ASEAN enters landmark free trade goal

ASEAN enters landmark free trade goal

P. Parameswaran, Manila, Agence France-Presse

Southeast Asia will enter the free trade era on Tuesday when six of 10 nations in the region eliminate duties on almost all products they had pledged under a tariff liberalization scheme a decade ago.

Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand are scheduled to bring down tariffs on a wide range of manufactured and agricultural products to between zero and five percent on Jan. 1, 2002 under the ASEAN Free Trade Area (AFTA) plan.

The six countries, the first members of the Association of Southeast Asian Nations (ASEAN), account for more than 96 percent of trade in the region.

"Jan. 1, 2002 is very significant because effectively, most of Southeast Asia will be a free trade area by then," ASEAN spokesman M.C. Abad told AFP.

The four other ASEAN members, newcomers Vietnam, Laos, Myanmar and Cambodia, are scheduled to reduce tariffs to no more than five percent from 2006.

With the dismantling of tariff rates under AFTA, Southeast Asia would enhance its competitive advantage as an international production base and serve as a catalyst for greater efficiency in production, Abad said.

"At the same time, the free trade plan would give Southeast Asian consumers wider choice for better quality consumer products at competitive rates," he said.

The current average tariff on goods traded among ASEAN members is estimated at about 3.5 percent -- down from 12.76 percent when AFTA took off in 1993.

The ASEAN free trade pact gives duty free privileges to products traded among member countries and which have at least 40 percent local content.

AFTA was adopted by the six original members in 1992 and implemented a year later to bring intra-regional tariffs to zero to five percent.

The original deadline to achieve the plan was 2008.

However, three years after AFTA's launching, ASEAN decided to speed up its implementation by five years to 2003.

It was advanced by another year to 2002 as a result of the regional financial and economic crisis of 1997-1998 and greater pressure of competition from other countries.

"That decision clearly demonstrated ASEAN's commitment to maintain Southeast Asia's economic competitiveness through economic integration," Abad said.

Under the free trade pact, ASEAN members have the option to temporarily exclude some products from AFTA to give breathing space for key domestic industries to develop before facing full- blown competition.

The two biggest products in intra-ASEAN trade at present are electrical machinery and equipment, and machinery and mechanical appliances.

Currently, only 1,675 of 44,062 specified items traded among the ASEAN six would have tariffs above five percent, Abad said.

ASEAN leaders have agreed to completely eliminate all import duties in the region by 2010 for the six original members and by 2015 for the new members.

Intra-ASEAN trade accounts for about 20 percent of the region's annual total trade of more than US$700 billion, officials say.

ASEAN's major trading partners are the United States, the European Union and Japan.

Southeast Asian leaders are planning to establish a mega East Asia free trade zone, covering ASEAN and China, Japan and South Korea with a total market of more than two billion people.