Regional Integration: From the European Experience to Southeast Asia
Chenchen Li
European Studies: Politics, Societies, and Cultures Bachelor Thesis 15 Credits Spring Semester/2020-05-22 Supervisor: Corina Filipescu
Contents
List of Figures ………………………………………………………………….. 3 Abstract ………………………………………………………………………… 4 List of Abbreviations …………………………………………………………… 5
1. Introduction ……………………………………………………………. 6 1.1 Why EU and ASEAN? ……………………………………………………. 6 1.2 Aims and research questions ……………………………………………… 8 1.3 Structure of the thesis ……………………………………………………... 9
2. Literature review ……………………………………………………….. 10 2.1 Discussion of classical integration theories ……………………………….. 10 2.2 Comparative regionalism between the EU and ASEAN …………………... 12
3. Theoretical framework of the thesis ………………………………...…. 14 3.1 New regionalism ……………………………………………………….….. 14 3.2 Liberal Intergovernmentalism ……………………………………………... 16
4. Research design and methods ………………………………………….. 17
5. Background ……………………………………………………………. 19 5.1 The European Union ..………….…………………………………………. 19 5.2 Association of Southeast Asian Nations ……………………...………..…. 21 5.3 Conclusion ……………...…………………………………………………. 23
6. The formation of new regional project in Southeast Asia and Europe … 24 6.1 Economic liberalization reform …………………………………………… 24 6.1.1 Malaysia …………………………………………………………………. 25 6.1.2 Thailand …………………………………………………………………. 26 6.1.3 Philippines ………………………………………………………………. 27 6.1.4 Indonesia ………………………………………………………………… 28
1 6.1.5 The European Community ……………………………………………. 28 6.1.6 Open economy consequence ………………………………………….. 29 6.2 Institutional difference ………………………………………………….. 31 6.3 Conclusion ………………………………………………………………. 37
7. Integration development since 2013 …………………………………. 38 7.1 Intergovernmental cooperation and competition ………………………… 38 7.2 Inter-state bargaining …………………………………………………….. 42 7.3 Conclusion ………………………………………………………………... 44
8. Final conclusions and reflection ……………………………………… 45 8.1 Summarize the findings …………………………………………………. 45 8.2 Recommendation for further study ……………………………………… 46 8.3 Final reflection …………………………………………………………… 46
Reference …………………………………………………………………….. 47
2 List of Figures
Figure 1: Intra-ASEAN and Extra-ASEAN Trade 2012-2018 ……………………. 40
Figure 2: Intra-EU and Extra- EU Trade 2014-2018 ……………………………… 40
Figure 3: FDI Flows in ASEAN, 1995-2017 (Billions of dollars) ………………… 42
Figure 4: Vietnam Exports to Indonesia of Rice ………………………………….. 44
3 Regional Integration: From the European Experience to Southeast Asia
Abstract
This thesis is based on the theoretical knowledge derived from the European integration experience to conduct a comparative study between the EU and ASEAN. This thesis investigates how endogenous factors affect how exogenous factors influence the EU and ASEAN institution building process within the European Single Market and ASEAN Free Trade Area. It argues that ASEAN members' domestic political interest and national preference formed within their cultural context as a result of their informal institutional economic cooperation. The thesis reviews literature and finds that the European model cannot be simply applied to ASEAN, thus a combination of new regionalism and liberal intergovernmentalism seeks to contribute alternatives to different aspects in the analysis of ASEAN regional integration.
4 List of Abbreviations
ASEAN Association of Southeast Asian Nations AFTA ASEAN Free Trade Area AIA ASEAN Investment Agreement CEPT Common Effective Preferential Tariff DSM Dispute Settlement Mechanism ECSC European Coal and Steel Community EC European Community ECJ European Court of Justice EP European Parliament EMU European Monetary Union EU European Union ESM European Single Market FDI Foreign Direct Investment NEP New Economic Policy NTB Non-Tariff Barriers SEA Single European Act
5 1. Introduction
This thesis aims to expand our understanding of the regional integration process in Southeast Asia by taking the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) as a comparative case study to examine the different trajectory of their integration development. The objective of this research is to analyse the outcomes of regional projects in ASEAN and the EU through their institution-building process in their economic sector by systematically applying theories that are derived from the European experience: new regionalism and liberal intergovernmentalism.
This thesis will contribute to the comparative regionalism scholarship, by study of comparative regionalism scholarship based on previous theoretical and empirical studies between the EU and ASEAN (Katzenstein 1996, Söderbaum2009; 2015, Acharya and Johnston 2007a; 2007b) to understand the regional integration process in ASEAN. By applying concepts such as open economy, domestic interests and national preference, cost of sovereignty, ASEAN Way and inter-state bargain to analyse the roles they played in influencing the ASEAN economic integration process. Additionally, this thesis seeks to contribute alternatives for different aspects and analysis in ASEAN regional integration.
1.1 Why EU and ASEAN?
In the recent decades, the world has considerably changed in terms of regionalisation and regionalism. Since the late 1980s we have also seen the growth of the changes in the functioning of the world economy and how multinational companies run their operations, and the weakening of nation states as the main position for formulating and implementing policies, which was characterised as new wave of regionalism (Hennet 2005; Söderbaum 2000 2009). Since then, the growth of regional cooperation and economic interdependence of a globalizing world have taken centre stage in international political economy. Empirically, the EU has been seen as an economic superpower, and a significant influence in the realm of international diplomacy and broader world order (Hill et al. 2017:4). Hence, the European integration process experience has drawn attention from other countries to replicate and extend their relations and seek economic dependence with other countries in order to benefit their own economies from what regional integration brings (Pattharapong 2014). As a result,
6 we have seen a number of regional preferential trading agreements across the continents in the past decades, such as NAFTA in North America, AcFTA in Africa Union, AFTA in Southeast Asia.
Taking examples of the EU and ASEAN, the most noticeable difference between the EU and ASEAN is the outcomes of their regional project. The EU has deep political and economic integration with supranational authority, while ASEAN preserves its national sovereignty and informal institutions mainly focus on regional cooperation. The EU’s supranational body and the roles of different institutions ensure the agreements and treaties are implemented accordingly into national legislation and monitoring the member’s behaviour. In ASEAN, on the other hand, the agreements and the approach are non-intervention and consultation based (Acharya 1997a; 2004). In this respect, it clearly shows different regional projects generated different outcomes, and the fundamental difference between the EU and ASEAN rests on their institutional design. Thus, it raises questions of what are the key factors that influenced their institutional design in their building process which generate different outcomes and what are their motivations to create regional projects?
Studying the EU and ASEAN itself is complicated, and several relevant elements have to be taken into account when attempting to compare them. First of all, we have to consider the chronological time difference between the EU and ASEAN. Eliassen and Árnadóttir (2014) note that the EU has existed longer and developed more rapidly than ASEAN. Thus, in which comparable political period of time is reasonable to present when comparing them? For example, if we compare the EU today to ASEAN in the 1970s, that is comparing a supranational institution to a slow development of regional organisation, the difference lay significant and the contrast of the findings could be invalid. Secondly, the political systems are different between these two organisations. All EU members are democratic polites, but ASEAN countries are mostly authoritarian capitalist or semi-democratic with differences between one another. Therefore, with these considerations and in order to give a fair standpoint, this thesis set two political times. The first is in the early 1980s to 1992 when both regions had economic impact from the recession and started the outward thinking to enhance trade, and that period was when new regional trade agreements and their own single market started. The second period set after two financial crises, and it aims to seek the
7 verification of their patterns of behaviour over the time and also avoid repeated study. Additionally, the EU has more institutional development in the economic sector than ASEAN, the European Single Market was built based on the Common Market since the Treaty of Rome in 1957. Thus, in line with the timeline setting, in the analysis parts I examine the EU as one entity and the core members in the ASEAN.
1.2 Aims and research questions
The aim of this thesis is to understand the regional integration in ASEAN and to investigate what are the main motivations, driving forces and reasons for emerging regionalism, and why these factors affect regional institutionalization. The comparative case study aims to analyse the difference between the EU and ASEAN by examining the European Single Market (ESM) and ASEAN Free Trade Area (AFTA), their initial design of these agreements during their institution formation process and verify whether they followed the design over the years. Thus, my main research question is:
“What are the main contributing factors to ASEAN and the EU's institutional building process within the European Single Market (ESM) and ASEAN Free Trade Area (AFTA)?”
In order to answer the research question systematically, the research question can be divided into few related operational questions as follows: ● What were the driving forces to create the AFTA and ESM? ● What are the differences between AFTA and ESM, and why do these differences and driving forces produce different logic of integration in these two regions? ● How are domestic political interest and preference in the ASEAN members reflected upon the AFTA framework in its institution-building and later development?
8 1.3 Structure of the thesis
The thesis is arranged in eight chapters. Following the introductory chapter, Chapter 2 gives a discussion of previous research. Chapter 3 explains the theoretical frameworks and how they related to this research. Chapter 4 presents the method and empirical data and the validity. In order to explain the formation and follow up the process, Chapter 5 gives a background introduction and discussion of ASEAN and the EU, to some extent also touch upon the driving force behind the ESM and AFTA. Chapter 6 and 7 are the analysis part, and set in two time periods. First, from the 1980s to early 1990s to analyse the formation of the AFTA and the ESM. By describing the reasons behind the economic liberation in both regions and comparing their institutional differences to answer the questions of what are the driving forces to those projects, and what caused the differences in their institutional building. The second period is set after two financial crises, depending on the most recent data in trade and foreign capital to examine whether ASEAN and EU followed the design they created during the institution-building process and if they displayed the same pattern over the time. It will have extra emphasis on ASEAN in order to give a comprehensive analysis of regionalism outside the EU. Finally, I will conclude my findings that not only both the EU and ASEAN displayed the pattern created in their initial design even after decades of development, but also national interest and the underlying preference of the ASEAN members that drove its institution in a different path than the EU.
