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.