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.