ASEAN on track for zero-tariff goals, but challenges remain

ASEAN on track for zero-tariff goals, but challenges remain

Martin Abbugao, Agence France-Presse, Singapore

The Association of Southeast Asian Nations (ASEAN) is on track to achieve a zero-tariff regime by 2015, a key ingredient for its ambitious plan to create a single market and production base by 2020, regional officials said.

Regional trade officials said the 10-member group was working its way through the difficulties of implementing the proposed ASEAN Free Trade Area (AFTA).

The process has been fraught with problems due to the wide variations in economic development of the nations, from wealthy Singapore at one end of the spectrum to Cambodia, Laos, Myanmar and Vietnam at the other.

Overall, AFTA aims to abolish tariffs on traded goods by 2010 for Singapore, Malaysia, the Philippines, Indonesia, Brunei and Thailand, the most developed nations of the group collectively known as the "ASEAN 6".

Tariffs for the four poorer countries, who are known in trade circles by the acronym of "CMLV" -- will be wiped out by 2015.

"By and large, AFTA remains on track towards achieving zero tariffs by 2010 for ASEAN-6 and 2015 for CMLV," a Singapore trade ministry spokesman told AFP, with the sentiment backed by a trade ministry official from another ASEAN member.

"I think all the political leaders of ASEAN have reaffirmed their commitments to AFTA," the official, who requested anonymity, said.

While trade is not normally a frontline issue at ASEAN's annual foreign ministers' meeting, the issue of economic integration is expected to be touched at this year's edition in Laos later this month.

ASEAN trade officials point out the successes for the region -- a market of 550 million people with a combined gross domestic product of US$1 trillion -- since the AFTA process began in 1993.

In particular, the ASEAN 6 have already trimmed tariffs on goods in their inclusion list to not more than 5.0 percent as of 2003.

Vietnam was given until 2006 to slash tariffs to 0-5 percent, Laos has until 2008, while Myanmar and Cambodia have until 2010.

"Undoubtedly, Thailand has greatly benefited from AFTA," a Thai Ministry of Commerce official told AFP.

Thai exports to the region rose to $21.25 billion in 2004 from only $6.56 billion in 1993, and ASEAN has become Thailand's largest export market.

But analysts say the group still has many big challenges to overcome if it is to realize its AFTA goals, particularly in removing protectionist barriers on certain sectors deemed "sensitive" to domestic interests.

The group must also ensure that members' tariff liberalization commitments are honored and prod the bloc's less developed members to include more products in a basket headed for tariff cuts.

Moreover, ASEAN should also speed up implementation of non- tariff measures -- another pillar in the overall goal to create a European Union-style ASEAN Economic Community by 2020 or earlier.

"ASEAN has a window of opportunity in which it is still viewed as a major and important trading bloc," said Ernest Bower, a US business consultant and former president of the U.S.-ASEAN Business Council.

"China and India are growing fast, and in the process they are drawing attention away from an ASEAN viewed as not entirely serious about economic integration."

Already, some ASEAN countries have sought to protect certain industries under an AFTA provision allowing the temporary exclusion of certain sectors from tariff reductions.

ASEAN's biggest member, Indonesia, has also put rice and sugar on a "highly sensitive" list of items which are to be excluded from drastic tariff cuts, according to Indonesian trade ministry spokesman Imam Pambagyo.

Pambagyo said Indonesia expects rice and sugar to be liberalized in 10-15 years' time.

"For Indonesia it's difficult as far as rice and sugar are concerned because they are related to our food resilience. First, we need to make sure our farmers have a competitive edge regionally or globally," Pambagyo said.

Vietnam has asked for a delay in opening up the automobile accessories and light trucks market, which again led to negotiations for compensation with Thailand.