ASEAN Free Trade Area Asean Free Trade Area (AFTA)[1] is a trade bloc agreement by the Association of Southeast

Asian Nations supporting local manufacturing in all ASEAN countries. 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 in order 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:

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 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 regions competitive advantage as a production base geared for the world market. 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.

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:

Change in Chapter Rule for Wheat Flour; Change of Tariff Sub-Heading for Wood-Based Products; Change in Tariff Classification for Certain Aluminum and Articles thereof.

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 coordination. 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 Secretariats 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 coordination 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 coordinate 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,[2] 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).[3] ASEAN Plus Three See also: Asian Monetary Unit

Members of the ASEAN Plus Three ASEAN Plus Three (APT) is a forum that functions as a coordinator of cooperation between the Association of Southeast Asian Nations and the three East Asia nations of China, Japan, and South Korea. Government leaders, ministers, and senior officials from the 10 members of the ASEAN and the three Northeast Asian states consult on an increasing range of issues.[4] The APT is the latest development of East Asian regional cooperation. In the past, proposals, such as ROKs call for an Asian Common Market in 1970 and Japans 1988 suggestion for an Asian Network, have been made to bring closer regional cooperation.[5] The first leaders' meetings were held in 1996 and 1997 to deal with Asia Europe Meeting issues, and China and Japan each wanted regular summit meetings with ASEAN members afterwards. The group's significance and importance was strengthened by the Asian Financial Crisis. In response to the crisis, ASEAN closely cooperated with China, Japan, and ROK. Since the implementation of the Joint Statement on East Asia Cooperation in 1999 at the Manila Summit, APT finance ministers have been holding periodic consultations.[6] ASEAN Plus Three, in establishing the Chiang Mai Initiative, has been credited as forming the basis for financial stability in Asia,[7] the lack of such stability having contributed to the Asian Financial Crisis. The Asian Currency Unit (ACU) is a proposed weighted index of currencies for ASEAN+3. The ACU was inspired by the now defunct European Currency Unit, replaced by the Euro. The Asian Currency Unit's purpose is to help stabilise the region's financial markets. The ACU as it is proposed is a currency basket and not a real currency, i.e., a weighted index of East Asian currencies that will function as a benchmark for regional currency movements.[8][9] The Asian Development Bank is currently reviewing different options concerning the technical aspects related to the ACU calculation, including the nature of the basket, the choice of fixed weights vs. fixed units, the selection of currencies to be included in the basket, the choice of weights, the criteria for their periodical revision, and other aspects as well. The Asian Development Bank was to announce the details of the ACU in March 2006 or later.[10] However external pressures delayed this announcement although the concept was still being studied in detail.[11] A panel discussion in February 2007 cited technical and political obstacles as having prevented the project from

advancing.[12] The unit, limited to ASEAN+3, was said to be still moving forward by mid-July 2007.[13] Since the process began in 1997, ASEAN Plus Three (APT) cooperation has broadened and deepened to also focus on subjects other than finance too in the discussion such as the areas of food and energy security, financial cooperation, trade facilitation, disaster management, people-to-people contacts, narrowing the development gap, rural development and poverty alleviation, human trafficking, labour movement, communicable diseases, environment and sustainable development, and transnational crime, including counter-terrorism. APT cooperation in the area of political and security cooperation has been deepened by regular dialogue and exchange of views through existing APT mechanisms, such as the APT Summit, APT Foreign Ministers Meeting, APT Senior Officials Meeting (SOM) and as well as through track 1.5 and track two dialogue, including East Asia Forum and Network of East Asia Think-tanks.In combating transnational crime in the region, the APT Work Plan on Cooperation in Combating Transnational Crime was adopted in 2006.[14] ASEAN Free Trade Area (AFTA Council) The ASEAN Free Trade Area (AFTA) The ASEAN Free Trade Area (AFTA) has now been virtually established. ASEAN Member Countries have made significant progress in the lowering of intraregional tariffs through the Common Effective Preferential Tariff (CEPT) Scheme for AFTA. More than 99 percent of the products in the CEPT Inclusion List (IL) of ASEAN-6, comprising Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand, have been brought down to the 0-5 percent tariff range. [Figure 1] ASEANs newer members, namely Cambodia, Laos, Myanmar and Viet Nam, are not far behind in the implementation of their CEPT commitments with almost 80 percent of their products having been moved into their respective CEPT ILS. Of these items, about 66 percent already have tariffs within the 0-5 percent tariff band. Viet Nam has until 2006 to bring down tariff of products in the Inclusion List to no more than 5 percent duties, Laos and Myanmar in 2008 and Cambodia in 2010. Products that remain out of the CEPT-AFTA Scheme are those in the Highly Sensitive List (i.e. rice) and the General Exception List. The Coordinating Committee on the Implementation of the CEPTScheme for AFTA (CCCA) is currently undertaking a review of all the General Exception Lists to ensure that