9 2. Literature review
Regional integration study has been heavily influenced by the creation of the EU and examined with classical integration theories that have derived from the European experiences, for example, neofunctionalism, intergovernmentalism. Although the classical theories have been helpful in studying the EU, they have encountered difficulties when applied to other regional projects (Farell 2005; Kim 2011; Börzel 2015). For instance, Farrell argues Asia did not suggest the generalisation of any particular model, least of all the European model which is often regarded as a benchmark for regional integration (Farrell 2005:2). Börzel (2015) points out that those double biased theories of cooperation and integration have limited explanatory power to address the questions of comparative regionalism. Therefore, it raises questions to what extent these classical theories are appropriate to explain regional integration phenomena and dynamics elsewhere? In the following sections, the first part presents an overview of the most influential schools of integration theory and why liberal intergovernmentalism provides more decisive explanations in ASEAN. The second part of the section aims to give a background of recent debate in the field of comparative regionalism between the EU and ASEAN, and what this thesis can contribute.
2.1 Discussion of classical integration theories
In the literature it is common to find academic studies categories according to two waves of regionalism, the ‘old regionalism’ and ‘new regionalism’ (Hettne 2000; 2005, Söderbaum 2009; 2015). The first wave of studies emerged in the 1950s, coinciding with the appearance of the European Coal and Steel Community (Farrel 2005). Neofunctionalism and intergovernmentalism predominantly underpins the theorizing of the process of regional integration, particularly in the early phase of the EU (Rosamond 2000; Farrell 2005; Telo 2014; Börzel 2015). Börzel (2015) describes these approaches as a power-based approach aimed to distribute the power from a powerful state, and the national government was a key actor to promote regional integration and policy-making.
Neofunctionalism explained how the process of integration as a set of economic activities across borders could generate wider economic integration. Neofuntionalist sought to explain
10 how these functional spillovers led to economic and political integration and how the creation of supranational institutions could accelerate the process, and expected to meet the demands of actors and economic agents. An important element in the theory emphasized the role of political actors. In terms of identifying key actors, intergovernmentalism is based on realist ideas, arguing that state, and national governments are primary actors in the integration process (Rosamond 2000).
Neofunctionalism is a theory of change and transformation (Rosamond 2000:2) which relies too much on the concept of spillover for which it has been criticised, in particular liberal intergovernmentalism. Liberal intergovernmentalists attempted to theorize European integration as a liberal theory of national preference formation and an intergovernmental account of strategic bargaining between states. Andrew Moravsik’s liberal intergovermentalist analysis (1991), highlights the emergence of the Single European Act (SEA) solely because of the common preferences of the three most important member-states of the EC (Germany, France and Britain) (Rosamond 2000:135-6). Thus, integration was driven by states themselves, the degree of integration depended upon the strategies and decision of key states. Supranational institutions characterized by neofunctionalism were of limited importance of integration.
In general, Moravsiks’s liberal intergovernmentalism recognizes the impact of domestic politics upon governmental preference and strategic inter-state bargain. Liberal intergovernmentalism, and its elements has been drawn from many fields of study, such as international relations theory, international political economy (Rosamond 2000), as well as from the debate of the second wave of regionalism where new regional trade agreements appeared during the 1990s (Farrell 2005). Therefore, liberal intergovernmentalism and the applicability of its concepts elaborated in the light of the European experience enable to explain regional cooperation in ASEAN, in particular evidenced in their further development. Moreover, liberal intergovernmentalism rejects the concept of supranational institutions, hence, ASEAN does not possess any supranational entities. Thus, it is more suitable to apply in the analysis of ASEAN in their endogenous development.
11 However, liberal intergovernmentalism lacks the explanation of the outward-oriented nature of these formats that developed since the late 1980s and early 1990s, which contrasted with the European model aimed at boosting intra-regional trade. In order to make sense of Asia’s open regionalism, scholars such as Achary and Buzan (2007) started to draw elements from IR theory but combined the domestic and international politics that challenged the conventional IR (Spandler 2020).
2.2 Comparative regionalism between the EU and ASEAN
As mentioned earlier, the new regional trade agreements arose in the other parts of the world during the 1990s, thus attracting the interest of scholars not primarily working on the European integration case. Sequentially, that allowed new perspectives to emerge, especially the work on new regionalism (Hettne 2000; 2005, Söderbaum 2009; 2015). Eliassen and Árnadóttir (2014) remark that the analysis on EU integration study has transferred from the traditional emphasis towards a broader examination of the relative roles of the various actors involved in the policy process. In other words, the analysis of the outcomes of regionalism will be more appropriate under a ‘new’ regionalism framework. Söderbaum (2015) asserts after decades of study of ‘new’ regionalism, the novel characteristic of the most recent phase of regionalism has been transformed to deepening and widening of regionalism. The current regionalism study is shaped by increasing dialogue between academic disciplines and regional specializations (European integration, Latin American, Asian-Pacific and African regionalism). There is also theoretical fragmentation to explain regionalism in the sense of various forms of regionalism, such as economy and security. That led to unproductive contestation, from ontological point of view, the meaning of regionalism, its cause, its effect; from epistemology point of view of how it should be studied, what to compare and how, and what the costs and benefit of regional integration were (Söderbaum 2015:21).
Harris (2002) in his analysis of the Asian-Pacific region is characterized by multilateralism. The Asian multilateralism responded to historical experience, colonialism, and regional preference, and was in an economic context shaped by reducing transactional cost. In reflecting regional preferences, the multilateral processes in Asia direct attention, first to norms of behaviour, second to the habit of consultation and accommodation (Harris
12 2002:123). These characteristics are conceptualized by Acharya to Southeast Asian region, the ‘ASEAN way’ (1997a), which is a more informal and network-based, in contrast to how the EU is a formal institutional-based regionalisation product. Regarding the ASEAN Way, Kim (2011) argues that analysts need to pay more attention to the domestic politics of ASEAN members and the structure of the global political economy, sometimes the constructivist’s view pays too little emphasis on it in their analysis. Scholars like Nesadurai (2003) drew from liberal theory to analyse how domestic interest influenced the state's liberalization strategies in ASEAN regional projects. Hennet (2005) emphasizes that one also needs to understand how national interest is formed in the first place in the process of regionalism, and Katzenstein (1996) suggests ethnicity and culture are important forms of non-institutional economic cooperation of the business networks in asian regional integration. Thus, several scholars have covered the precolonial notion of sovereignty (Katzenstein 1996; Achary 1997a; Harris 2002; Kim 2011).
The growing recognition of ASEAN’s regional role somewhat diluted the realist outlook of scholarship on Southeast Asian international relations, so was the liberal ideas about formal institutionalization (Spandder 2020). However, scholars adopting a constructive lens in fact experienced a short length of the explanation of identity as a basis for cooperation in Southeast Asia (Acharya 2007a; 2007b). Vice versa, realism entrenched itself as the main theory, analyzing Southeast Asia’s politics through the vulnerability of regional regimes from internal and external challenges, which has the influence on regime security theory (Khong 2005; Kim 2011). To some extent, this demonstrates the influence of state-actor in ASEAN in their institution building.
After reviewing numerous scholars’ work, there is no single theory able to explain a whole picture of the regional integration process in ASEAN. Liberal intergovernmentalism justified the endogenous dynamic of the region in terms of national interest, how its preference formed, and interstate bargain. On the other hand, it shortens the stretch to explain the open economy in the region which can be compromised by the new regionalism perspective, such as societal influence. Therefore, this thesis uses both theories to explain regional integration in a broader standpoint, and aims to contribute to the understanding of regionalism in ASEAN, its cause, its effect and what the cost and benefit of regionalism are. Additionally,
13 this thesis takes account of historical, cultural aspects into ASEAN regionalism within their regional economic cooperation context. As the scope of this thesis is unable to cover all of these aspects, I only touch upon those perspectives and bring their elements into the economic sector to provide a comprehensive understanding and explanation in order to grasp part of the dynamics in ASEAN.
3. Theoretical framework of the thesis
The definition of regions and regionalism has been contested. There is no consensus on the definition of regions, thus it often depends on the particular question and problem under investigation. Hettne (2005) argues that all regions are socially constructed and politically contested. Söderbaum (2009) claims that all kinds of regions can be created from ‘above’ and from ‘below’, which means it can be state-led from social force but also it can be market-driven. Such a perspective responds to the endogenous processes of regionalism which refers to the complex interplay of state-market-society relation (Hettne and Söderbaum, 2000). In Hettne’s point of view regionalism refers to a tendency and a political commitment to organise a specific regional project in which Söderbaum (2009) thinks it often leads to institution building. On the hand, regionalisation refers to more complex processes of forming regions rather than the outcomes, a concept of region-building is described to the regionalisation. In the following sections, explains how the theory connects to the analyse.
