Fed: Mahathir departs, ASEAN says yes to Aust free trade

AAP General News (Australia)
04-23-2004
Fed: Mahathir departs, ASEAN says yes to Aust free trade

By Shane Wright

CANBERRA, April 23 AAP - Prime Minister John Howard perhaps best summed up Australia's
attitude towards former Malaysian leader Mahathir Mohamad late last year.

Asked to respond to Dr Mahathir's threat to treat Australia as a terrorist state if
it acted as a regional security sheriff, Mr Howard dismissed one of the nation's harshest
critics.

"He's just retiring and we wish him a long and happy retirement," he said at the time.

Dr Mahathir stepped down a month later.

Now, less than six months on, the Association of South East Asian Nations (ASEAN) has
signalled its support to open free trade talks with both Australia and New Zealand.

Since 1995, Australia has been hopeful of coming to a trade agreement with ASEAN which
covers 10 nations including its largest neighbour, Indonesia.

But at every turn Dr Mahathir stood in the way, arguing he did not recognise Australia
as part of East Asia.

Just two years ago he said Australia could join ASEAN, as long as Australia became Asian.

But when he stepped down after 22 years in office, the biggest stumbling block to Australia
and New Zealand's efforts to more closely link with ASEAN was swept way.

Mr Howard and his NZ counterpart, Helen Clark, have been invited to a leaders meeting
in Laos in November where the ASEAN free trade deal will be on the table.

The change of tune from ASEAN is not purely because of Dr Mahathir's departure.

For some time, concerns have been growing within ASEAN that its relevance is on the
wane, largely because of the strong growth of China.

ASEAN plans to strike free trade deals with China and Japan in coming years.

Australia and NZ are both interested in trade agreements with China and Japan, although
the likelihood of a Japanese trade deal remains remote.

By linking in with ASEAN and China, and possibly Japan, Australia and NZ stand on the
threshold of an East Asian trading bloc that would have the economic weight to take on
both the United States and Europe.

The director of the Asia-Pacific School of Economics and Government, Andrew MacIntyre,
said the chances of a huge Asian trading bloc were remote.

Not only were there major economic obstacles to such an idea, but the United States
would not support the creation of an entity of which it may not be a member.

"There are all kind of economic obstacles, with Japan and China, and political problems
with the US," he said.

"The US wouldn't like to see East Asia come together into a powerful group, if the
US was not a member. There would be economic and political concerns in the US about it."

Prof MacIntyre said any economic benefits from an Australia-ASEAN were likely to be
small, but the greater benefit would be on the political front.

He said by linking with Australia and NZ, ASEAN would put some pressure on the slow-going
Doha round of world trade talks.

"Australia and New Zealand have about the same economic activity as the ASEAN nations
combined, so from that point it's a joining of economies," he said.

"ASEAN is recognising that it needs to get larger to remain relevant, especially China
and Japan, India and the US.

"But it also pushes along the world trade talks by showing that there are groups of
countries willing to discuss free trade."

Australia already has a free trade deal in place with Singapore, should have a deal
with Thailand operating from next year, and of course awaits confirmation of the agreement
with the US.

The Thai agreement perhaps gives the best insight into how negotiations for a trade
deal with ASEAN will progress.

In the Thai case, agricultural commodities and business qualifications were some of
the key sticking points.

Free trade between Australia and Thailand won't be completed until well into the mid-2020s
in some major agricultural products.

Australia runs an almost $7 billion trade deficit with ASEAN countries already on two-way
trade worth around $35 billion.

The total stock of financial investment between Australia and ASEAN has doubled in
recent years to more than $54 billion.

Foreign Minister Alexander Downer said the benefits to Australia by linking into ASEAN
were enormous.

"If we could create a free trade agreement between Australia and over 500 million people
in ASEAN ... it would be very good for jobs in Australia, it would be very good for two-way
trade," he told ABC Television.

Now it's just a matter of getting the formal approval from ASEAN leaders for the negotiation
process to begin.

And one of those leaders making the decision will not be Mahathir Mohamad.

AAP sw/pw/bwl

KEYWORD: ASEAN AUST (AAP BACKGROUNDER)

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