At the ASEAN Joint Foreign and Economic Ministers’ Meeting held in Kuala Lumpur on 25 October 2025, ASEAN diplomats and economic policymakers highlighted the difficulty of achieving policy synergy amid the increasingly close interlinkage between economic and security issues.^[1] This reflects how the current global economic landscape is increasingly characterized by geopolitical fragmentation and the growing overlap between trade, economic security, and national industrial strategy. Great power rivalry between the United States and China is no longer confined to military and diplomatic domains but has expanded into technology, supply chains, energy, and access to critical minerals.^[2] States are now actively using trade, investment, and technology policies as instruments of national strategy. In this context, international trade can no longer be understood as a neutral economic activity.^[3] Free trade agreements increasingly function as part of broader frameworks for economic resilience, supply chain security, and strategic positioning within the global system. This shift is evident in the growing prominence of economic security, energy transition, and technological self-reliance in international trade forums.^[4] Countries are seeking to reduce dependence on single sources of supply, diversify trade partners, and establish new strategic partnerships. Accordingly, modern trade agreements are not solely directed toward market efficiency, but also toward geopolitical stability and long-term economic interests. Trade cooperation has become part of the architecture of national economic strategy rather than merely an instrument of liberalization.

In this context, ASEAN occupies an increasingly important position. The region sits at the crossroads of global supply chains, possesses a growing manufacturing base, and controls a number of strategic resources, including minerals needed for the energy transition and digital transformation.^[5] Rising global demand for renewable energy components, battery technologies, electric vehicles, data centers, and digital infrastructure further enhances the region’s economic and strategic relevance. In addition, ASEAN’s relative regional stability and market integration make it an attractive long-term economic partner.^[6] These conditions provide ASEAN member states with greater potential bargaining power in international economic negotiations, provided that such potential is supported by consistent policy strategies. At the same time, countries outside the region, including Canada, are facing similar pressures to restructure their trade and investment strategies. Geopolitical uncertainty, supply chain concentration risks, and the need to secure access to strategic resources are driving diversification of economic partnerships. In recent years, Canada’s economic strategy has shown increased focus on the Indo-Pacific as a new source of growth and as part of its effort to reduce dependence on traditional markets.^[7] Thus, both ASEAN and Canada are in comparable positions: both are driven to expand economic partnerships, diversify markets, and build more geopolitically resilient trade relations.

Within this evolving landscape, the ASEAN-Canada Free Trade Agreement (ACAFTA) negotiations, which began in 2021, should be understood strategically. The agreement is not merely a market-opening instrument, but also part of both parties’ efforts to build a long-term economic partnership amid global economic restructuring. ACAFTA is expected to cover trade in goods and services, investment, and other strategic sectors.^[8] From Canada’s perspective, the agreement supports the expansion of economic partnerships in Southeast Asia, supply chain diversification, and access to emerging markets and strategic resources.^[9] From ASEAN’s perspective, it supports broader market access, the attraction of quality investment, and deeper integration into global value chains.^[10] Accordingly, ACAFTA concerns not only tariff reduction and trade facilitation, but also the direction and quality of long-term economic relations between the parties. However, past trade negotiations show that developing countries do not always negotiate from strong positions. Market access pressures, investment dependence, and geopolitical dynamics may lead to the acceptance of unbalanced commitments. ASEAN’s response to unilateral tariff measures by the United States, for example, illustrates how states may be pushed to negotiate defensively rather than leverage their strategic bargaining power.^[11] It is therefore important for ASEAN states to view ACAFTA not only as a liberalization opportunity, but also as a framework for strategic economic policy design. The key question is not merely how much trade will increase, but how the agreement will affect states’ capacity to pursue development strategies.

At present, several ASEAN countries are promoting a shift in development strategy from raw material extraction-based models toward strengthening domestic value added.^[12] This shift is implemented through downstream industrialization policies, domestic processing requirements, and the development of advanced manufacturing sectors. The objectives include strengthening national industrial structures, creating higher value-added employment, enhancing technological capacity, and reducing dependence on raw commodity exports. Restrictions or bans on raw mineral exports and the development of domestic processing facilities serve as key indicators of this structural transformation, aimed at repositioning countries from raw material suppliers to active participants in industrial value chains.^[13] This strategy is often linked to rising global demand for critical minerals associated with the energy transition and the green economy. Nevertheless, such narratives should be assessed critically, as extraction and refining activities carry significant environmental and social risks, including pollution, ecosystem damage, and conflicts with local communities. Moreover, technological development is dynamic and may alter future mineral demand patterns. In this regard, narratives surrounding a “critical minerals crisis” are often overstated to legitimize large-scale extractive expansion.^[14] Therefore, natural resource policies must be grounded in precautionary principles and the protection of public interests. To support economic transformation, states employ various industrial policy instruments, including domestic processing requirements and strategic downstream sector policies, to stimulate investment, strengthen domestic productive capacity, and increase value added.^[15] This approach reflects an industrialization strategy in which the state acts not merely as a market regulator, but as a long-term economic development coordinator.

