ASEAN in 4th year of free trade plan
ASEAN in 4th year of free trade plan
By P. Parameswaran
SINGAPORE (AFP): Intra-Southeast Asian trade receives an added push as booming regional economies enter their fourth year of tearing down internal tariff barriers under a landmark free-trade plan that embraced Vietnam.
Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, the other members of the Association of Southeast Asian Nations (ASEAN), are to simultaneously slash tariffs on nearly 41,000 products in 1996.
The tariffs will be brought down to between zero and five percent as part of their race to achieve an ASEAN Free Trade Area (AFTA) by 2003.
Vietnam, which joined ASEAN in July, said it will cut tariffs on 857 products from January -- its first step towards AFTA membership. The communist state will fulfill the free-trade goal three years after the other six.
John Lye, economist with Merrill Lynch, said the market liberalization exercise would enhance intra-ASEAN exports, which jumped by more than 22 percent year-on-year to US$31.1 billion in the first half of 1995.
It would ease the region's dependence on trade with the outside world, particularly the West, he said.
"Years down the road, as they industrialize further under this free trade environment, the ASEAN economies will also be less dependent on machinery imports" from outside the region, Lye said.
Many of the ASEAN nations are riddled with deficits in their current accounts because of imports of expensive machinery needed to power their rapid economic growth.
To ensure that the free trade plan brings quick benefits to ASEAN's 400 million people, officials said goods which enjoyed tariff cuts would be cleared quickly at customs checkpoints under a regional project also launched Monday.
"Green lanes are being set up at ASEAN airports and ports to speed up clearance of CEPT products," said an ASEAN official.
The Common Effective Preferential Tariffs scheme is the vehicle which allows all the ASEAN economies to liberalize their markets by cutting tariffs and extend preferential treatment to each other.
ASEAN embarked on an ambitious plan in 1993 to turn the world's fastest growing region into a free trade area by 2008.
The deadline was later trimmed to 2003 and further shortened to 2000 for about 80 percent of goods produced in the region.
ASEAN officials said in the 2000-deadline plan, some 38,397 products would see their tariffs slashed to a 0-5 percent range.
Under the new time frame, some 10,605 products would see tariffs coming under the axe in Malaysia, 8,867 in Thailand, 7,909 in Indonesia, 6,112 in Brunei, 5,708 in Singapore and 4,694 in the Philippines, they said.
Some analysts, suggesting protectionist tendencies, say exporters from outside ASEAN would be at a big disadvantage if tariffs among ASEAN members were to be scrapped completely and tariffs from non-ASEAN nations remain unchanged.
But ASEAN leaders have stressed that AFTA was not meant to protect ASEAN industry.
The Hong Kong-based Political and Economic Risk Consultancy Ltd., in a recent report on free market economics in Asia, said the clout of the United States, for example, would lessen as the relative position of the U.S. market for exports from the region declines.
"And it is declining at a rapid rate," it warned.
But other analysts say the bigger challenge to ASEAN is internal -- tackling trade liberalization when Cambodia, Laos and Myanmar join it by the turn of the century.
Hoang Anh Tuan, a senior fellow at the Singapore-based Institute of Southeast Asian Studies, said going by Vietnam's experience, Cambodia, Laos and Myanmar should be allowed to fulfill the goals of AFTA at a later time, probably 2010.
"But are the ASEAN members willing to allow this?," Hoang asked. "And if so, how can all ASEAN members seek consensus on future economic issues, while some have maximized the goals of AFTA and want to turn to the next stage of economic cooperation, and others have not and are not willing to do so?."