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ASEAN Free Trade Area

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challenged and removed. (January 2009)
ASEAN Free Trade Area (AFTA)
!"
is a trade bloc agreement by the #ssociation of
$outheast #sian %ations supporting local manufacturing in all #$&#% countries.
The #FT# agreement 'as signed on () *anuary !++( in $ingapore. When the #FT#
agreement 'as originally signed, #$&#% had si, members, namely, -runei, .ndonesia,
/alaysia, Philippines, $ingapore and Thailand. 0ietnam 1oined in !++2, 3aos and
/yanmar in !++4 and 5ambodia in !+++. #FT# no' comprises ten countries of #$&#%.
#ll the four latecomers 'ere re6uired to sign the #FT# agreement in order to 1oin
#$&#%, but 'ere given longer time frames in 'hich to meet #FT#7s tariff reduction
obligations.
The primary goals of #FT# seek to8
• .ncrease #$&#%7s competitive edge as a production base in the 'orld market
through the elimination, 'ithin #$&#%, of tariffs and non9tariff barriers: and
• #ttract more foreign direct investment to #$&#%.
The primary mechanism for achieving the goals given above is the 5ommon &ffective
Preferential Tariff (5&PT) scheme, 'hich established a schedule for phased initiated in
!++( 'ith the self9described goal to increase the ;region’s competitive advantage as a
production base geared for the world market;.
Contents
• ! <istory
• ( The 5ommon &ffective Preferential Tariff (5&PT) scheme
• = >ule of ?rigin
• @ #dministration
• 2 Aispute resolution
• B Further trade facilitation efforts
• 4 /embership
• ) #$&#% Plus Three
• + >elated free trade areas
• !C >eferences
[edit] History
# proposal to set up a Free Trade #rea in #sean 'as first mooted by the Thai Prime
/inister #nand Panyarachun, 'hich 'as agreed upon 'ith amendments during the
#$&#% $eniors &conomic ?fficial /eeting (#&/) in Duala 3umpur. .n *anuary !++(,
the #$&#% members signed the $ingapore Aeclaration at the heart of 'hich 'as the
creation of #FT# in !2 years. This is a comprehensive program of tariff reduction in the
region, 'hich is to be carried out in phases through the year (CC). This deadline 'as
subse6uently moved for'ard and #FT# became fully operational on ! *anuary (CC=.
?ver the course of several years, the initial program of tariff reductions 'as broadened
and accelerated and other ;#FT# Plus; activities 'ere initiated. This includes efforts to
eliminate non9tariff barriers, harmonisation of customs nomenclature, valuation, and
procedures and development of common product certification standards.
[edit] The Common Effective Preferential Tariff
(CEPT) scheme
Unlike the &U, #FT# does not apply a common e,ternal tariff on imported goods. &ach
#$&#% member may impose tariffs on goods entering from outside #$&#% based on its
national schedules. <o'ever, for goods originating 'ithin #$&#%, #$&#% members are
to apply a tariff rate of C to 2 percent (the more recent members of 5ambodia, 3aos,
/yanmar and 0ietnam, also kno'n as 5/30 countries, 'ere given additional time to
implement the reduced tariff rates). This is kno'n as the 5ommon &ffective Preferential
Tariff (5&PT) scheme.
#$&#% members have the option of e,cluding products from the 5&PT in three cases8
!.) Temporary e,clusions: (.) $ensitive agricultural products: =.) Eeneral e,ceptions.
Temporary e,clusions refer to products for 'hich tariffs 'ill ultimately be lo'ered to C9
2F, but 'hich are being protected temporarily by a delay in tariff reductions.
$ensitive agricultural products include commodities such as rice. #$&#% members have
until (C!C to reduce the tariff levels to C92F.
Eeneral e,ceptions refer to products 'hich an #$&#% member deems necessary for the
protection of national security, public morals, the protection of human, animal or plant
life and health, and protection of articles of artistic, historic, or archaeological value.
#$&#% members have agreed to enact Gero tariff rates on virtually all imports by (C!C
for the original signatories, and (C!2 for the 5/30 countries.
[edit] !le of "ri#in
The 5&PT only applies to goods originating 'ithin #$&#%. The general rule is that local
#$&#% content must be at least @CF of the F?- value of the good. The local #$&#%
content can be cumulative, that is, the value of inputs from various #$&#% members can
be combined to meet the @CF re6uirement. The follo'ing formula is applied8
>a' material cost H Airect labor cost H Airect overhead cost H Profit H .nland transport
cost , !CCF F?- value
<o'ever, for certain products, special rules apply8
• 5hange in 5hapter >ule for Wheat Flour:
• 5hange of Tariff $ub9<eading for Wood9-ased Products:
• 5hange in Tariff 5lassification for 5ertain #luminum and #rticles thereof.
