Introduction

This chapter attempts to identify problems and prospects in AFTA rather than address them at length. As such, we shall keep the discussion short, treating it like a research agenda on how AFTA would operate after the Uruguay Round as the General Agreement on Tariffs and Trade (GATT) is restructured into the World Trade Organization (WTO). Thus, the chapter focuses on the global trading system and AFTA.

The Global Environment

Having developing, open economies dependent on external sources for trade, investment, technology, and other factor flows, ASEAN is greatly affected by the state of the world economy. The global environment is witnessing at least five mega-trends which simultaneously affect these exchanges. The first relates to the political revolution which began in the 1980s. This ranges from the metamorphosis of command economies in Asia and Europe to new capitalist centres to more market orientation reflected in liberalization, deregulation, and privatization in other economies. Effectively, a more competitive economic order resulted with more players in the system.

The second is associated with the electronics revolution since the 1950s, which broke the constraints of time and space. Telecommunications and computers have converged and product miniaturization is another outcome. At the same time that the world has shrunk, greater economic interdependence and transmission of business cycles or volatility have resulted from the electronic network.

The third trend concerns the corporate revolution which saw the internationalization of value added or commodity chains (Ohmac 1990; Porter 1990; Kahler 1991; Dickc-n 1992; Howells atid Wood 1993). This has simultaneously meant an unprecedented supercompetitive era and global shake-out from which no industry or country can be immune to (Turner and Hodges 1992). As world trends point towards political independence and self-rule on one hand, there are more economic alliances on the other. Acquisitions and alliances mean added muscle without getting bigger, producing a product anywhere using resources from anywhere by a company located anywhere, to be sold anywhere.