ASEAN needs to reformulate rules of origin

The Jakarta Post, Jakarta

In a bid to strengthen the position of the Association of Southeast Asian Nations (ASEAN) in free trade negotiations, an expert has urged the group to reformulate its rules of origin.

"ASEAN as a group needs to strengthen the rules of origin," Hadi Susastro, the executive director of the Center for Strategic and International Studies (CSIS) said on Wednesday.

He said that such a move was aimed at helping develop production structures in the region even though individual ASEAN members had separate free trade agreements with other countries.

Six of ASEAN's 10 member countries -- Indonesia, Singapore, the Philippines, Thailand, Malaysia and Brunei -- are now implementing the ASEAN Free Trade Area (AFTA) agreement.

Under the agreement, low import tariffs on goods traded among the six countries can only be enjoyed if the local content reaches 40 percent.

The four other ASEAN members -- Vietnam, Laos, Cambodia and Myanmar -- have been allowed to delay their tariff reductions until 2010.

"This is a problem that must be soon resolved by ASEAN. They must set up rules of origin that can be used in all free trade negotiations," he told reporters on the sidelines of a seminar.

ASEAN is now also looking to soon ink free trade deals with several countries, including China, India and Japan.

Each of the ASEAN members are also seeking the opportunity of entering into free trade pacts with other countries, such as the United States.

In May, Singapore and the United States, for example, signed a bilateral free trade agreement, kicking off sweeping trade liberalization in goods and services.

The two countries, however, set a local content requirement different from ASEAN's common requirement, with the result that products from other ASEAN countries cannot avail of the Singapore-U.S. free trade pact.

The two countries have implemented Integrated Sourcing Initiatives (ISI) on non-sensitive, globalized sectors, such as high-technology products.

Under the ISIs, over 100 hi-tech goods, which already enter the United States with duty exemptions when exported from Singapore to the United States can be given preferential treatment, such as less administrative red tape.

The United States hopes that its trade pact with Singapore will become a model for future deals with other ASEAN countries.