3.1 New regionalism
New regionalism theorized by Söderbaum (2009; 2015) that focuses on the relationship between globalization and regionalism, its increasing in the number of regional trade agreements, an externally oriented and less protectionist type of regionalism, a more multi-dimensional and pluralistic type of regionalism with a more varied institutional design. The theory was not primarily centered around trading schemes or security cooperation, instead emphasized on the role of market and civil society actors, and the importance of flows of capital, trade and people (Hennet and Söderbaum 2000). Acharya (2001) absorbs these characteristics as non-Western approaches that emphasize the role of non-state actors and informal institutions. Börzel (2015), Eliassen and Árnadóttir (2014) all argue that a social constructivist view offers limited capacity to explain why EU and Asian regions produce
14 different logics of integration. Börzel (2015) claims a different driven force of regional cooperation and integration, the difference lies in their outcomes. Thus, a governance approach allows examining formal and informal regional processes, and provides a useful framework to address the complexity of regional organization and regionalism. Moreover, the distinction relates to the institutional design generated by the level of analysis and the logic of action, to which they subscribe according to whether they consider the main drivers of region-building to be within (endogenous) or outside (exogenous) the region.
In relation to my thesis, the new regionalism established in the 1990s and characterised by a multitude of actors and shaped by exogenous formative factors in the rapid economic globalisation. This explains the economic liberalisation or open economy in the EU and ASEAN was driven by the external pressure and resulted in ongoing globalization. Telò (20104) claims exogenous factors also include purely political benefits from trade agreements. It explains the intergovernmental cooperation within the EU generated further development of supranational institutions. Kim (2011) asserts political preference was not predominated by external pressure but emerged from the endogenous process over time. These aspects in relation to historical conflicts, culture, politics and economics explain why it shaped ASEAN way and how the ASEAN Way influenced the ASEAN institutional building in trade agreements, as well as the institutional differences to the EU. These concepts in the new regionalism share common elements in liberal intergovernmentalism. Additionally, the exogenous and endogenous factors provide a framework to explain why ASEAN governments have a strong intention to preserve its sovereignty that result in a principle of non-invention and consensus-based.
Overall, the new regionalism aims to explain how market-driven and the increased liberalization of trade led to dilute national government control over their national economy, established institutions to ensure further advantage of the effects on economic growth, which characterised in the formation of regional trade agreement, that is examined in the case of AFTA in ASEAN, and SEM in the EU. At the same time, explains the motivation of these trade agreements, how internal and external factors drove ASEAN regional integration process to the other path than the EU.
15 3.2 Liberal Intergovernmentalism
Liberal intergovernmentalism was developed by the work of Andrew Moravcsik (1993). Its demands for integration arise within processes of domestic politics, emphasizing the primacy of state-led regional integration and the outcomes are supplied as a consequence of intergovernmental negotiation (Rosamond 2000; Cockerham 2010). Traditional intergovernmentalism assumes that integration is driven by the goals and interests of the member states. Liberal intergovernmentalism is characterized by Moravcsik in three essential assumptions. First, rational state behaviour, which means the cost and benefits of economic interdependence are the primary determinants of national preferences. Second, national state interests and preference formation through domestic political interaction. The process of domestic preference formation identifies the potential benefits of policies perceived by the national government. Third, a framework of interstate negotiation. Moravcsik claimed that this model implies that governments first define a set of interests, then bargain among themselve in an effort to realize those interests (Moravcsik 1993:481). Börzel’s critiques the liberal theories that they created bias when explaining other low-level socio-economic or low level economic and social transaction regionalism in the other part of the world (Börzel 2015). Because regionalism may emerge in the absence of economic interdependence and liberal democracy. Others consider liberal intergovernmentalism as an approach rather than theory (Rosamond 2000). Eliassen and Árnadóttir (2014) argue that intergovernmentalism is the most suitable approach to explain integration of ASEAN. Thus, it should be emphasized, one needs to be aware that ASEAN cannot be fully understood and explained under a single theory, nor theories and concepts applied to ASEAN justify all regional processes.
In relation to my thesis, based on the previous research done by Kim (2011) and Pattharapong (2014), they conclude, liberal intergovernmental analysis explains the economic interdependence between ASEAN members directed for the individual member states’ political economics gain (Kim 2011). Therefore, it corresponds to Moravcsik's claim that welfare and economic interests are the dominant issues in the process of integration that the EU member states wish to cooperate on. Hence, the primary goal of national governments during this process is the balance between the competing economic interests within the domestic sphere, rather than political concerns (Pattharapong 2014). In a sense, this
16 experience derived from Europe can also be accommodated in the ASEAN regional integration setting. Moreover, the post-colonial ideologies stimulate the possession of sovereignty and legitimacy in the ASEAN members, as a result of the ASEAN Way is non-interfering in internal affairs (Acharya 2001). Thus, national governments are the most critical actors to control the outcomes of the integration. That is, in the case of ASEAN, international bargains are driven by the national government instead of supranational authority. Therefore, as concluded by Craig and De Búrca, liberal intergovernmentalism views the integrated region as a mechanism for strengthening state sovereignty rather than a challenge to the nation state (Craig and De Búrca 1999). Manfield (1993) claims that trade is higher among countries that are cooperating and lower among those that are actual or potential enemies. In a way, it can explain the emergence of the ASEAN Free Trade Area and the regional economic cooperation among the members, and how the intra-trade evolved over the time.
4. Research Design and Methods
The regional integration outcomes in the EU and ASEAN is distinctive, that the EU is a formal supranational institution, whereas ASEAN is an informal and non-intervention organization. Thus, one can argue that theories and concepts applied to understand the European integration cannot be applied thoroughly everywhere. As Bryman (2012:74) notes, comparing two or more cases put researchers in a better position to establish the circumstance in which a theory will or not hold. Therefore, using comparative research design allows this research to seek explanations for similarities and differences of the EU and ASEAN, and to gain greater awareness and a deeper understanding of why different regions generate different outcomes. In May’s (2011:249) words, by examining different societies, we can ask why some have developed in similar ways and others in diverse ways, this added to an understanding and explanation of the complicated relationships between economic, social and political systems. With this in mind, by using two contrast cases such as the EU and ASEAN to contribute explanations of their different regional integration outcomes by examining major factors during their institution building process.
17 The primary data were generated from a range of official documents in the English language. The materials include literature, official statistics, trade agreements, declarations and news articles. Most archived sources and documents were from the ASEAN and European Commission official website. The declaration and trade agreements are in support of the discussion of the EU’s and ASEAN’s institution building differences. In this research, the statistics data are considered as crucial supplements to the archival sources in questions and are designed to obtain additional arguments and evidence to the findings through empirical study. The trade figures calculated based on data obtained from Eurostat and ASEANstats aim to examine and compare the degree of economic integration in the EU and ASEAN. The FDI trend chart exported from ASEAN Secretariat report underpins the ASEAN members primary interest to form the AFTA agenda. The trade in rice chart between ASEAN members specifically examines the inter-state bargain activities.
In terms of the process of study, the advantage of carrying out comparison like the comparative case study is that it helps us understand the phenomenon that we are interested in better when we compare it with something else that is similar to it. As May (2011:249) claims the method is an import-mirror view that means borrowing of ideas from other countries in the spirit of learning from one context to transplant into another. Comparisons reveal difference and diversity, to allow for the possibility of identifying the difference and similarity, comparative analysis considers both endogenous and exogenous factors (May 2011). In relation to the comparative case study between the EU and ASEN, the endogenous factors include the variables such as culture specificity which affect how exogenous factors influence each country and within its region.
Comparative studies have been critiqued for being largely quantitative. The shortcoming of the quantitative method is data are often generated that are unproblematically taken as fact rather than critically examined (May 2011:258). Therefore, a combination of qualitative and quantitative approaches are being proposed to comparative studies. In order to establish causal relationships that have internal and external validity, we also need to take a variable of ‘which period of time to compare’ into account to seek to identify what happened before or after significant events as resulted in the EU institution building process, but did not happen the same way in ASEAN. Hence, it is also an additional reason for my choice of time when
18 comparing the EU and ASEAN. The cultural and historical differences as the adds-on to my findings to existing ways of understanding.
Above all, this thesis conducts under the methods with both qualitative and quantitative analysis in order to minimise biased observation, and seek to explicitly state the findings with the theoretical frameworks applied to this research. Because, if this thesis was only based on document analysis would be considered for being too subjective, that its findings rely too much on the researcher’s often unsystematic views about what is significant and important (Bryman 2012:448). Therefore, statistics enable us to understand theoretical discussion empirically and validate those findings. However, one needs to keep in mind that although official statistics represent rich data sets, they could be represented only by what is seen as of importance to officialdom (May 2011: 75). Justification of the representativeness of the data deriving from state sources depends on “whether a measure that is devised of a concept really does reflect the concept that it is supposed to be denoting” (Bryman 2012:47). Overall, understanding and learning is the aim of this comparative work.
5. Background
This chapter provides an overview of the political and economic backgrounds that underpin the formation of the European Single Market and ASEAN Free Trade Area. It also highlights the progress made by the EU along its development trajectory. At the same time, it identifies major incentives which have motivated countries in ASEAN to decide to take part in the regional project as well as touches upon other influential factors that shaped their formation in both EU and ASEAN.
5.1 The European Union
The European Union (EU) is the most successful integration project in a modern world. From signing the Rome Treaty to Maastricht, from the Single Market to the Enlargement. Europe has provided experiences and examples for other regions to practice. The ‘institutional’ elements seen as characteristic of the European model reflects on its economic and political integration. Deepening and widening is a key strategy in the European integration process. Deepening with more economic integration, such as the free trade area, customs union,
19 internal market, monetary union, political union; widening through enlargement (Gavin 2005). The Treaty of Rome established the European Economic Community and also introduced supranational institutions. The Single European Act (SEA) was the first revision of the Treaty of Rome. The SEA ratified in 1986 and entered into force in 1987, set the European Community created a single market and to provide the EC a legal basis for the single market, introducing majority voting and increasing power to the Council of Minister and European Parliament (EP) for a co-decision making. The European internal market provided for the four freedoms. Free movements of goods, services, people and capital. The internal market meant to reduce tariff and transactional cost and act as a power force to the national economies (Gavin 2005). The Act also provided the EC a legal basis for the market and rules for majority voting, as well as framework for further developments in the Community (Eliassen and Árnadóttir 2014). Therefore, it required a massive legislative programme to rewrite the national legislation.
