THE ASEAN FREE TRADE AREA AND THE HARMONISATION OF TRANSPORT REGULATIONS : WITH REFERENCE TO LAND TRANSPORT BETWEEN MALAYSIA AND SINGAPORE

Abstract

The rapidly changing international and domestic economic environment have motivated ASEAN to go beyond the pursuit of regional peacekeeping and political stability into greater economic cooperation. In the Fourth ASEAN Summit this year, it was agreed that an ASEAN Free Trade Area would be established over a fifteen year time frame. Economic theory states that economic integration may lead to trade creation or trade diversion. It is therefore useful to examine the likely impact of a free trade area on trade in the region. This academic exercise attempts to address the above issue by carrying out a partial equilibrium analysis on the potential effects of integration on intra-ASEAN manufactured trade. A trade model on the ASEAN five countries is constructed. Using the model, the effects of a 100 percent tariff reduction within a one time period is examined. The conclusion from this analysis is that the trade expansion effect is quite significant but the gain is not evenly distributed. At this juncture, it is also important to recognise that a successful regional trading arrangement must go well beyond the lowering of intra-regional tariff barriers. One neglected area which is critical to the facilitation of trade flows is cooperation in transport. Hence, an attempt has also been made in this study to identify some potential areas for regional transport cooperation. In particular, the focus is on the harmonisation of land transport regulations between Malaysia and Singapore. A comparison of the transport laws in the two countries reveals that there is scope for harmonisation. Due to the lack of time and resource, a comprehensive analysis of all transport areas is not possible.