As a result of the formation of a free trade area between six member countries

Deep trade agreements are important institutional infrastructure for regional integration. They reduce trade costs and define many rules in which economies operate. If efficiently designed, they can improve policy cooperation across countries, thereby increasing international trade and investment, economic growth and social welfare. World Bank Group research finds that:

• Deep agreements boost trade, foreign investment and global value chain (GVC) participation more than shallow agreements. On average, deeper agreements increase goods trade by more than 35 percent, services trade by more than 15 percent, and GVC integration by more than 10 percent.
• Aspects of deep agreements are public goods. Certain provisions of these agreements benefit all trading partners, and have positive welfare effects through expanded trade and an improved policy environment. But their efficient design requires a balancing of interests between different members and between member and nonmember countries.
• Regional Trade Agreements (RTAs) are currently at the center of many policy debates and are likely to shape trade and economic relations in the coming years. Some of these discussions are about reversing or renegotiating current arrangements, as in the case of Brexit and the North American Free Trade Agreement. In many other cases, often involving developing countries, new trade agreements have been concluded or are being negotiated, including the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership (CPTPP), the European Union–Mercosur trade agreement, the Regional Comprehensive Economic Partnership between the Association of Southeast Asian Nations (ASEAN) countries and six of their major trading partners, and the Continental Free Trade Area (CFTA) in Africa.

Working with partners such as the WTO and OECD, the World Bank Group informs and supports client countries that are seeking to sign or deepen regional trade agreements. Specifically, WBG work includes:

• Data and indicators – on the content and depth of regional trade agreements.
• Analysis – on the impact and efficient design of regional trade agreements.
• Advisory services – inform the design of regional trade agreements, to strengthen capacity.

WBG research on regional trade agreements:

Maliszewska M, Z. Olekseyuk and I. Osorio-Rodarte, March 2018,  Economic and distributional impacts of comprehensive and progressive agreement for trans-pacific partnership : the case of Vietnam. Washington, D.C. : World Bank Group.

Mattoo, A., A. Mulabdic, and M. Ruta. 2017. “Trade Creation and Trade Diversion in Deep Agreements.” Policy Research Working Paper Series 8206, World Bank, Washington, DC.

Mulabdic, A., A. Osnago, and M. Ruta. 2017. “Deep Integration and UK–EU Trade Relations.” In The Economics of UK-EU Relations, edited by Nauro F. Campos and Fabrizio Coricelli, 253–282. Springer.

Osnago, A., N. Rocha, and M. Ruta. 2017. “Do Deep Trade Agreements Boost Vertical FDI?” World Bank Economic Review 30 (Supplement): 119–125.

Osnago, A., N. Rocha, and M. Ruta. forthcoming. “Deep Trade Agreements and Vertical FDI: The Devil Is in the Details.” Canadian Journal of Economics.

Ruta, M. 2017. “Preferential Trade Agreements and Global Value Chains: Theory, Evidence, and Open Questions.” Policy Research Working Paper Series 8190. World Bank, Washington, DC.

The Association of Southeast Asian Nations is a regional organization that brings together disparate neighbors to address economic and security issues, but the group’s impact remains limited.

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CFR.org Editors

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Last updated April 11, 2022 3:30 pm (EST)

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Summary

• It is an intergovernmental organization of ten Southeast Asian countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. 
• The bloc’s biggest success in recent years has been promoting economic integration among members. It also helped negotiate the RCEP, the world’s largest free trade agreement.
• ASEAN has struggled to form a cohesive response to Myanmar’s military takeover and China’s claims in the South China Sea, which overlap with those of several ASEAN members.

Introduction

The Association of Southeast Asian Nations (ASEAN) is a regional grouping that aims to promote economic and security cooperation among its ten members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. ASEAN countries have a total population of 662 million people [PDF] and a combined gross domestic product (GDP) of $3.2 trillion. The group has played a central role in Asian economic integration, joining negotiations to form the world’s largest free trade agreement and signing six free trade deals with other regional economies.

Yet experts say ASEAN’s impact is limited by a lack of strategic vision, diverging priorities among member states, and weak leadership. The bloc’s biggest challenges, they say, are developing a unified approach to China, particularly in response to territorial disputes in the South China Sea, and responding to Myanmar’s civil war.

How ASEAN Works

ASEAN is headed by a chair—a position that rotates annually among member states—and is assisted by a secretariat based in Jakarta, Indonesia. Important decisions are usually reached through consultation and consensus guided by the principles of noninterference in internal affairs and peaceful resolution of conflicts. Many experts see this approach to decision-making as a drawback of the organization. “These norms of consensus and noninterference have increasingly become outdated, and they have hindered ASEAN’s influence on issues such as dealing with China and crises in particular ASEAN states,” says CFR’s Joshua Kurlantzick. 

