For activity 3.

6 page 57

Looking back on ASEAN Integration 2015: Realizing ASEAN Economic Community

through Free Trade

ASEAN Integration 2015 has been an issue on the aspect of the Philippine economy.

According to Amador and Teodoro (2014), the end-goal of ASEAN economic integration is the

full realization of an ASEAN Economic Community, wherein the region will be transformed “into

a single market and production base, a region of equitable economic development, and fully

integrated into the global economy.” Our country nowadays is one of the fastest growing

economies in Southeast Asia. According to Asian Development Bank, despite natural disasters

that devastated parts of the country in the fourth quarter of 2013, gross domestic product (GDP)

grew by a solid 6.5% in that period, bringing full-year growth to 7.2%, well above the 4.7%

average recorded from 2008 to 2012 which manifests the strength of our economy this time. It

seems that the idea of ASEAN Integration is good and appealing especially to its member nations.

But are we prepared to meet the competitive challenges in terms of integrating with other countries

in the region? Specifically, are we fully equipped with the shift of economic system having been

said to be in a single market and production base? These questions are very essential to our

economy specially that we are still fuelling up after the past downfalls of the previous

administration and inevitable calamities. The thing is how relevant it is to an ASEAN member

country. ASEAN Integration 2015 has a strong purpose of unifying the members of ASEAN to be

economically productive through ASEAN Economic Community 2015’s free flow of exchange of

goods or free trade although it has adversaries and challenges needed to be faced with.

ASEAN 2015 has been planned for a long time and a lot of people in the Philippines and
in Asia are preparing hard and they expect considerable advantages. Meanwhile, some experts

have raised objections against ASEAN 2015 since 2013 in earnest.

The labor problems and the importance on economic tariff are the major issues in the

controversy. Most optimistic parties claim that ASEAN Integration 2015 will solve the labor

problem in the Philippines and they assure that it will help Philippine citizens get a job. However,

there is also a concern. Catherine S. Valente (2013) writes, “The question is, are we prepared to

meet the competitive challenges in terms of integrating with other countries in the region? Some

groups believe that the Philippine may not yet be out of the race to promote integration of our

economies, since the country somehow seems unprepared to meet the competitive challenges.”

About the importance of economic tariff, many business and economic specialists emphasize that

zero tariff will be a big problem to the Philippine in the end because some insufficient competitive

domestic products will be ignored in the fullness of the competitive economy. BDO Unibank

Incorporated President Nestor Tan said that while some businesses see the AEC as an opportunity,

the integration would be more of a threat to local firms. At the same time, most problems of

ASEAN 2015 are that the Philippine needs more preparation and more time, not only the

Philippines but also different Asian countries are concerned about some rush decisions.

One of the goals of ASEAN Integration 2015 is to have an ASEAN economic community

wherein there will be a single market and production base. First, in connection to this, free trade

or the free flow of exchange of goods enters into the picture wherein it increases economic

growth. Gregory Mankiw (2010) states that open world trade increases economic growth and

living standards. In addition, the ability to trade freely increases opportunity, choices and

standards of living. Countries with the freest economics today generally have adopted a capitalist

model of economic development remaining open to international trade and investment. Also this
focuses on one dimension, as an example, “ the price at which commodity can be delivered and

is extremely narrow in cutting off a large number of other considerations about impacts on

employment in different parts of the world, about environmental impacts and on culture”, writes

Soderbaum (Malarden University). Moreover, free trade is capable of transmitting more than

just physical goods or services to consumers. As Adam Smith (18th century economist) termed, it

emerges with the self-confidence opening itself to an inflow of goods and the ideas and practices

involving them. Thus a culture of freedom can become both the cornerstone and capstone of

economic prosperity.

Second, ASEAN economic community as a highly competitive region, a region of

equitable economic development, in this case free trade will increase the size of market.

“Economic dynamism exists to countries that enact free trade policies which fosters a wellspring

of freedom, opportunity and prosperity whom every citizens benefit from…”, writes Froning

(2000). Also higher incomes and growth equals openness to trade. For one thing, these benefits

are transcended through rising incomes due to an “increase in market size” that supports more

specialization, faster technology diffusion and stronger incentives to invest in non-viral assets,

(Counterpunch 2014). In addition, increased sales and market share are the rewards of free

trade’s risk taking. This increase greatly and excessively flows into smaller countries that are

economically unstable or less in property but are willing to trade. Poor countries advantage in

being able to trade for capital is that the payoff is more direct in their private sectors.

Finally, as a region fully integrated into the global economy, developing countries will be

encouraged in unveiling new products and expanding the production of existing products as a

result of free trade. Also, it promotes better position to attract international financing and

collaboration (Jefferson, 2014). Furthermore, “as long as intellectual property protection is in place
and agencies such as border control are well-structured, foreign corporations are more motivated

to invest”, writes Jefferson, (2014). As an example, Thailand encourages free trade and now ranks

among one of the most attractive investment locations in the developing world.

