By Blake Berger
ASEAN has not only emerged as the fulcrum for East and Southeast Asian regional architecture, but also as a key partner in the Obama administration’s strategic re-balance towards Asia. Currently, the organization is seeking to integrate its 10 member states into a more cohesive bloc. The development gap between ASEAN’s wealthier and poorer member states remains a crucial challenge facing the organization’s integration efforts. One factor contributing to this gap is the inequitable trade restrictions facing Southeast Asia’s less developed countries – Cambodia, Laos, and Vietnam.
Exports from these countries to the United States face high customs duties that dampen their economic growth and weaken the development of their domestic industries and workforces. Cambodia paid an average of 16.9 percent in customs duties for goods imported into the United States in 2011, Vietnam paid 9 percent, and Laos paid 7.7 percent. This means Cambodia, which exported $2.7 billion in goods to the United States that year, paid an inordinate $458.9 million in customs duties.
The high tariff rates the poorer ASEAN states face is far higher than those paid by their more developed neighbors. In 2011, Singapore paid just 0.3 percent in average customs duties, Malaysia paid 0.8 percent, and Thailand paid 1.8 percent. Inequitable trade with the region’s poorer countries not only impacts the U.S. trading relationship, but also further impedes ASEAN’s goal of helping them develop and integrating them into the regional economy.
Average U.S. tariffs on low-end manufactures like textiles and clothing apparel are significantly higher than those on energy, high-tech manufactures, luxury products, and heavy-industry goods. The U.S. tariff rate for clothing is 14.7 percent, for leather it is 13.2 percent, and for shoes it is 10 percent. In contrast, energy imports face a rate of just 0.1 percent, cars of 2.5 percent, and computers and semiconductors face no tariffs at all. Clothing apparel accounted for 97 percent of Cambodia’s total exports to the United States in 2011, and 56 and 51 percent of Laos and Vietnam’s, respectively.
In order to address the inequities of the trading system, the United States has enacted a series of Generalized System of Preferences (GSP) programs, which provides some tariff waivers on goods entering the U.S, helping mitigate the trade barriers for these poorer countries. There are currently six preference programs, but not one of them covers Asia or the Pacific. Senator Dianne Feinstein last July introduced the Asia-South Pacific Trade Preferences Act, which would address Cambodia, Laos, and 11 other Asia-Pacific states. It has yet to reach the Senate floor for a vote.
Addressing the inequities in the U.S. trade relationship with ASEAN’s less developed members would help enhance the relationship in two ways: 1) A GSP program would help the U.S. build a more comprehensive trade strategy and avoid weakening or dividing ASEAN. 2) Helping narrow the development gap within ASEAN would strengthen the organization and boost the grouping’s integration efforts.
Despite recent advances in the U.S. relationship with Southeast Asia, bringing equity to the customs duties faced by the region’s poorest economies is critical to a comprehensive trade strategy with ASEAN. Crafting a trade preferences act would go a long way to closing ASEAN’s development gap and boosting regional integration.
Mr. Blake Berger is a research intern with the CSIS Southeast Asia Program.