RIETI-ERIA Session "Changing Global Situation and the Roles of ASEAN and Japan" (Summary)

Introduction

The world continues to face many challenges of significant reach and impact such as the COVID-19 pandemic, conflicts between major powers, and energy and climate issues. Within this context, ASEAN has the potential to have an increasingly critical role to play in achieving and maintaining economic stability and political security in and around the Indo-Pacific. Likewise, Japan also has an important role to play not only as a neighbor of ASEAN, but as a partner and stakeholder. Together, they have the capacity to change the global situation for the better if their directions and goals align.

In this session titled “Changing Global Situation and the Roles of ASEAN and Japan” during ASEAN-Japan Business Week 2023, experts from both sides will share their thoughts and engage in discussions on timely and pertinent topics, including RCEP as a regional trade integration platform. As Japan and ASEAN celebrate 50 years of friendship and cooperation, how will their relationship evolve in the next 50 years? How will they adapt to tense geopolitical circumstances involving both internal and external powers, and how will they tackle difficult issues like the energy transition, global value chains, etc.?

Opening Remarks

URATA Shujiro (Chairman, RIETI/ Professor Emeritus, Waseda University)

On behalf of RIETI and the Economic Research Institute for ASEAN and East Asia (ERIA), I am pleased to organize and host this session on “the Changing Global Situation and the Roles of ASEAN and Japan” on the occasion of the 50th Year of ASEAN-Japan Friendship and Cooperation.

The world appears to be overcoming the COVID-19 pandemic, but it continues to face major crises such as U.S.-China tensions, Russia’s aggression against Ukraine, and climate change. Meanwhile, the economic and political landscape has been changing rapidly, with China’s share in the world economy rising remarkably.

Japan benefits substantially from its relationship with ASEAN member countries, and many Japanese companies have invested in the region. In addition, ASEAN has been instrumental in the construction of various regional frameworks such as the Regional Comprehensive Economic Partnership (RCEP), which was enacted in January 2022.

As the world is faced with crises that have the possibility of destroying economic environments, I would like to know how we can avoid the aggravation of the situation and maintain growth momentum, and how we can cooperate to achieve these objectives.

Keynote Speech 1

Shing Kwok CHOI (Director and CEO, ISEAS–Yusof Ishak Institute)

Prime Minister KISHIDA Fumio highlighted that the foundation of the current ASEAN-Japan relationship is nothing less than trust and respect established through exchanges among people in all walks of life. As we reflect on and celebrate the past 50 years, we may look to the future with much hope as we are in a strong and sound position to elevate our relationship and transform the nature of our cooperation to suit future challenges.

The world we live in today is very different compared to when we first began in 1973. Southeast Asia is preoccupied with building back from the socioeconomic setbacks of the COVID-19 pandemic and coping with the military tensions and intense geopolitical competition. The prospect of a protracted Russia-Ukraine conflict, potential hostilities over the Taiwan Strait, and continued tensions sparked by North Korean missile tests formed an ominous backdrop that threatens to overshadow the peace and stability enjoyed in the region.

Within the region, new security alliances such as the Quadrilateral Security Dialogue (QSD) or the Quad and the Australia-United Kingdom-United States partnership or AUKUS have raised questions as to the sustainability and relevance of ASEAN centrality. Disputes in the South China Sea, the ongoing Myanmar crisis, and the lack of progress in the implementation of the Five-Point Consensus challenge ASEAN’s unity and effectiveness in regional affairs, while other non-traditional security challenges pose significant risks to the region’s economic growth and prosperity.

Japan’s support for ASEAN’s regional architecture has been crucial for our mutual success. Both sides have worked together consistently over the years to foster closer ties on political, economic, and social fronts. This fruitful partnership has contributed to a broader, more open, and more inclusive regional framework, and it is clear that Japan will continue to be a very important partner for ASEAN going forward.

ASEAN-Japan relations can aim to be one of the unchanging anchors that contributes to the future peace and prosperity of both sides. Besides standing together strongly to uphold shared norms and strengthen multilateral governance structures, we can also assist each other to contribute to the region within each country’s individual means. However, I expect the mainstay of the cooperation to remain in the economic and social realms where we can endeavor to further boost trade, investment, and people-to-people exchanges with each other.

