VII - ASEAN Trade Policy Options: An Overview

Summary

Introduction

To any country, especially the one with a free enterprise economic system, foreign trade is a means towards economic ends in terms of growth, stability and social equity. At the same time, foreign trade can be an outcome of macro-economic situations. A country would want to trade at the best possible terms measured in both volume and value. This can be achieved by various means including macro-economic structural adjustment, balance of payments measures, especially foreign exchange rate adjustment, and direct trade policy interventions.

During the period up to 1980, it was quite clear that the structure of foreign trade of the ASEAN countries was determined mainly by the individual country economic structure. The resource-rich countries of Malaysia and Indonesia exported mainly natural resources and imported manufactured goods. To a certain extent, the Philippines and Thailand also relied on natural resource exports, including agro-based products. Singapore exported manufactured goods and also served as a transit for exports of primary goods for other ASEAN countries. Thus, ASEAN foreign trade policy up to the seventies was to promote exports of primary products at the best possible terms.

After 1980 several changes have taken place, which have affected the structure of foreign trade of the ASEAN countries. Firstly, the production structure became more diversified towards manufacturing activities, the output of which were increasingly meant for export. Also, it should be borne in mind that trading in manufactured goods is notably different from trading in primary goods. It involves many more rules and regulations which require trade policy measures. And secondly, since 1985 there has been a series of realignments of exchange rates of the major currencies, which have drastically affected the structure of foreign trade of countries in ASEAN.

At present and probably in the next several decades, the structure of foreign trade of ASEAN will be determined by both macro-economic and exchange rate adjustments, and trade policies and practices. Thus, in discussing trade policy options of ASEAN we need to bear in mind the macroeconomic and exchange rate factors.