The e,porter must obtain a IForm AJ certification from its national government attesting
that the good has met the @CF re6uirement. The Form A must presented to the customs
authority of the importing government to 6ualify for the 5&PT rate. Aifficulties have
sometimes arisen regarding the evidentiary proof to support the claim, as 'ell ho'
#$&#% national customs authorities can verify Form A submissions. These difficulties
arise because each #$&#% national customs authority interprets and implements the
Form A re6uirements 'ithout much coordination.
[edit] Administration
#dministration of #FT# is handled by the national customs and trade authorities in each
#$&#% member. The #$&#% $ecretariat has authority to monitor and ensure
compliance 'ith #FT# measures, but has no legal authority to enforce compliance. This
has led to inconsistent rulings by #$&#% national authorities. The #$&#% 5harter is
intended to bolster the #$&#% $ecretariatKs ability to ensure consistent application of
#FT# measures.
#$&#% national authorities have also been traditionally reluctant to share or cede
sovereignty to authorities from other #$&#% members (although #$&#% trade
ministries routinely make cross9border visits to conduct on9site inspections in anti9
dumping investigations). Unlike the &U or %#FT#, 1oint teams to ensure compliance and
investigate non9compliance have not been 'idely used. .nstead, #$&#% national
authorities must rely on the revie' and analysis of other #$&#% national authorities to
determine if #FT# measures such as rule of origin are being follo'ed. Aisagreements
may result bet'een the national authorities. #gain, the #$&#% $ecretariat may help
mediate a dispute but has no legal authority to resolve it.
#$&#% has attempted to improve customs coordination through the implementation of
the #$&#% $ingle Windo' pro1ect. The #$&#% $ingle Windo' 'ould allo' importers
to submit all information related to the transaction to be entered electronically once. This
information 'ould then be shared 'ith all other #$&#% national customs authorities.
[edit] $is%!te resol!tion
#lthough these #$&#% national customs and trade authorities coordinate among
themselves, disputes can arise. The #$&#% $ecretariat has no legal authority to resolve
such disputes, so disputes are resolved bilaterally through informal means or through
dispute resolution.
#n #$&#% Protocol on &nhanced Aispute $ettlement /echanism governs formal
dispute resolution in #FT# and other aspects of #$&#%. #$&#% members may seek
mediation and good offices consultations. .f these efforts are ineffective, they may ask
$&?/ to establish panel of independent arbitrators to revie' the dispute. Panel decisions
can be appealed to an appellate body formed by the #$&#% &conomic 5ommunity
5ouncil.
The Protocol has almost never been invoked because of the role of $&?/ in the dispute
resolution process. $&?/ decisions re6uire consensus among all #$&#% members, and
since both the aggrieved party and the alleged transgressor are both participating in
$&?/, such consensus cannot be achieved. This discourages #$&#% members from
invoking the Protocol, and often they seek dispute resolution in other fora such as the
WT? or even the .nternational 5ourt of *ustice. This can also be frustrating for
companies affected by an #FT# dispute, as they have no rights to invoke dispute
resolution yet their home #$&#% government may not be 'illing to invoke the Protocol.
The #$&#% $ecretary Eeneral has listed dispute resolution as re6uiring necessary
reform for proper administration of #FT# and the #&5.
[edit] F!rther trade facilitation efforts
&fforts to close the development gap and e,pand trade among members of #$&#% are
key points of policy discussion. #ccording to a (CC) research brief published by the
World -ank as part of its Trade 5osts and Facilitation Pro1ect,
("
#$&#% members have
the potential to reap significant benefits from investments in further trade facilitation
reform, due to the comprehensive tariff reform already realised through the #$&#% Free
Trade #greement.
This ne' analysis suggests e,amining t'o key areas, among others8 port facilities and
competitiveness in the .nternet services sector. >eform in these areas, the report states,
could e,pand #$&#% trade by up to 4.2 percent (L(( billion) and 2.4 percent (L!4
billion), respectively. -y contrast, cutting applied tariffs in all #$&#% members to the
regional average in $outheast #sia 'ould increase intra9regional trade by about ( percent
(LB.= billion).
="
[edit] &em'ershi%
5ountries that agree to eliminate tariffs among themselves8
• -runei
• .ndonesia
• /alaysia
• Philippines
• $ingapore
• Thailand
• /yanmar
• 5ambodia
• 3aos
• 0ietnam
>egular ?bservers
• Papua %e' Euinea
• Timor93este
The most recent #$&#% meeting 'as observed also by 8
• 5hina
• *apan
• $outh Dorea
• .ndia
• #ustralia
• %e' Mealand
[edit] ASEAN Pl!s Three
$ee also8 #sian /onetary Unit
/embers of the #$&#% Plus Three
#$&#% Plus Three (#PT) is a forum that functions as a coordinator of cooperation
bet'een the #ssociation of $outheast #sian %ations and the three &ast #sian nations of
5hina, *apan, and $outh Dorea.
The first leaders7 meeting 'as held in !++4 and the group7s significance and importance
'as strengthened by the #sian Financial 5risis. The grouping 'as institutionalised by
!+++.