I welcome the ASEAN-Japan Economic Co-Creation Vision that shows a future direction for economic co-creation, and suggest that both sides look at the ongoing energy transition as one key area of focus in which both sides have much to both offer and gain. Given Japan’s leading role in environmental, financial, and technological relations with ASEAN, as well as its position as chair of the G7 this year, it can take the lead and coordinate with other ASEAN dialogue partners to push forward energy transition in the region.

I strongly commend ASEAN-Japan Business Week as an important initiative to enhance the relationship between both sides, and believe it will contribute many fruitful ideas that can strengthen ASEAN-Japan relations for the next 50 years.

Keynote Speech 2

Kitti PRASIRTSUK (Professor, Faculty of Political Science, Thammasat University)

Japan’s foreign policy towards Southeast Asia is arguably the most successful foreign policy of Japan. We witnessed a shift from anti-Japanese sentiments in the 1970s to the perception that Japan is the most-trusted major power among ASEAN opinion leaders, according to a survey conducted by ISEAS–Yusof Ishak Institute. Japan won the hearts and minds of Southeast Asians through cultural exchange, official development assistance (ODA), foreign direct investment (FDI), peacekeeping operations (PKO), and soft power through cultural products and food.

What can Japan do next with ASEAN? First, I think Japan should be growing with ASEAN, which was the third-fastest growing economy in the world last year. Moreover, ASEAN is becoming a bigger market, and the middle class is estimated to be around 334 million people by 2030. This is an opportunity for both sides in terms of consumption.

Second, Japan and ASEAN can co-create in services and soft power in the cultural and content industries. For example, there has been a mutual penetration of both food cultures, for example, beef bowls localized to Thailand with Thai spices and Thai chicken rice in Japan. I think further co-creation can bring diversity to Japan’s pop culture through including Southeast Asian elements, such as through joint movies and series production or joint boy bands and girl groups. Importantly, I think soft power influence is shifting from the West to the East as well, given the popularity of East Asian pop culture in the global scale.

Third, Japan can partner with ASEAN more in non-traditional security. Amid U.S.-China rivalry and tensions, ASEAN countries avoid choosing sides. Here, Japan can be a third pole for ASEAN countries as it has a good record in PKO, disaster relief, and cooperation in non-traditional security, evident by the PKO activities in Cambodia and the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP). Japan also plays a constructive role in cybersecurity through the ASEAN-Japan Cybersecurity Capacity Building Centre (AJCCBC), representing a high level of trust for Japan among ASEAN countries.

Why should Japan and ASEAN work together in security? China is economically important for both Japan and ASEAN. China and Japan are neighbors and need to co-exist peacefully. Japan and ASEAN have converging interests in co-existing and engaging with China, and in reducing tensions between the U.S. and China. Although ASEAN countries have different security interests and perspectives, there are some common denominators. Japan can provide an alternative to Southeast Asia for its security needs in many areas, including non-traditional security, humanitarian assistance and disaster relief (HADR), cyber security, maritime security, PKO, AI-based security, space operations, defense industry development, and health security. Overall, Japan can consider two approaches in security cooperation, specifically more traditional security in Northeast Asia and more non-traditional security in Southeast Asia. This may be called “decoupling security.” Japan can be a different type of major power for ASEAN. In fact, Japan have been so for a few decades already.

In conclusion, in terms of socio-economic aspects, Japan can grow and co-create with ASEAN, and for security, it can cooperate and partner with ASEAN particularly in non-traditional security. That is how we can continue and add to our healthy relations for prosperity and peace in a changing world.