The idea of creating a single market, was to recover the performance for the economy such as in manufacturing and productivities. The initiation of the single market for a larger European market promoted two important projects that accelerated a deeper integration process. Especially the Maastricht Treaty, as the central aim was the achievement of the European Monetary Union (EMU), with the introduction of a single currency (Griffiths 2014:186). Eliassen and Árnadóttir (2014:235) argue that the EMU and the Europe currency represent the most important contribution to a further deepening of the integration process in the years to come. Thus, the project of the single market was not only simply to resolve the economic and bargaining problem, but rather an EU political agenda for the long term. As Fligstein (1996:13) argues the intention of Jacques Delors, the then President of the European Commission was to use cooperation on the single market project to build more agreements and expansion of the EU. Moreover, the single market programme provided linkage for a closer intergovernmental cooperation among EU member states. For example, EU external relations in cooperation in the field of foreign policy, security and defence were the sensitive issues that reach to the core of sovereignty of the nation states, as result member states were extremely reluctant to integration and opposed cooperating in this area for many years (Vanhonnacker 2017). Ludlow (2014) notes that the area of justice and home affairs related to the 1992 programme meant to abolish the border control increased the member state’s
20 capacity to stop criminals fleeing oversea, control illegal immigration, in which lead to the process for a unified and common European foreign policy. Eventually, it has enabled the EU to act as one entity and developed into a coherent and effective international actor. Overall, the success of the single market accelerated the further integration development in the European Community. The SEA which helped to finish the 1992 programme and improved the role and importance for the Council of Ministers and European Parliament and generate their abilities to comment on all directives. The Maastricht Treaty or the Treaty on European Union in particular, marked the largest leap forward in European integration. It had broadened the scope and scale, and pushed this momentum forward with a variety of policy issues added to EU purview which will influence the EU in future policy.
5.2 The Association of the Asian Nations
In Southeast Asia, On 8 August 1967, representatives, the Foreign Ministers of Indonesia, Malaysia, the Philippines, Singapore and Thailand, sat down together in the main hall of the Department of Foreign Affairs building in Bangkok, Thailand and signed a document. The Bangkok Declaration laid the foundation of the birth of the Association of Southeast Asian Nations. The establishment of ASEAN aimed to ensure peace, stability and prosperity in the region. These aims and purposes were about cooperation in the economic, in promotion of social, cultural, technical, educational and other fields of development in the region through cooperative programmes, safeguarding the regional peace and stability through abiding respect. During the first wave of regionalism, the emergence was concerned with peace and saw the nation state as a threat. In the case of ASEAN, Communism and Vietnam was the reason by the other six nations, as Stubbs (2000), Eliassen and Árnadóttir (2014) claim that the Vietnam war was a proxmire for the establishment of the Association to avoid the diffusion of Communism and feared it would take over the power. So did Europe, the emergence of the European Coal and Steel Community (ECSC) aimed to maintain peace and hold balance from powerful states, such as Germany. For instance, the Schuman Plan scheme meant to force the German enact a law consistent with international agreements and sought to transfer power to ECSC, a supreme authority. Gillingham (2014:80) asserts that this German-Franco cooperation was more than a dream-pipe, it eliminated political obstacles to future economic partnership. Respectively, Southeast Asia was able to establish and sustain
21 regional stability. According to Stubbs (2000:300), ASEAN, on the economic side, attempts to generate projects that linked member states were fraught with problems and essentially proved fruitless. Thus, ASEAN was a good example of how economic regionalism can be a mechanism by which a border security and political goals can be pursued (Faweett and Hurrell,1995:44). ASEAN proclaims itself as representing “the collective will of the nations of Southeast Asia to bind themselves together in friendship and cooperation and, through joint efforts and sacrifices, secure for their peoples and for posterity the blessings of peace, freedom and prosperity” (Overview n.d. [ASEAN]). It can be understood that ASEAN endorsed the notion of consensus based, non-intervention of domestic affairs, loose institutional structures through the model of cooperation to achieve mutual goals.
January 28, 1992, six leaders from ASEAN --Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, signed an agreement aimed to liberalise intra-ASEAN trade and investment by reducing tariffs. Stubbs (2010) asserts it was surprising but also instructive. A year earlier, in April 1991, Anand Panyarachum, the then Thai Prime Minister, first broached the idea of an ASEAN free trade area with the Singapore Prime Minister, Goh Chock Tong, and later pressed the idea on other ASEAN leaders over the next few months (Stubbs 2010:304). Two months earlier, in February 1991, the Thai military launched a coup against the business-based and highly corrupted politicians who had used their power through the late 1980s to advance their own mainly economic nationalist interest and undermined the military institutional control (Stubbs 2019:303). Anand, highly respected by both bureaucracy and the business community, was chosen by the military to head two interim governments between 1991 and 1992 and hoped to rally business and bureaucratic support for the new regime. (Stubbs 2000:303; Hicken 2004:637). Anand filled his cabinet with technocrats, businessmen to work on the policy reforms that accelerated the capital liberalization, reduced tariffs and cut taxes which met the needs for rapid export-oriented expansion. “The idea of ASEAN-wide free trade was integral to the set of liberalizing proposals being discussed by these policy-oriented organizations and to the liberalization programme being developed by the Anand administration”, and the free trade agreement was “thought to be an apt solution to both a political predicament and a set of emerging economic challenges” (Stubbs 2000:304).
22 Singapore was a strong advocate of the AFTA project as Goh saw the proposed trade bloc as a timely ASEAN response to a changing international economic landscape that was marked by the emergence of new markets in Eastern Europe and regional economic blocs such as Single European Market (National Library Board [History SG], 28 January 1992). Singapore as a long standing entrepot (transhipment port) would benefit significantly from the reduction of trade barriers. In addition, by the 1990s, it had become a world financial, trade, industrial center. Thus, improving the efficiency and productivity in the region would increase the attractiveness of the country. As Kim (2010:419) asserted “the real objective of the formation of AFTA was not to stimulate intra-ASEAN trade per se but to increase their competitiveness and integration with the world economy”. Therefore, at the time Goh felt that the intra-regional competition brought about by the reduction of trade barriers would, in the long run, increase the competitiveness of ASEAN economies (National Library Board [History SG], 28 January 1992).
5.3 Conclusion In comparison to the European Union, the most significant difference between these two organizations lies in their institutional form. The EU clearly exhibits an example of supranational integration. A series of its integrating developments embedded with legally binded frameworks, led to spillover effects and intergovernmental cooperation that generated deepening integration. ASEAN, by contrast, has a weak institutional structure with the principle of respecting sovereignty, non-intervention and consensus-based engagement. As a result, ASEAN remains under the influence of the national government.
After all, in the early stage of regional integration, security interdepencies were among the most important driving factors. Later, economic prosperity became more crucial for the nation members in both the EU and ASEAN in response to their economic turmoil and the pressure from globalization. In chapter 6, I will analyse how globalization came to foster liberal reform and shifted to open economy in ASEAN’s four biggest core members and the EU, as well as accompanied by the emergence of regional cooperation.
23 6. The formation of new regional project in Southeast Asia and Europe
Fligstein and Mara-Drita (1996) assume that institution-building moments occur when socio, economic, or political crises undermine the current institutional arrangements. That assumption can be explained in the early 1980s recession in Southeast Asia and Europe. As the second wave of regionalism emerged in the 1980s and was dominated by the relationship between globalization and regionalism, the role of market and civil society actors, and the importance of flows of capital, trade and people forced the liberalization of the economy. Thus, one first needs to understand what caused the opening economy in the case of ASEAN and the EU that changed to market-driven integration and avoided economic protectionism. Hence, the first operational question “what were the driving forces to create the AFTA and ESM?” will be answered in 6.1. I will summarize how the economic pressure and external forces forced the shift of the balance from the economic nationalists to the liberal reformers that paved the way for the emergence of new projects that respond to the ongoing globalisation process and changed to outward-thinking. Moreover, I will analyse those driving forces, and how national interest was formed in the first place to initiate the projects, which touches upon part of the third operational question of “how are domestic political interest and preference in the ASEAN members reflected upon the AFTA framework in its institution-building”. 6.2 aims to answer the second operational question “what are the differences between AFTA and ESM, and why do these differences and driving forces produce different logic of integration in these two regions?”. I will analyse the differences of their institution-building and why it is as such.
6.1 Economic liberalization reform
The 1985-6 regional wide recession in Southeast Asian and Europe promoted by low commodity prices was the catalyst of the shift in balance of power between the economic nationalists and the liberal reformers (Stubb, 2000:301). As in Singapore, the aftermath of this recession resulted in Singapore’s low competitiveness compared to other three Asian Tigers. As Wee said in 1988, "if new companies cannot make profits in Singapore, or if they cannot make larger profits here than elsewhere, they will simply not come” (The Strait Times, 2016 [SG]). In order to rebound from the recession, Singapore called for the private sector to take the lead to spot new
24 opportunities. This also indicates Singapore’s underlying preference and interest for promoting the free trade area in ASEAN region. However, the recession had major impacts in the four biggest ASEAN markets, namely, Malaysia, Thailand, Philippine and Indonesia. I exclude Singapore and Brunei in the examination of shifting balance, and examine the EU as one entity. In addition to the reasons I address in the introductory chapter 1.2, because Singapore already had a liberal market and Brunei considerably a smaller market. As in the case of the EU, the single market was built on the premises of the existence of a common market.
