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)