Panel Discussion 1: RCEP as a regional trade integration platform

KIMURA Fukunari (Consulting Fellow, RIETI/ Professor, Faculty of Economics, Keio University/ Chief Economist, ERIA)
Dionisius A. NARJOKO (Senior Economist, ERIA)
Shandre M. THANGAVELU (Professor, Jeffrey Cheah Institute on Southeast Asia, Sunway University/ Institute for International Trade, University of Adelaide)
SHIMIZU Kazushi (Professor, Faculty of Economics, Kyushu University)
URATA Shujiro (Chairman, RIETI/ Professor Emeritus, Waseda University)

KIMURA:
Regional supply chains or international production networks have been a major source of international competitiveness for ASEAN and East Asia in the past three decades, but with intensifying geopolitical tensions, some developed countries are inclined to be inward-looking and supply chains are becoming fragile. How can ASEAN and Japan enhance the resilience of supply chains and continuously utilize the globalization forces for the region? What is the role of regional economic integration such as RCEP? How can ASEAN and Japan cooperate?

Speech 1

NARJOKO:
RCEP is a platform for deeper regional integration in East Asia. It was motivated by the increased competition between countries in the global market and the issue of geopolitics in the region, but there already were established international production networks between countries. We know there is a noodle-bowl phenomenon for many of the bilateral free-trade agreements (FTAs), but ASEAN also would like to engage with broader East Asia integration and expand their coverage in the region.

RCEP is very consistent with the ideas put forward by ASEAN and its East Asian neighbors. It was built on the concept of ASEAN centrality, and its key feature is to promote international production networks or global value chains (GVCs) through liberal rules of origin (ROOs), self-certification for ROO, and opened services sector. At the same time, RCEP is a flexible and open-minded FTA, and is the first FTA to include all of China, Japan, and Korea, which significantly supports GVCs and promotes geopolitical stability.

There is a cumulative effect of liberal ROOs. For example, a production facility in one ASEAN member state needed to use two FTAs to produce or assemble one product before RCEP, but now it only needs one platform. As a result, RCEP will bring forward very aggressive services commitments.

However, there are a couple challenges. These include progress with the built-in agenda, smoothly or seamlessly connecting the agenda of ASEAN integration with the broader RCEP integration, and ensuring effective and efficient implementation.

One special characteristic of RCEP is that it is a “living agreement.” Under Chapter 18 of the agreement, it is open to input from the private sector and businesses. In other words, RCEP is very dynamic, nimble, and flexible, and it tries to closely follow the dynamics or changes in the business environment.

Speech 2

THANGAVELU:
Trade has been very beneficial for us, but at the same time there has been a very uneven impact across countries, within countries, and between countries. We need a rules-based trading area as the GVC is based on a rules-based trading arrangement, and RCEP provides this. It is not just a multilateral FTA, but it seems to be more forward-looking and a “living agreement” that will allow us to align many different dimensions and build more inclusive and sustainable growth for ASEAN and East Asia.

RCEP adopts best practices and reduce the risk of structural adjustments. By having a single ROOs, it allows the movement of goods, capital, and people with a single multilateral agreement. It also enables us to identify gaps at the industry and policy level for reform, and mobilize resources at the regional level. Furthermore, it allows us to manage structural transformation within and between countries, and address contemporary issues such as human capital, energy, climate change, and inclusive growth as a “living agreement.”

Within this architecture, there is a new form of institutional framework called the RCEP Secretariat that will not only coordinate, monitor, and evaluate, but also address some forward-looking industries and institutions. The RCEP Secretariat is very important in creating more forward-looking institutions and to coordinate them in terms of climate change, human capital, and evaluating risk. At the same time, it also allows us to think about forward-looking industries not only for more developed RCEP members, but also for less developed ASEAN members in terms of best practices, innovation, understanding global trends, and evaluating risk. We expect the RCEP Secretariat to address these key issues as a “living agreement.”

Speech 3

SHIMIZU:
First, economic integration including the ASEAN Economic Community (AEC) and RCEP has great significance in the current tough economies of East Asia and the world. These situations include increasing protectionism and the U.S.-China conflicts, the COVID-19 pandemic and its effects, Russia’s invasion of Ukraine and its many influences, and the military coup in Myanmar. In East Asia, ASEAN has been leading economic integration and improving AEC. ASEAN proposed RCEP in 2011, and it entered into force in 2022 as a framework of East Asian regional cooperation centering on ASEAN. It has great meaning for East Asian economies because it is the first mega-FTA in East Asia. It will promote trade, investment, and new rulemaking, and it will strengthen supply chains in the region.