On the other hand, modern trade agreements increasingly extend beyond tariffs and market access. Many new-generation agreements include provisions affecting domestic regulatory areas, including investment policy, standards of treatment for business actors, and limitations on certain policy instruments.^[16] This expanded scope has implications for states’ flexibility in designing and adjusting economic policies. Commitments that are drafted too broadly or rigidly may constrain governments’ ability to adapt policies in response to changing economic and technological conditions.^[17] Therefore, the design of treaty norms becomes critically important. In this regard, policy space is a key element in ensuring that economic openness does not undermine a state’s capacity to carry out its development mandate. Energy transition, technological change, and evolving global markets require adaptive policy responses. States therefore need sufficient flexibility to adjust industrial strategies, natural resource governance, and economic regulation in line with national priorities. A well-designed trade agreement should not lock in future policy choices but should provide a cooperation framework that respects domestic regulatory space. Accordingly, ACAFTA should be understood as part of strategic economic governance design, rather than merely an instrument for increasing trade volumes. Its success should be measured not only by flows of goods and investment, but also by its ability to preserve ASEAN states’ policy space in pursuing long-term development strategies. A balance between economic openness and regulatory sovereignty is a necessary condition for trade cooperation to align with inclusive and sustainable development objectives.

^[1]Association of Southeast Asian Nations, “Chairman’s Statement of the ASEAN Joint Foreign and Economic Ministers (AMM-AEM) Meeting,” (Kuala Lumpur: ASEAN, 25 October 2025), hlm. 1.

^[2]Stéphanie Balme, “The Silent Parallels of US-China Rivalry: A Clash of Power, Not Models,” The SAIS Review of International Affairs, (2025), hlm. 11.

^[3]Blayne Haggart, “Modern Free Trade Agreements Are Not About Free Trade,” Centre for International Governance Innovation, 11 April 2017, tersedia pada https://www.cigionline.org/articles/modern-free-trade-agreements-are-not-about-free-trade/, diakses pada tanggal 9 Januari 2026.

^[4]Jostein Hauge, Bruno Houtzager, dan Alessandro Julian Hormann, “The new economic nationalism: industrial policy and national security in the United States, China, and the European Union,” Geoforum Volume 166 (2025), hlm. 1.

^[5]Vlado Vivoda, Indra Overland, dan Roman Vakulchuk, “Navigating ASEAN’s critical materials future: Opportunities, risks and strategic imperatives,” Mineral Economics (2025), hlm. 1

^[6]ASEAN dan The World Bank, ASEAN Integration Monitoring Report, (Washington: The World Bank Printing, 2013), hlm. iv.

^[7]Government of Canada, “Diversifying trade for Canada,” 22 Mei 2025, tersedia pada https://international.canada.ca/en/global-affairs/campaigns/diversifying-trade, diakses pada 9 Januari 2025

^[8]Association of Southeast Asian Nations, “Joint Leaders’ Statement on ASEAN-Canada Strategic Partnership,” (Jakarta: ASEAN Secretariat, 5 September 2023), hlm. 1.

^[9]Danial Azhar, “Canada seeks pact with Southeast Asian countries to diversify trade   ,” Reuters, 10 Juli 2025, tersedia pada https://www.reuters.com/world/americas/canada-seeks-pact-with-southeast-asian-countries-diversify-trade-2025-07-10, diakses pada 31 Januari 2025

^[10]ASEAN Economic Community Strategic Plan 2026–2030 (diadopsi 26 Mei 2025 oleh KTT ASEAN ke-46), hlm. 3.

^[11] Ludiro Madu, “Fragmentasi ASEAN terhadap Kebijakan Tarif Trump?,” Kompasiana.com, 5 Agustus 2025, tersedia pada https://www.kompasiana.com/ludiro/688ce52eed6415339179a1c2/fragmentasi-asia-tenggara-terhadap-kebijakan-tarif-trump?, diakses pada tanggal 9 Januari 2026.

^[12]Michael Meyer, et al., “How ASEAN Can Move Up the Manufacturing Value Chain,” BCG, 15 Juni 2021, tersedia pada https://www.bcg.com/publications/2021/asean-manufacturing, diakses pada 31 Januari 2026

^[13]Andrea Andrenelli, et al., “Trade and domestic effects of export restrictions: Insights from case studies of cobalt, lithium and nickel,” OECD Trade Policy Papers No. 300 (2025), hlm. 6

^[14]Vlado Vivoda, Lachlan Nieboer, dan Rowan Bisshop, “Narrative warfare in critical minerals: Information manipulation and governance challenges,” The Extractive Industries and Society, Volume 25 (2026), 9 Januari 2026.

^[15]Andrea Andrenelli, et al., “Trade and domestic effects of export restrictions: Insights from case studies of cobalt, lithium and nickel,” OECD Trade Policy Papers No. 300 (2025), hlm. 6

^[16]Mariusz Boguszewski, “New generation free trade agreements as a driver of institutional change: A case of Vietnam,” Stosunki Międzynarodowe – International Relations (2022), hlm. 4.

^[17]Rosanna Jackson, “The purpose of policy space for developing and developed countries in a changing global economic system,” Research in Globalization 3 (2021), hlm. 2.