The Role of Southeast Asian Regional Integration in Promoting Global Business

Introduction

One would think that John Sweeney, as a life-long unionist and current president of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), would be opposed to the concept of globalization. In fact, he sees globalization as inevitable, although, "in its current form, globalization cannot be sustained. Democratic societies will not support it. Authoritarian leaders will fear to impose it”. (Sweeney among the Globalists, November 2000) His view is that globalization needs to be rethought and reshaped to manifest more values than the freedom of capital in order “to make the global system safe for decent societies” (ibid.).

Sweeney might be right on all counts, particularly as applied to Southeast Asia. Initially ambivalent to toward regional integration and with issues of trust, member nations of the Association of Southeast Asian Nations (ASEAN) have been careful in their implementation (Munakata, 2002, p.1). This paper will offer an analysis of the role of regional integration of Southeast Asia in the promotion of global business by examining the advantages and disadvantages of regional integration, comparing the economic development stages of countries within the region, and examining the ramifications of the region’s economic development for global business.

Advantages and Disadvantages of Regional Integration

Ideally, regional integration should increase efficiencies through competition and lower and reduce variation of prices across the region. Reality, however, often falls short of this ideal. Even in Europe where there has been a sustained effort and high impetus for regional integration, neither of which are evident in ASEAN, it took the adoption of a common currency for the costs of automobiles to begin to normalize from county to country. (Hill, 2005, p.268)Some of the other benefits of the preferential trading agreements that are negotiated within regional blocs like ASEAN are the liberalization of services (including financial), investment, protection of intellectual property rights, better labour and environmental standards, and dispute resolution.(Carstens, 2005)One of the negative aspects of regional integration is the loss of low-skilled, low paying jobs in some member countries to other member countries where labour and other costs are less expensive. It can be argued, however, that this is a short term problem and that the benefits of lower prices for the goods once produced domestically and the increased opportunities to sell raw materials, equipment, and services to the countries now manufacturing those goods realize a net benefit that offsets the loss of those jobs. (Hill, 2005, pp.272-273). ASEAN’s member countries’ ability to realize such benefits, however, has been very limited. As of 2005, only 5% of intra-ASEAN trade was attributed to goods whose tariffs had been reduced through ASEAN preferential trade arrangements (p.290)Another possible effect of regional integration that worries observers is that regional trading blocs will form “economic fortresses” that will lock out producers from outside the blocs with high tariff barriers. This has a potential to result in a decline in trade between blocs that would counter the gains from free trade within those blocs. (Hall, 2005, p.269)Economic Development Stages of Member CountriesTable 1 compares the gross domestic products, per capita GDP, GDP growth, and principal industries of the ASEAN member countries. It is interesting to note that countries with the lowest per capita GDP have economies that are engaged primarily in heavily manual forms of farming and fishing and low-end manufacturing. In contrast, the countries with the highest per capita GDP are engaged in high-tech manufacturing and oil refining.

It is noteworthy that the economic health of the member countries has a strong correlation to the health of their citizens. Countries with the lowest per capita GDP have the shortest life expectancy and highest infant mortality rates and the countries with the highest per capita GDP have the longest and lowest. (World Almanac & Book of Facts, 2006).

The Southeast Asian region is as politically diverse as it is religiously. The region has two Communist governments, three constitutional monarchies, an Independent sultanate, and Military dictatorship and three Democratic Republics. All the world religions are represented in large numbers, although principally Buddhist and Muslim (ibid.). While there are strengths in diversity, these differences probably account for ASEAN’s inability to realize the full benefit of its trade partnerships.

Ramifications for Global Business

Having had difficulty in realizing benefits from mutual trade agreements, it is not