The ASEAN Economic Community Under the ASEAN Charter, its External Economic Relations and Dispute Settlement Mechanisms

Abstract

Ten years after the outbreak of the Asian financial crisis in 1997/1998, 2008 experienced another financial turmoil. This time, those Asian countries that were seriously struck by the Asian financial crisis are opting for a regional approach. They are not turning to the International Monetary Fund (the IMF), and are trying to deal with this financial crisis by themselves. As most Asian countries sought assistance from the IMF during the Asian financial crisis in 1997–1998, the change in their attitude in this financial crisis is worthy of investigation. The Asian financial crisis highlighted the crucial role of regional integration, and thus offered the stimulus for economic integration in this region. Firstly, the Association of Southeast Asian Nations ( “ASEAN”) brought forward their programme of an ASEAN Free Trade Area (AFTA) from 2008 to 2002. Secondly, ASEAN 3 (ASEAN plus China, Japan and the Republic of Korea, hereinafter “Korea”) process was institu- tionalised in Malaysia in December 1997, with the aim of reacting against the financial crisis and ensuring their capacity to maintain financial stability. The experiences during the Asian financial crisis drove Asian countries to safeguard themselves against the next financial turmoil, and strengthened their determination for further economic integration.The coming into being of ASEAN 3 can be deemed as a response to the Asian financial crisis.

Up to now, there have been several significant events in relation to the regional economic integration in ASEAN and its East Asian Dialogue Partners. Firstly, the ASEAN Charter entered into effect on 15 December 2008. The ASEAN Charter envisages the establishment of three communities (or three pillars) under the framework of ASEAN: the ASEAN Economic Community (the AEC); the ASEAN Political-Security Community; and the ASEAN Socio-Cultural Community. The 2004 Protocol on Enhanced Dispute Settlement Mechanism is a vehicle to enhance the establishment of the ASEAN Economic Community. Externally, negotiations for free trade agreements based on the framework agreement between ASEAN and its East Asian Dialogue Partners have been fruitful. By 2008, ASEAN had signed agreements on trade in goods with China, Japan and Korea. In addition, agreements on trade in services have been signed between ASEAN and China and Korea. A dispute settlement mechanism modelling the 1994 ASEAN Protocol on Dispute Settlement Mechanism, arbitral tribunals in essence, is included in the free trade agreements between ASEAN and China, Japan, and Korea. From an institutional perspective, the ASEAN Charter, the ASEAN Protocol on Enhanced Dispute Settlement Mechanism and the dispute settlement mechanism provided in the free trade agreements between ASEAN and its East Asian dialogue partners provide a good foundation for a deeper integration in the ASEAN 3 process.

This paper aims to examine the progress of regional integration of ASEAN 3 with special focus on its legal infrastructure. With this aim, I will firstly examine the legal architecture of the AEC under the ASEAN Charter. I will then review the progress of economic integration in ASEAN 3, including initiatives within ASEAN and free trade agreements between ASEAN and its East Asian counterparts. I will cover both economic/trade integration and financial/monetary cooperation.3 Finally, I will analyze dispute settlement mechanisms provided within ASEAN and by those agreements signed by ASEAN and China, Japan and Korea. This paper ends with a short conclusion summarizing major arguments.

Keywords: ASEAN, AFTA, Economic and Trade Integration, Financial and Monetary Cooperation, Dispute Settlement Mechanism