Southeast Asia: Regional Conflict and Cooperation

• SEATO (1954-1977) was formed by the Manila Pact of September 1954.
• Members included the USA, UK, France, Pakistan, Malaya, Thailand, and the Philippines.

• Few initiatives were taken.
• Intra-ASEAN trade fell from 15.5% (1970) to 12.6% (1975).
• There was little industrial cooperation.

• Declaration of ASEAN Concord 1976 - its basis was global economic conditions: the breakdown of Bretton Woods in 1971, the 1973 food crisis, and the 1974-75 oil crisis causing recession and a commodity price slump.
• The Concord defined areas of economic cooperation.

The ASEAN Preferential Trading Arrangements (PTA), agreed in 1977, set preferential tariffs.

• Limitations - the products covered had little importance.
• Long exclusion lists.
• The preferred items were under 1% of ASEAN trade.
• National interests were put over regional ones.
• Import-substitution protection remained.

• AIP - large-scale projects of US$300-400 million (urea plants in Malaysia and Indonesia, Philippine phosphate fertiliser, Thai soda ash, and Singapore's diesel engine); it failed due to disagreement over locations.
• AIC (1981) - divided production phases among members; hardly any auto parts were approved.
• AIJV (1983) - joint ventures with the private sector.
• Consensus decision-making slowed progress.

• The New International Economic Order (NIEO, 1973-1979) demanded commodity market reform and reform of the GATT, IMF, and World Bank.
• The 1979 second oil crisis caused balance of payments problems.

AFTA aimed to reduce tariffs on intra-ASEAN trade.

• Motivations - the late-1980s recession; FDI was diverted to China; ASEAN wanted to boost exports and investment.
• The main mechanism was the Common Effective Preferential Tariff scheme (CEPT).
• Limitations - weak institutions; a lack of specificity on excluded goods; and work still needed on non-tariff barriers and rules of origin.

• Exposed ASEAN's weaknesses: members criticised one another's responses, and the crisis questioned the principle of non-interference.
• Responses - a Common ASEAN Position on reforming the international financial architecture; use of ASEAN currencies in intra-ASEAN trade payments; regional surveillance (peer review by ministers); and Bilateral Swap Arrangements introduced in 1998.

The inclusion of Vietnam and Myanmar widened the market size and labour pool, and attracted FDI.