ASEAN’s separate national tariff regimes leave member states facing major powers from different positions as tariffs return as bargaining tools. The Diplomat’s Sukegawa Seiya argues that the bloc should revive its customs union vision. Without it, he warns, a fragmented market risks remaining a “collection of assembly hubs” instead of becoming a higher-value-added economic region and a negotiating actor in its own right.
The limits of a flexible market
ASEAN’s economic integration rests on the ASEAN Free Trade Area, agreed in 1992, and the Common Effective Preferential Tariff scheme, implemented in 1993. The system lowered tariffs on goods originating within the region, but each member kept the freedom to set tariffs on imports from outside ASEAN. National governments, therefore, still divide authority over external trade policy.
A Common External Tariff would require ASEAN members to apply the same tariff schedule to imports from outside the bloc. Under a fully functioning customs union, goods entering the region could circulate freely once the common tariff had been paid. In principle, members would no longer need certificates of origin or customs-clearance procedures for preferential intra-ASEAN trade.
The customs-union proposal isn’t new. The Philippines, then ASEAN chair, raised it in August 1986 at the ASEAN Economic Ministers’ Meeting. The proposal called for gradual cuts to regional tariffs within a fixed time frame and a common tariff on outside imports. Members reached no consensus: Indonesia opposed the deadline, while Singapore objected that the plan could lead to higher external tariffs. At the time, intra-ASEAN trade accounted for about 20 percent of member states’ total trade, and reliance on outside markets made a common external tariff difficult to accept.
ASEAN chose a flexible free trade area instead. That arrangement helped attract foreign investment and imported intermediate inputs, while supporting production for global markets. It also expanded regional production networks. Yet many members remained concentrated in assembly operations, relying on external suppliers for key components, advanced materials, and research and development. The value added retained within ASEAN didn’t rise in proportion to the value of its exports.
Separate bargains, shared exposure
The article says tariffs, export controls, subsidies, and scrutiny of circumvention increasingly figure in economic security. When individual members accept different terms in separate negotiations with major powers, companies may find it harder to treat ASEAN as a single production base. If members keep bargaining separately on critical trade issues, regional supply chains and ASEAN centrality could weaken.
A customs union could cut border costs and let companies source parts and materials across ASEAN, then allocate production stages throughout the region. The proposed outcome is more regional sourcing, consolidated production, and investment in higher-value activities—not simply the movement of goods through national tariff systems. The article identifies jobs and the value retained in the region as people-level stakes: compatible industrial policy could promote skills development, technology adoption, and research and development, while helping create more high-quality jobs.
The ASEAN Geoeconomics Report 2025 recommended pursuing a Common External Tariff alongside a compatible regional industrial policy. A tariff schedule alone wouldn’t deliver an industrial upgrade. The report proposes companion measures: connecting members’ strengths and promoting technology adoption, skills, research and development, and intra-regional sourcing. The customs union is presented as a market foundation, not a complete solution.
The machinery behind the proposal
A customs union would require agreement on customs revenue, trade-remedy measures, and negotiating authority with third countries. ASEAN would also need to reconcile free trade agreements that members concluded separately. It could consolidate existing agreements into ASEAN-wide agreements, or harmonize preferential rates and rules of origin across trading partners and product categories. If national tariff differences remained, members would still need origin checks and collection of tariff differences at internal borders to prevent imports from being diverted through lower-tariff members.
As an initial step, the article proposes harmonizing low tariffs on critical inputs that the region cannot adequately source, including semiconductor manufacturing equipment and critical minerals. It also calls for integrating customs procedures, standards, conformity assessment, investment policy, skills development, and research and development support. The stated aim is to connect components and materials to more advanced production stages.
The proposal isn’t for a “tariff fortress” that raises high barriers against the rest of the world. It seeks a common external tariff and unified negotiating authority, which could give ASEAN greater collective bargaining power and help shield it from tariff coercion. Sukegawa’s stated destination is a region with deeper capabilities in technology, components, and research and development, retaining more value added at home rather than depending on cheap labor and assembly work.