ASEAN rejects free trade plan with Australia, NZ

ASEAN rejects free trade plan with Australia, NZ

CHIANG MAI, Thailand (Agencies): The Association of Southeast
Asian Nations on Friday rejected a proposal for establishing a
US$ 1 trillion free trade zone with Australia and New Zealand.

The economic ministers of the 10-member ASEAN, holding an
annual meeting, instead agreed on a weaker proposal for a "closer
economic partnership," a joint press statement said.

"We can't be over-ambitious. It's not an easy thing to merge
the two regions together," Thai Deputy Prime Minister Supachai
Panitchpakdi told a news conference.

The press statement said the economic partnership between the
two regions would be defined further by senior officials who
would make recommendations in 2001.

It marks a second setback for ASEAN's ambitions to expand free
trade after Malaysia backtracked on a commitment to cut tariffs
on its auto industry under the ASEAN Free Trade Area, or AFTA.

The ministers also appeared to backtrack on previous
commitments to reduce tariffs by acknowledging that certain
member states may not be ready to open up their markets.

Formalizing an ongoing dispute between Thailand and Malaysia
over the latter's decision to delay tariff cuts on automobiles,
Asean members agreed to set up a mechanism under which nations
that don't comply with tariff cuts will provide compensation to
the members that suffer.

ASEAN economic ministers met on Friday with their counterparts
from the Closer Economic Relations pact, or Australia and New
Zealand, to discuss a report by a joint task force that
recommended setting up a tariff-free zone "at the earliest
possible time."

The report said such a free trade area was "not only feasible
but advisable" as it would create a market of about 560 million
people and bring a benefit of US$48 billion in additional gross
domestic product by 2020.

Hiding his disappointment, Australian Trade Minister Mark
Vaile described the agreement to develop closer economic
relations as a "significant step forward."

New Zealand and Australia had been pushing for the move, but
Malaysia, Indonesia and Philippines had voiced reservations. The
other members of ASEAN are Thailand, Singapore, Brunei, Cambodia,
Vietnam, Laos and Myanmar.

"At this point in time, the environment is just not right as
far as Malaysia is concerned. Even within AFTA we are still
evolving," Malaysia's International Trade and Industry Minister
Rafidah Aziz said.

"We are so preoccupied. We want to make sure the AFTA works,"
she said. "We are not about being political heroes. We are
talking about something that benefits the people."

On Thursday, Rafidah had said that there is already an AFTA-
CER linkage and to expand it to a formal organization needs
political decisions.

Indonesian Minister of Industry and Trade Luhut Pandjaitan
said on Friday that ASEAN has to be pragmatic and realistic.

"We are not ready yet from the Indonesian side to set up a
free trade area between AFTA and CER," he said.

It had been originally hoped to begin negotiations between
ASEAN and CER early next year and complete them within the year
with a view to full integration by 2010.