Second, economic integration supports supply chains which are driving economic development, especially in East Asia. ASEAN policies have supported the production networks of corporations. For example, ASEAN policies including the Brand-to-Brand Complementation (BBC) since 1988, the ASEAN Free Trade Area (AFTA) since 1992, and AEC have supported the complementation of Toyota’s cars and car parts in ASEAN. Now, RCEP will further strengthen East Asian supply chains.

Third, ASEAN has been the most important player in implementing RCEP. Originally, ASEAN proposed RCEP and led the negotiations, so ASEAN’s centrality and initiative are inevitable in RCEP because East Asian economic integration is balanced with ASEAN at the center.

Finally, ASEAN and Japan must cooperate to maintain the ASEAN centrality in RCEP and advance RCEP, especially by deepening and widening it as it is vitally important the East Asian economy and by extension, the world economy.

Speech 4

URATA:
I agree with the points which were made by previous speakers about the importance of RCEP and the possible contributions that RCEP can make to promoting economic growth through expanding trade and investment, but I would like to mention a few challenges.

RCEP is a very important framework. One challenge will be enacting it and ensuring that RCEP members implement what they have committed to. Following that, monitoring and enforcing these commitments will be very important. I would like to see Japan and ASEAN cooperate to make sure that this happens. Another challenge will be enlarging or expanding RCEP. I would like to see mega-regional arrangements such as RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) enlarge their membership so that they may eventually be expanded to cover all the countries in the world.

Furthermore, upgrading the contents of RCEP will be challenging. We know there are several chapters which can be upgraded or improved. I would like to see that happen, and I would like to see Japan and ASEAN leading these discussions.

Discussion

KIMURA:
In addition to RCEP, we have other economic integration initiatives like CPTPP. How can we think of the relationship or positive possible synergy among multiple integration initiatives?

URATA:
In my view, CPTPP and RCEP are complements. There are many overlaps, but there are also differences such as in the level of market access, issue coverage, and level of commitment. Recognizing these differences, I think RCEP is more suitable for developing countries and CPTPP is more suitable for more developed countries. In that way, a country can first join RCEP, and then join CPTPP after achieving economic growth.

KIMURA:
How can we fully utilize the nature of ASEAN integration elements in the East Asian framework particularly for securing regional supply chains?

SHIMIZU:
ASEAN has long promoted economic integration and established AEC in 2015, which is very useful and business-friendly economic integration and is suitable for the corporate supply chains. ASEAN has also been leading economic integration in East Asia, and it has been the most important player in RCEP. AEC’s rules and systems are expanding to RCEP, so deepening and evolving AEC will be very important for deepening and evolving RCEP. AEC and RCEP will support supply chains and economic growth in East Asia, so ASEAN and Japan should cooperate to improve and advance both of them.

KIMURA:
ASEAN’s initiatives include many policy modes and elements beyond just simple tariff cuts. What is the importance of various policy modes in economic integration particularly from the experience of ASEAN economic development?

NARJOKO:
One area where ASEAN and its trading partners in East Asia have benefited a lot is trade facilitation. The ASEAN single windows are very helpful in facilitating and increasing trade especially by reducing costs at the border. The next area of reform is in investment and trade facilitation. Under RCEP, there will the implementation of self-certification where exporters will be able to utilize the zero tariffs of RCEP, for example. It will bypass a lot of red tape and be very promising for the future.

KIMURA:
The international division of labor is evolving. The manufacturing production networks are still very important, but now we have connections in services and also the so-called “third unbundling.” How can the integration initiatives in East Asia contribute to this new era?

THANGAVELU:
In the post-pandemic recovery, we observed the acceleration of technologies, leading to the emergence of new kinds of services. Therefore, in the new form of GVC, we will see more service linkages, and servicification and digitalization will strengthen the GVC network and production activities in East Asia, meaning that countries with technologies will accelerate faster while countries without technologies will stagnate.

The dynamism of East Asia and ASEAN is driven by diversity. ASEAN has consolidated these differences by setting a rules-based trading area that will challenge a lot of the decoupling effects of the GVC. Moreover, with the RCEP Secretariat, RCEP will have an institutional structure to discuss contemporary and new issues every year for deeper integration as a “living agreement.”

