized Commodity Description and Coding Systems”. https://unstats.un.org/unsd/tradekb/Knowledgebase/50018/Harmonized-Commodity-Description-and-Coding-Systems-HS.
[7] Notably, China’s imports of “iron and steel” (HS code 72) more than doubled in 2020, from $4 billion to $10.6 billion.
[8] Products related to vaccines (e.g. freezing equipment) likely contributed to the substantial increase in exports of HS 84.
[9] https://voxeu.org/article/2020-trade-impact-covid-19-pandemic
[10] Behrens, Kristian, Gregory Corcos, and Giordano Mion. “Trade crisis? What trade crisis?.” Review of economics and statistics 95, no. 2 (2013): 702-709.
[11] Tan, Day-Yin, and Mui-Yin Chin. “ASEAN-China trade flow: a study on intra-industry trade in manufacturing sector.” Advanced Science Letters 23, no. 4 (2017): 2691-2694.
[12] These measures are constructed using the input-output tables of both China and its eight top trading partners (EU, US, ASEAN, Japan, Korea, India, Australia, and New Zealand) from 2010-2017.
[13] Hummels, David, Jun Ishii, and Kei-Mu Yi. “The Nature and Growth of Vertical Specialization in World Trade.” Journal of International Economics 54, no. 1 (2001): 75–96.
[14] Data for product-level exports are not available for Brunei, Laos, and Cambodia. Foreign value added for the products are drawn from Ministry of Commerce’s 2017 Report on Global Value Chains and China’s Value Added Trade, available at http://images.mofcom.gov.cn/www/201811/20181130164119212.pdf.
[15] http://www.xinhuanet.com/english/2021-04/13/c_139877286.htm.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Malcolm Cook, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- The recent Leaders’ Summit on Climate Change convened by the Biden Administration signalled the US’ return and major powers’ unwavering commitment to tackling climate change.
- Four of ten ASEAN leaders — Indonesia, Singapore, The Philippines, and Vietnam — were invited to the summit and announced their newest goals and initiatives, which include renewable energy acceleration, decarbonisation practices, and pathways to net-zero emissions.
- One key emphasis shared by several ASEAN leaders’ speeches is the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) which recognises differentiated levels of economic development between states in response to climate change.
- Some ASEAN thought-leaders have recently expressed a growing concern about the Carbon Border Adjustment Mechanism (CBAM), introduced by the European Union (EU), functioning as trade protectionism or discrimination which could threaten the exports of developing countries.
- The themes and issues raised by some ASEAN leaders at the summit are a harbinger of climate negotiations to come. Can developed and developing countries find a balance between heightened climate ambition and the spirit of CBDR-RC?
* Melinda Martinus is Lead Researcher (Socio-Cultural Affairs) at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute, and Qiu Jiahui is Research Officer at the Climate Change in Southeast Asia Programme.
THE LEADERS’ SUMMIT ON CLIMATE: AN INSIGHT
The recent Leaders’ Summit on Climate Change, organised by the Biden Administration, signalled the US’ return to the Paris Agreement after years of neglect. The US and 40 world leaders restated their commitment and highlighted their countries’ efforts to limit global warming to 1.5-degree Celsius, and most importantly, demanded more concrete actions from the United Nations Climate Change Conference (COP 26) to be held in November 2021 in Glasgow.
To observers, the summit showed a glimmer of hope that two major powers, the United States and China — despite their belligerent relationship in trade and strategic affairs — are approaching climate challenges with the same urgency. As major carbon emitters, both countries agreed to ramp up efforts to combat rising temperatures and strengthen international institutions in meeting this challenge.
In his opening remarks, President Biden spoke about economic opportunities from climate actions which include job creation, clean technology and infrastructure renewal. The US’ climate plans also call for decarbonising the US power sector by 2035 and achieving net-zero emissions by 2050.
The Biden Administration recently introduced a US$2 trillion plan to overhaul the country’s infrastructure and boost the US economy’s competitiveness. The plan emphasises the need to accelerate renewable energy adoption, provide ubiquitous charging stations for electric cars, and invest in public transportation. While Republicans and Democrats are still deeply divided on the matter, Biden’s pragmatic and economically opportunistic approach to climate change exhibits a strategic bid to win bipartisan support.
