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.
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