ASEAN trade body endorses enhanced 'rules of origin'

Zakki P. Hakim, The Jakarta Post, Jakarta

Trade ministers of the Association of Southeast Asian Nations (ASEAN) member countries endorsed on Thursday a revised agreement on the "rules of origin" in a bid to help boost regional trade.

The decision was taken during a one-day meeting of the 18th ASEAN Free Trade Area (AFTA) council here.

The rules of origin include, among other things, a stipulation that products manufactured in an ASEAN country must have a minimum 40 percent local or ASEAN content (raw materials or components) to be able to enjoy low tariffs when exported to other countries within the region. This is part of the game rules under AFTA, where import tariffs are cut to between zero and 5 percent through the Common Effective Preferential Tariffs (CEPT) scheme.

The revision of the rules of origin cut the threshold of the local content requirement to 20 percent, a move that theoretically should boost trade within the region as more exported products can enjoy the lower tariff facility.

Indonesia's Minister of Industry and Trade Rini Soewandi, who also chairs the AFTA council, told a press conference that the new 20 percent threshold would still be reviewed in the coming years with a possibility of further reductions to around 10 percent.

Rini said that the enhanced CEPT rules of origin was expected to boost trade within ASEAN countries from 23 percent of the region's total trade last year to up to 27 percent at the end of 2007.

ASEAN exports to the world were valued at US$403.39 billion last year, a 12.12 percent increase from $383.85 billion in the previous year.

Trade among ASEAN countries has been consistently low since AFTA gradually started more than a decade ago, compared to regional trade among European Union member countries and the Mercosur, where it reached 75 percent and 35 percent of the region's total trade.

Mercosur, a South American economic group, consists of Brazil, Argentina, Paraguay, Uruguay, Chile and Bolivia.

The reason behind the low trade among ASEAN member countries is that the private sector in the region has been reluctant to exploit the CEPT scheme due to additional paperwork, insignificant benefits and potential loss of revenue for local government.

Moreover, the regional group has yet to streamline customs procedures and to adopt shared product standards.

Elsewhere, the AFTA council has also completed the conformity of standards for electrical and electronic products, which would open more market access for production within the region.

The meeting also discussed the status of various requests made under the protocol regarding the implementation of CEPT scheme's temporary exclusion list.

Indonesia had requested that sugar be included in the highly sensitive list, which enabled the country to impose an unlimited import duty without a time frame, but had to face opposition from Thailand although all other countries granted the request.

It was concluded that Indonesia and Thailand would solve the matter on a bilateral basis.

ASEAN's founding members are Brunei Darussalam, Malaysia, the Philippines, Singapore, Thailand, and Indonesia, with Cambodia, Laos, Myanmar and Vietnam its newer members.