In a move described as “unprecedented” by the Malaysia Star, the national steel associations of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam, e.g., the ASEAN countries with steel manufacturing, made a joint appeal to the ASEAN Secretariat and ASEAN member states to revisit the ASEAN-China FTA.

Under the rubric of the ASEAN Iron & Steel Council (AISC), the steel associations complained about a surge in steel imports from China, now at 9.1 million MT for Jan-Sept 2012, up 47.3% when compared with the same period in 2011. This move represents the continuing frustration of ASEAN manufacturers with ASEAN’s FTAs, which I described in an earlier post. During the FTA negotiations, steel and other industries felt that they had limited opportunities to present their case to ASEAN negotiators. From their point of view, the resulting FTAs shortchanged their interests.

On the other hand, the ASEAN governments can also respond that the ASEAN steel industry did not comprehend what the FTAs would entail and did not adequately prepare themselves for increased competition from China and other trading partners. Both are correct. The political-economic dynamic during the ASEAN FTA negotiations was relatively undeveloped. The sort of government-business interaction seen in FTA negotiations conducted by the US and other countries was missing in ASEAN during the ASEAN FTA negotiations.

This arose both because of a lack of opportunity and a lack of awareness. In any event, the ASEAN manufacturing industries now face heightened regional competition from Chinese industries who have had to divert shipments from a weakened Europe and relatively slow domestic market.

The Chinese government’s VAT rebate policy further encourages exports. The AISC move also reflects the continuing development of the ASEAN-level political economy. The national steel associations are seeking relief through trade remedies and non-tariff barriers from individual ASEAN member states.

That is nothing new and has been going on in ASEAN for years. In fact, as the ASEAN-China FTA is actually a collection of 10 FTA agreements (e.g., Brunei-China, Cambodia-China, etc.), any legal action actually undertaken will necessarily be at the national level, whether through a renegotiated ASEAN-China FTA (unlikely), antidumping/antisubsidy cases (more likely) or under the safeguard provisions of the ASEAN-China FTA (quite possible). Collective action by ASEAN industry associations is also not new.

For example, the ASEAN Federation of Textile Industries (AFTEX) coordinated textile and apparel policy in the days of the Multilateral Fiber Agreement. What is new is that the AISC went to the ASEAN Secretariat. By working together at the ASEAN-level to deal directly with the ASEAN institutions, the AISC correctly understands that it is not enough in the ASEAN Economic Community to work at the national level.

The ASEAN institutions must also be involved, not only to bolster confidence among the ASEAN member states to tack action, but to coordinate policy on a regional level. The AISC is a long ways from becoming as powerful as Eurofer in Europe. But the AISC’s policy approach at the ASEAN-level will be adopted by other ASEAN industries, as they cope with the continuing development of the ASEAN Economic Community. Expect similar initiatives to come as the AEC matures.

Edmund Sim is a U.S. international trade lawyer at the Singapore office of Appleton Luff and adjunct associate professor of law at National University of Singapore. There, he teaches the first course developed on the law and policy of the ASEAN Economic Community (AEC). You can follow him via AEC Blog.

About the author

I am a U.S. international trade lawyer at the Singapore office of Appleton Luff and adjunct associate professor of law at National University of Singapore. There, I teach the first course developed on the law and policy of the ASEAN Economic Community (AEC). I have also advised the ASEAN Secretariat in an EU-funded assistance project on the ASEAN Trade in Goods Agreement (ATIGA), and represented companies in dealing with the ASEAN Industrial Cooperation (AICO) scheme, Common External Preferential Tariff (CEPT) program and other ASEAN economic integration

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