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Business Group Seeks to Boost US-ASEAN Trade - 2002-02-23

A U.S. business group is urging the Bush administration to strengthen economic ties with Southeast Asia. The U.S.-ASEAN Business Council says the United States needs to preserve Southeast Asia as its fifth largest export market, deal with emerging economic challenges from China, and continue the fight against terrorism.

The Association of Southeast Asian Nations, ASEAN, trails only Canada, the European Union, Mexico and Japan as a market for U.S. exports. In the year 2000, the United States exported $47 billion worth of goods to ASEAN countries - three times the figure for China.

U.S. direct investment in ASEAN countries topped $50 billion in the year 2000, nearly equal to the amount of investment in Japan and exceeding figures for Mexico and Brazil.

However, analysts are alarmed by a decline in foreign direct investment in comparison with China. Whereas 10 years ago, ASEAN received almost 67 percent of all investment flowing to Asia, by 2000 the picture was much different - with 75 percent going to China and Hong Kong.

At the same time, Southeast Asian countries are going ahead with plans to form a free trade area with China. Analysts say this would create a market of enormous size - with two-way trade totaling $1.2 trillion.

At their just-ended meeting in Thailand, ASEAN foreign ministers vowed to start negotiations with Beijing on the free trade area as early as March.

The U.S.-ASEAN business council says Southeast Asian countries, particularly those with Muslim populations, face the challenge of maintaining their support for counter-terrorism, while dealing with domestic political concerns. Council president Ernest Bowers says Washington needs to recognize these concerns and balance them with expanding economic and trade relations.

"After September 11, obviously the approach of the administration became focused on the war against terrorism and we feel in the business community it strengthens the case for engaging the 10 ASEAN countries. Certainly having strong economically healthy stable partners in a fight against terrorism is very important and from the business community's point of view we have a very important and dynamic relationship with these countries," Mr. Bowers says.

The U.S.-ASEAN Business Council says U.S. companies stand to benefit from ASEAN's expanded economic ties with China. However, the United States needs to "stay in the game" with its own free trade arrangement with ASEAN. Separate efforts are under way, such as a free trade talks with Singapore, and strengthening the bilateral agreement with Vietnam.

Mr. Bower says U.S. companies would welcome an emerging ASEAN - China free trade area, provided the arrangement is open and complies with World Trade Organization, WTO rules.

The state of Indonesia's economy has also been a concern of the U.S. business community. Twenty U.S. executives went to Jakarta recently, meeting with President Megawati, government officials and political parties. Mr. Bower said the delegation was told the Indonesian government is determined to put its economic house in order and continue reforms.

"This is a government that is serious. A government that is welcoming American investment. It's a government that believes in its relationship with the United States and is sensitive to the fact that the U.S. official priority right now is the fight against terrorism and that there is some link between that fight and the ability to be able to have investments coming from the states and going forward," he says.

Two other U.S. business delegations, representing some 20 U.S. companies, will be going to Singapore in March to discuss trade issues. In April, another larger group will go to the Philippines. Both countries have been a focus of Southeast Asian anti-terrorism efforts.

Analysts say the fight against terrorism could affect business confidence in Southeast Asia. However, Ken Richeson, executive director of the U.S.-ASEAN Business Council urges a broader view.

"Relationships and policies always have to be multi-faceted. There is a positive correlation between counter-terrorism activities and extending and deepening our relationships between the United States and Southeast Asia, and between expanding and facilitating trade and investment. All of those things work together in a very positive way. And the danger is you end up fixated on one and neglect the other two," Mr. Richeson says.

The business council report also urges the Bush administration to review all U.S. sanctions affecting ASEAN countries, recognizing security issues in the aftermath of the September 11 terrorist attacks. The United States maintains economic sanctions against Burma, one of the 10 ASEAN member countries.