ASEAN trade body endorses enhanced 'rules of origin'

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.