TRADE
The ASEAN Free Trade Area (AFTA)
The ASEAN Free Trade Area has now been virtually realized. The six original signatories have reduced tariffs on all products listed in their 2002 Inclusion List (IL) to 0-5 percent. Since 1 January 2003, tariffs on 99.55 percent (44,160 tariff lines out of total 44,361 tariff lines) of products in the 2003 IL of the ASEAN-6 have been reduced to the 0-5 percent tariff range. Products in their IL, which still have tariffs of above 5 percent, are those that have been transferred from the Sensitive List (SL) and General Exception List (GE) in 2003. The average tariff for ASEAN-6 under the CEPT Scheme is now down to 2.39 percent from 12.76 percent when the tariff-cutting exercise started in 1993.
The newer members of ASEAN still have to reach the 0-5 percent tariff for intra-ASEAN trade – Viet Nam in 2006, Lao PDR and Myanmar in 2008, and Cambodia in 2010. Overall, in 2003, 87.85 percent of all products in the IL of the ten Member Countries tentatively have tariffs of between 0-5 percent and about 10.68 percent of these products have tariffs of above 5 percent. Ultimately, tariffs will be completely abolished by 2010 for ASEAN-6 and 2015 for the newer members with flexibility on some sensitive products until 2018.
Note: “Other” represents those tariff lines which will be moved to the IL in 2003. The information on the applicable CEPT rates will be available once concerned Member Countries issue the necessary legal enactments.
Pursuant to the Protocol to Amend the Common Effective Preferential Tariff (CEPT) scheme for AFTA for the Elimination of Import Duties, the ASEAN-6 have committed to eliminate tariffs on 60 percent of their products in the IL by the year 2003. Based on the tentative 2003 CEPT Package, most of ASEAN-6 have already met the target. Currently, about 48 percent of products in the IL of the ASEAN-6 have zero tariffs.
A work programme on the elimination of Non-Tariff Barriers (NTBs) is expected to be finalized by the AFTA Council Meeting in September 2003. This work programme would include, among others, the process of verification and cross-notification; updating the working definition of Non-Tariff Measures (NTMs) and NTBs in ASEAN; the setting-up of a database on all NTMs maintained by Member Countries; and the eventual elimination of unnecessary and unjustifiable NTMs.
A Task Force on the CEPT-AFTA Rules of Origin is currently working on improving and strengthening the CEPT Rules of Origin and its Operational Procedures, which include the following measures, among others: (a) standardizing the calculation of local/ASEAN content, where possible; (b) consider the adoption of substantial transformation rule as an alternative rule in determining product origin for specific sectors that cannot comply with the 40% local/ASEAN content requirement; (c) adopting specific rules of origin for specific sectors such as automotive and semi-finished aluminum products, where possible; (d) identifying measures to prevent circumvention of the CEPT Rules of Origin and strengthen Rule 22 of the Operational Procedure; and (e) addressing problems encountered in the issuance and processing of Certificates of Origin (Form Ds).
Direction of Trade
ASEAN’s exports had regained its upward trend in the two years following the financial crisis of 1997-1998 reaching its peak in 2000 valued at US$ 408 billion. However, as a result of the economic slowdown in the United States and Europe and the recession in Japan, ASEAN exports declined in 2001 to US$ 366.8 billion. The decline in ASEAN trade continued up to the first three quarters of 2002. [see Figures 2 and 3]
While trade with traditional industrial markets remained robust, share of intra-ASEAN trade remained low with intra-ASEAN exports constituting 22.75 percent in 2001. This share was 21.14 percent in 1993 when AFTA was launched.
Intra-ASEAN exports for the first three quarters of 2002 decreased by 1.5 percent, while intra-ASEAN imports increased by 3 percent. [see Figure 4]
ASEAN Trade with Selected Trading Partners
The United States, the European Union, Japan, China (including Hong Kong) and the Republic of Korea (ROK) are ASEAN’s largest exports markets. On the import side, Japan, followed by the US and EU, China (including Hong Kong) and the ROK, are the largest sources of ASEAN imports.
For the first three quarters of 2002, ASEAN exports to the US, EU and Japan declined. During the same period, exports to China and the ROK increased by 18.7 percent and 3.3 percent, respectively.
