AFTA needs to exist with other groups

AFTA needs to exist with other groups

By Faisal Harahap

JAKARTA (JP): ASEAN ministers and senior officials have been
working hard in finding ways and means to keep the ASEAN Free
Trade Area (AFTA) relevant to their group of nations. They have
been successful in at least designing an AFTA scheme workable
within the world trade accord (GATT) and the Asia Pacific
Economic Cooperation (APEC) timetable.

While their efforts to liberalize trade and investment among
themselves need time to become fruitful, there exist, elsewhere
in the globe, inward-looking regional groupings and non-tariff
barriers in the form of labor rights and environmental and
dumping issues enforced by certain developed countries.

It is interesting to note that in a situation where trade
liberalization is being enhanced through world trade accords and
globalization, people are busy in establishing regional
cooperation. Regional cooperation can easily slip to become
economic integration and one may wonder how a group of integrated
economies would not be indiscriminative in nature.

To complete the scenario, AFTA and the Malaysia-initiated East
Asia Economic Caucus (EAEC) have been submerged into the bigger
regional grouping, APEC.

There is nothing wrong in forming regional groupings, such as
AFTA and APEC, or a Europe-Asia-Pacific Cooperation, if a group
of countries wish to do so, as long as it promotes the welfare of
the people of those countries and does not go against the GATT
rules.

It has been less than a year since the Common Effective
Preferential Tariff (CEPT) of AFTA was made operational. A period
of time too short for the expected results to materialize for
ASEAN countries to have to take into account the wishes of other
countries on how to rearrange their economic policies together
with their trade and investment liberalization schemes.

At this stage, ASEAN ministers and senior officials cannot
think of AFTA without having APEC in their minds. Issuing
statements and expressing opinions on AFTA are sure to have
implications on APEC. ASEAN countries at the moment are facing
three arenas: GATT, APEC and AFTA, but the need to look into the
problem of maintaining the existence of AFTA in the framework of
APEC seems more pressing.

Cynics may keep saying that the most spectacular achievement
of ASEAN countries is their success in hiding differences among
themselves, but the ASEAN ministers and senior officials have
once again proven their capabilities and willingness to solve
problems when confronted with them.

Aside from the economic factor, AFTA has social and emotional
values to the ASEAN countries and it would be unthinkable that
these countries could abandon AFTA for the sake of anything.

The fact is that ASEAN countries are in different stages of
their economic growth and a trade liberalizing scheme, though
painful to the slow member countries, should be worked out to an
agreeable extent that would not disrupt the economies of these
slower member countries.

If AFTA and APEC are to be simultaneously effective in
enhancing their economies, ASEAN countries should shape,
institutionalize and program these regional groupings in a way
that enables the two to co-exist in harmony and not in
contradiction to the GATT rules. These countries must find room
to maneuver within the world trade accord in making AFTA and APEC
of some use to their countries.

A workable formula would be to design AFTA and APEC schemes
superseding the GATT guidelines and to have the AFTA scheme a bit
more progressive than that of APEC.

The Marrakesh agreement allows member countries four years to
adjust their trade regulations to GATT principles. If the
duration proved to be insufficient, developed and developing
countries would be given another four and six years,
respectively, to finish the job. Developing countries are allowed
to impose a maximum import tariff of 40 percent. Indonesian Trade
Ministry officials have confirmed that this country's import
duties of more than 40 percent cover only 505 out of 8,000 items
and these happen to be commodities that are very sensitive to
world market price fluctuations.

APEC drafted a tariff reduction timetable in their meeting in
Tokyo last July. They recommended 10, 15 and 20 year time
schedules for the developed, newly industrialized and developing
member countries, respectively, to reduce their tariff barriers
to a maximum of 5 percent. The timetable would have to be
discussed in a ministerial meeting in November this year.
Deliberations of the APEC summit later in the same month, among
other matters, would surely focus on this subject.

Members of the AFTA Council agreed in their meeting in Chiang
Mai, late September, to progressively change AFTA's
liberalization scheme by shortening their import tariff reduction
timetable from 15 years to 10 and a phasing out of their list of
excluded items in five years, thus incorporating the scheme
suitably within the GATT and APEC arrangement.

In facing the Jan. 1, 1995, deadline, about one-fifth of the
123 signatories of the Marrakesh agreement were reported to have
ratified the trade accord. The United States and the European
Union are not without difficulties in the ratification of the
accord, and discussions have been going on between the United
States, the European Union, Canada and Japan to pledge their
commitment not to miss the approaching deadline. None of the
ASEAN countries have ratified the accord and they might encounter
similar internal problems in the ratification process.

But apart from the ratification problems of the world trade
accord, ASEAN leaders seemed to be more than ready to sit in on
the APEC summit this coming November because they have nothing to
worry about on AFTA.

The writer is a civil servant based in Jakarta.