Supporters of ASEAN, such as Kishore Mahbubani, who served as Singapore’s permanent representative to the United Nations, say the grouping has improved previously hostile regional relations. “[ASEAN’s] culture of consultations and consensus generated geopolitical miracles, some so stealthy that few outside the region have noticed them,” says Mahbubani.

The Bloc’s History

Formed in 1967, ASEAN united Indonesia, Malaysia, the Philippines, Singapore, and Thailand, who sought to create a common front against the spread of communism. In 1976, the members signed the Treaty of Amity and Cooperation in Southeast Asia [PDF], which emphasizes mutual respect and noninterference in other countries’ affairs.

Membership doubled by the end of the 1990s. The resolution of Cambodia’s civil war in 1991, the end of the Cold War, and the normalization of relations between the United States and Vietnam in 1995 brought relative peace to mainland Southeast Asia, paving the way for more states to join ASEAN. With the addition of Brunei (1984), Vietnam (1995), Laos and Myanmar (1997), and Cambodia (1999), the group started to launch initiatives to boost regional cooperation. For example, the members signed a treaty in 1995 to refrain from developing, acquiring, or possessing nuclear weapons.

Faced with the 1997 Asian financial crisis, which started in Thailand, ASEAN members pushed to further integrate their economies. For instance, the Chiang Mai Initiative was a currency swap arrangement initiated in 2000 among ASEAN members, China, Japan, and South Korea to provide financial support to one another and fight currency speculation.

In 2007, the ten members adopted the ASEAN Charter [PDF], a constitutional document that provided the grouping with legal status and an institutional framework. The charter enshrines core principles and delineates requirements for membership. (Timor-Leste submitted an application for membership in 2011, but some members oppose its accession.) The charter laid out a blueprint for a community made up of three branches: the ASEAN Economic Community (AEC), the ASEAN Political-Security Community, and the ASEAN Socio-Cultural Community.

ASEAN’s Diversity

ASEAN brings together countries with significant differences. Singapore has the highest GDP per capita in the group, at around $60,000, according to 2020 World Bank figures; Myanmar’s is the lowest, at around $1,400. Demographics differ across the region, too, with many religious and ethnic groups represented. For example, Singapore and Vietnam are among the world’s most religiously diverse countries, according to a 2014 Pew Research Center report, while Buddhist-majority Cambodia and Muslim-majority Indonesia are relatively homogeneous. ASEAN’s geography includes archipelagos and continental land masses with low plains and mountainous terrain. 

The members’ political systems include democracies, authoritarian states, and hybrid regimes. The past decade has seen previously semidemocratic governments grow increasingly authoritarian. Today, Timor-Leste remains the only fully free democracy in Southeast Asia, according to research and advocacy group Freedom House.

Economic Progress

ASEAN has made some progress toward economic integration and free trade. In 1992, members created the ASEAN Free Trade Area (AFTA) with the goals of creating a single market, increasing intra-ASEAN trade and investments, and attracting foreign investment. In 1996, the average tariff rate across the bloc was around 7 percent [PDF]; today, intra-ASEAN tariffs are effectively zero. The bloc has prioritized eleven sectors for integration, including: electronics, automotives, rubber-based products, textiles and apparels, agro-based products, and tourism.

In November 2020, ASEAN members joined Australia, China, Japan, New Zealand, and South Korea in signing the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement in the works since 2012. Although the RCEP doesn’t cut tariffs drastically, it covers more of the world’s population—30 percent—than any other trade agreement. It promotes economic integration between Northeast and Southeast Asia. ASEAN is also party to six free trade agreements with countries outside of the grouping, including India.

However, there remain major challenges to economic integration, such as non-tariff barriers, government-mandated investment prohibition areas, and differences in GDP per capita. Intra-ASEAN trade as a share of the bloc’s overall trade remains low, at 21 percent [PDF] in 2020. Domestic issues, such as instability and corruption, have also hurt trade within the bloc. 

Moreover, the COVID-19 pandemic [PDF] was severely disruptive to economic growth. ASEAN attempted to coordinate a regional response in 2020 to address economic and health-care challenges, but successful pandemic management ultimately hinged on individual states’ policy decisions. Member states agreed to coordinate economic recovery plans and keep trade open. However, prolonged lockdowns severely reduced industrial production, construction, and consumer spending. Travel restrictions hampered intra-bloc trade and tourism, which contributed almost $400 billion to ASEAN member economies in 2019. In a 2020 ASEAN secretariat survey [PDF], nearly 80 percent of respondents agreed that cross-border freight operations had become more costly or time consuming. 

Regional Security Challenges

ASEAN remains divided over how to address security challenges. These include China’s claims in the South China Sea, human rights abuses, political repression by member states, narcotics trafficking, refugee flows, natural disasters, and terrorism. 