KIMURA:
Discussions on geopolitical tensions are certainly very important, but the atmosphere is gradually changing. We need a balance between economic security issues and purely economic issues, and we have to keep a rules-based trading regime in order to utilize GVCs effectively for economic development.

Panel Discussion 2: Changing global situation and the roles of ASEAN and Japan

OBA Mie (Professor, Faculty of Law, Kanagawa University)
Thitinan PONGSUDHIRAK (Professor, Faculty of Political Science, Chulalongkorn University/ Senior Fellow, Institute of Security and International Studies)
Sharon SEAH LI-LIAN (Senior Fellow, ISEAS–Yusof Ishak Institute)
Siew-Mun TANG (Director, Political and Security Directorate, ASEAN Secretariat)

OBA:
From my point of view, geopolitical challenges can be divided into three categories: external challenges, internal challenges, and long-term challenges. I would like to begin with the Shangri-La Dialogue which is held annually in Singapore and provides a forum for leaders, ministers, and experts from the region to gather and engage in broad dialogue on geopolitical issues. Since Prof. PONGSUDHIRAK was there, I would like to ask him to give his impression.

Speech 1

PONGSUDHIRAK:
The Shangri-La Dialogue just had its 20th iteration in 2023. They have gone through many topics and issues over the years, and now with the rising and intensifying tensions and confrontation between the U.S. and China, the U.S.-China relationship is front and center. Interestingly, the two biggest speakers–General AUSTIN, the U.S. Secretary of Defense; and General LI, the Chinese Minister of National Defence–spoke on different days to avoid them being in the same place on the same day.

General AUSTIN has been to the Shangri-La Dialogue twice before. The themes for him were Taiwan, China, and how the U.S. is preparing for any contingency of a change in the status quo of China’s various maneuvers. On the other hand, General LI echoed similar views from last year, specifically that China’s core interest is Taiwan, China has a right to be in the South China Sea, and its views on the U.S.-China relationship.

It was interesting to me that China was the only country of the big countries that talked about the region as the “Asia-Pacific,” not as the “Indo-Pacific.” For General AUSTIN, it was always the Indo-Pacific. I think the Indo-Pacific is generally viewed from a security-oriented frame, while the Asia-Pacific is considered more from the perspective of prosperity. That is how China sees it. It was also interesting to hear China referred to as the People’s Republic of China (PRC), especially by U.S. officials and scholars, because it has a certain and critical connotation to it. They did not talk much about Myanmar, but there were other concurrent sessions about cybersecurity, emerging issues, and ASEAN centrality.

Overall, the Shangri-La Dialogue is the biggest arena for security issues and geopolitics discussion in the region. I thought it was great, and it showed how important it is to have face-to-face, in-person meetings, especially with ministers and high-level officials.

Discussion

OBA:
Do you have any comments on the Shangri-La Dialogue? How do you think about the great power rivalry?

TANG:
We have always had to contend with major powers in the region, but our approaches have been a bit different. In the 1960s and 1970s, it was to keep them away. At the end of the Cold War, it was about engaging them. Now, I think we have to live with all of the major powers and make sure that they do not clash with each other. In terms of ASEAN-Japan cooperation, I believe focusing on economics and people-to-people relations in the next 50 years is too short-sighted. We need to have a common discussion on our political security relationship.

SEAH:
ASEAN does not like to choose. All the major powers have been telling ASEAN, “We are not making you choose. We are giving you a buffet of choices so that eventually you choose,” but the underlying narrative is “Please choose me.” I think we have to be realistic that it is not one big choice that ASEAN will make, but many small choices. ASEAN can also work with the middle powers like Japan, Korea, Australia, the UK, and India.

OBA:
How do you evaluate strategic linkages led by external powers developing around ASEAN such as AUKUS and the Quad?

PONGSUDHIRAK:
I think ASEAN centrality is challenged by the emergence and intensification of other cooperative vehicles, and that ASEAN is not seen as sufficient to organize the region for peace and security. AUKUS and the Quad are really aimed at China, meaning that the security environment in the region will be more intense and confrontational, which is definitely not desirable.

