ASEAN Free Trade Area

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Trade arrangements in Southeast Asia

The ASEAN Free Trade Area (AFTA) [1] 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. [5] [6] [7] [8] [9] [10]

Contents

The AFTA agreement was signed on 28 January 1992 in Singapore. When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. AFTA now comprises the ten countries of ASEAN. All the four latecomers were required to sign the AFTA agreement to join ASEAN, but were given longer time frames in which to meet AFTA's tariff reduction obligations.

The primary goals of AFTA seek to:

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.

History

1967

1976

1977

1987

1991

1992

1993

1995

1997

1999

The Common Effective Preferential Tariff (CEPT) scheme

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 three cases: 1.) Temporary exclusions 2.) Sensitive agricultural products 3.) General exceptions. 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.

For sensitive agricultural products include commodities such as rice, ASEAN members have until 2010 to reduce the tariff levels to 0-5 %.

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. ASEAN members have agreed to enact zero tariff rates on virtually all imports by 2010 for the original signatories, and 2015 for the CMLV countries.

Rule of origin

The CEPT only applies to goods originating within ASEAN. The general rule is that local ASEAN content must be at least 40% of the FOB value of the good. The local ASEAN content can be cumulative, that is, the value of inputs from various ASEAN members can be combined to meet the 40% requirement. The following formula is applied:

( Raw material cost
+ Direct labour cost
+ Direct overhead cost
+ Profit
+ Inland transport cost )
x 100 % FOB value

However, for certain products, special rules apply:

The exporter must obtain a “Form D” certification from its national government attesting that the good has met the 40% requirement. The Form D must be presented to the customs authority of the importing government to qualify for the CEPT rate. Difficulties have sometimes arisen regarding the evidentiary proof to support the claim, as well as how ASEAN national customs authorities can verify Form D submissions. These difficulties arise because each ASEAN national customs authority interprets and implements the Form D requirements without much co-ordination.

Administration

Administration of AFTA is handled by the national customs and trade authorities in each ASEAN member. The ASEAN Secretariat has authority to monitor and ensure compliance with AFTA measures, but has no legal authority to enforce compliance. This has led to inconsistent rulings by ASEAN national authorities. The ASEAN Charter is intended to bolster the ASEAN Secretariat's ability to ensure consistent application of AFTA measures.

ASEAN national authorities have also been traditionally reluctant to share or cede sovereignty to authorities from other ASEAN members (although ASEAN trade ministries routinely make cross-border visits to conduct on-site inspections in anti-dumping investigations). Unlike the EU or NAFTA, joint teams to ensure compliance and investigate non-compliance have not been widely used. Instead, ASEAN national authorities must rely on the review and analysis of other ASEAN national authorities to determine if AFTA measures such as rule of origin are being followed. Disagreements may result between the national authorities. Again, the ASEAN Secretariat may help mediate a dispute but has no legal authority to resolve it.

ASEAN has attempted to improve customs co-ordination through the implementation of the ASEAN Single window project. The ASEAN Single Window would allow importers to submit all information related to the transaction to be entered electronically once. This information would then be shared with all other ASEAN national customs authorities.

Dispute resolution

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

Efforts to close the development gap and expand trade among members of ASEAN are key points of policy discussion. 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]

Membership

Countries that agree to eliminate tariffs among themselves:

Regular Observers

The most recent ASEAN meeting was observed also by:

ASEAN–Australia–New Zealand Free Trade Area

An International treaty titled: Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) signed in Cha-am, Phetchaburi, Thailand on 27 February 2009 created a free trade area between ASEAN nations, Australia and New Zealand. [26]

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<span class="mw-page-title-main">Southeast Asia</span> Subregion of the Asian continent

Southeast Asia is the geographical south-eastern region of Asia, consisting of the regions that are situated south of China, east of the Indian subcontinent, and north-west of mainland Australia which is part of Oceania. Southeast Asia is bordered to the north by East Asia, to the west by South Asia and the Bay of Bengal, to the east by Oceania and the Pacific Ocean, and to the south by Australia and the Indian Ocean. Apart from the British Indian Ocean Territory and two out of 26 atolls of Maldives in South Asia, Maritime Southeast Asia is the only other subregion of Asia that lies partly within the Southern Hemisphere. Mainland Southeast Asia is entirely in the Northern Hemisphere. East Timor and the southern portion of Indonesia are the parts of Southeast Asia that lie south of the Equator.

