Introduction

With regionalism gaining strength, Free Trade Agreements (FTAs) have emerged to be a reality all over the world. It is seen as an action by governments to liberalize or facilitate trade and investment on a bilateral basis through detailed negotiations. In Asia, the Association of Southeast Asian Nations (ASEAN) is fast emerging as an integration hub for FTAs by forging economic ties with China, Japan, Korea, India, Australia and New Zealand. What are the perceived benefits and challenges of these FTAs and how can they be building blocks for regional integration?

This paper attempts to answer these questions, starting with the need for FTAs, followed by a summary of the different types of ASEAN FTAs. It then summarizes some salient characteristics of ASEAN FTAs, followed by a discussion on perceived benefits and concerns. Subsequently, it elaborates on the implications of ASEAN FTAs on the process of economic integration in the region. Finally, it concludes by giving some policy recommendations.

Need for an ASEAN FTA

ASEAN was getting frustrated with the slow pace of the World Trade Organization (WTO) or Doha negotiations. It was also losing interest with the lacklustre momentum in the Asia Pacific Economic Cooperation (APEC). At the same time, as the FTA networks were growing in the United States and the European Union, ASEAN countries feared that the success of the Euro Area and the North American Free Trade Agreement (NAFTA) might dominate the global trading system. Hence, to increase their bargaining power in the global trading arena and to compensate the lack of multilateral trade liberalization, ASEAN thought of uniting together.

Secondly, the 1997–98 financial crisis taught an important lesson that ASEAN needs to strengthen economic cooperation with the neighbouring countries. The region must develop a “self-help” mechanism for better economic and financial management.