President Xi Jinping, in much the same way, has reiterated China’s commitment to green development. China has vowed a technological revolution, industrial transformation, and innovation to achieve carbon neutrality before 2060 — the country is to begin phasing down coal in the period of 2026-2030. Unlike the US, China has in recent years been looking to build a global coalition. On several occasions, Chinese leaders pledged their commitment to green initiatives to benefit all Belt and Road (BRI) partner countries. Chinese investment has brought capacity-building opportunities and technology transfers which are much needed for sustainable development in these developing countries.
Similarly, other major economies are adopting the premise of green transformation to revive their economies after the Covid-19 crisis. The European Green deal, an ambitious plan to make Europe carbon neutral by 2050, is one example. President Macron of France has suggested an overhaul of the global financial system, bringing together sovereign funds, asset managers, and private equity firms to integrate climate risks in the investment calculation. Likewise, Chancellor Merkel of Germany has reiterated the need to establish a robust market system to stymie carbon emissions. As one of the global leaders on climate action, Germany has been fairly successful in implementing carbon pricing. Early this year, it introduced a €25 (US$30) per ton carbon tax on the transport and heating sectors.[1]
CONTENTIOUS ISSUES
Four of ten ASEAN member states—Indonesia, Singapore, the Philippines, and Vietnam—were invited to the summit, where they announced their newest goals and initiatives. President Joko Widodo announced that Indonesia is piloting a net zero emissions development project called the Indonesia Green Industrial Park, and that it will rehabilitate 620,000 hectares of mangroves up to 2024. Philippine Secretary of Finance, Carlos G. Dominguez III, shared that The Philippines’ first NDC had just been submitted. Prime Minister Lee Hsien Loong announced the Singapore Green Plan 2030, a living plan with climate and sustainability targets across sectors such as energy, green finance, transport, waste and adaptation. He also shared that Singapore will quadruple its solar energy production by 2025. President Nguyen Xuan Phuc highlighted new targets of increasing the share of renewables in the primary energy supply by 20% by 2030 and 30% by 2045, and reducing greenhouse gas intensity by nearly 15% and methane emissions from agriculture by 10%.
One key emphasis shared by several ASEAN leaders’ speeches is the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC), which acknowledges that the non-polluters of yesterday should not bear the cost of climate consequences today. Often brought up by developing countries to call for assistance in achieving their climate goals, this sentiment was echoed at the summit by Indonesia, The Philippines and Vietnam, as well as China.
In particular, President Xi Jinping used this principle to discourage developed countries from enacting green trade barriers, and instead called for them to support developing countries in finance, technology and capacity building to help transition to low carbon-development. President Joko Widodo approached the same topic from the angle of multilateralism, warning that applying trade barriers under the pretext of environmental issues would undermine a real global partnership. These arguments highlight a growing concern about green trade barriers threatening exports from developing countries where environmental regulations may be less stringent, and are perceived as trade protectionism by developed countries.
In March 2021, the European Parliament backed a Carbon Border Adjustment Mechanism (CBAM) proposal, which, if implemented, would impose a carbon price on certain carbon-intensive imports into the European Union (EU), including cement, steel, aluminium, oil refining, paper, glass, chemicals, and fertilisers, whether embedded in intermediate or final products.[2] The CBAM is applied to extend the geographical reach of EU’s carbon price in order to more accurately reflect the carbon content of imports.[3] This mechanism aims to mitigate longstanding concerns about carbon leakage or the relocation of emissions from the EU to non-EU countries due to the high carbon price imposed within the EU. Without such a mechanism, a reduction in overall global emission is impossible to achieve.
Some critical points have been emerging against the CBAM proposal, however, chief of which being the unfair impact it will have on developing countries’ exports. If such a law is imposed to all imports currently covered by the EU’s Emission Trading System, up to US$16 billion of exports from developing country to the EU could face an additional charge, thus making them less competitive in the EU market.[4] This could undermine the principle of CBDR-RC embraced by the Paris Agreement that forms the basis of agreement that developing countries should not share the same burden as those of the rich. Under such a principle, the global community has acknowledged that rich countries must bear the cost of climate change, as they have historically contributed a larger share of carbon emissions.