<span class="mw-page-title-main">ASEAN</span> International organization of Southeast Asian countries

The Association of Southeast Asian Nations, commonly as ASEAN, is a political and economic union of 10 states in Southeast Asia. Together, its member states represent a population of over 600 million over a land area of 4.5 million km2 (1.7 million sq mi). The bloc generated a purchasing power parity (PPP) gross domestic product (GDP) of around US$10.2 trillion in 2022, constituting approximately 6.5% of global GDP (PPP). ASEAN member states include some of the fastest growing economies in the world.

<span class="mw-page-title-main">ASEAN Summit</span> Meeting of ASEAN member states

The ASEAN Summit is a biannual meeting held by the members of the Association of Southeast Asian Nations (ASEAN) in relation to economic, political, security, and socio-cultural development of Southeast Asian countries. In addition, it serves as a prominent regional (Asia) and international (worldwide) conference, with world leaders attending its related summits and meetings to discuss various problems and global issues, strengthening co-operation, and making decisions. The summit has been praised by world leaders for its success and ability to produce results on a global level.

<span class="mw-page-title-main">East Asia Summit</span> Annual ASEAN meeting since 2005

The East Asia Summit (EAS) is a regional forum held annually by leaders of, initially, 16 countries in the East Asian, Southeast Asian, South Asian and Oceanian regions, based on the ASEAN Plus Six mechanism. Membership expanded to 18 countries including Russia and the United States at the Sixth EAS in 2011. Since its establishment, ASEAN has held the central role and leadership in the forum. EAS meetings are held after the annual ASEAN leaders' meetings, and plays an important role in the regional architecture of Asia-Pacific. The first summit was held in Kuala Lumpur, Malaysia on 14 December 2005.

The East Asia Economic Caucus (EAEC) or East Asia Economic Group (EAEG) was a regional free trade zone (FTA) proposed in 1997 by Malaysian Prime Minister Mahathir Mohamad and encompasses most nations of East and Southeast Asia (ESEA). However, Japan at the time refused participation due to the exclusion of the United States, which at the time had tariffs on each other, has an economy too deeply interlinked through trade, and was still reeling from the effects of the Japanese asset price bubble. They also added that they were already members of the Asia-Pacific Economic Cooperation (APEC) and many other notable regional organizations in ESEA. South Korea was also extremely dissatisfied with the idea of placing Japan at the center of the proposed organization due to historical connotations.

The First East Asia Summit was held in Kuala Lumpur, Malaysia on December 14, 2005. The East Asia Summit (EAS) is a pan-Asia forum held annually by the leaders of 16 countries in the East Asian region. EAS meetings are held after annual ASEAN leaders' meetings.

<span class="mw-page-title-main">Economic Research Institute for ASEAN and East Asia</span>

The Economic Research Institute for ASEAN and East Asia or ERIA is an international organization established in Jakarta, Indonesia in 2008 by a formal agreement among Leaders of 16 countries in the East Asian region to conduct research activities and make policy recommendations for further economic integration in the East Asia. ERIA works very closely with both the ASEAN Secretariat and 16 Research Institutes to undertake and disseminate policy research under the three pillars, namely “Deepening Economic Integration”, ”Narrowing Development Gaps”, and “Sustainable Development” and provide analytical policy recommendations to Leaders and Ministers at their regional meetings. ERIA provides intellectual contributions to East Asian Community building and serves as a Sherpa international organization. ERIA Ranks 9th among the world's "Top International Economics Think Tanks" according to the 2020 Global Go To Think Tanks Index Report conducted by the University of Pennsylvania.

<span class="mw-page-title-main">Free trade agreements of New Zealand</span>

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The Comprehensive Economic Partnership for East Asia (CEPEA) is a Japanese led proposal for trade co-operation, free trade agreement, among the 16 present member countries of the East Asia Summit. All those movements and efforts were taken over by the following Regional Comprehensive Economic Partnership.

<span class="mw-page-title-main">ASEAN–China Free Trade Area</span> Asian free-trade area

The ASEAN–China Free Trade Area (ACFTA) is a free-trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and the People's Republic of China.

The ASEAN–India Free Trade Area (AIFTA) is a free trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and the Republic of India. The initial framework agreement was signed on 8 October 2003 in Bali, Indonesia. and the final agreement was on 13 August 2009. The free trade area came into effect on 1 January 2010. India hosted the latest ASEAN-India Commemorative Summit in New Delhi on 26 January 2018. In the financial year 2017–18, Indo-ASEAN bilateral trade grew by almost 14% to reach US$81.3 billion. India's imports from ASEAN were valued at US$47.13 billion while its exports to ASEAN stood at US$34.2 billion.

