Thursday, July 21, 2005

ASEAN in tariffs progress

Martin Abbugao


The Association of Southeast Asian Nations is said to be on track to achieve a zero-tariff regime by 2015, a key ingredient for its ambitious plan to create a single market and production base by 2020.

Regional trade officials said the 10-member group was working its way through the difficulties of implementing the proposed ASEAN Free Trade Area.

The process has been fraught with problems due to the wide variations in economic development of the nations, from wealthy Singapore at one end of the spectrum to Burma, Cambodia, Laos and Vietnam at the other.

Overall, AFTA aims to abolish tariffs on traded goods by 2010 for Singapore, Malaysia, the Philippines, Indonesia, Brunei and Thailand, the most developed nations of the group collectively known as the ASEAN 6.

Tariffs for the four poorer countries will be wiped out by 2015.

While trade is not normally a frontline issue at ASEAN's annual foreign ministers' meeting, the issue of economic integration is expected to be touched at this year's session in Laos next week.

ASEAN trade officials point out the successes for the region - a market of 550 million people with a combined gross domestic product of US$1 trillion (HK$7.8 trillion) - since the AFTA process began in 1993. In particular, the ASEAN 6 have already trimmed tariffs on goods in their inclusion list to not more than 5 percent as of 2003.

Vietnam was given until 2006 to slash tariffs to 0-5 percent, Laos has until 2008, while Burma and Cambodia have until 2010.

Thai exports to the region rose to US$21.2 billion in 2004 from US$6.5 billion in 1993, and ASEAN has become Thailand's largest export market.

But analysts say the group still has many big challenges to overcome if it is to realize its AFTA goals, particularly in removing protectionist barriers on certain sectors deemed ``sensitive'' to domestic interests.

The group must also ensure that members' tariff liberalization commitments are honored and prod the bloc's less-developed members to include more products in a basket headed for tariff cuts.

Moreover, ASEAN should also speed up implementation of non-tariff measures - another pillar in the overall goal to create a European Union-style economic community by 2020 or earlier.

``ASEAN has a window of opportunity in which it is still viewed as a major and important trading bloc,'' said Ernest Bower, a US business consultant and former president of the US-ASEAN Business Council. ``China and India are growing fast, and in the process they are drawing attention away from an ASEAN viewed as not entirely serious about economic integration.''

Already, some ASEAN countries have sought to protect certain industries under an AFTA provision allowing the temporary exclusion of certain sectors from tariff reductions.

Malaysia has sought a delay in the opening up of its auto sector, sparking a demand for compensation from Thailand, a regional manufacturing base for the world's major carmakers.

The Philippines asked to protect its nascent petrochemical industry.

Singapore's trade ministry said it had conducted bilateral talks with Manila on the issue and this was resolved amicably.

ASEAN's biggest member, Indonesia, has also put rice and sugar on a ``highly sensitive'' list of items that are to be excluded from drastic tariff cuts, according to Indonesian trade ministry spokesman Imam Pambagyo. He said Indonesia expects rice and sugar to be liberalized in 10 to 15 years.

Vietnam has asked for a delay in opening up the automobile accessories and light trucks market, which again led to negotiations for compensation with Thailand.

Some other countries may ask to protect certain sectors when the deadline to slash tariffs to 0-5 percent draws nearer. But Bower said ASEAN should put a stop to ``backsliding and side-deals'' if it wished to be seen as a unified market, especially as it negotiates free-trade deals with neighbors like China, Japan and India. AGENCE FRANCE-PRESSE

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