TANG:
I think the reality is that the Quad and AUKUS are here to stay. They are doing things that ASEAN was not meant to do. ASEAN is not a military alliance. It is about defense cooperation and security dialogue. In that sense, I see the rise of minilateralisms as a multilayered approach in regional security architecture. Having a multilayered approach gives us more options which solidifies and strengthens our position and prevents the rise of a hegemon. It also allows more engagement from external partners.

ODA:
How do you evaluate the efforts by AUKUS and the Quad to convince ASEAN countries of their positive presence?

SEAH:
While AUKUS deals with the transfer of nuclear technology, increasingly there is the sense in the region that security by any means is also security, so why oppose it? When the Quad started, it had a very strong defense security angle which caused a lot of concern in ASEAN. The four partners actually listened and began to shift to more practical cooperation which the region very much appreciates.

PONGSUDHIRAK:
AUKUS and the Quad are basically vehicles to deal with China. We have a whole ASEAN bureaucracy protecting, driving, and rationalizing ASEAN, but it is really challenged now by these new enterprises. If ASEAN leans toward the Quad and AUKUS, then it leans against China, so I think it is a bit hard-pressed. I think ASEAN works best when the great powers are at relative peace. When the great powers are in conflict, it is in disarray. I also believe we have to start thinking of ASEAN in a different way to be able to work without the original 10 members.

SEAH:
I think there is the possibility to change the perception. It is really a perception from China’s point of view that the Quad is trying to contain them. Certainly, that was foremost in the mission statements when the Quad started, but recently they have been putting aside some of these narratives to bring about cooperation. I would urge ASEAN to keep an open mind to this.

TANG:
ASEAN is fundamentally an association focused on regional cooperation. There is no unified foreign policy, security policy or alliance in that sense. To have us united on foreign policy and security policy is asking too much because that is not what we were set up for. If ASEAN cooperates with the Quad, is it anti-China? If ASEAN cooperates with China, is it anti-U.S.? If we think along those kinds of measurements, we have nobody to work with. In that sense, given the limitations, opportunities, and chances that we have, I think we have no choice but to work with everybody. But we need to go into these partnerships with our eyes wide open.

We are always pressed to make choices. The major powers understand and respect our positions, but they always want us to choose them. ASEAN’s message is that the future of the region must have an ASEAN voice. We are part and parcel of this region, and we have to be in the conversation. This is where the ASEAN Community’s Post-2025 Vision comes into play.

ODA:
What do ASEAN countries expect from cooperation with Japan regarding energy transition?

SEAH:
Southeast Asia faces the same climate challenges as Japan, but we have less capacity to cope with impacts, so climate security is going to become a very big issue in the future. At the same time, we are an engine of economic growth and have high energy demand. ASEAN needs to undertake adaptation, but it also needs to mitigate. How do we accomplish both simultaneously? This is one area where we can cooperate. In the Southeast Asia Climate Outlook Survey by my institute, we found that the region sees Japan as the top country that should play a more proactive role in sharing their climate expertise, practical ability, and technical knowhow.

I want to highlight that in the area of climate change mitigation and energy transition, we cannot afford to stay in a donor-recipient relationship. We have to take equal partnership to proactively tackle these problems. In addition, Japan should engage ASEAN as a collective whole. In that regard, it would be very beneficial for ASEAN to come up with a collective mitigation plan to make it easier for dialogue partners to cooperate with us.

PONGSUDHIRAK:
Southeast Asia is a little bit challenged and behind the curve on the energy transition. I think ASEAN would like Japan to engage with them as a region, but I think Japan would have to look at ASEAN more on an individual basis as there is a lot of disparity. I think Japan needs to become more autonomous and assertive on a wide range of issues.

TANG:
On the matter of climate change, we are all in the same boat. Any climate change externality in ASEAN will also impact Japan and vice versa. I think that is where we should pool our collective resources to face this existential threat.

OBA:
ASEAN-Japan relations have clearly improved compared to 50 years ago, and it is shifting from a donor-recipient relationship toward an equal partnership. In 1977, Prime Minister FUKUDA delivered a speech in Manila where he talked about equal partnership. Now is the time to ensure this partnership flourishes.