Investment Protection under the Proposed ASEAN-United States Free Trade Agreement

I. INTRODUCTION In October 2009, U.S. Senator Richard Lugar (R-IN) introduced legislation initiate free trade negotiations between the United States and the Association of Southeast Asian Nations (ASEAN). (1) This article examines the proposed ASEAN-U.S. free trade agreement, focusing on the central element of arbitration. Part II provides background on the ten-country and its progress towards improving the regional economy. Part III provides background on free trade agreements (FTAs) and the recent proliferation of these agreements entered into by Asian governments, including the agreement between ASEAN, Australia and New Zealand which came into effect in 2010. This agreement gives foreign investors recourse through arbitration. Part IV explains that the proposed ASEAN-United States free trade agreement will undoubtedly include this feature. Lastly, Part V describes substantive protections that will maximize the efficacy of the ASEAN-United States agreement. By building upon their previous efforts, the United States and can promote economic activity between them and across Southeast Asia. II. BACKGROUND ON ASEAN, AFTA, AND AIA Southeast Asia was political hotbed during the 1960s. Its governments agreed upon a fundamental need develop regional forum alleviate pressures within the region and promote economic growth between the (2) Thailand, Indonesia, Malaysia, the Philippines, and Singapore created by executing the Bangkok Declaration on August 8, 1967. The initial objectives were to alleviate intra-ASEAN tensions, reduce the regional influence of external actors, and promote the socioeconomic development of its member states further hedge against Communist insurgency. (3) eventually expanded include the five other Southeast Asian countries. Brunei joined in 1984, after receiving independence from the United Kingdom. (4) One decade later, four additional countries joined ASEAN: Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1999. (5) regularly convenes at summits, and its decision-making is based on consensus. The ASEAN way involving diplomacy as opposed confrontation is manifest in the strong cohesion that now exists between the member states. (6) Decades after its formation, transitioned into an institution fostering regional economic integration. (7) Beginning at its January 1992 meeting in Singapore, executed series of agreements, collectively known as the Free Trade Agreement (AFTA), which seek liberalize economic activity within the region. (8) The primary mechanism that AFTA employs is the reduction of tariffs on goods originating within ASEAN; (9) members remain free set their own tariffs for goods imported from outside ASEAN. Specifically, AFTA sets targets for the gradual reduction of these tariffs up five percent. (10) This approach seeks stimulate intra-ASEAN trade because, under the theory of comparative advantage, lowered tariffs will increase economic transactions amongst members, thereby improving the regional economy. (11) In 1997, Southeast Asia experienced severe economic crisis that originated in Thailand and spread Indonesia, crippling that country. (12) Investment poured out of the region. (13) Each affected member had chart its own path towards economic recovery because was unable coordinate response. (14) This shortcoming prompted two-pronged reaction by at its December 1998 meeting in Hanoi, Vietnam, in an effort alleviate the impact of the crisis and prevent reoccurrences. In its first response, accelerated the AFTA tariff reduction schedule, (15) although the later-added members were given additional time comply. (16) As result of this acceleration, intra-regional tariffs were reduced dramatically; now more than 99% of all goods are traded within 0-5% tariff rate between the first six members, with the four newest members not far behind in implementing tariff reduction. …