The Significance of the 2012 ASEAN Economic Ministers Meeting

The ASEAN Economic Ministers Meeting (AEM) and related meetings are taking place in Siem Reap, Cambodia, from August 25 to September 1. Economic and trade ministers from the 10 ASEAN member countries, together with their counterparts from dialogue partners China, South Korea, Japan, Australia, New Zealand, India, Canada, Russia, and the United States, are gathering to discuss economic cooperation and trade liberalization within the ASEAN countries and between ASEAN and its foreign partners. This will be the highest-level ASEAN meeting since the failure of the foreign ministers to issue a joint communiqué at the contentious ASEAN Ministerial Meeting in Phnom Penh in July.

Q1: What is the AEM and what has it accomplished?

A1: The first AEM meeting took place in Jakarta, Indonesia, in 1975. The ASEAN economic ministers now meet and hold consultations with ASEAN dialogue partners every year. Since 2010, the newer member states of ASEAN—Cambodia, Laos, Myanmar, and Vietnam—have held separate economic ministers meetings on the sidelines of the AEM.

Last year’s AEM took place August 10–11 in Manado, Indonesia. That meeting completed tariff reduction schedules for the ASEAN Trade in Goods Agreement and a plan to complete reservations lists for the ASEAN Comprehensive Investment Agreement by the end of 2011. That agreement entered into force in March 2012. At an informal AEM retreat in Kuala Lumpur, Malaysia, in October 2011, the ASEAN economic ministers drafted a Framework for Regional Comprehensive Economic Partnership, which laid out the principles through which ASEAN will engage interested ASEAN free trade agreement partners and other foreign economic partners.

Q2: What is on the agenda at this year’s AEM and related meetings?

A2: Cambodia’s senior minister and minister of commerce, Cham Prasidh, will chair the week-long AEM. Related meetings this year include the ASEAN Investment Forum, the Mekong-Japan Economic Ministers Meeting, the Economic Ministers Meeting among Cambodia, Laos, Myanmar, and Vietnam, and the ASEAN-Mekong Basin Development Cooperation Ministerial Meeting.

The United States and ASEAN will launch the first ASEAN-U.S. Business Summit at the AEM. The summit will allow business representatives from the United States and ASEAN countries to exchange ideas and directly channel their recommendations to the ASEAN economic ministers. The ASEAN ministers will also hold joint meetings with the ASEAN Free Trade Area Council and the ASEAN Investment Area Council. ASEAN ministers will hold a consultation meeting with the head of the World Intellectual Property Organization.

Q3: What role does the United States play at the AEM?

A3: For the first time, the U.S. trade representative, Ron Kirk, will lead the U.S. delegation to this year’s AEM and to the ASEAN-U.S. Business Summit on August 30–31. Kirk will also attend a meeting on the ASEAN-U.S. Trade and Investment Framework Arrangement (TIFA) and an informal meeting of the East Asia Summit economic ministers, which will include the ASEAN countries and all their dialogue partners except Canada. Kirk’s participation in the AEM sends a strong signal to ASEAN leaders about the U.S. commitment to deeper economic engagement with the region. Kirk will meet separately with Cambodian leaders and participating ministers to discuss bilateral trade issues and report on the progress of regional trade initiatives, including negotiations on the Trans-Pacific Partnership (TPP) trade agreement and developments in the Asia-Pacific Economic Cooperation (APEC) forum.

Q4: What is the significance of the AEM for ASEAN?

A4: This year’s AEM holds special significance for ASEAN for several reasons. It takes place less than a month after the 45th anniversary of ASEAN’s founding. During the August 8 commemoration of the anniversary in Jakarta, ASEAN secretary-general Surin Pitsuwan called for greater consolidation of the organization, and Indonesian foreign minister Marty Natalegawa stressed the need to maintain ASEAN centrality in regional relations. The AEM will serve as the first test of those goals following the impasse in July over what the ASEAN foreign ministers would say in a communiqué about disputes in the South China Sea.

The AEM provides an opportunity for the ASEAN economic ministers to coordinate their efforts on the ASEAN Economic Community (AEC) blueprint. The AEC, set to go into effect in 2015, seeks to bring about the free movement of goods, services, investments, and skilled labor within Southeast Asia. ASEAN had reportedly completed over 70 percent the AEC blueprint’s goals for 2008–2011 by the time of last year’s AEM, but independent observers raise questions about whether the grouping will fully achieve its AEC goals in the next three years. The AEC would boost the region’s economic competitiveness by consolidating the 10 economies into a single market and production base and by integrating the region more closely into the global economy.

ASEAN’s economies have grown at strong rates despite the global economic slowdown, and they continue to attract foreign investment. The economies of Indonesia, Malaysia, Vietnam, Cambodia, and Laos all grew between 5 and 8 percent in 2011. The Philippines joined that high-growth club with Asia’s second-strongest growth rate of 6.4 percent in the first quarter of 2012. Laos is set to join the World Trade Organization by the end of the year.

Q5: What are the implications of this year’s AEM meeting for U.S.-ASEAN relations?

A5: The AEM is strategically significant for U.S.-ASEAN relations in a number of ways. First, this is the first time that Trade Representative Kirk has participated in the AEM and ASEAN-U.S. Business Summit. Kirk’s participation follows Secretary of State Hillary Clinton’s appearance at the U.S.-ASEAN Business Forum in Siem Reap in July and underscores the importance that the United States attaches to economic relations with the grouping. ASEAN is the United States’ fourth-largest trading partner and home to more U.S. investment than China or India. For the United States, bolstering trade ties with ASEAN is beneficial not only to U.S. businesses; it also contributes to the country’s strategic rebalance to the Asia Pacific. For ASEAN, stronger U.S.-ASEAN trade ties are central to the grouping’s further integration into the global economy and to ensuring a sustainable U.S. presence in the region.

Second, the participation of a cabinet official in this year’s meeting signals the United States’ recognition of the need to engage ASEAN as a body on the economic front. Although the United States is in the process of negotiating the TPP trade agreement in which four ASEAN members (Brunei, Malaysia, Singapore, and Vietnam) are participating, the Obama administration also understands that engaging all 10 members of ASEAN is important for enhancing overall U.S.-ASEAN relations. Recent steps by the United States to normalize relations with Myanmar are making it easier for Washington to engage ASEAN as a grouping. The United States engages ASEAN on trade issues under the ASEAN-U.S. TIFA. At this year’s AEM, the United States will have the opportunity to build on this economic foundation for its rebalancing to the Asia Pacific.

Gregory Poling is a research associate, and Phuong Nguyen a researcher, with the Southeast Asia Program at the Center for Strategic and International Studies in Washington, D.C.

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