ASEAN may go slow on free trade goals
ASEAN may go slow on free trade goals
SINGAPORE (Reuters): Leaders of the Association of Southeast
Asian Nations (ASEAN) are expected to talk loudly about the need
to meet trade liberalization goals when they meet in Hanoi next
week but quietly agree to allow the process to slow.
Analysts say the region's 18-month-old financial crisis will
not derail ASEAN's commitment to achieve tariffs of no more than
5 percent within the nine-country grouping by the year 2003.
However, liberalization schedules towards this date may be
allowed to slide.
"It's going to be tough for many of the (ASEAN) economies to
be aggressive in terms of the lifting of restrictions and
reducing trade barriers," said Andrew Fung, regional Treasury
economist at Standard Chartered Bank in Singapore.
"But it is not going to be a fatal blow to liberalization,"
Fung said.
Under the current plan for the ASEAN Free Trade Area (AFTA),
tariffs are to be cut to between zero and 5 percent by the year
2003. More than 46,000 tariff lines have already been cut,
representing some 83 percent of intra-ASEAN trade.
"Currently the way the program works is they've been phasing
all these different tariff lines into the scheme at a ceiling
tariff rate of 20 percent per year," said Peter Baldwin, director
of consultancy group Intercedent Asia.
"They've done three years now and of course they've left all
the hard stuff until the end," he said.
Some analysts believe that with the spotlight on ASEAN to show
its commitment to the goal of free trade, the leaders will
endorse a goal to drop tariffs to a flat rate of zero percent by
2003 instead of a zero to 5 percent range.
But to avoid any dispute within the region, the schedule to
implement this measure will be made "voluntary".
"I think they are going to underline their commitment to the
lifting of trade restrictions, but we are going to see very few
details in terms of timing," said Standard Chartered's Fung.
Aside from the overall free trade goal, the ASEAN meeting will
be scrutinized by Asian business for any changes to the details
of the AFTA scheme.
"The big thing people are looking for is to bring forward the
switch of products from the temporary exclusion list onto the
inclusion list," said Baldwin.
"As soon as products are off the exclusion list, they don't
have any common effective preferential tariff. When they come
into the scheme, the maximum ceiling rate is 20 percent, which is
a big drop for some products, like auto parts," he said.
Another issue is the World Trade Organization's (WTO) Trade
Related Investment Measures, or TRIMS, which cover local content
quotas. Under WTO plans, most local content requirements are due
to be abolished by January 1, 2000.
"All the ASEAN countries in trouble on this one. The WTO does
carry a big stick. As most Asian countries are export oriented,
their export partners are going to make a fuss," Baldwin said.
In the discussions over the tariff rate targets, the products
to be included and excluded and the local content levels, one key
issue is likely to be raised most and that is the impact of any
new measures on employment.
Since the regional financial crisis began in July 1997, most
ASEAN nations have plunged into recession and unemployment levels
have soared, particularly in places like Indonesia.
"If your sewing machine industry is going to be wiped out
because of AFTA, then the industry lobby against AFTA becomes
stronger and stronger," said Intercedent's Baldwin.
"It is pretty reasonable to assume that they (ASEAN) would
like to protect, if possible, their own domestic economies," said
Fong Cheng Hong, a senior vice president at Nomura Singapore.
But Fong did not believe that economic nationalist pressures
would derail the trade liberalization process
"One of the things about Asia, especially now with economies
in bad shape, is we need a lot of money for refinancing of the
banking and corporate sector, so continued liberalization of
trade is going to bring back the international investor and
that's crucial for ASEAN's recovery," she said.