Further, there is concern about the technical aspects of the carbon tax on imported goods. Currently, the EU favours limited implementation on some carbon-intensive goods. However, drawing distinctions between targeted and non-targeted sectors is extremely challenging since the supply chain of goods production has now become highly complex. Companies tend to object to disclosing location details of their supply chains, often considering these to be trade secrets.[5] Companies could also re-route their products from countries that impose carbon tariffs over to unregulated markets.[6] Calculating the total carbon content of a certain good will also be a huge challenge. For instance, a car might be made of components from many countries with different climate and energy policies.[7] To be sure, more robust rule of origins control in a Free Trade Agreement (FTA) would help importers determine the country of origin and carbon content of a product.
Likewise, the implementation of the CBAM is politically costly for the EU. Some countries have raised concerns over the CBAM to the World Trade Organisation (WTO), particularly on how the EU may use the mechanism as a revenue raising tool and to favour their domestic resources rather than as a means of addressing climate change.[8]
WHERE DOES ASEAN STAND?
Generally, the EU’s CBAM is viewed by its global counterparts as a protectionist and unilateral approach to trade and environmental protection. EU officials have however frequently affirmed that such an approach is necessary and that the absence of climate actions by other countries could derail the decarbonisation progress made so far by the EU.
As the third largest trading partner and one of the largest exporters of machinery and transport equipment, agricultural products, and textile and clothing to the EU, ASEAN is generally not expected to favour such a mechanism. Yet, a recent survey report on the Perception of the Planned EU Carbon Border Adjustment Mechanism in Asia Pacific from Konrad Adenauer Stiftung captures nuanced perceptions among three ASEAN member states thought-leaders; Indonesia, Singapore, and Thailand.[9]
The survey report highlights that Indonesia, for instance, fears that the CBAM would damage its palm oil sector as the European Commission labels palm oil as high-risk commodity based on the indirect land use changes that result from its production. On the other hand, because Indonesia has not yet established its carbon pricing mechanism, the CBAM could be a trigger for Indonesia to adopt more ambitious climate policies. Experts also suggest that such a mechanism could become acceptable to Jakarta if the revenue generated from the CBAM is used to help Indonesia develop its decarbonisation pathway.
It should be noted though, that smoother environment-related trading interactions are possible. Experts cite the case of EU-Indonesia cooperation on certified timber. The EU, acknowledging Indonesia’s particular challenges, provides assistance in capacity building and developing monitoring systems for its timber exports. This allows Indonesia to adhere to the EU’s regulations and upgrade its own national timber legality assurance system. In this case, close understanding and support not only help avoid disputes, but also assist Indonesia in improving the robustness of its own environmental framework. Experts thus recommend a similar approach for implementing the CBAM and other environmental trade mechanisms that still manages to maintain good trade relations and empower Indonesia to heighten its climate ambitions.
Thailand, despite concerns over the technical aspects of the implementation and the potential disadvantage these hold for developing countries, views the CBAM as a positive step in mitigating change climate impact. The country is in the process of developing its compulsory emissions trading scheme, and the CBAM could in that context encourage businesses to enhance their decarbonisation efforts and meet the country’s climate pledges.
Singapore, meanwhile, expresses little concern about the CBAM as long as it complies with international rules and agreements. Singaporean experts suggest that the EU could start with small steps, for instance, only taxing heavy polluting industries before gradually moving towards other industries.
Indonesia and Malaysia – two of the most vocal opponents of the CBAM in ASEAN – recently protested against the EU’s 2018 decision to ban palm oil imports for biofuel claiming how the industry contributes to deforestation, peatland degradation and resulting emissions. The Indonesian government claimed that it was a protectionist move to favour European rapeseed.[10] Both initiated WTO dispute complaints against the EU in 2019 and 2021 respectively, claiming that the EU’s measures violated international trade agreements. The two cases are being heard, even as the EU and Indonesia continue to negotiate a free trade agreement. Similarly, at the second Seoul Summit of Partnering with Green Growth and the Global Goals 2030, Prime Minister Hun Sen of Cambodia called for a commitment to globalisation through multilateralism and international trade openness as a means for strengthening climate actions.[11]
Earlier this year, ASEAN and the EU initiated the first joint group meeting on palm oil.[12] Indonesia’s Foreign Affairs Deputy Minister, Mahendra Siregar asserted Indonesia’s willingness to improve sustainability practices in the palm oil industry, citing Indonesia’s moratorium on new logging and plantation permits which successfully dwindled deforestation by 75% within the 2019-2020 period. At the same time, Indonesia demanded a fairer and transparent assessment from the EU.[13] Other vegetable oils such as rapeseed and soya plantations cultivated in the EU also contribute to pollution on soils, rivers and seas due to the use of pesticide. Mahendra also noted that another ASEAN country, The Philippines, had also expressed concerns about coconut oil being increasingly rejected by the EU market. These environmental trade regulations and disputes are likely to be a source of climate conundrum of the future.