6.1.1 Malaysia
The Malay government took advantage of its high oil commodity prices to implement the New Economic Policy (NEP) during the 1970s which sought to redirect wealth to the Malay section of population and correct the imbalance and eradicate poverty in the rural area (Stubb 2000; Lee and Lee 2017). The Mid-Term Review of the Fourth Malaysia Plan announced a state-sponsored heavy industry project aimed to privatize the sector that emphasized the state objective of ‘strengthening the foundation of the manufacturing sector', a concept of ‘Malaysia Inc’ (Lee and Lee 2017:448). The NEP was promoted by the Minister for Trade and Industry Dr Mahathir Mohamad who became the Prime Minister a year later. The policy aimed to establish industry in areas such as iron and steel; cement; general engineering. The recession in the first 1980s forced Mahathirt to face the possible failure of the NEP and especially his heavy industry policy, which resulted in the liberal reformers pressing Mahathir to open up the economy and seek out the foreign direct investment (Stubbs 2000:301). The recession led to greater emphasis on private drives as it encouraged foreign investors to enter into joint ventures with leading malaysian businessmen as a new source of growth. In Bowei’s words it was a basis to bail out Dr Mahathir’s industrialization policy (Bowie 1994). This initiative not only reinforced the mission of the NEP to the Malay community but also created a group of supporters with funds to Dr Mahathir that he could use for defending his political challenges by the United Malays National Organisation. As Stubbs argues that Dr Mahathir and his political allies moved from being essentially economic nationalist in the early 1980s to moderate liberal reformers
25 due to the increasing conviction of the value of opening up the Malysian economy to the wider global economy (Stubbs 2000:301).
6.1.2 Thailand
The economic nationalists tied closely to the import substitution sectors (Stubbs 2010). As Thai economy entered the 1980s, it struggled to adjust to the same external shocks as many other developed countries (Hicken 2004). The balance between economic nationalists and liberal reformers swung back and forth in the 1970s, especially the two oil shocks caused several deteriorations in the Thai economy in terms of trade (Hicken 2004; Stubb 2010). The aftermath reflected in the early 1980s that Thai’s national savings declined sharply and export competitiveness was growing weaker, and the economic nationalists were almost overthrown by the technocrats, bankers and other elites to open the economy (Stubbs 2010:301). During the early-mid 1980s, the Prem government had made major structure adjustments so as to force economic reform, and shifted to the liberal reformers to chart a new export-oriented economic course in order to avoid a larger crisis (Hicken 2004:3; Stubb 2000:301). Hicken (2004) also claims that the initial reforms were not enough to liberalize and the Prem government had to abolish several export taxes and reduce import taxes on materials, and began a campaign of soliciting FDI projects as well as revised the tax to encourage more labor-intensive manufacturings. The Prem’s policies were carried out even against his strong opposition from political parties, business groups, and most significantly the military (Hicken 2004:4). These policy reforms put Thailand in a position where it was able to take advantage of the investment from East Asian countries such as Japan in the late 1980s.
The reform capacity in Thailand is a reflection of two factors: the incentives policy makers face to pursue reform, and their ability to enact their preferred policies (Cox and Mccubbins 2001). Since the return of elections in 1979, due to the combination of an unusual political system with few incentives for forming national parties, power within the Thai government has been relatively fragmented (Hicken 2000:8). Because, Thai political parties are mainly groups of individuals or a network of patrons-clients
26 who are forced to be together and have been temporary alliances of individuals and factions for the purpose of competing for elections (Hicken 2004:6-7). Thus, even though the election in 1980 was undergoing, the political leaders realized that military support remained an indispensable condition for stable government. As a result, the then General commander of the army Prem, was appointed to be the Prime Minister in 1980. Hicken (2000) notes that the political parties needed the support from the military and the Prem’s government needed the support of the political parties for stability and legitimacy purposes. The result was a compromise between Prem and the leaders from various parties for exchange economic policy reform that was insulated and run by Prem-backed technocrats (Hicken 2000:11).
6.1.3 Philippines
Philippines, the economist nationalists dominated in manufacturing in which that much of it developed, tied to import-substituting industrialization. The rising world interest rates made it more pricey for the Philippines to import oil and lowered the price for the export commodities which put the Philippines facing a series of balance of payment crises from the 1980s onwards (Stubbs 2000:302). Stubbs (2000) asserts that it resulted in the technocratic liberal reformers who were backed by Marcos government possessed limited power to counter the economic nationalist who had external power in both institutions. Bowie (1997) claims that the Marcos’ weak government was never able to break the deeply entrenched oligarchy structure of the Philippines political economy and stymied the emergence of a strong central state (Bowie and Unger 1997:99). The assasination of Marcos’s main political opponent, Begnino Aquino, in October 1983 overturned Marcos open economy policy and caused the economic turmoil that overthrew his regime in 1986. Aquino’s widow, Corazaon, who was supported by rebel soldiers led by the Secretary of Defence and other members of the business and economic elites, took over the government in the 1986 election. The economic nationalist gradually lost influence and was forced by their dependence on the IMF and the World Bank to liberalize the economy in return for loans to mitigate its debt problems (Stubbs 2000:302). During Corazon’s term, her government overcame opposition by pressing for reforms and attempted to recover Marcos’
27 ‘cronies’ and her ability to unite forces against Marcos, and restarted the economic liberalization process (Subbs 2000; Ringuest and Estrada 2003). Thus, the 1983-85 crisis was a transitional period for economic openness (Ringuest and Estrada 2003).
6.1.4 Indonesia
Indonesia benefited significantly from the buoyant oil market during the period 1973-84. The country successfully invested the proceeds of the oil boom revenue more effectively than practically any other country in a similar position (Aswichyono et.al 1996:342), which gave the economic nationalists their prominent place in government decision-making circles (Subbs 2000:302). As Aswichyono notes that the banking system was dominated by the state-owned banks, and the government maintained a regime of subsidised credit which through selective allocation to favoured clients, particularly the politically powerful borrowers, and the government itself also played as a major actor that undertook large investments in state-owned enterprises (Aswichyono et.al 1996:343). The fall of the oil price in the early 1980s forced the Suharto government to reform the banking system, introducing an efficient and clean duty draw-back system in order to promote trade growth. These reforms put free-trade on its footing and foreign investment regulations were liberalized significantly. Gradually, most restrictions were removed and a set of liberalising policies that shifted the country to an outward orientation that was more open to imports (Aswichyono et.al 1996).
6.1.5 The European Community
The difficulties that the EU faced during the period in the early 1980s, in large part had much to do with the economic turbulence of the 1970s, in which the Community had to digest British accession and the European market was hit by the global economic downturn. The events in the 1970s led to a new phenomenon: stagflation, which is the coexistence of the outright recession and high inflation. At the same time, challenges from the Japanese economy in car manufacturing and electronic technologies made the European products less competitive in terms of price and quality, which led the European market to lose the competitive position in the high-technology field. Notably, firms like Philips (the Netherlands) and Siemens (Germany) could no longer afford to develop the next generation
28 of products on their own (Griffiths 2014:186). Domestically, European countries faced more pressure from big business as the policy of national champions had led to a considerable fragmentation of markets at a time. As Ludlow (2014) notes that the strategies the European countries followed during the 1970s and early 1980s erred in two fundamental ways: they were too protectionist and they placed undue reliance on so-called national champions in which often big nationalized industries. As a result of these misguided policies, Ludlow argues (2014:224) that Europe had become “less productive, less efficient and less inclined to innovate technologically than either America or Japan” and “trapped in their small semi-protected national market”. Thus, if the EC could merge the common market and the European big firms would realize the benefit of deeper integration and boom the economy from a larger domestic market as what the American and Japanese economy did. This was where the ideal for creating a large market emerged according to Ludlow (2014).
6.1.6 Open Economy Consequence
The economic recession faced by Malaysia, Thailand, Philippines and Indonesia during the early 1980s shifted the balance of domestic decision-making groups towards economic outward-looking reformers (Stubbs 2000). The FDI inflows to the ASEAN domestic market, together with other factors reinforced this trend. These endogenous factors drove the emergence of the AFTA project. Overseas relocation of operation plants from other Asian countries seeked to low cost export platforms outside due to their rising domestic wage levels (Stubbs 2000; Hicken 2004; Stubbs 2000). Notably, the appreciation of the Japanese yen against the US dollar following the Plaza Accord in 1985 was the major factor to push Japanese exporters to search for other production bases in Southeast Asia. In order to compete with Japanese manufacturers, other Asian countries such as South Korea, Taiwan, and Hongkong had to follow the Japan lead (Subbs 2010:303). Thus, in response to the exogenous factor of the globalization trend, the ASEAN governments had to open their economy to be an ideal and competitive region for foreign investors. As a consequence, the net FDI inflows to Malaysia grew from less than US$5000,000 in 1986 to US$2.3 billion in 1990, and between 1987 and 1988 total FDI in Thailand more than tripled (Hicken 2004; Athukorala 2010). By the end of 1980s, the FDI had become a crucial source of economic growth in the ASEAN
29 economy. It was through FDI that the core ASEAN governments had emerged from the recession of the 1980s to engage in outward-oriented industrialization and become significant exporters of manufactured goods (Nesadurai 2003). This flood of investment helped fuel the boom in the broader economy that produced a way for policies to be put in place and paved the path for more trade agreements in the region. More importantly, it laid the foundation for the creation of the free trade area. Thus, in the case of ASEAN, it verifies the assumption of new regionalism, that the new regional agreement was not primarily centered around trading schemes or security cooperation, but rather the importance of flows of capital into their own national state. To a certain extent, the creation of AFTA was a result of the interplay between the global, exogenous and local, endogenous factors. As Börzel (2011) claims those factors shaped its institutional design and mediated its effects.
