ASEAN Economic Community Integration

ASEAN Economic Community Integration

The United States has had a diplomatic relationship with ASEAN since 1977, cooperating in trade, economic and social development, people-to-people connections, institutional strengthening, national security, defense, science and technology and education.

Nearly $5.3 trillion in traded goods pass through the South China Sea annually, of which the U.S. share accounts for over $1 trillion. Trade with ASEAN countries supports over half a million U.S. workers and American businesses have invested more capital in ASEAN than in China. U.S. firms partner with ASEAN companies to explore and develop technologies and trade opportunities.

In 2015, the ASEAN Economic Community (AEC) came into effect, establishing a common market that dramatically reduced tariffs and non-tariff barriers across ASEAN member countries. This resulted in the freer movement of goods, services, investment, skilled labor and capital. In response, USAID is working alongside the Philippines to improve the country’s competitiveness in the global market; maximize opportunities offered by a larger, borderless ASEAN market; and address gaps in the country’s ASEAN AEC obligations. These measures support the U.S. government’s Partnership for Growth with Equity initiative, which advances the U.S. and Philippine governments’ shared goal of accelerating inclusive and sustained growth.

In 2017, Philippines chairs the ASEAN Summits and related meetings, coinciding with the 50th founding anniversary of ASEAN. This will also mark the 40th year of ASEAN-US dialogue.

FACILITATING TRADE AND INVESTMENT

From 2001-2010, growth of Philippine merchandise trade averaged 6 percent, while other ASEAN countries enjoyed double-digit growth. Since 2013, USAID’s $11 million Trade-Related Assistance for Development (TRADE) project has helped improve the Philippines’ standing in the international economy through higher levels of trade and foreign direct investment.

Through TRADE, USAID helped the Philippines pass landmark competition and customs modernization legislation that helps to prevent unfair trade practices and harmonizes customs procedures. USAID and the Philippine Government’s Inter-Agency Committee on the AEC, chaired by the Department of Trade and Industry, developed the AEC Game Plan to help government agencies maximize the opportunities presented by ASEAN integration. The publication includes toolkits and roadmaps to enhance the country’s competitiveness, in particular of small and medium enterprises; comply with ASEAN requirements and standards; and strengthen stakeholder collaboration. TRADE is currently helping to update the AEC Game Plan to include the new, broader 2025 time horizon of the AEC.

Using the AEC Game Plan as a guide, the Department of Trade and Industry developed the National Trade Repository, a web-based, one-stop-shop that updates traders on tariff and non-tariff measures for goods entering, exiting and transiting through the Philippines. The repository includes domestic regulations and procedures with which traders must comply. This reduces traders’ cost and time spent searching for trade-related information. It also better equips the Philippines to participate in other free trade agreements, which require countries to progressively reduce restrictions on trade and enhance transparency of import and export processes.

CONNECTING ASEAN TO ENHANCE KEY INDUSTRIES

Tourism
Almost 100 million international tourists visit ASEAN nations each year. The Philippines seeks to expand access to this growing market. USAID, through its nearly $19 million Advancing Philippines Competitiveness (COMPETE) project boosts the Philippines’ competitiveness in tourism, agribusiness and logistics. USAID helped the Department of Tourism create the ASEAN Tourism Strategic Plan for 2016-2025, which was launched at the ASEAN Tourism Forum 2016 in Manila. The plan is guiding the country as it improves infrastructure and eases travel; develops and promotes tourist destinations and products, like handicrafts, food items and other souvenirs; and establishes tourism corridors, which enable travelers to visit multiple destinations and entire regions. Between 2012 and 2016, USAID, through COMPETE, significantly increased financing for tourism road infrastructure from $15 million in 2010, to $444 million in 2015. This resulted in the construction of more than 2,000 miles of roads.

Logistics
The challenge of connecting ASEAN countries is linking 600 million people in a region that spans over 4.5 million cubic kilometers of land and water. The Philippines alone is comprised of more than 7,000 islands. The High-Level Task Force on ASEAN Connectivity's Master Plan is improving the physical, institutional and people-to-people connectivity within the region. An intra- and international ASEAN Roll-On, Roll-Off (RO-RO) Network, spearheaded by the Philippines and Indonesia is one of the important improvements. USAID and the Department of Transportation and Communication, Department of Trade and Industry, Mindanao Development Authority and the Philippine Chamber of Commerce and Industry are establishing ASEAN RO-RO and domestic RO-RO routes to open new markets for local farmers, businesses and traders in the Philippines. Launched in April 2017, USAID helped establish the first route that connects the cities of Davao and General Santos in Mindanao with Bitung, Sulawesi Island in Indonesia. Both domestic and International companies, including American agribusiness enterprises, forecast significant cost savings for their supply chain and logistics requirements.

Agribusiness
Through COMPETE, USAID helps farmers improve productivity and product quality, so that they can fulfill the scale and quality standards required by large exporting firms and international buyers. To help ensure that food entering other countries is safe, USAID trains farmers on food safety management, including the Good Agricultural Practices. This certification is recognized by international regulatory bodies, such as U.S. Food and Drug Administration.

Through USAID, close to 2,000 cacao farmers in Palawan scaled up production to supply cacao beans to Mars, Inc., an American confectionery manufacturer. Each farmer is expected to earn an additional $2,857 (Php143,805) per year once the first batch of harvests begin in 2017. Meanwhile, Mars is assured a low-cost, high-quality and consistent supply of cacao.

SHAPING THE ECONOMIC AGENDA

In preparation for the Philippines ASEAN Chairmanship in 2017, USAID, through TRADE, has been supporting the Department of Trade and Industry and the Inter-Agency Committee on the AEC shape the economic agenda and advance the development priorities of the Philippines for 2017 ASEAN events. The Philippines, with guidance from USAID, developed a number of proposals for ASEAN members: a trade facilitation index to assess member countries’ customs and clearance procedures; an e-commerce framework across ASEAN; a system for companies to self-certify their products’ origin, allowing for preferential tariffs under the ASEAN Free Trade Area; and a new AEC scorecard with a more robust monitoring mechanism.

In line with the AEC 2025 Blueprint’s objective to promote resilient and inclusive competition, innovation and connectivity, TRADE is supporting the Department of Trade and Industry to champion strengthened roles for micro-, small- and medium-sized enterprises (MSME) in the ASEAN regional economy. Through the development of an action agenda in three strategic measures, the department is increasing trade and investment; integrating MSMEs into the global value chains; and developing an innovation-led economy. These agendas will be formulated through a series of high-level, multi-stakeholder roundtable sessions preceding a large-scale ASEAN MSME Development Summit planned for July 2017.

Last updated: October 30, 2017

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