A pleasant day everyone! Good morning Doc BamBi.

As a continuation of our report, I’ll be discussing the next topic. Honestly, I didn’t made deeper
research on this topic due to poor internet connection, so classmates if you have additional
information, please share it with the class after the discussion. But before I proceed let me share
with you a short video

https://www.youtube.com/watch?v=ZLKQH5T0rXo

Based on the video presented, it was all about the ASEAN free trade area.

https://en.wikipedia.org/wiki/ASEAN_Free_Trade_Area
What is AFTA?

The ASEAN Free Trade Area (AFTA) is a trade bloc agreement by the Association of Southeast

Asian Nations supporting local trade and manufacturing in all ASEAN countries, and facilitating
economic integration with regional and international allies. [2][3][4] It stands as one of the largest and
most important free trade areas (FTA) in the world, and together with its network of dialogue
partners, drove some of the world's largest multilateral forums and blocs, including Asia-Pacific
Economic Cooperation, East Asia Summit and Regional Comprehensive Economic Partnership.
The ASEAN Free Trade Area (AFTA) is composed of six original members of the Association of Southeast Asian
Nations (ASEAN) – Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. With the objective to
liberalise intra-ASEAN trade.

https://eresources.nlb.gov.sg/history/events/bf07b77f-68fd-4473-9ccb-1197fe323cb8
\Who proposed AFTA?

, the AFTA was first proposed by then Thai Prime Minister Anand Panyarachun at the 24th ASEAN ministerial
meeting held in Bangkok in July 1991. He was the former prime minister of Thailand and He was effective in
initiating economic and political reforms, one of which was the drafting of Thailand's "Peoples'
Constitution", which was promulgated in 1997 to 2006.

When was the AFTA established?

The AFTA was endorsed by the six heads of government at the fourth ASEAN Summit held in Singapore on 28
January 1992.[2] In accordance with the AFTA Framework Agreement, ASEAN members had to commit to
establish a free trade area by 2008 by means of a Common Effective Preferential Tariff (CEPT) scheme. Taking
effect from January 1993, this scheme would gradually reduce tariffs on capital goods, manufactured products
and processed agricultural goods.[3]

  One of the first ASEAN countries to fulfil its AFTA commitment by lifting import tariffs on the goods listed under
[5]

the CEPT scheme was Singapore.[6]

Singapore was a strong advocate of the AFTA as then Prime Minister Goh Chok Tong saw the proposed trade
bloc as a timely ASEAN response to a changing international economic landscape that was marked by the
emergence of new markets in Eastern Europe and regional economic blocs such as the Single European Market
and the North America Free Trade Area.[4] In addition, Goh felt that the intra-regional competition brought about
by the reduction of trade barriers would, in the long run, improve the efficiency and productivity of ASEAN
economies. This would in turn increase ASEAN’s attractiveness to foreign investments.[5] 

In December 1995, the heads of government of the six original ASEAN members agreed to accelerate the CEPT
scheme of the AFTA from 2003 to 2008. Over the years, the scope of the AFTA expanded to include Vietnam
joined in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. These newer ASEAN members were
required to adhere to the AFTA agreement but were given longer time frames to meet their trade liberalisation
commitments.[9]
The primary goals of AFTA seek to:

 Increase ASEAN's competitive edge as a production base in the world market

through the elimination, within ASEAN, of tariffs and non-tariff barriers; and
 Attract more foreign direct investment to ASEAN.
 The liberalisation of trade in the region through elimination of both intra-
regional tariffs and non-tariff barriers had contributed towards making
ASEAN's manufacturing sectors more efficient and competitive in the
global market. As a result, consumers are able to source goods from the
more efficient producers in ASEAN, thus creating a robust intra-ASEAN
trade.

The primary mechanism for achieving such goals is the Common Effective Preferential Tariff
scheme, which established a phased schedule in 1992 with the goal to increase the region’s
competitive advantage as a production base geared for the world market.