Other motivations behind the establishment of AFTA were discerned and revealed by numerous studies (Harris 2002; Kim 2010; Okabe and Urata 2013). First, the ASEAN policy makers thought that an expansion of intra-ASEAN trade could get them out of their economic problems and the promotion of economic development of the ASEAN countries would result in output growth and productivity efficiency. Internally, Kim (2010:423) asserts that “ASEAN members' concerns about domestic regime security are such that when it comes to pursuing regional integration, leaders ought to balance the goals not just between regional economic integration and global economic integration but also between regional security and domestic regime survival”. Thus, ASEAN member’s preferences on regional integration put more emphasis on domestic political interests in the formation of their strategic preference, and these preferences were not fixed by the exogenous factors, but rather developed internally over the time. This not only implies the new regionalism of the endogenous factors but also responds to Moravssik's liberal intergovernmentalism claim that rational state behaviour does not emerge from fixed preference, but rather from dynamic political process in the domestic polity (Rosamond 2000:137). Second, the external pressure from the rising trend of regional trade agreement. As Okabe (2013) notes that the ASEAN leaders saw that such a trend would result in discrimination against their products in their export markets (Osabe and Urata 2013:1). Harris (2002) describes it as the European trade
30 protection was important in stimulating regional economic cooperation, as the EC’s move towards a single market it created fear of a ‘fortress Europe’ in the Asian region. The shift to the interdependence of the global process made ASEAN and the ASEAN members didn’t want to be left behind of the second wave of regionalism which aimed to enhance free trade (Kim 2010).
In the case of the EU, the course of the mid-1980s was arguably the most active and dynamic period of the European integration process since the Common Market was put in place in the 1960s. The result of a slowing economic growth in the early 1980s, referred to as stagflation and eurosclerosis, led to high and persistent unemployment. Since the 1970s, economic interdependence had been growing between the member states through trade. State actors had no ability to engage in independent economic action to promote their economies, they also experienced losing sovereignty as the result of this growing interdependence, which forced the EC to have institutional reform and to create a project that was in everyone’s interest. (Fligstein and Mara-Drita 1996). Both AFTA and ESM projects share similarity as they were a response to seek a recovery of the economic pressure from the early 1980s recession, and tried to overcome the weak competitiveness of the local market. This has proved that the theoretical discussion of the new and open regionalism is formed in both ASEAN and the EU as a part of the ongoing globalisation process of economic liberalization.
The new regionalism experienced in the EU led to institutional reform resulting in the shift of the dominance in the integration process to non-state actors. In contrast, the creation of the AFTA embedded with national interest in the first place determined the institutional design that differs from the EU’s institutionalization.
6.2 Institutional differences
The launch of the single market project revitalized the EC and helped to overcome the long standing institutional paralysis, and created onward pressure for more integration (Ludlow 2014). To create the single market, which in turn required multiple pieces of European legislation, consequently necessitated its institutional workings aim to facilitate the enactment of these new laws, led to a series of pressures so as to explain its subsequent course. In
31 contrast to the AFTA, the European single market not only differed from the historical perspective, but more importantly in the institutional involvement. According to the new regionalism frameworks, the EU integration process within ESM emphasis on the various roles of actors involved in the policy process (Gavin 2005).
The EU has four key institutions (Eur-Lex n.d.): the European Council of Ministers, the European Commission, the European Court of Justice, and the European Parliament. The Commission acts independently of national government and serves the interest of the Union with the responsibility to draft legislation. The Parliament and the Council of Minister share the legislative co-decision making procedure. However, the difference is, the final authority still lies with the Council of Ministers (Eliassen and Árnadóttir 2014). The European Court of Justice (ECJ) holds a central position in the EU system, and its purpose to interpret the EU law and the final decision of its application, and safeguard the enforcement of EU directives into the member state's national legislation.
Despite the turbulent period in the 1970s, the main achievement of the EC was to enable the European Court of Justice to be developed into a more effective legal system which increased the important role of the ECJ and its growing authority. The ECJ was on account of its own jurisprudence and acted independently as one entity, was not the result of policial (re)consideration within the member states, and thus, made it possible for the national courts to accept the supremacy of Community law (Griffiths 2014:168). Therefore, decisions made by ECJ are bidding on all parties involved, such as individuals, private organizations and national states. This can be demonstrated with the Cassis de Dijon case in 1979 (Case 120/78), wherein the German importer refused to import the liquor from France whose minimal alcohol content did not meet the German standard. The ECJ ruled that one product was lawfully produced and recognized in one member state shall also be recognized by all member states under the principle of mutual recognition. As Ludlow (2014) argues that the Court’s decision for that case increased the EC's power for decision-making which helped the Commission remove the Non-tariff barriers arrangement. The NTB arrangement was designed to protect the home-grown companies and firms to compete with its European rivals. Griffiths (2014:168) notes that it prepared the way for the single market programme under the leadership of Jacques Delors, the then Commission President.
32
The European Commission played a pivotal role as a collective institutional entrepreneur during the process of establishing the ESM and a series of changes in the EU decision-making policies. Delors was able to promote two additional projects: the Single European Act and the Maastricht Treaty (Fligstein and Mara-Drita 1996). The former altered the voting procedure of the Council of Minister replaced by qualified majority voting that covered major policy responsibility, including the internal market; it also grew the role for the Parliament to cooperate with the Council which gave the Parliament the real legislative power. The latter aimed for the reform of monetary union. These point to the degree of authority that the Commission has, and more importantly, highlight the dominant feature of the European regionalism that is strong supranational institutions.
AFTA and ASEAN Way
In comparison to the European economic integration, the manner in which AFTA evolved and what institutionalized it wanted to be has developed in its own very distinct way. What has become known as the “ASEAN Way” as an essential approach characterized in the ASEAN regional multilateral relation. According to Acharya (1997a:329) “involves a high degree of discreteness, informality, pragmatism, expediency, consensus-building, and non-confrontational bargaining styles which are often contrasted with the adversarial posturing and legalistic decision-making procedures in Western multilateral negotiations”. Thus, the new regionalism development in ASEAN with non-western approach emphasizes the role of informal institutions. It has been well demonstrated by the ATFA project, which pays full respect for the sovereignty and independence of its members through consultation and consensus, based much more on networks of personal contact and social bound than legal commitment. Thus, one can say the negotiation over AFTA and the implementation of the agreements was heavily influenced with this approach. Hence, under the AFTA agreements, settlement of disputes are generally based on agreeing on the principle first and resolving the issue over a period of time (Stubbs 2000).
ASEAN’s flexible and informal approach also means that its members unwillingly give up their power, and it has no supranational institution, such as the European Commission. This has been demonstrated by its member governments being reluctant to interfere in each other's
33 internal affairs, and the effort made by the ASEAN Secretariat to ensure supranational institutions are not adopted in Southeast Asia (Stubbs 2000). Economic cooperation at the beginning was an important defence strategy against Communist revolution for their own regime's survival. ASEAN leaders were aware that the cost for deeper integration and fear may generate threat to regime security. Kim (2010:423) notes “deeper integration through the single market can threaten the survival of authoritarian ASEAN regimes by locking them into radically liberal economic reforms that incumbent ruling elites (whose clientelist regime-support networks prefer only incremental and selective liberalization and privatization) cannot afford”. This is demonstrated in the Agreement on the Common Effective Preferential Tariff (CEPT) in which notes “nothing in this Agreement shall prevent any Member States from taking action and adopting measures, which it considers necessary for the protection of its national security” (AFTA Council 1992b:Article 9). Additionally, Nesadurai (2002; 2009) and Kim (2010) reveal that most ruling elites of ASEAN regard the delegation of supranational institutions (as in an European supranationalism) as an organizational model is harmful and might endanger national cohesion and political stability. In other words, ASEAN leaders’ political will for deeper integration cannot be strong if the idea is perceived to threaten their regime's security despite the deeper economic interdependence might lead to more security in the region. Therefore, Eliassen and Agnes Árnadóttir argue (2014) that the establishment of ASEAN was seen as a tool to strengthen national sovereignty rather than overcome nationalism problems in the region, as it did in Europe.
Unlike the ASEAN Way of informalized, consensus and consultation-based norm of solving disputes, the EU's approach to dispute settlement exhibits a clear preference for judicial settlements based on clear rules and binding decisions. Under the single market agreement, the Commission monitors the application of EU law and can launch infringement proceedings against the member states that do not comply. The EU single market directives — incorporation in national law (EUR-Lex 2004) demonstrates the Commission’s power to oversee the national implementation, which enables the Commission to take legal penalties and actions before the ECJ. In contrast, the ASEAN Secretariat ensures their members comply with the AFTA agreements but has no legal authority to enforce the implementation. The main mission of the ASEAN Secretariat meant to ‘initiate, facilitate and coordinate’ the
34 ASEAN stakeholders collaboration. Agreement on ECPT (AFTA Council 1992b) emphasises the importance of consultation, which stated in article 8 that the disputes should be resolved by consultation; the norms of non-interferences that elaborates in article 9 which allows member states take actions and adopt measures if the state considers it is necessary. Example taken on the 1996 Protocol on DSM, which reaffirm its ASEAN Way that respects sovereignty, encourage the settlements based on consultation and avoiding penalties, and emphasize the role of the Secretary-General of ASEAN is limited only to officio capacity, offer good offices, conciliation or mediation with the view to assisting its members to settle a dispute. ASEAN style of decision-making has a high preference for consultation and consensus which means that disputes are rarely aired publicly. In this respect, disagreements are usually processed through an informal and discrete bargaining style with closed meetings of senior bureaucrats and politicians. In contrast with the European multilateral negotiation, the European Court of Justice exists as an independent legal mechanism involving the settlement of disputes or a panel of technical experts are not part of the ‘ASEAN Way’. Instead, as Stubb (2010) notes the first step is that the problems arising within AFTA are dealt within informal discussion among senior officials from the economic ministries through their regular meetings. If the problems cannot be resolved, they will be delivered in the senior minister meeting under the sphere of the ASEAN Economic Ministers Meetings. This procedure is implicitly stated in the AFTA agreements (AFTA Council 1992a) which called “an appropriate body shall be designated for the settlement of disputes”. Thus, this flexible and informal approach made the enforcement for the disputes settlement by the institution limited.
