Australia and New Zealand enjoy one of the most open economic and trade relationships in the world. That relationship is based on a comprehensive agreement known as Closer Economic Relations (CER). The CER agreement came into force in 1983, committing the parties to the gradual elimination of tariff and non-tariff barriers to trade and the promotion of trans-Tasman trade of the two countries’ manufactured products. As the agreement does not provide for common external tariffs for the rest of the world, the CER is not a customs union. The Agreement allows the free movement not only of goods and services but also of residents of either country. Hence, the CER is considered as one of the most successful examples of economic integration in the world.
The CER has strengthened the economic linkages between Australia and New Zealand, thereby increasing trade and creating employment in both economies. As of 2006-07, CER trade had increased by over 600 per cent since the CER trade agreement came into force in 1983. Bilateral trade was valued at $15 billion in that year. While Australia is New Zealand’s most important trading partner, New Zealand is Australia’s fourth-largest market. Total two-way investment stands at around $35 billion and each country is the other’s major market for tourism. All this reflects the high level of economic integration that the CER has achieved over the last 25 years. The CER might, therefore, be a good model for ASEAN’s economic integration efforts. Moreover, the CER is of greater relevance to ASEAN than the EU. This is because the CER is not a customs union but essentially a free trade area, which ASEAN is also aspiring to become in the next seven years.
ASEAN is undergoing its own regional economic integration process. In 2003, ASEAN leaders agreed on an ambitious project of establishing an ASEAN Economic Community (AEC) by 2020. The AEC was envisioned as a single market and production base with free flow of goods, services, investments, capital and skilled labour. Later, the deadline was brought forward by five years to 2015, which is just 7 years from now. Accordingly, the ASEAN leaders adopted the AEC Blueprint at the November 2007 ASEAN Summit in Singapore. While the blueprint is a serious document, there are numerous challenges in implementing it.
While Australia and New Zealand have reaped the benefits of a wide-ranging single market, the Pacific island neighbors also benefit from the “integration externalities”. The CER had worked closely with ASEAN since late 1960s. A major milestone was achieved in 2002, when the AFTA-CER Closer Economic Partnership (CEP) was established. The AFTA-CER CEP aimed at promoting greater trade and investment flows between ASEAN and CER. This has now moved to negotiations on a FTA between the two groups, starting in 2005 and expected to be completed by 2008 with full implementation within next ten years.
Against this backdrop, ASEAN Study Centre (ASC) in the Institute of Southeast Asian Studies (ISEAS), Singapore, would like to undertake a study, with the following objectives:
- Examine Australia-New Zealand relations over the last 25 years.
- Draw some lessons for the ASEAN Economic Community
For this purpose, ASC is seeking to commission a paper that would discuss the following in detail:
For the last 25 years, Australia-New Zealand relations have been dominated by the importance of bilateral trade and cooperation through agreements such as the CER. The study would examine the bilateral trade and investment relations between Australia and New Zealand and the impact of the CER trade agreement on each member country (may include a real case study). It would examine the strategies and measures adopted by these countries to encourage intra-regional trade and investment.
The second part of the paper would draw some lessons for ASEAN. The CER trade agreement did not just reduce tariffs, quotas and other barriers; it was also about the harmonization of rules, business law, customs and government procurement. What can ASEAN learn from the CER experience? What challenges have emerged in the implementation of the CER trade agreement and how have they been taken care of? What are the important public policies required at both domestic and regional levels for a smooth transition to a single market and for maximizing gains in the process?
The author(s) would be required to submit a paper which would be subsequently published as a policy report by ISEAS.