The Common Effective Preferential Tariff (CEPT) scheme [edit]

Unlike the EU, AFTA does not apply a common external tariff on imported goods. Each ASEAN
member may impose tariffs on goods entering from outside ASEAN based on its national
schedules. However, for goods originating within ASEAN, ASEAN members are to apply a tariff
rate of 0-5 %(the more recent members of Cambodia, Laos, Myanmar and Vietnam, also known
as CMLV countries, were given additional time to implement the reduced tariff rates). This is
known as the Common Effective Preferential Tariff (CEPT) scheme.
ASEAN members have the option of excluding products from the CEPT in four cases:
1.) Inclusion List: 2)Temporary exclusions 3.) Sensitive agricultural products 4.) General
exceptions.
1. Inclusion list: manufactured products – including capital goods, processed agricultural
products and those products failing outside the definition of agricultural products.
2. Temporary exclusions refer to products for which tariffs will ultimately be lowered to 0-5 
%, but which are being protected temporarily by a delay in tariff reductions. Ex. Mining,
forestry, fishery, etc.)
3. For sensitive agricultural products include commodities such as rice, ASEAN members
have to reduce the tariff levels to 0-5 %. Ex. Unprocessed agricultural products-rice,
sugar, onion, etc.)
4. General exceptions refer to products which an ASEAN 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. Ex. Gun,
ammunition, narcotics, etc)
https://www.aseanbriefing.com/news/aseans-free-trade-agreements-an-overview/#:~:text=On
%20November%2015%2C%202020%2C%20ASEAN,percent%20of%20the%20world's%20population.

Benefits

 it is important for foreign investors to understand ASEAN’s free trade

agreements (FTAs) to capitalize on the bloc’s long-term potential.
ASEAN could become the world’s fourth-largest economy by 2030, comprising of a
consumer market valued at over US$4 trillion.

This economic achievement will be driven by four major forces: strong demographic
trends (65 percent of ASEAN’s 600 million population will be middle-class),
increasing foreign investment, rising income levels, and digital advances.

Strengthening the bloc’s continued growth trajectory is its various free trade
agreements (FTAs) some of which are the world’s largest. These FTA offers
numerous opportunities for foreign investors, ranging from capitalizing on Singapore
as the region’s financial services hub or moving manufacturing operations to low-
cost regions in Vietnam, Indonesia, and Malaysia.

International businesses can benefit from ASEAN’s FTA network in the form of
reduced importer costs, improved custom clearances, and increased access to
products eligible for preferential treatment. Moreover, there are numerous tax and
fiscal benefits such as tax holidays and deductions.

Dispute resolution[edit]
Although these ASEAN national customs and trade authorities co-ordinate among themselves,
disputes can arise. The ASEAN Secretariat has no legal authority to resolve such disputes, so
disputes are resolved bilaterally through informal means or through dispute resolution.
An ASEAN Protocol on Enhanced Dispute Settlement Mechanism governs formal dispute
resolution in AFTA and other aspects of ASEAN. ASEAN members may seek mediation and
good offices consultations. If these efforts are ineffective, they may ask SEOM (Senior Economic
Officials Meetings) to establish panel of independent arbitrators to review the dispute. Panel
decisions can be appealed to an appellate body formed by the ASEAN Economic Community
Council.
The Protocol has almost never been invoked because of the role of SEOM in the dispute
resolution process. SEOM decisions require consensus among all ASEAN members, and since
both the aggrieved party and the alleged transgressor are both participating in SEOM, such
consensus cannot be achieved. This discourages ASEAN members from invoking the Protocol,
and often they seek dispute resolution in other fora such as the WTO or even the International
Court of Justice. This can also be frustrating for companies affected by an AFTA dispute, as they
have no rights to invoke dispute resolution yet their home ASEAN government may not be willing
to invoke the Protocol. The ASEAN Secretary General has listed dispute resolution as requiring
necessary reform for proper administration of AFTA and the AEC.

Further trade facilitation efforts[edit]

To further facilitate the trade Efforts to close the development gap and expand trade among
members of ASEAN. According to a 2008 research brief published by the World Bank as part of
its Trade Costs and Facilitation Project,[24] ASEAN 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 ASEAN Free Trade Agreement.
This new analysis suggests examining two key areas, among others: port facilities and
competitiveness in the Internet services sector. Reform in these areas, the report states, could
expand ASEAN trade by up to 7.5% ($22 billion) and 5.7% ($17 billion), respectively. By contrast,
cutting applied tariffs in all ASEAN members to the regional average in Southeast Asia would
increase intra-regional trade by about 2% ($6.3 billion). [25]

https://fta.miti.gov.my/index.php/pages/view/asean-afta

Membership[edit]
Countries that agree to eliminate tariffs among themselves:

  Brunei
  Indonesia
  Malaysia
  Philippines
  Singapore
  Thailand
  Myanmar
  Cambodia
  Laos
  Vietnam
Regular Observers

  Papua New Guinea

  East Timor
The most recent ASEAN meeting was observed also by:

  China
  South Korea
  Japan
  India
  Russia
  Australia
  New Zealand

Francis Mark A. Quimba Mark Anthony A. Barral Maureen Ane D. Rosellon Sylwyn C. Calizo Jr.,
December 2020 - Impact of FTA on Philippine Industries: Analysis of Network Effects
https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps2031.pdf