<span class="mw-page-title-main">Enlargement of ASEAN</span> Process of expanding the Association of Southest Asian Nations

The enlargement of the Associationof Southeast Asian Nations is the process of expanding the Association of Southeast Asian Nations (ASEAN) through the accession of new member states. This process began with ASEAN's five original members, who founded the association through the signing of the Bangkok Declaration in 1967. Since then, the ASEAN's membership has grown to ten with the accession of Cambodia in 1999.

<span class="mw-page-title-main">Regional Comprehensive Economic Partnership</span> 2020 Asia-Pacific free trade agreement

The Regional Comprehensive Economic Partnership is a free trade agreement among the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. The 15 member countries account for about 30% of the world's population and 30% of global GDP, making it the largest trade bloc in history. Signed in November 2020, RCEP is the first free trade agreement among the largest economies in Asia, including China, Indonesia, Japan, and South Korea.

The ASEAN Smart Cities Network (ASCN) is a collaborative platform that aims to unify smart city development efforts across ASEAN. The ACSN aims to facilitate cooperation on smart city development, broker smart city development projects between city government units and local private sector firms, and secure funding and support for these developments from ASEAN's external partners. The initiative was launched at the 32nd ASEAN Summit as a key deliverable of Singapore's ASEAN Chairmanship in 2018, and its Inaugural Meeting took place on 8 July 2018.

The Timor-Leste–Indonesia–Australia Growth Triangle (TIA-GT) is a combined initiative of the regions of Eastern Indonesia, Northern Australia, and the Democratic Republic of Timor-Leste. This initiative aims to promote and foster economic growth through integrated economic development in the region that these nations reside in. The growth triangle was created in 2012, after a meeting was held by Indonesian president Susilo Bambang Yudhoyono with Prime Minister of Australia Julia Gillard and Timor-Leste Prime Minister Xanana Gusmao. The initiative aims to support economic, social, and cultural development primarily by attracting investment, developing manufacturing industries, enhancing human capital, and overall building a stronger cooperative relationship between the three countries involved. The initiative also aimed to accelerate the accession of Timor-Leste into the Association of Southeast Asian Nations (ASEAN) and to fulfill goals set by Timor-Leste's Strategic Development Plan, such as increasing the nation's economic prosperity and stability. The growth triangle is often misinterpreted as a free-trade zone; however, while there are elements of free trade agreements between Indonesia and Australia specifically, the terms of the growth triangle initiative are not directly linked to these free trade agreements, and the goals of the growth triangle do not specifically encompass free trade between the three nations.

Vietnam, although a relatively young and small nation, has successfully established trade relations with dozens of countries worldwide. This is especially evident in the number of free trade agreements (FTAs) that the country has signed and is participating in. Being part of the Association of Southeast Asian Nations (ASEAN), economic opportunities for Vietnam expands beyond bilateral trade agreements with specific countries to include multilateral trade agreements via the ASEAN Free Trade Area (AFTA).

