ASEAN mull outright elimination of tariffs in 2003

ASEAN mull outright elimination of tariffs in 2003

HANOI (AFP): Southeast Asian nations are discussing plans to
do away with import tariffs by 2003 for early implementation of a
free-trade area despite a sharp economic downturn in the region,
according to a top ASEAN official.

Under the current free-trade plan, the Association of
Southeast Asian Nations (ASEAN) aims to bring down tariffs to a
maximum five percent by January 2003 for its six original members
-- Malaysia, Thailand, Indonesia, Brunei, the Philippines and
Singapore.

Newer entries Laos, Cambodia, Myanmar and Vietnam have been
given longer.

ASEAN Secretary General Rodolfo Severino said several member
economies were discussing eliminating tariffs outright by 2003
although they had an option of keeping duties of up to five
percent under the ASEAN Free Trade (AFTA) timetable.

"Now we are working, not formally, to speed up some more, for
the outright elimination of tariffs in ASEAN trade," he told AFP
as ASEAN foreign ministers prepared to open annual talks in Hanoi
on Monday.

"Different countries have different ways of achieving it but
the important thing is some kind of decision" for legislation
calling for an abolition of tariffs, he said.

Severino said if export-led ASEAN members were willing to drop
tariffs to five percent, "why not do away with it altogether?"

"This is because what you gain in terms of protection is not
worth the administrative cost of customs -- might as well do away
with it.

"My own view of that is that it makes sense to do away with
these tariffs instead of keeping this five percent," he said.

Severino said the proposal had been discussed within ASEAN but
some countries were wary for political reasons.

Asked whether the current economic difficulties in the region,
stemming from a drop in exports due to the US slowdown, could
allow ASEAN members to go ahead with such tariff elimination, he
said: "What can protection of five percent buy you?

"The idea here is to integrate the markets -- you bring in
investments. The answer to an economic downturn is not protection
(of markets)," he said.

Latest statistics show ASEAN trade surged 23 percent in the
first half of 2000 to US$348 billion from $283 billion in the
same period of 1999.

Exports in the region grew by 22 percent to $189 billion in
the January-June period in 2000 from the previous year.

ASEAN trade with all major trading partners has increased
except with the United States, which may fall into recession.

Intra-ASEAN exports grew by 41 percent to $44.32 billion in
the first half of 2000.

Officials say that AFTA may lose its competitiveness with the
impending entry of China into the World Trade Organization and
with more attractive free-trade plans in other regions.

About 60 percent of foreign investment in Asia now goes to
China compared to 16 percent into ASEAN -- a reverse of the
picture eight years ago.

S. Pushpanathan, assistant director of external relations in
the ASEAN secretariat, said Southeast Asian nations could not
ignore the growth of free-trade areas around the world,
especially in the Americas, and the impending expansion of the
European Union.

"ASEAN should be cognizant of these developments," he said.

The ASEAN foreign ministers, minus Indonesia's Alwi Shihab who
has canceled his attendance to confront political turmoil at
home, are expected to adopt a resolution calling for another
round of talks among member states to free trade in the key
services sector.

ASEAN has endorsed a set of broad guidelines to drive long-
term liberalization in services.