Page 14 - ASEAN-EU Dialogue 2018: Regional and Inter-Regional Economic Cooperation: Identifying Priorities for ASEAN and the EU

Chapter Three
Trade Liberalisation: Comparing the ASEAN and EU Approaches
Rahul Mishra

Introduction
One of the major positive outcomes of the globalisation has been its role as an enabling force
in fostering greater integration of economies across the world. This is particularly true of
leading global and regional economies which are more integrated with one another than ever
before. Historically, trade and market openness has gone hand-in-hand with better economic
performance in most of the countries- at all levels: Creating new opportunities for workers,
consumers and firms around the globe and in helping lift millions out of poverty. It is widely
argued that relatively open economies grow faster than those which are relatively more inward
looking. It is also common knowledge that salaries and working conditions are generally better
in companies that trade than in those that do not (Organisation for Economic Co-operation and
Development, 2019).

Since the onset of globalisation and later with the growth of regionalism, trade liberalisation
and free trade helped economies grow faster and foster greater synchronisation within their
different sectors. In that context, several favourable developments took place during the 1990s.
In 1995, World Trade Organization (WTO) was formed pushing the General Agreement on
Tariffs and Trade (GATT) aside. Trade liberalisation and market-oriented reforms were at their
peak during the late 1990s. One of the major beneficiaries of open market system was China.
There have been remarkable achievements in China’s trade liberalisation process, especially
since 1992. Those changes in China’s foreign trade system created a favourable environment
for trade reform started in early 1990s in the direction of significant liberalisation, which was
consistent with international conventions (Li, 1996). Rise of globalisation coincided with
China’s own open - door policy and economic reforms, which benefitted it immensely. Along
with China, other developing economies such as India, and Brazil also benefitted from trade
liberalisation and the globalisation wave, leading to their opening up to the world.

Concept of Trade Liberalisation
A World Bank publication by Demetrios Papageorgiou, Armeane M. Choksi, and Michael
Michaely (1990) defines trade liberalisation as:

The benchmark (of trade liberalisation) is the idea of neutrality. A completely neutral
trade regime is one that provides equal incentives to domestic sales and to exports. Thus,
in principle, a trade regime that includes government intervention but also manages to
provide equal incentives to exports and domestic sales is a neutral one, as is a
completely free trade regime with no government intervention. A program of reform
that moves a country's trade system closer to this paradigm is regarded as a
liberalization; policies that move it further away are regarded as a reversal of
liberalization (Papageorgiou et al., 1990:4).

The view that a liberal trade regime promotes economic growth and efficiency has won wide
acceptance in recent years as many developing countries- for a variety of reasons, and in a
variety of different circumstances- have successfully moved from highly restrictive trade
regimes toward policies that cause fewer economic distortions (Papageorgiou et al., 1990). S.M.
Shafaeddin, in a discussion paper for United Nations Conference of Trade and Development
(UNCTAD), talks about different episodes of trade liberalisation. He divides the countries that
undergo reform process, into three groups. The first group, Shafaeddin argues, is the one which

8