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.