Tuesday, July 5, 2016
ASEAN - What ASEAN Can Learn From Brexit
There are lessons for the regional grouping as it advances the ASEAN Economic Community.
In June, British voters elected to leave the European Union—commonly referred to as “Brexit”—exiting the single market system that has unified European economies since 1992. The results have shocked the world, shaking the confidence of many who long heralded the European Union as the best example for the benefits of global economic integration. Government officials, analysts, and businesspeople are busy trying to predict the consequences, hedge bets, and plan for an uncertain future.
One of the lessons being drawn from the Brexit vote is the level of discontent with an increasingly globalized world, where many people feel less in control of their own countries—a sentiment that impacts how people feel about immigration, economics, and trade. We see this phenomenon playing out in debates over trade deals in the United States and elsewhere around the world where countries are attempting to shape the forces of economic integration.
This dynamic is also playing out in Southeast Asia, where ten countries are involved in one of the most ambitious projects of regional economic integration anywhere. In 2015, the ten countries that comprise the Association of Southeast Asian Nations (ASEAN) officially launched the ASEAN Economic Community (AEC), the goal of which is to create a “highly integrated and cohesive economy.” And while ASEAN has long rejected forming an EU-style supranational government, the benefits of integrating the economies of what would be the world’s seventh largest single market have convinced ASEAN countries to cede certain aspects of sovereignty. One report by the Asian Development Bank noted that “closer trade integration between the ten countries under the AEC could, by 2025, lift aggregate output by as much as seven percent.”
But the AEC is facing serious headwinds in its constituent countries, where the currents of nationalism and non-intervention in sovereign affairs are strong, and where the anger of those who feel that globalization is leaving them behind is no less intense than in Great Britain.
If the AEC is to succeed, ASEAN nations must learn the lessons of the Brexit vote.
First, the Brexit outcome indicates that growth within ASEAN must be shared. The Leave platform in the U.K. successfully targeted voters with sensationalist economic statistics to suggest that Britain would be better off on its own. By capitalizing on anti-immigration sentiments, economic inequality, and lack of understanding of the EU, the Leave campaign won the support of voters who ironically benefit the most from EU integration. These voters tended to be older, less educated, and live in rural areas. Their concerns focused on the loss of jobs, rising inequality, the supposed misallocation of government funds to the EU instead of British systems, and the increase in immigration.
The challenges posed by unequal growth can be seen around the world, and Southeast Asia is no exception. Seven ASEAN states have levels of inequality worse than that of the U.K. (data for two of the ASEAN states, Brunei and Myanmar, is unavailable). The AEC is set to worsen wage gaps around the region, and disproportionately benefit male-dominated fields. The benefits of the AEC will also not be borne equally around by all countries: while economies like Cambodia will gain, larger, more developed economies like Indonesia are unlikely to see the same growth. Indonesia, a strongly protectionist country, will also likely see the growth of high skilled labor, leaving its poorer population behind. These impacts set the stage for an unstable, unequal AEC that is all too similar to the current EU. ASEAN has the chance to refine the AEC into a truly inclusive single market from its inception, but it must ensure that the benefits of the Community are far reaching and extend beyond elites to all sectors of society.
Second, Brexit shows that citizens’ education about regional institutions is vital. A key problem faced by the Remain campaign in the U.K. was the lack of accurate knowledge about the EU and its relationship with Great Britain. Shortly after Brexit polls closed, Google Trends reported a spike in the number of people who googled “what is the EU”; similarly, a 2013 EU Survey found that nearly half of EU citizens said that they didn’t understand how the EU worked.
ASEAN faces the same issue. One study found that only a quarter of Southeast Asian citizens know what ASEAN is. And while the study did not ask about the AEC, one can infer that understanding of the AEC would be far less. Understanding of ASEAN is hindered by ASEAN’s English-only usage, which makes it difficult for regional messaging in an area brimming with hundreds of languages.
Another lesson learned from the Brexit outcome is that ethnic tensions impact economic decisions. Immigration featured as one of the – if not the – most prominent issues during the referendum campaign in the U.K. While the AEC may have the power to integrate and assimilate financial regulations, each country of course will continue to shape its own economic growth policies. This means that countries with economic policies that are discriminatory may fuel tensions once markets and borders are opened further to people from other countries. Therefore, ASEAN nations will need to address racial discrimination and inequalities within their own countries. Malaysia must address its New Economic Policy, which gives legal preferences to ethnic Malays. And Singapore needs to fight against xenophobia toward its migrant workers , who have been the backbone of its infrastructure boom.
Finally, Brexit demonstrated what happens when regional integration fails to adequately address regional disparities within the economic bloc. In the years leading up to Brexit, financial instability in EU member states contributed to a sentiment prevalent in certain countries that individual countries were supporting others at their own expense. This was highlighted by the Leave campaign’s popular yet inaccurate message that the 350 million pounds sent to the EU every week could be used to fund the U.K.’s National Health Service.
As ASEAN integrates its economies, member states need to remain mindful and understanding of the economic disparities within the region. For example, as Thailand experiences instability, and Cambodia and Laos are expected to reap the benefits from the AEC, ASEAN must ensure that every government works with its people and business communities to take advantage of comparative advantages within the AEC so that no country feels as though it has not seen widespread gains from the AEC.
The success of the AEC could help empower the rest of ASEAN, giving ASEAN countries the confidence to further strengthen regional cooperation on everything from the environment to migration to preventing health pandemics. But if the AEC fails, it will be a massive blow to the ASEAN project.
At the end of the day, the politics within the regional bloc cannot outpace the politics of each member country – and most importantly the needs of their peoples – if the AEC is to succeed. Fortunately, despite these obstacles, prospects for the AEC are good. With enthusiasm for ASEAN integration across the region, there is still room to shape the AEC – and opinions of it – to ensure that it is sustainable and beneficial to all.
Michael H. Fuchs and Stefanie Merchant
Michael H. Fuchs is a Senior Fellow at the Center for American Progress and a former Deputy Assistant Secretary of State for East Asian and Pacific Affairs. Stefanie Merchant is a member of the National Security team at the Center for American Progress, focusing on East and Southeast Asia.