The absence of the role of the ASEAN Secretariat and an independently juridical entity reflects the low political will of the ASEAN members for further integration. The ESM highlighted the West European tradition of ‘the rule of law’ that the relation between the state and society is governed by legal norms. The other key difference between these two types of single market is their nature per se. The European single market eliminates the border controls, facilitates the four freedoms of good, service, capital and labour. The Completing the Internal Market White Paper stated “... Member States will agree on the abolition of barriers of all kinds, harmonisation of rules, approximation of legislation and tax structures…” (European Commission 1985:4). That means the removal of all tariffs and
35 quotas once it is enacted. On the other hand, in accordance with the AFTA framework agreement, the leaders of ASEAN and their government’s commitment to tariff reduction on investment flows and intra-trade in all manufactured products, capital goods and processed agricultural goods reduce to 0%-5% within fifteen years by means of a CEPT scheme, taking effect from January 1993 (AFTA Council 1992a; 1992b). Thus, not only ASEAN doesn’t have a supranational institution, but also it does not cover the same policy area as the EU nor the same degree of free trade among its members.
The ASEAN regional culture context is another crucial form of non-institutional economic cooperation of the business network in ASEAN, and important to understand the way in which the AFTA agreement was signed and implemented. General pressure from globalization, the impact on domestic culture of international values, including democratic, westernization and capitalism also possessed the influence to the ASEAN Way. For instance, the concept, ‘Asian value’, constructed by Singapore, and supported by Malaysia and China in particular. They advocated the importance of the role of this ideology in economic, social and political development in which Harris (2000:122) notes that “it uses as propositions to legitimize authoritarian governmental approaches to governance”, as “the strong supports were given by the authoritarian regimes”. Dr Mahathir, the former Prime Minister of Malaysia claimed that the Asian values are universal, European values are simply European, and contended that the West attempts to impose their value on developing countries is a disguised ‘cultural imperialism’(Hoon 2004:156). The rejection of western values associated with the ASEAN history, which has been important to ASEAN in every way. Moreover, all its members have greatly influence from the European countries’ colonialism and shared postcolonial identities, which created a strong attachment to sovereignty and thus to “eschew sovereignty-pooling or integrationist projects” with the limited exception of AFTA, and “designs or modalities that are sovereignty-affirming” (Achary and Johnson 2007b:261). Thus, regionalism in ASEAN is closely linked to anti-colonialism and the quest to facilitate economic and political development in their newly independent nation-states. Hence, that nationalism was used as a tool for the state-building process in the region as “the local elites used national identity against its colonial rulers” (Eliassen and Árnadóttir 2014:228). Therefore, the concept of the sovereignty cost was generated from the history of colonialism which is embedded in the domestic politics of ASEAN members. This is one indication of
36 why ASEAN emphasizes sovereignty and intergovernmental cooperation while rejecting supranationalism as an organization model, and implementation of the CEPT scheme in all sense is about ‘cooperation’ and ‘consultation’ under the agreements.
6.3 Conclusion
The open economy and liberalized market had promoted the creation of regional projects in both ASEAN and EU to be more competitive in response to the external and internal pressure from the early 1980s to the early 1990s. The economic interdependence in the EU within ESM was safeguarded with supranational actors in promotion of cooperation activities as the main driver of regional institution-building. Supranational players such as the European Commission, the EP and the ECJ played important roles on policy outcomes. In the case of ASEAN, to attract FDI and benefit their own economies, was ASEAN government's primary interest and preference to create AFTA. Meanwhile, in order to avoid jeopardizing their regime's survival, the ASEAN member’s governments adopted an informal, consensus-based institutional design. The success of AFTA has to be viewed in light of the distinctive approach to regional cooperation that has been developed among the members. The commitment of the ASEAN leaders to the AFTA process, the consent for the flexible and informal approach to the disagreement between the ASEAN leaders that helped to move the AFTA process forward, and the prevailing regional culture did not mesh with rule-based economic liberalization. However, as Stubbs (2000) notes that the conflict and strategic bargaining have taken place at various times and will continue to be a challenge for the full implementation of the AFTA. This is because that state’s economic development models correlated to different institutional design. Anarchy argues (Achary and Johnson 2007a) that developed states with open industrial economies tend to avoid deeper integration as a supranational institution model as it may restrict their access to the global economy, and developing states may find regional cooperation highly useful for collective bargaining over market. In chapter 7, I will examine whether the EU and ASEAN followed their initial institution design in their further development.
37 7. Integration development since 2013
Over decades of development, both the EU and ASEAN experienced territorial expansion through enlargement. In the case of the EU, membership has made economic transformation irreversible, credible and therefore anchored monetary stability, structural change, marketing institution-building as indispensable principles underlying EU decisions-makings (Langhammer 1998). The EU has moved forward towards a widening and deepening integration strategy. At the same time, ASEAN has made steady progress on its internal economic cooperation and external integration with other partners in the rest of Asia and the world. Trade and FDI has been the main engine of the rapid economic growth and development in ASEAN ever since the launch of the AFTA (Kawai and Naknoi 2015). However, the non-intervention and consultation principle allows the new member to have a transitional period to fulfill the commitment of the regional agreement. As a result, a full commitment of the AFTA agreement by all members has delayed the deadline a few times. Consequently, it hindered the further integration development in ASEAN.
Chapter 6 examined the exogenous and endogenous factors that drove the intergovernmental trade agreement and influenced their institution building process. However, during the process ASEAN’s member governments still acted as key actors to promote and facilitate these agreements. Thus, this chapter attempts to verify and reaffirm the assumptions of liberal intergovernmentalism made by Moravsik, that the rational state behaviour and their preference formulation, interstate bargain still exist in the pattern of their behaviour through empirical examination.
7.1 Intergovernmental cooperation and competition
In response to the financial crisis, ASEAN (ASEAN Press Release 2008) amended protocol packages on goods and services that aimed towards more integrated and progressive liberalisation of ASEAN economy, especially after the financial crisis in 1997. Paradoxically, the ASEAN member government accelerated the ASEAN Investment Agreement (AIA) program in 1999, the decision to bring forward the date to remove all exemptions from full market access, but was only direct to the ASEAN investors, the deadline for foreign investors remained at 2020. Nesadurai (2003) argues that the ASEAN members did not remove the
38 discrimination against foreign investors during the crucial period of time in order not to jeoparidse the already precarious economic climate. These responses and actions of ASEAN governments revealed ASEAN provided little to mitigate the crisis, commonly seen as putting the institution under sufficient strain to diminish greatly its value, lacking resources and capacity to respond to the regional economic upheaval, as well as the limited role in the global arena (Harris, 2002; Narine 2002). As Jones and Smith (2007) argue that the proliferation of declarations and protocols were largely just rhetorical. In the case of the EU, the eurozone debt hit following the 2007/2008 financial crisis due to Greece’s profligacy and the contagion of imbalance debt spread to Ireland and Southern Europe, which led to a multi-year crisis in the EU. Zeitlin (2019:965) argues that the crisis challenges facing the EU have created multiple spaces for politicization, at both domestic and European level, the Union has increased polarized political actors, and increased political mobilization that resulted in a rift between the debtor and creditor countries when it came to the crisis management of the Eurozone and its domestic economies. Consequently, the Euro crisis stimulated preferences for further integration between countries depending on their economic performance. Moreover, it also reflected the EU facing a ‘polycrisis’ and institutional dilemmas of operating a single currency that encompassed multiple varieties of capitalism. Hence, whether to claim a deepening and widening integration in EU and ASEAN only exists on paper or exhibits in practice, one way to examine it is through their trade and capital flow activities.
Figure 1 indicates the intra-trade in ASEAN is a much smaller proportion than the extra-trade, which means the economic interdependence and integration is weak in ASEAN. Moreover, the figure also demonstrates the intra-trade trend in ASEAN is declining over the time. In the case of the EU, according to the World Economic Forum (Edmond 2019), the EU's main export partners are the EU members. AS Figure 2 demonstrates that the trade between EU members is higher than the EU's export which means the EU has stronger economic interdependence. In other words, there has no observable impact on the intergovernmental policy practices of the ASEAN members, and the members not only failed to transform their trade and investment pattern but also they have less or no interest in regional economic community integration-building. Because this coincides with Manfield’s (1993) claims that trade is higher among countries that are cooperating and lower among
39 those that are actual or potential enemies. In other words, the ASEAN members are more interested in the pursuit of their own national interests. Thus, in contrast, the EU’s higher intra-trade presents a high level of cooperation and integration.