A lot of experts and Philippine citizens are looking forward to ASEAN 2015 Economic

Community’s expected future. It will help the entire economy of the Philippines to grow

substantially. However, some specialists in this field insist that the free trade implemented in

ASEAN 2015 Economic Community has critical problems in expecting good results. First of all,

free trade with countries which have prevailing economic states causes dumping. The World Trade

Organization says that if a company exports a product at a price that is lower than the price, it

normally charges in its own home market, or sells at a price that does not meet its full cost of

production, it is said to be "dumping" the product. It is a sub part of the various forms of price

discrimination and it is classified as third degree price discrimination. Even though producers in

one country are trying to eliminate the producers in another country and gain a larger share of the

world market, it has been rampant for a long time. Dumping by these kinds of countries will lessen

the value of the industry of one’s country. According to Adam smith’s theory “indivisible hand,”

dumping is inevitable in the free and open market. Superior and better things to consumers can

survive, and if not, it will be encroached by them. The Philippines cannot be an exception and

dumping can threaten its economy any time.

Secondly, the Philippines has to face against the unfair agreements. This statement is

related to first argument logic. Even in people’s real life, there must be a relation of top and bottom

when people have contracts or agreements. Therefore, in the free trade agreements between

countries, unfair agreements are unavoidable to the Philippines and they have no choice to accept

unreasonable agreements. There was a case which represented the realistic view of free trade and
unfair agreement. According to journalist Jodi Beggs, farmers in the Africa, Caribbean and Pacific

countries who received no support from government, find their markets bombarded by heavily

subsided agricultural products, destroying their market and means of earning and income. These

countries may have opened up to 90% of their economies to European imports in just a decade. It

is very fast to give them the chance to fight on a bias footing and breaking farmer’s livelihoods.

Likewise, mining and agriculture, which are the major industries of the Philippines will be

conquered completely by foreign competitors.

Finally, domestic industries could be neglected. In short, the Philippines still needs

economy tariff. For government and domestic companies, they can protect domestic jobs and

infant industries. The hope is that foreign investors will buy the domestic version of employees

and products. Moreover, they retaliate against a trading partner, so they can protect home

customers from harmful and expensive goods. There are many people and developing industries

which it has to give opportunities. As what BDO Unibank Incorporated president Nestor Tan

insisted, “ASEAN 2015 Economic Community is not too late to start when the Philippines has

better economic status in Asia and a confident, high- technology which many foreign investors

want to invest”.

The concerns in con arguments make sense and they are all reasonable to understand why

ASEAN Economic Integration 2015 is incomplete and it does not guarantee the perfect success in

the future. However, there are enough refutations to retort the con arguments. First, dumping is

inevitable problem according to Adam Smith’s theory of “indivisible hand”, but it is also

predictable to solve this problem. The World Trade Organization insists that they have tried to

stipulate international rules and laws that can help those damaged countries. Moreover, dumping

sales problem is considered as an old one by the WTO’s effort and many countries’ cooperation.
 Secondly, unfair agreement cannot be helped because no countries are able to get perfect

treaties which are all commanding. Of course, there must be unfair agreements and the Philippines

has no choice to accept them if it has free trade agreement with stronger countries. However, Denis

H. Froning (2000) insists that there are more benefits that the country can get such as flourishing

innovation and generating economic growth after the Philippines endures this early step. Next,

when a country has equivalent or better economic status with strong countries, it can have more

advantages. For instance, when a certain country adjusts agreements with other countries, it can

suggest what it wants easily than before.

Finally, the Philippines’ agricultural industries, which are major industries, are quite

stable and competitive compared to other countries which have the same major industries.

According to the Philippine economic update 2013, even though natural disaster comes to the

Philippines periodically, export rate of agricultural part is regularly increasing and Philippine fruits

are still consumable and popular to the consumers. Therefore, “The free entry of goods and

services across economic borders can only mean more economic opportunities for countries in the

region and therefore more opportunities for employment and livelihood, and the challenge for us

in preparation for this new regime is to sharpen our competitiveness and facilitate the ease of doing

business in our jurisdiction,” states Florencio Abad. Likewise, a lot of experts and specialists say

that it has to push ahead with plans when it has opportunities.

The expectation is that the economies will aggressively open up the moment barriers to

trade – both tariff and non-tariff will be eliminated. Economies will be liberalized to achieve the

goal of ASEAN becoming a single market and production base, (Amador and Theodoro, 2014).

As a recall, although ASEAN Integration 2015 has a purpose of unifying the members of ASEAN

to be economically productive, it has adversaries and challenges to be faced with. These

adversaries and challenges will be the Philippines’ motivation in responding to a better economic

status of our country as a member of ASEAN. The most possible and effective thing the country

should do, especially the government agency concerned to economy is to maximize the attention

towards the economic value of the country, and to be steps ahead of the incoming ASEAN

integration 2015’s single market production base and free trade.

In addition, according to Balboa (2010), it is important for policy makers in the country to

sustain the momentum of Philippine economy or perhaps even accelerate the pace towards

establishing ASEAN Economic Community

In conclusion, ASEAN Economic Community’s creation is indeed one thing to look

forward to. “Integration may have birth pains in the beginning but at the end of the day, there are

many opportunities that each member-state can take advantage of, which will benefit the people

of ASEAN”, states Amador and Theodoro (2014).