CONCLUSION
The issues raised by leaders at the Summit are a harbinger of climate negotiations to come. Whether developed and developing countries can find a balance between heightened climate ambition and the spirit of CBDR-RC bears monitoring, especially for developing Southeast Asian countries that are vulnerable to environmental trade regulations.
At COP26, the world will observe the US’ return to its leadership role in international climate negotiations, the effects of net-zero commitments from major economies, and a new urgency for a green recovery from the COVID-19 pandemic. Much has changed since 2019, while the clock keeps ticking for the environment.
ISEAS Perspective 2021/85, 23 June 2021
ENDNOTES
[1] DW, “Merkel Pushes for Carbon Pricing ‘worldwide’ at Final Climate Conference,” DW.COM, May 6, 2021, https://www.dw.com/en/merkel-pushes-for-carbon-pricing-worldwide-at-final-climate-conference/a-57451959.
[2] European Parliament, “Towards a WTO-Compatible EU Carbon Border Adjustment Mechanism,” 02 2021, https://www.europarl.europa.eu/doceo/document/A-9-2021-0019_EN.html.
[3] M. Mehling and R. Ritz, “Going beyond Default Intensities in an EU Carbon Border Adjustment Mechanism,” Cambridge Working Papers in Economics, Cambridge Working Papers in Economics (Faculty of Economics, University of Cambridge, September 16, 2020), https://ideas.repec.org/p/cam/camdae/2087.html.
[4] Sam Lowe, “The EU’s Carbon Border Adjustment Mechanism: How to Make It Work for Developing Countries” (Centre for European Reform, April 22, 2021), https://www.cer.eu/publications/archive/policy-brief/2021/eus-carbon-border-adjustment-mechanism-how-make-it-work.
[5] Ben McWilliams and Georg Zachmann, “A European Carbon Border Tax- Much Pain, Little Gain,” Policy Contributions, Policy Contributions (Bruegel, March 2020), https://ideas.repec.org/p/bre/polcon/35218.html.
[6] McWilliams and Zachmann.
[7] The editorial board, “EU’s Carbon Border Tax Plan Is Risky but Needed,” Financial Times, January 29, 2020, https://www.ft.com/content/28bbb54c-41b5-11ea-a047-eae9bd51ceba.
[8] Lowe, “The EU’s Carbon Border Adjustment Mechanism.” and WTO, “Brexit, EU’s Carbon Border Adjustment Mechanism Take Centre Stage at Market Access Committee,” accessed June 1, 2021, https://www.wto.org/english/news_e/news20_e/mark_16nov20_e.htm.
[9] Konrad Adenauer Stiftung, “Perception of the Planned EU Carbon Border Adjustment Mechanism in Asia Pacific — An Expert Survey” (Konrad Adenauer Stiftung, March 2021), https://www.kas.de/en/web/recap/single-title/-/content/perception-of-the-planned-eu-carbon-border-adjustment-mechanism-in-asia-pacific-an-expert-survey.
[10] Verdinand Robertua, “ENVIRONMENTAL DIPLOMACY: CASE STUDY OF THE EU-INDONESIA PALM OIL DISPUTE,” July 10, 2019.
[11] Xinhua, “Cambodian PM Renews Call for Freer Int’l Trades, Adherence to Multilateralism,” accessed June 6, 2021, http://www.xinhuanet.com/english/asiapacific/2021-06/01/c_139982475.htm.
[12] ASEAN, “First Meeting of the Joint Working Group on Palm Oil between the European Union and Relevant ASEAN Member Countries,” ASEAN | ONE VISION ONE IDENTITY ONE COMMUNITY, February 1, 2021, https://asean.org/first-meeting-joint-working-group-palm-oil-european-union-relevant-asean-member-countries/.
[13] Jayanty Nada Shofa, “Asean Leads by Example in Sustainable Vegetable Oil: Indonesia,” Jakarta Globe, accessed June 1, 2021, https://jakartaglobe.id/business/asean-leads-by-example-in-sustainable-vegetable-oil-indonesia.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Malcolm Cook, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |