Dream and hope of 10 nations

Dream and hope of 10 nations

As we all know, most of the Southeast Asian region has now
become a free trade zone.

Accounting for over 96 percent of all ASEAN trade, the first
six signatories of the Common Effective Preferential Tariff
scheme for the ASEAN Free Trade Area, or AFTA, have reduced their
tariffs on intra-regional trade to no more than five percent for
almost all products in the Inclusion List (IL), or removed them
altogether.

The AFTA was established in January 1992 to eliminate tariff
barriers among the 10 Southeast Asian countries to integrate
ASEAN economies into a single production base and to create a
regional market.

The Agreement on the Common Effective Preferential Tariff
(CEPT) Scheme for the AFTA requires that tariff rates levied on a
wide range of products traded within the region are reduced to 0
percent to 5 percent. Quantitative restrictions and other
nontariff barriers are to be eliminated.

Although originally scheduled to be realized by 2008, the
target of a free trade area in ASEAN was continuously moved
forward.

The elimination of tariffs and nontariff barriers among the
ASEAN members has served as a catalyst for greater efficiency in
production and long-term competitiveness.

Moreover, the reduction of barriers to intra-regional trade is
giving the ASEAN consumer a wider choice and better quality
consumer products.

By the beginning of this year, only 3.8 percent of products in
the CEPT Inclusion List of the first six signatories, or 1,683
items out of 44,060, should have had tariffs above five percent.

The current average tariff on goods traded under the AFTA
scheme is estimated at about 3.8 percent. In the light of its
later accession to the CEPT Agreement, Vietnam is expected to
realize AFTA in 2006, Laos and Myanmar in 2008, and Cambodia in
2010.

The first signatories to the CEPT scheme were Brunei
Darussalam, Indonesia, Malaysia, the Philippines, Singapore and
Thailand.

The free trade area covers all manufactured and agricultural
products. However, 734 tariff lines in the General Exception
List, representing about 1.09 percent of all tariff lines in
ASEAN, are permanently excluded from the free trade area for
reasons of national security, protection of human, animal or
plant life and health and articles of artistic, historic and
archaeological value.

Facilitation Initiatives: Trade facilitation activities in the
areas of customs and the elimination of technical barriers to
trade with a view to lowering the cost of doing business in the
region have also received attention.

ASEAN's efforts have been directed at the simplification and
harmonization of customs procedures, and specifically, through
measures such as the harmonization of tariff nomenclature and the
accelerated implementation of the WTO Valuation Agreement. ASEAN
has adopted an ASEAN Harmonized Tariff Nomenclature and will be
implementing it this year.

ASEAN is seeking to develop product-specific mutual
recognition arrangements (MRAs) in conformity assessment so that
product-related standards and regulations do not become technical
barriers to trade. A Mutual Recognition Arrangement on
telecommunications equipment has already been put in place.

Negotiations are proceeding in the areas of cosmetics,
pharmaceuticals, electrical and electronic products.

ASEAN has also agreed to align national standards with
international standards, such as those of the International
Standards Organization (ISO), the International Electrotechnical
Commission (IEC) and the International Telecommunications Union
(ITU), for 20 priority product groups by the year 2000.

These 20 product groups represent some of the most widely
traded products in the region, including important consumer
durables such as radios, television sets, refrigerators, air
conditioners and telephones.

In addition to the 20 product groups, ASEAN will embark on the
harmonization of another 72 standards for safety and 10 standards
for Electromagnetic Compatibility (EMC).

Rule-based Trade Arrangement: ASEAN has adopted a disputes
settlement mechanism (largely patterned after the WTO disputes
settlement understanding) covering all economic agreements.

This establishes a mechanism for resolving any problems
arising from the implementation of any economic agreement in
ASEAN.

The provision on emergency measures under the CEPT Agreement
has been strengthened to make it consistent with the WTO
Agreement on Safeguarding Measures. A Protocol on Notification
Procedures has been established which requires advance warning of
actions or measures that can have an adverse effect on
concessions granted under an existing ASEAN agreement.

ASEAN has also agreed on a Protocol Regarding the
Implementation of the CEPT Scheme Temporary Exclusion List, which
is intended to provide some flexibility to countries facing real
problems on their last tranche of manufactured TEL products.

The Protocol will allow countries to temporarily delay the
transfer of these TEL products or suspend concessions on those
TEL products already transferred into the IL. The mechanism is
based on Article XXVIII (Modification of Schedules) of GATT 1994.

Elimination of all Import Duties: ASEAN leaders have agreed to
eliminate all import duties by 2010 for the six original members
of ASEAN and by 2015 for the new members.

This move will fully create an integrated regional market of
500 million people.

Currently, 20,701 tariff lines (representing 38 percent of the
IL) already have zero duties. By 2003, the first six members will
each have at least 60 percent of their IL with zero duties.
Vietnam will have 35.37 percent of its IL with no tariffs in
2006, while Lao PDR and Myanmar will abolish import duties on
87.6 percent and 3.9 percent respectively of their IL by 2008.
Cambodia will eliminate duties on 7.64 percent of its IL in 2010.

Direction of ASEAN Trade: As a result of the successful
implementation of the CEPT Scheme, trade among ASEAN countries
has grown from US$44.2 billion in 1993 to $95.2 billion in 2000,
representing an average annual increase of 11.6 percent. As of
2000, intra-regional exports made up about 23.3 percent of total
ASEAN exports. Before the financial and economic crisis struck in
mid 1997, intra-ASEAN exports had been increasing by 29.6
percent. This is significantly higher than the rate of increase
of total ASEAN exports, which grew at 18.8 percent during the
same period.

While there has been a slight contraction of intra-ASEAN trade
in the year 2001, largely as a result of the global and regional
economic slowdown, this is expected to pick up with the recovery
of the global economy expected in the latter half of 2002.

The realization of the AFTA in no way lessens the importance
of ASEAN's other economic partners. The ASEAN leaders, at their
summit in Bandar Seri Begawan from 5 November through 6 November
2001, resolved to promote economic linkages among East Asian
countries toward integrating the ASEAN region with China, Japan,
and the Republic of Korea.

ASEAN-China FTA: The leaders of ASEAN and China considered the
report of the ASEAN-China Expert Group on Economic Cooperation,
set up upon the suggestion by Chinese Premier Zhu Rongji at their
meeting in Singapore last year.

They endorsed the proposal for a Framework on Economic
Cooperation and agreed to establish an ASEAN-China Free Trade
Area within 10 years, with special and differential treatment and
flexibility for the newer ASEAN members.

The agreement would also provide for an "early harvest" of
benefits. With a combined market of 1.7 billion people, a free
trade area between ASEAN and China would have a gross domestic
product of $2 trillion and total trade of $1.23 trillion.

Discussions among officials on the scope and modality of the
free trade area will commence this year.

The joint experts group estimates that the establishment of an
ASEAN-China FTA could increase ASEAN's exports to China by 48
percent and China's exports to ASEAN by 55 percent. An FTA is
also expected to boost ASEAN's GDP by 0.9 percent and China's GDP
by 0.3 percent.

To promote the expansion of trade and investment between ASEAN
and Japan, the leaders have endorsed the forging of a closer
economic partnership.

A group of experts from ASEAN and Japan has been established
to recommend measures on how to further enhance economic
cooperation between the two sides. The report of the experts'
group will be submitted to the next ASEAN-Japan summit in 2002.

ASEAN-Japan trade reached $113.6 billion in 2000.

The ASEAN leaders also proposed to explore with the Republic
of Korea the possibility of establishing a free trade area
between the two sides.

The leaders agreed to set up an experts group to study this
matter. ASEAN-ROK trade reached $28.9 billion in year 2000.

In September 2001, the economic ministers of ASEAN and the
Closer Economic Relations of Australia and New Zealand endorsed a
framework to link the two groups economically through an AFTA-CER
closer economic partnership.

They have also approved a work program for the implementation
of the framework. Two-way trade between AFTA and CER amounted to
$18.43 billion in 2000.

The realization of AFTA is not only a huge step towards
regional economic integration in ASEAN; it is also an important
building bloc for economic cohesion in the larger Asia-Pacific
region, bringing together the economies of Northeast Asia and CER
with those of Southeast Asia.

-- ASEAN Secretariat