CANADA-ASEAN TRADE

GEOFF DONALD AND WAYNE FARMER

East Indies. Nanyang. Indochina. The Land below the Winds. Regardless of what it has been called, from the global city state of Singapore, to the 17,508 islands of Indonesia, to rapidly growing Vietnam, Southeast Asia is one of the most dynamic and fascinating regions in the world with a wide variation of geography, cultures, risks and opportunities. With a population of 670 million people and a combined gross domestic product (GDP) of $2.8 trillion, the countries of Southeast Asia created the Association of Southeast Asian Nations or ASEAN in 1967, an intergovernmental organization that promotes economic, political and security cooperation among its 10 members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

ASEAN’s greatest successes are the promotion of peace and regional economic integration amongst its 10 members. As a bloc, ASEAN is the fifth largest economy in the world and is supportive to the ideas of open, rules-based free trade, with multiple free trade agreements with major regional and international trading partners.

Demographically, while its overall population growth rate is slowing, the ASEAN region will continue to grow to almost 800 million people by 2050.

While 2020 was a difficult year everywhere, ASEAN is set to rebound at over 6% GDP growth in 2021 with countries such as Vietnam and the Philippines expected to perform even better.

This economic growth will raise living standards for the people of ASEAN. A recent World Economic Forum report shows that income levels in the ASEAN bloc will grow annually by 6% to 8%, with the number of high- and upper-middle income households nearly doubling from 30 million in 2019 to 57 million people by 2030. The ASEAN region will be a global economic driver in the years ahead because of increasing foreign investment, integration with global supply chains and its strategic geographic location.

More people having good jobs and higher incomes means more money in people’s pockets (that they will want to spend). This also means that ASEAN represents a key growth market for any country looking to increase its exports, including Canada.

As our sixth-largest trading partner – with two-way trade between them totalling $20.5 billion in 2019 – ASEAN remains a strategic trading partner and an important diversification partner for Canada.

Currently, Canada has free trade access with Vietnam, Malaysia, Singapore and Brunei through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, it has no free trade agreements with Indonesia, Thailand, Philippines, Myanmar, Cambodia or Laos. So, while Canada does have some trade access to the region, there is much room to deepen the economic partnership.

Now the good news: near the end of 2019, Canada and ASEAN concluded their exploratory discussions for a possible Canada-ASEAN Free Trade Agreement (FTA). Earlier this year, Brunei – as the 2021 ASEAN chair – announced that the launch of a Canada-ASEAN FTA is set as its major policy priority for the regional bloc in 2021. If free trade negotiations are to be formally launched, the ASEAN economic ministers meeting in September would be the most likely forum.

However, Canada is not the only country interested in a closer trade relationship with ASEAN. The European Union, the United Kingdom and the U.S. are all taking steps to upgrade their trade relationships. This means that Canada may soon find itself falling further behind in the region.

With Canada and ASEAN sharing commitments to an open, rules-based, free-trade system, an FTA between the two regions should be within reach, but Canada must pursue it now, or it will find itself at the back of an awfully long line of other suitors.

As Canada continues to look to expand its trade opportunities, the high-growth region of Southeast Asia is one that is not to be overlooked.

Geoff Donald is the Canada-ASEAN Business Council’s advocacy chair and managing director at Asia Engagement Consulting Group. Wayne Farmer is CABC president and managing partner at Islemount Capital Advisers.