A tiny but important golf course needed to win the game<\/p>\n
Hadi Soesastro, CSIS, Jakarta<\/p>\n
The ASEAN Free Trade Area (AFTA) at last became a reality on
\nJan. 1, 2002 -- on paper, anyway.<\/p>\n
This fact, however, is not to be taken lightly.<\/p>\n
A decade ago, ASEAN leaders decided to establish a free-trade
\narea, a decision that received many skeptical reactions.<\/p>\n
Some worried that AFTA might be just another pointless trade
\nagreement, just like the ASEAN PTA (Preferential Trading
\nAgreement), which was signed into existence in 1977.<\/p>\n
AFTA has its official seal of approval in a document less than
\n10 pages thick.<\/p>\n
This document has fallen short of clarifying how its final
\ngoals will be met, as it simply refers to CEPT (Common Effective
\nPreferential Tariffs) as its method of achieving its target.<\/p>\n
This is quite a contrast with NAFTA (the North American Free
\nTrade Area), established by the United States, Canada and Mexico
\nin 1993. The document marking that agreement is a full one
\nthousand pages thick.<\/p>\n
Hence the cynical comment that AFTA stands for \"Action First,
\nTalk After\" -- that is, getting things agreed to first with the
\nformulation coming later.<\/p>\n
As it happened, the establishment of AFTA, scheduled
\noriginally for 2008, was accelerated to 2003 and then to 2001.<\/p>\n
Perhaps this is the uniquely ASEAN way of getting things done.<\/p>\n
Whatever may be said about AFTA, since Jan. 1, 2001, the trade
\nzone -- including six previous members of ASEAN Brunei
\nDarussalam, the Philippines, Indonesia, Malaysia, Singapore, and
\nThailand -- has been almost completely liberalized.<\/p>\n
As originally agreed, Indonesia will postpone the lowering of
\nits tariffs for 66 products until 2003, including petrochemicals
\nand plastics. Malaysia will do likewise until 2005 with respect
\nto automotive products.<\/p>\n
Over 90 percent of ASEAN-6 tariff headings are already placed
\nin the Inclusion List (IL), with tariffs ranging between zero and
\nfive percent in 2002. Most of these tariff headings have been
\nmade zero percent; it has also been agreed that, in 2010, all
\ntariffs will be reduced to zero percent.<\/p>\n
Today, the average tariffs of the tariff headings in IL are
\nalready very low, 2.91 percent. Compare this with the average
\ntariffs of 12.76 percent when AFTA was first launched in 1993.<\/p>\n
However, there is the Temporary Exclusion List (TEL) for
\ntemporarily excluded products in the AFTA.<\/p>\n
Those products were gradually shifted into the IL beginning in
\n1996. There are products in the Sensitive List (SL), mostly
\nconsisting of agricultural products like rice and sugar.<\/p>\n
Those products must enter the IL by 2010. Products in the
\nGeneral Exception List (GEL), including dangerous goods like
\nammunition and environmentally hazardous materials, will remain
\nin the exception list.<\/p>\n
Thus, the import tariff is almost eliminated.<\/p>\n
The presence of non-tariff barriers still become a problem,
\nhowever. The AFTA includes the elimination of non-tariff
\nbarriers, but the details of this process have never been given.<\/p>\n
Perhaps the process is expected to run based on good will.<\/p>\n
But exporters usually complain when they are facing non-tariff
\nbarriers, especially suddenly imposed barriers.<\/p>\n
There is palpable fear that a decrease in tariffs will be
\nfollowed by the imposition of tariff barriers. It is also
\nnecessary to develop various dispute settlement mechanisms,
\nincluding anti-dumping regulations.<\/p>\n
The procedure to obtain permits for import with the AFTA
\npreferential tariff also need simplification.<\/p>\n
So far, only five percent of all inter-ASEAN trade has applied
\nto the preferential tariff rates, probably because it is a costly
\nand time-consuming procedure.<\/p>\n
Besides that, perhaps the AFTA tariff is not far below the
\ntariff for the most favored nation (MFN) status implemented by
\nall members of the World Trade Organization (WTO).<\/p>\n
The ASEAN countries have continuously lowered their MFN
\ntariffs. The acceleration of the AFTA process may widen the
\ntariff differential, and stimulate the use of the AFTA tariff.<\/p>\n
The AFTA is actually not aimed at promoting inter-ASEAN trade,
\nbut mainly intended to make the ASEAN economy more competitive,
\nand the ASEAN countries more attractive to global investment.<\/p>\n
ASEAN wants to become one of the world's production and export
\nplatforms.<\/p>\n
If inter-ASEAN trade barriers are eliminated, the ASEAN region
\nconsisting of countries with different comparative advantages
\nwill become a production zone highly attractive to international
\ninvestors.<\/p>\n
Various multinational companies have also come to recognize
\nthat idea and begun to rationalize their production in the ASEAN
\nregion both to make their products more competitive while
\nstimulating their production activities.<\/p>\n
To ensure optimum results, the AFTA needs to be expanded to
\nservices and investment in an integrated program. It is necessary
\nto bolster an AFTA-plus idea.<\/p>\n
The AFTA also constitutes the first step of ASEAN economies
\nto integrate themselves into the world economy.<\/p>\n
Integrated efforts will better guarantee the likelihood of
\nmaking a success than individual efforts. The implementation of
\nthe AFTA is an exercise in trade liberalization.<\/p>\n
Ideally, we should try the concept of new trade with our
\nneighbors before implementing it as practice in the global arena.<\/p>\n
Similarly, if we want to play golf and compete with
\nprofessionals like Tiger Woods, serious exercise is required.<\/p>\n
The Asia-Pacific Economic Cooperation (APEC) also needs an
\nexercise in trade liberalization through what is called concerted
\nunilateral liberalization.<\/p>\n
APEC functions as a driving range for each of its member
\nstates to improve their strokes while glancing at their sides to
\nexamine the technique applied by their rivals.<\/p>\n
At the moment, AFTA can be seen like a mini-golf course --
\nverdant and beautiful, but in need of some work before it can
\ncompete on a global scale.<\/p>",
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