ASEAN Ministers agree trade deal but doubts persist
ASEAN Ministers agree trade deal but doubts persist
CHIANG MAI, Thailand (Reuters): Southeast Asian economics ministers, meeting in Thailand under the shadow of flagging regional markets, on Thursday agreed a framework for settling a simmering trade row over tariff barriers.
But the deal will not be formally signed until November, and raises the specter of tit-for-tat protectionist measures if members of the Association of South East Asian Nations (ASEAN) fail to agree on penalties for backtracking on trade pledges.
The dispute began earlier this year when Malaysia withdrew its auto sector from industries slated for tariff reductions under the ASEAN Free Trade Area (AFTA). The move particularly angered Thailand, also keen to promote its auto industry.
The ASEAN meeting in the northern city of Chiang Mai agreed a protocol to deal with countries that renege on trade commitments.
Countries "facing real difficulties" will be allowed to submit an application to delay tariff cuts in certain industries, and will then have 180 days to agree compensation for other affected member states, according to a draft of the protocol.
If no agreement is reached before the deadline, affected countries have the right to retaliate by withdrawing some of their own products from the free trade pact.
Ministers denied the deal was a step backwards for ASEAN.
"Far from it," Malaysian Trade and Industry Minister Rafidah Aziz told a news conference.
"This protocol very clearly reflects ASEAN taking a very pragmatic and realistic approach in evolving AFTA."
The protocol is due to be formally adopted at an ASEAN meeting in Singapore in November, and Malaysia and Thailand will then have to begin talks to try and agree compensation.
Thursday's meeting also cast doubts over quick progress in agreeing a merger of Australia and New Zealand's Closer Economic Relationship (CER) trade zone with AFTA.
Australia and New Zealand's trade ministers join the meeting on Friday, and say they hope ASEAN will agree to begin formal talks by early next year on creating a united free trade area.
But Malaysia and Indonesia, which have thorny relations with Australia, are less enthusiastic, and Friday's meeting may agree only to more ASEAN studies of the proposal.
Malaysia's Rafidah said the "political environment" must also be conducive before formal talks on the trade zone can proceed, and suggested that further studies needed to be done.
Thai Deputy Prime Minister Supachai Panitchpakdi also sounded a note of caution, saying officials still had to do a lot of work studying a report by an ASEAN task force, which recommends pressing on with talks on merging the free trade zones.
The meeting comes at a time of mounting concern for ASEAN, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Regional currencies are tumbling, stock markets are in retreat and hopes of a strong recovery from crisis are being replaced by fears the region could slide back into recession.
Supachai said ASEAN was up to the challenge.
"Although many of us still need to deal with the economic turmoil which erupted three years ago, I am certain that we can, together, rise above any kind of pressures and challenges put before us if we continue to support each other and remain resolute," he told the opening ceremony.
European Union Trade Commissioner Pascal Lamy is also due to join the meeting on Friday, and officials from Japan, China and South Korea will hold talks with ASEAN on Saturday.