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Can ASEAN Learn from the European Union?

Does the European Union (EU) offer any lessons to the ASEAN nations as they explore closer economic integration? In this opinion piece, Rolf J. Langhammer, a professor at the Kiel Institute for the World Economy, draws parallels between the two to explore that question.

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ASEAN was founded in 1967. In that year, the European Economic Community (EEC), which was established in 1957 through the Rome Treaties, had almost finished its first stage of regional integration.

It had abandoned tariffs on most industrial goods in intra-EEC trade in five consecutive steps (between 1957 and 1968). At the same time, it had agreed upon a common external tariff on these goods, which was the average between higher external tariffs in Italy and France and lower tariffs in Germany and the Benelux countries.

Hence, parallel to a free trade area, the EEC had set up a customs union with a common policy in trade and a mandate from the EEC Commission to negotiate with third countries on trade issues.

The customs union could have raised problems of impairment of benefits accruing under GATT-membership for non-EEC countries (Art. 24 GATT), as these countries would have faced less favorable entry conditions in the German/Benelux markets compared to the pre-1957 period.

Yet, parallel to the formation of the free trade area in industrial goods in the EEC, the two GATT multilateral rounds (Dillon and Kennedy Round) resulted in a 40% tariff cut on the EEC external tariff, so that no non-member countries had reason to invoke Art. 24 GATT.

That procedure had been textbook-like and in the aftermath of 1957 spurred the ambition of many developing countries to replicate the EEC model, characterized as stepwise: from a free trade area via a customs union and common market to an economic community; legalistic: every step is embedded in binding and lawful obligations; and top-down: the electorate, though being the principal, waives its rights in favor of the agents, the executive.

Latin American and African countries tried to replicate the EU and experienced all kinds of disenchantment; from remaining “paper tigers” (most West African schemes) to stagnation and crises (Latin American Free Trade Association), disintegration and dissolution (East African Economic Community) and even a “soccer war” (Central American Common Market in 1969). East and Southeast Asia, however, stayed far away from any attempt to follow the European way.

For a long time, due to the enormous heterogeneity, including political rivalry, among its countries, any form of institutionalized integration proved to be a non-starter in Asia.

What was lacking was not only the rule of law. The region lacked the overlap between a trade bloc and a capital bloc, essential for integration steps beyond trade; the stabilizing element of a leading regional currency like the DM in Europe; a benevolent hegemon as in Germany and France in Europe; and the synergy of sector-specific cooperation projects supporting integration steps, as with the European Atomic Energy Community (Euratom) and the European Community for Coal and Steel on the one hand and the EEC on the other.

Source: What Lessons Can ASEAN Learn from the EU?

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