ASEAN Development in the Cargo Airline Industry

This article discusses the impact of ASEAN's free trade policies on the cargo airline industry, including the increase in air cargo volume and growth rates of intra-ASEAN passenger and cargo by air. It also explores the challenges faced in becoming a trading partner, such as the lack of a common currency and parliament, and how these issues could be addressed. The article concludes by highlighting the benefits of a common currency and parliament for the region.

Running head: ASEAN DEVELOPMENT IN THE CARGO AIRLINE INDUSTRY
ASEAN development in the cargo airline industry
Name of Student:
Name of University:
Author Note:

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ASEAN DEVELOPMENT IN THE CARGO AIRLINE INDUSTRY
Response to Question 1:
AESEAN Trade in Goods Agreement (ATIGA) had the objective to achieve the free
movement of goods in the area which resulted into the decrease in trade barriers and the increase
in the depth of economic linkages among the Member States, cutting down business costs,
increase in trade and a larger market and economies of scale for businesses (Chia 2014). The
tariff rates for more than 96 percent of traded products among the six ASEAN countries are
technically zero, which has successfully enabled the free movement of goods in these countries.
Quite satisfactorily, all of the ASEAN countries have implemented the objectives successfully
and there is no lag on the plan at present. The facility of open trade has had an impact on the
cargo airline industry. The multilateral agreements of the opening of freight services between the
ASEAN countries have facilitated in increasing the air cargo volume by 50 percent. In addition,
the volume of cargo transferred amongst the countries have also increased to over 40,000 tons.
Response to Question 2:
In the regional field, almost 25 percent of the goods of the region are exported to the
other ASEAN partners. This is established and have been made possible because of the
implementation of the zero tariff rate policy by the AESEAN countries through policies such as
AESEAN Economic Community. On the global front, many of the global companies have
established their headquarters in the ASEAN countries. This has enabled them to provide service
within the region by producing the goods in the region, saving up a lot of tariff. There has been a
shift of composition of traded goods from bulk cargo, which is transported by rail or sea, to
lighter components that are transported by air. This has increased the growth rates of intra-

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ASEAN DEVELOPMENT IN THE CARGO AIRLINE INDUSTRY
ASEAN passenger and cargo by air. This is portrayed in the rise in the yearly capacity of air for
intra-ASEAN international arrivals that has grown by more than 50 percent in the past ten years.
Response to Question 3:
A trading partner is defined as an organization that is responsible for conducting e-
business with other organizations. The steps of becoming a trading partner include exchanging
the business documents and transactions, providing security of business and assuring contracts
for the partner (Acharya 2014). ASEAN has the capability of becoming a trading partner for the
world because of the great demands of the customers. The western countries have had an
influence on the south eastern countries, which makes it a market form the western countries.
This opportunity can be utilized well by the ASEAN countries to be a significant trading partner
with the world. The cargo airlines industry can also be of use in order to help the ASEAN
countries in becoming trading partners. The free trade policy amongst the ASEAN countries
have enabled the free flow of goods in between them and the cargo airlines industry play a huge
role in facilitating this approach. The freedom is not only in trading but also in the aviation
industry.
Response to Question 4:
The primary difference between ASEAN and EU is that ASEAN is an inter-governmental
organization. In contrast to this, EU is a supranational organization where the member states
have an agreement in certain areas such as trade, to satisfy their sovereignties. Secondly, the EU
or the European Union has introduced a common currency called the euro (Wong 2015).
Whereas, the ASEAN countries do not have a common currency and do not plan for one either.

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ASEAN DEVELOPMENT IN THE CARGO AIRLINE INDUSTRY
Thirdly, the EU has its own parliament in contrast to ASEAN. All of the differences are the
strengths of EU and it is evident that in order to succeed greatly, an organization needs to
facilitate and deal with the issues in a unified manner. They should agree on common grounds in
order to achieve their unified purpose.
Response ton Question 5:
One of the largest challenges that the ASEAN countries face while trading is the factor of
the lack of a common currency. The exports and imports within the region suffer due to the
presence of the different currencies. Trading becomes a complicated affair with the exchange of
currency for every transaction. The tourism industry also suffers die to this. The tourists cannot
travel throughout the ASEAN region with a single currency unlike in the European Union states.
Hence, currency plays a major role as a blockage of trade in ASEAN. The lack of acceptance of
the policy of single aviation market by some of the important members of the ASEAN and an
agenda that was incomplete, which did not include more ambitious relaxations to the access of
market and ownership and rules of control.
Response to Question 6:
A common currency in the ASEAN region will have multiple benefits. Trading will
become easier along with tourism. This is because the traders and tourists would not have to
worry about the different currencies and the exchange rates. Having a common currency will
also increase the inflow of goods in intra-regional trade.
Response to Question 7:
The lack of a common parliament to deal with the common issues in an organized
manner affects the ASEAN partners greatly and they should focus on fixing the issue. The lack

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ASEAN DEVELOPMENT IN THE CARGO AIRLINE INDUSTRY
of a common parliament cannot facilitate the fact of dealing with the common issues together but
the issues become individual issues of the different governments. However, for the cargo
industry, the ASEAN partners should focus on the acceptance of the policies and concept of free
trade by air or a single market of aviation.
Response to Question 8:
There is a major challenge in the shipping sector that is hampering the growth of ASEAN
into becoming a single market. The domestic economic policies in many markets demand high
levels of local content. These policies are the reasons why companies are required to construct a
part of their assets locally (Tongzon and Lee 2016). They are also required to employ local crew
and align with local partners in order to enable trade within that country. These policies not only
create additional costs for the industry and local economies but also hamper the efficiency of the
regional maritime industry. In the area of transportation of cargo by air, the idea of a single
aviation market is unaccepted by some of the key members of the state. The agenda that is
framed for the same is also incomplete and does not include more ambitious relaxations to
market access and ownership and rules of control.

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ASEAN DEVELOPMENT IN THE CARGO AIRLINE INDUSTRY
References:
Acharya, A., 2014. Constructing a security community in Southeast Asia: ASEAN and the
problem of regional order. Routledge.
Chia, S.Y., 2014. 10. The ASEAN Economic Community: progress, challenges, and prospects. A
World Trade Organization for the 21st Century, p.269.
Fu, X., Oum, T.H., Chen, R. and Lei, Z., 2015. Dominant carrier performance and international
liberalization–The case of Northeast Asia. Transport Policy, 43, pp.61-75.
Tongzon, J.L. and Lee, S.Y., 2016. Achieving an ASEAN single shipping market: shipping and
logistics firms’ perspective. Maritime Policy & Management, 43(4), pp.407-419.
Wong, R., 2015. Creeping supranationalism: The EU and ASEAN experiences. In Drivers of
Integration and Regionalism in Europe and Asia (pp. 267-283). Routledge.