Based on the study on the Impacts of FTA on Philippine Industries

Trade is an important component of the Philippine economy given that 2017 figures show that total
imports and exports (size of trade) is about 72.0 percent of GDP. The Philippine Development Plan
2017-2022 (NEDA 2017) also identified trade as an integral component of the Philippine strategy for
industrial development through the expansion of markets and increasing the linkages of domestic
firms, particularly the Micro, Small, and Medium Enterprises (MSMEs) to GVCs. To this, the
Philippines has pursued forming trade agreements with key partners in the region. The Philippine
trade agreements has allowed the Philippines to import majority of products from its partner
countries at zero tariff rates (Table 14). Neighboring ASEAN partners have close to 100.0 percent of
its exports to the Philippines at zero percent tariff. Japan, through the PJEPA, and Australia and New
Zealand also have more than 95.0 percent of products subjected to zero tariffs. Despite this,
utilization rates of FTAs (Table 15) have been very low for some of the country’s key partners. Japan,
India, and South Korea have below 50.0 percent utilization rate of FTAs. China performs a little
better at 62.7 percent but this is still relatively lower than Thailand (73.4%), Indonesia (79.3%) and
New Zealand (81.4%).

Insert table

The results of the analysis show that imports under an FTA scheme (relative to MFN imports) have a
positive and significant direct effect on industry growth and labor productivity. This provides
evidence that the country is benefiting from trade agreements through improvements of industry
output. The results also show that the Philippines is not benefitting from trade agreements through
the increase in employment. Businesses seem to increase their output by increasing the labor
productivity of their employees rather than increasing the number of workers.

The results of the analysis show that the linkages of the Philippines seem weak as reflected by the
statistically insignificant relationship of the upstream and downstream effects with GVA. One way of
increasing the connectivity of Philippine businesses and industries is to initiate Supplier development
and linkage programs which would link domestic firms, especially SMEs, with foreign affiliates of
MNCs. It is recommended that key government agencies related to trade and investment (e.g.
DTI/BOI) facilitate the matching of firms as well as providing subcontracting and outsourcing advice
to domestic firms.

It is also recommended that trade policies ensure that businesses translate gains from cheaper
imports to increasing production and employment. The negative relationship between the shock and
employment reveal that businesses are hesitant to increase employment despite benefiting from
importation at lower rates. It is therefore recommended that trade policies are supported by strong
employment policies. In an interview, former NEDA Secretary General Ernesto Pernia mentioned
that young Filipinos “are underutilized because their skills are not being enhanced by education,
training or employment. Government needs to strengthen its JobStart program, which provides
assistance to young Filipinos in finding decent jobs (NEDA 2016).” Businesses are hesitant to increase
employment because these tend to become long-term investments which would include in-house
training and skills development. Thus, government needs to increase the confidence of industries
and companies in the growth prospects of the country for them to translate their gains from tariff-
free imports to employment. There is also the need to address the supply side issues of labor. To
ensure that businesses would be able to find the appropriately skilled workers for employment,
there may be a need for government to provide incentives to encourage universities and researchers
to interact more closely with industry and thus, in the medium to long run develop the specialized
skills and technological capabilities they need.

http://investasean.asean.org/index.php/page/view/asean-agreements
Under ASEAN, the Philippines has preferential trade agreements with
China, Hong Kong, India, Japan, South Korea, and Australia and New
Zealand. Visit https://www.dti.gov.ph/ and  http://tariffcommission.gov.ph/
for a list of Philippine trade agreements and corresponding tariff schedules
and commitments. Other trade-related information is also available at the
Philippine National Trade Repository website http://pntr.gov.ph/.

ASEAN Trade in Goods Agreement 

The 2010 ASEAN Trade in Goods Agreement (ATIGA) consolidated all
Common Effective Preferential Tariff/ASEAN Free Trade Area
(CEPT/AFTA) commitments related to trade in goods. It seeks to establish
a single market and production base with a free flow of goods in the
ASEAN region, a major component of the ASEAN Economic Community
(AEC).  ATIGA covers tariff liberalization, trade facilitation initiatives,
simplification of rules of origin, and establishment of an ASEAN Trade
Repository. Visit http://investasean.asean.org/ for updates on ASEAN
trade.

https://www.trade.gov/country-commercial-guides/philippines-trade-agreements#:~:text=It
%20seeks%20to%20establish%20a,of%20an%20ASEAN%20Trade%20Repository.