Figure 1: Intra-ASEAN and Extra-ASEAN Trade 2012-2018
Author’s calculation (Source: ASEANstats 2020)
Figure 2: Intra-EU and Extra- EU Trade 2014-2018
Author’s calculation (Source: Eurostat 2020; Eurostat 2020)
40 Chapter 6 has mentioned that the foriegn investment had increased in the ASEAN members after they opened their economy in the late 1980s and the creation of the AFTA partly was to reduce the tariff in order to accommodate the transaction cost for foreign capital. It is worth emphasising this point as the structural power of foreign capital was significant in influencing the AFTA decision, which revealed at the Singapore Summit in 1992 that to convince the leaders of its necessity to attract FDI to the region. Nesadurai (2003:73) notes that the ASEAN governments had come to realise that the formation of regionalist projects in the developed world, such as NAFTA and SEM was not so much a threat to free trade as much as a potential source of competition for global production capital, in which demonstrated to the ASEAN policymakers the potential of large and regional markets in attracting FDI inflows.
The interest shown by foreign firms in investing in those regions helped shape the ASEAN members’ national preference and later expansion. Figure 3 indicates, over the years the FDI inflow to ASEAN increased over six times. The ASEAN Investment Report 2018 claims that three member states Singapore, Indonesia and Vietnam accounted for 72 percent of FDI inflow in 2017, and Singapore reamined the region’s largest recipient, accounting for 45 percent of total inflows in ASEAN. This also explicitly implies the reason for Singapore's advocacy of the AFTA project. Indonesia’s inflow major in manufacturing, wholesale and retail. The largest foreign capital is from Japan with investments in automotive activity. Considerably, the report shows that the wholesale and retail trade emerges to be the main sector from industry recipients. The increasing FDI inflow to ASEAN contrasts to its intra-trade. One can argue that intra-trade and FDI are different indicators for the degree of economic integration, however, the industry for attracting the FDI is the disputed category of products that are excluded from the CEPT. ASEAN members' domestic political priority emphasizes the distribution over growth led to dispute among member governments, particularly in automotive and agriculture.
41 Figure 3: FDI Flows in ASEAN, 1995-2017 (Billions of dollars)
Source: ASEAN Secretariat (2018)
7.2 Inter-state bargaining
Interstate negotiation described by Moravsik can be ascribed to the compliance bargaining (Jönsson and Tallberg 1998) that refers to a process of all bargaining and negotiation between signatories to an agreement or institution that has already concluded. Searching for mutual acceptable solutions may entail compromises that may not fully conform to the original agreement, in which the bargain process can lead to some form of institutional strengthening (Nesadurai 2003:135). In the case of AFTA, automobile is the most notable dispute over liberalising trade rose problems in certain member governments to implement the commitments that had already been adopted. The consequences of the dispute threaten the core ASEAN members as the main purpose of the creation of the AFTA for manufacturing activities which the foreign investors were interested in.
Compliance bargaining on automobile by Indonesia and Vietnam
Vietnam issued a dispute in a 2017 ministerial decree on manufacturing, assembly and import of motor vehicles and motor vehicle warranty and maintenance services over Indonesia for not meeting import requirements. According to the APPENDIX 2 HIGHLY SENSITIVE LIST,
42 categories related to automobile subject to 20-50% of tariff capping, even though all members committed to the Protocol on the Special Arrangement for Sensitive and Highly Sensitive Products 1999 (AFTA Council 2004) ending the tariff rates of 0-5% by the end of 2010. Additionally, Vietnam is obligated to eliminate all quantitative restrictions on sensitive products by 2013. Noteworthy, Vietnam began to develop its automobile industry in the early 1990s. As a member of ASEAN, Vietnam must make substantial reduction on its tariff rate in preparation for planned admission to the CEPT in order to deal with the issue of trade and investment liberalization, which put Vietnam in the position to face the same competitive condition in terms of tariff. Takayasu (1998) notes, Vietnam had short of time to build a competitive automobile industry before liberalization that resulted in a major impact to the Vietnam automobile policy from the changing trends in the world’s automobile industry. Because, major assemblers and parts manufacturers are increasingly establishing divisions of labor and the direction of the automobile industry in a particular country depends on whether that industry is included in such divisions of labor. Thus, in order to protect its own domestic industry and hold foreign capitals, it would only make logic for Vietnam to boost its automobile export by eliminating the competitors. However, surprisingly, in 2018 the dispute was resolved and Indonesia was able to export 38,832 CBU vehicles worth US$718 million to Vietnam (Jakarta Post 2018). So, why is that? We need to take a deep look at their agriculture relationship.
Compliance bargaining on agriculture by Indonesia and Vietnam
ASEAN’s agriculture policy setting is heavily focused on rice and trade in rice is excluded from the CEPT. The same tariff barrier applied to ASEAN and non-ASEAN countries. Countries like Thailand, Vietnam, Laso are the exporters, Singapore, Philippine are mainly the rice importers. Indonesia imposes an import ban on rice partially dependent on the self-sufficient policy, and rice export only conducted by state-owned enterprises. As the Global Trade Alert (2014) claims those strong restrictions target private endeavours from import and export rice. Beyond import barriers, a number of countries pose export restrictions on rice. For example, in Vietnam, rice exports are centrally controlled through licensing arrangements and state-owned enterprises, as well as imposes the largest number of non-tariff measures, together with Philippines (OECD 2018). In other words, taxation on rice is the
43 main agricultural income for the government. In 2018, Indonesia amended its restriction and reportedly imported 500,000 tons of rice from Vietnam over Thailand (The Jakarta Post 2018) as Figure 4 shows. Since the unique ASEAN Way of resolving dispute settlement, the process is not publicly aired, thus one can assume that the settlement of the import and export of automobile and rice was a compliance bargain off their first prior interest.
Figure 4 Vietnam Exports to Indonesia of Rice
Source: Trading Economics (2018)
7.3 Conclusion
The intra-trade indicates the EU exercise deeper economic integration that contrast to the ASEAN. The example of the automobile and agriculture dispute not only affirms the inter-state bargain assumption that states first define a set of interests, then bargain among themselve in an effort to realize those interests, but also helps the elimination of tariff move forward. The ASEAN Investment Report 2018 also claims that 57 per cent rise in investment in agriculture was mainly due to intra-ASEAN investment. This demonstrates the improvement of the AFTA, in a way strengthening the ASEAN institution.
44 8. Final conclusions and reflection
This thesis sought to identify the contributing factors to the EU and ASEAN institutional building process. By analysing the process within the regional trade agreement in the beginning of 1980s and their further development, this thesis has shown the dominant influence of ASEAN national government’s interest determined the outcome that contrasts to the EU. In the absence of a theory of ASEAN integration in the literature, this thesis took the theoretical frameworks derived from the European experience that takes into account both the structure of the economic interdependence and the domestic political interests in ASEAN members.
8.1 Summarize the findings
During the early stage of creation of the EU and the ASEAN, security interdependencies was the most crucial driving factor. In response to their local economic problems and pressure faced by globalization impact in the early 1980s, boosting the local market’s competitiveness became the most important factor that facilitated market liberalization and promoted regional trade agreement. In the case of ASEAN, attracting FDI as their main national preference, however, the ASEAN governments also realized deeper economic integration would put their regime's survival at risk. As a result, the ASEAN members refused to surrender their sovereignty to create a supranational authority, which caused the most obvious difference between the EU and ASEAN that laid in their institution forms. EU’s supranational actors in promotion of cooperation activities that contrast to ASEAN’s informal engagement which featured in the ASEAN Way.
Even though the informal approach helped to move the AFTA process forward, conflict and strategic bargaining have been taking place in their further development and challenged the full commitment of the AFTA framework. These challenges have been demonstrated in their intra-trade and inter-state bargain since financial crises. ASEAN’s upholding of the ASEAN Way of decision-making and dispute settlement at the moment, as well as the low degree of intra-trade indicate a strong political will to move further integration beyond the free trade area is still missing. It is unclear whether the compliance bargain would strengthen ASEAN’s institution enough for it to take operational steps for deeper integration. However, it is worth
45 emphasizing that the ASEAN governments are unlikely to give up their sovereignty in the near future, unless there are significant factors that affect their preference.
8.2 Recommendation for further research
Above all, domestic political interest and national preference in Southeast Asia regional integration processes, formed within their cultural context, are important forms of informal institutional economic cooperation. To better understand the implications of these results, future study could address the Western and Eastern philosophical thinking into formal and informal institutional design when analysing or theorizing regional integration. For example, the classical Confucianism referred to social harmony that can be reflected in the consensus-based and consultation decision-making process in ASEAN. Legalism, focused on pragmatic government through an autocratic and absolute state, can to some extent be exhibited in most of the ASEAN members’ domestic politics. Western thinking cradled from polis in ancient Greece to liberalism emerging during the Enlightenment evolved the European society towards a more liberal and democratic. These fundamental differences rest upon the social norms derived from these philosophical thoughts underpin the EU’s institutionalization and Asian Value in general.
8.3 Final reflection
As stated in chapter 3 that there is no theory to explain the ASEAN integration process. European integration models cannot be simply applied to the ASEAN due to their different political system and domestic circumstance. To be specific, the theoretical inference cannot generalise the empirical findings. For instance, new regionalism explains the endogenous and exogenous factors as the driving force to liberalise the market. However, it cannot fully explain the non-state actors' influence in ASEAN integration process, as the states still remain the key actors in the region. Liberal intergovernmentalism explains well ASEAN’s intergovernmental economic cooperation and their national interests, preferences and how it formed as well as the bargaining process. However, it lacks the explanation of the external shock that caused the open economy in ASEAN. Therefore, a combination of two theoretical frameworks was employed to help capture a broader standpoint, and this thesis could contribute to offer alternatives for different aspects and analysis in ASEAN integration.
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