@"
#$&#% Plus Three, in establishing the 5hiang /ai .nitiative, has been credited as
forming the basis for financial stability in #sia,
2"
the lack of such stability being a
contributing factor to the #sian Financial 5risis. The #sian 5urrency Unit (#5U) is a
proposed 'eighted inde, of currencies for #$&#%H=. The #5U 'as inspired by the no'
defunct &uropean 5urrency Unit, replaced by the &uro. The #sian 5urrency Unit7s
purpose is to help stabiliGe the region7s financial markets. The #5U as it is proposed is a
currency basket and not a real currency, i.e., a 'eighted inde, of &ast #sian currencies
that 'ill function as a benchmark for regional currency movements.
B"4"
The #sian Aevelopment -ank is currently revie'ing different options concerning the
technical aspects related to the #5U calculation, including the nature of the basket, the
choice of fi,ed 'eights vs. fi,ed units, the selection of currencies to be included in the
basket, the choice of 'eights, the criteria for their periodical revision, and other aspects
as 'ell. The #sian Aevelopment -ank 'as to announce the details of the #5U in /arch
(CCB or later.
)"
<o'ever e,ternal pressures delayed this announcement although the
concept 'as still being studied in detail.
+"
# panel discussion in February (CC4 cited
technical and political obstacles as having prevented the pro1ect from advancing.
!C"
The
unit, limited to #$&#%H=, 'as said to be still moving for'ard by mid9*uly (CC4.
!!"
[edit] elated free trade areas
• #$&#% N #ustralia N %e' Mealand Free Trade #rea (##%MFT#) is a free trade
area bet'een #$&#% and #%M5&>T#, signed on (4 February (CC+
!("
and
coming into effect on ! *anuary (C!C.
!="
Aetails of the ##%MFT# agreement are
available online.
!@"
• #$&#%N5hina Free Trade #rea (#5FT#), in effect as of ! *anuary (C!C
!2"
• #$&#%N.ndia Free Trade #rea (#.FT#), in effect as of ! *anuary (C!C
!2"
• #$&#%N*apan 5omprehensive &conomic Partnership (#*5&P)
• #$&#%NDorea Free Trade #rea (#DFT#), in effect as of ! *anuary (C!C
!2"
• 5omprehensive &conomic Partnership for &ast #sia
[edit] eferences
!. ( #FT# O FT#s (#$&#% $ecretariat)
(. ( World -ank
=. ( ;Aeeper .ntegration in #$&#%8 Why Transport and Technology /atter
for Trade,; *ohn $. Wilson O -en1amin Taylor: Trade Facilitation >eform .ssue
-rief, The World -ank. (CC).
@. ( #$&#% Plus Three 5ooperation
2. ( 5hiang /ai .nitiative as the Foundation of Financial $tability in &ast
#sia
B. ( # ne's report of the #5U (Chinese)
4. ( # paper analysing a broader basket of currencies
). ( .ntervie' 'ith #sian Aevelopment -ank representative (@ February
(CCB
+. ( #A- 'ebsite8 -oost for ne' monetary scheme 9 #$&#%H= finance
ministers to back #sian 5urrency Unit plan
!C. ( The *apan Times 9 *apan, $outh Dorea can pull #sia together
!!. ( The .n6uirer (Philippines) 9 #sian currency unit shaping up
!(. ( *oint /edia $tatement on the $igning of the #greement &stablishing the
#$&#%9#ustralia9%e' Mealand Free Trade #rea, Thailand, (4 February (CC+
!=. ( #$&#%, #ustralia and %e' Mealand 3eadersK $tatement8 &ntry into
Force of the #greement &stablishing the #$&#%9#ustralia9%e' Mealand Free
Trade #rea (2 ?ctober (CC+, 5ha am <ua <in, Thailand
!@. ( Euide to the agreement establishing the #$&#%9#ustralia9%e' Mealand
Free Trade #rea (##%MFT#)
!2. P
a

b

c
Pushpanathan, $undram ((( Aecember (CC+). ;#$&#% 5harter8
?ne year and going strong;. The Jakarta ost. >etrieved ! *anuary (C!C.
• #$&#% Free Trade #greement
v ) d ) e Association of So!theast Asian Nations
/ember states of
#$&#%
-runei ) -urma (/yanmar) ) 5ambodia )
.ndonesia ) 3aos ) /alaysia ) Philippines )
$ingapore ) Thailand ) 0ietnam
?bservers Papua %e' Euinea ) Timor93este
$ummitsQForums
#$&#% $ummits ) ASEAN Free Trade
Area ) #$&#% H= ) #$&#% >egional
Forum ) #$&/ ) &ast #sia $ummit ) 5&P&# )
5/.
>elated articles
#nthem ) 5harter ) 5ommon Time ) Aate of
&stablishment ) &mblem ) Flag ) <ymn )
?rganiGations ) $&# Eames ) $ecretariat )
Treaty of #mity and 5ooperation