In recent months, a primary challenge for ASEAN has been developing a response to the February 2021 coup in Myanmar. The junta has violently suppressed protests, and the conflict with opposition forces has escalated into civil war. Yet the bloc’s response has been limited due to internal divisions. Cambodia, Laos, Thailand, and Vietnam have remained close to the military junta and are pushing ASEAN to recognize the junta. By contrast, Malaysia and Indonesia have pushed ASEAN to take the unprecedented step of disinviting junta leader Senior General Min Aung Hlaing from important summits. 

A long-standing challenge has been forming a joint response to China, particularly to maritime disputes with Beijing in the South China Sea. Brunei, Indonesia, Malaysia, the Philippines, and Vietnam claim features in waters contested with China. For those countries, China’s moves to reclaim land and build artificial islands are seen as violations of their national sovereignty. In response, some have invested in modernizing their militaries. For other ASEAN members, tensions in the South China Sea are geographically distant and not a priority. A few, such as Cambodia, even tend to support China’s claims and block joint ASEAN statements on the South China Sea. In 2002, ASEAN and China signed the nonbinding Declaration of Conduct of Parties in the South China Sea, though they have not yet negotiated a legally binding code. 

The United States, which has a strong interest in preventing China from controlling access to the South China Sea, has continued military cooperation with ASEAN members, including the Philippines, Thailand, and Vietnam, and has increased its maritime presence to enforce freedom of navigation in international waters.

ASEAN members are divided over their ties to China and to the United States. The region is in need of investment, trade, and infrastructure development, and China has moved to meet these needs, most recently through its Belt and Road Initiative. But member states are anxious about becoming economically dependent on China, and many seek defense cooperation with the United States to hedge against China’s growing military power. 

U.S.-ASEAN Relations

The United States is ASEAN’s fourth-largest trading partner in terms of goods, trailing China, the European Union, and Japan. Merchandise trade between the two sides reached more than $307 billion in 2020. 

The United States has launched subregional and bilateral initiatives to boost ties, including the Mekong-U.S. Partnership, which aims to deepen cooperation between the United States and Cambodia, Laos, Myanmar, Thailand, and Vietnam on issues related to the environment, health, education, and infrastructure development. U.S. presidents have also met Southeast Asian leaders during the annual East Asia Summit, which is hosted by ASEAN and also attended by the heads of state of Australia, China, India, Japan, New Zealand, Russia, and South Korea.

The Barack Obama administration, as part of its so-called “pivot” or “rebalance” to Asia, increased U.S. participation in activities with ASEAN. President Obama and other senior officials attended ASEAN summits. The administration also named the first resident ambassador to ASEAN, joined the Treaty of Amity and Cooperation, and established an annual U.S.-ASEAN summit. In 2015, the United States and ASEAN elevated their relationship to a strategic partnership. The following year, Obama hosted the first U.S.-ASEAN leaders’ summit in California.

The Donald Trump administration sent high-ranking officials to Southeast Asia, including Vice President Mike Pence and secretaries of state and defense. But President Trump attended just one meeting with ASEAN leaders, in 2017. Some experts in Southeast Asia say the Trump administration’s inconsistent engagement with the region caused U.S.-ASEAN relations to deteriorate. The U.S. withdrawal in 2017 from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement formerly known as the TPP, set back broader U.S. efforts to demonstrate commitment to the region’s trade integration, they say. The United States is not part of the RCEP trade deal.

President Joe Biden has promised to boost ties with ASEAN by collaborating on issues such as climate change, global supply chains, and the pandemic. In 2021, the two sides held high-level meetings, with top U.S. officials visiting several ASEAN countries. However, CFR’s Kurlantzick argues that the administration has yet to deliver on its promise to strengthen ties. In early 2022, the administration announced the Indo-Pacific Economic Framework for regional economic cooperation, but it has yet to release details. Moreover, Biden has said he won’t enter new trade deals until the COVID-19 pandemic is under control.

Recommended Resources

CFR’s Joshua Kurlantzick discusses democratic backsliding and the revival of military rule in Southeast Asia. 

In this 2021 report [PDF], the East-West Center, the U.S.-ASEAN Business Council, and the ISEAS–Yusof Ishak Institute take stock of U.S.-ASEAN ties.

For World Politics Review, Kurlantzick looks at ASEAN’s response to the Myanmar coup.

This Backgrounder explores Myanmar’s troubled history.

This InfoGuide unpacks China’s maritime disputes in the East and South China Seas.

• Southeast Asia
• Asia
• Regional Organizations
• Defense and Security
• Trade
• Myanmar

Lynn Hong, Lindsay Maizland, Carlos Galina, and Eleanor Albert contributed to this report.

For media inquiries on this topic, please reach out to .

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