References

  1. ↑ "AFTA & FTAs". ASEAN Secretariat. Archived from the original on 30 October 2012.
  2. ↑ "The ASEAN Free Trade Area: Reaching Its Target – Opening Remarks of H.E. Rodolfo C. Severino , Secretary General of the Association of Southeast Asian Nations, at the AFTA 2002 Sympossium". 31 January 2002. Retrieved 3 November 2019.
  3. ↑ "ASEAN Free Trade Area (AFTA Council)". ASEAN | One Vision One Identity One Community.
  4. ↑ "ASEAN leaders agree to create an ASEAN Free Trade Area - Singapore History". eresources.nlb.gov.sg.
  5. ↑ "India at the East Asia Summit". mea.gov.in. August 2018.
  6. ↑ "Trade agreements are in ASEAN's best interests". East Asia Forum. 6 February 2016.
  7. ↑ "ASEAN's role in Asia Pacific: In the driver's seat or just a back-seat driver?". ink.library.smu.edu.sg.
  8. ↑ "History". www.apec.org.
  9. ↑ Elec, Andrew. "Back to Canberra: Founding APEC" . Retrieved 3 November 2019.
  10. ↑ "Understanding ASEAN free trade agreements". aseanbriefing.com. 13 February 2014.
  11. ↑ "History - The founding of ASEAN". asean.org. Archived from the original on 8 August 2021. Retrieved 7 October 2021.
  12. 1 2 3 "ASEAN Summit: Malaysia To Take Centre Stage---ASEAN---China Center". www.asean-china-center.org. Retrieved 7 October 2021.
  13. ↑ Desker, Barry (October 2017), "The 1976 Bali Summit: ASEAN Shifts Gears", 50 Years of ASEAN and Singapore, WORLD SCIENTIFIC, pp. 21–34, doi:10.1142/9789813225138_0002, ISBN   978-981-322-511-4 , retrieved 7 October 2021
  14. 1 2 3 Indorf, Hans H. (1978). "THE KUALA LUMPUR SUMMIT: A Second for ASEAN". Southeast Asian Affairs. 1978: 35–44. doi:10.1355/SEAA78C. ISSN   0377-5437. JSTOR   27908333.
  15. 1 2 3 4 Crone, Donald (1988). "THE ASEAN SUMMIT OF 1987: Searching for New Dynamism". Southeast Asian Affairs. 1988: 32–50. doi:10.1355/SEAA88C. ISSN   0377-5437. JSTOR   27911946.
  16. ↑ "ASEAN Economic Co-operation The Tasks Ahead: Report of a Colloquium on "ASEAN Economic Co-operation: The Tasks Ahead" held in Singapore 27–28 February 1987". ASEAN Economic Bulletin. 4 (1): 119–124. 1987. ISSN   0217-4472. JSTOR   25770146.
  17. 1 2 3 4 5 Akrasanee, Narongchai. "ASEAN Free Trade Agreement: A Major Milestone in the 50 Years of ASEAN" (PDF). The ASEAN Journey: Reflections of ASEAN Leaders and Officials. 1. Archived (PDF) from the original on 21 January 2021.
  18. 1 2 Hapsari, Indira M.; Mangunsong, Carlos. "Determinants of AFTA Members' Trade Flows and Potential for Trade Diversion" (PDF). Asia-Pacific Research and Training Network on Trade Working Paper Series. 21. Archived (PDF) from the original on 22 December 2014.
  19. ↑ TONGZON, JOSE L. "THE CHALLENGE OF REGIONAL ECONOMIC INTEGRATION: THE VIETNAMESE PERSPECTIVE". The Developing Economies. XXXVII-2 (June 1999): 137–61.
  20. ↑ Frost, Frank. "Vietnam's Membership of ASEAN" (PDF). Current Issues Brief (3 1995–96). Archived (PDF) from the original on 9 April 2016.
  21. ↑ "Association of Southeast Asian Nations (ASEAN) | Treaties & Regimes | NTI". www.nti.org. Retrieved 7 October 2021.
  22. ↑ Stuart-Fox, Martin (1998). "Laos in 1997: Into ASEAN". Asian Survey. 38 (1): 75–79. doi:10.2307/2645470. ISSN   0004-4687. JSTOR   2645470.
  23. 1 2 "THE THIRTEENTH MEETING OF THE ASEAN FREE TRADE AREA (AFTA) COUNCIL" (PDF). Archived (PDF) from the original on 26 August 2017.
  24. ↑ World Bank Archived 30 May 2008 at the Wayback Machine
  25. ↑ "Deeper Integration in ASEAN: Why Transport and Technology Matter for Trade," Archived 5 February 2009 at the Wayback Machine John S. Wilson & Benjamin Taylor; Trade Facilitation Reform Issue Brief, The World Bank. 2008.
  26. ↑ "Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (Cha-am, Phetchaburi, Thailand, 27 February 2009) - ATS 1 of 2010”. Australasian Legal Information Institute, Australian Treaties Library. Retrieved on 18 April 2017.
  27. ↑ New Zealand Ministry of Foreign Affairs and Trade. "ASEAN Australia New Zealand FTA (AANZFTA)". New Zealand Ministry of Foreign Affairs and Trade. Archived from the original on 16 October 2015. Retrieved 28 April 2016.
  28. 1 2 3 Pushpanathan, Sundram (22 December 2009). "ASEAN Charter: One year and going strong". The Jakarta Post . Retrieved 1 January 2010.
  29. ↑ "MOFA: Entry into Force of the Japan-ASEAN Comprehensive Economic Partnership Agreement". www.mofa.go.jp. Retrieved 18 September 2019.
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