only those consistent with Article 9(b)1 of the CEPT Agreement are included in the lists. ASEAN Member Countries have also resolved to work on the elimination of non-tariff barriers. A work programme on the elimination of non-tariff barriers, which includes, among others, the process of verification and crossnotification; updating the working definition of Non-Tariff Measures (NTMs)/Non-Tariff Barriers (NTBs) in ASEAN; the setting-up of a database on all NTMs maintained by Member Countries; and the eventual elimination of unnecessary and unjustifiable non-tariff measures, is currently being finalized. In an effort to improve and strengthen the rules governing the implementation of the CEPT Scheme, to make the Scheme more attractive to regional businessmen and prospective investors, the CEPT Rules of Origin and its Operational Certification Procedures have been revised and implemented since 1 January 2004. Among the features of the revised CEPT Rules of Origin and Operational Certification Procedures include: (a) a standardized method of calculating local/ASEAN content; (b) a set of principles for determining the cost of ASEAN origin and the guidelines for costing methodologies; (c) treatment of locally-procured materials; and (d) improved verification process, including onsite verification. ASEAN Trade with Selected Trading Partners The United States, the European Union and Japan continued to be ASEANs largest export markets. Japan, followed by the U.S. and EU, were the largest sources of ASEAN imports. During the first half of 2002-2003, ASEAN-6 trade with major markets as a whole increased by 11.71 percent for exports and 6.91 percent for imports. However, ASEAN exports to the U.S. and India and imports from Canada and India declined during the same period. [Figure 5] Association of Southeast Asian Nations[show]

Flag Motto:

Emblem

"One Vision, One Identity, One Community"[1] Anthem: The ASEAN Way

Menu 0:00

Headquarters Working language Membership -

Jakarta, Indonesiaa English[show] 10 states[show] 2 observers[show] Leaders Le Luong Minh[2] Brunei[3]

Secretary General Summit Presidency

Establishment - Bangkok Declaration Charter 8 August 1967 16 December 2008 Area 4,479,210.5 km2 2,778,124.7 sq mi

Total

Population 2011 estimate Density 602,658,000 135/km2 216/sq mi 2011 estimate US$ 3.574 trillion[4] US$ 5,930 2011 estimate US$ 2.356 trillion US$ 3,909

GDP (PPP) Total Per capita

GDP (nominal) Total Per capita

0.663b HDI (2012) medium Currency 10 currencies[show] ASEAN (UTC+9 to Time zone +6:30) Calling code 10 codes[show] Internet TLD 10 TLDs[show] Website

www.aseansec.org

ASEAN FREE TRADE AREA (AFTA): AN UPDATE

The ASEAN Heads of State and Government decided to establish an ASEAN Free Trade Area or AFTA in 1992. The objective of AFTA is to increase the ASEAN regions competitive advantage as a production base geared for the world market. A vital step in this direction is the liberalization of trade through the elimination of tariffs and non-tariff barriers among the ASEAN members. This activity has begun to serve as a catalyst for greater efficiency in production and long-term competitiveness. Moreover, the expansion of intraregional trade is giving the ASEAN consumers wider choice and better quality consumer products. The Common Effective Preferential Tariff (CEPT) Agreement for AFTA requires that tariff rates levied on a wide range of products traded within the region are reduced to 0-5%. Quantitative restrictions and other non-tariff barriers are to be eliminated. Although originally scheduled to be realised by 2008, the target of a free trade area in ASEAN was continuously moved forward. AFTA will now be fully completed by the year 2002. Products Covered Under the CEPT Agreement In principle, the free trade area covers all manufactured and agricultural products, although the timetables for reducing tariffs and removing quantitative restrictions and other non-tariff barriers differ. Inclusion List. Products in the Inclusion List are those that have to undergo immediate liberalisation through reduction in intra-regional (CEPT) tariff rates, removal of quantitative restrictions and other non-tariff barriers. Tariffs on these products should be down to a maximum of 20% by the year 1998 and to 0-5% by the year 2002. The new Members of ASEAN have up to 2006 (Viet Nam), 2008 (Laos and Myanmar) and 2010 (Cambodia) to meet this deadline. By the year 2000, there would be 53,294 tariff lines in the Inclusion List representing 82.78% of all tariff lines in ASEAN. Temporary Exclusion List (TEL). Products in the Temporary Exclusion List can be shielded from trade liberalisation only for a temporary period of time. However, all these products would have to be transferred into the Inclusion List and begin a process of tariff reduction so that tariffs would come down to 0-5%. Starting on 1 January 1996, annual installments of products from the TEL have been transferred into the Inclusion List. By the year 2000, there would remain 9,674 tariff lines in the TEL representing about 15.04% of all tariff lines in ASEAN. Sensitive List. This contains unprocessed agricultural products, which are given a longer time frame before being integrated with the free trade area. The commitment to reduce tariffs to 05%, remove quantitative restrictions and other non-tariff barriers is extended up to the year 2010. The new members of ASEAN have up to 2013 (Viet Nam), 2015 (Laos and Myanmar) and 2017 (Cambodia) to meet this deadline. By the year 2000, there would be 370 tariff lines in the Sensitive List making up 0.58% of all tariff lines in ASEAN.

General Exception (GE) List. These products are permanently excluded from the free trade area for reasons of protection of national security, public morals, human, animal or plant life and health and articles of artistic, historic and archaeological value. There are 1,036 tariff lines in the GE List representing about 1.61% of all tariff lines in ASEAN.

Acceleration of AFTA The acceleration of the AFTA timetable has been adopted as part of the measures in response to the regional financial crisis, which hit East Asia beginning in July 1997. It signals the ASEAN countries reaffirmation of their commitment to continue with regional integration and economic liberalization. TABLE 1 TIMETABLE FOR ACCELERATING AFTA FOR THE ORIGINAL SIX ASEAN COUNTRIES

YEAR 2000

COMMITMENT A minimum of 90% of the six countries total tariff lines must have tariffs of 0-5%. Individually, each country would commit to achieve a minimum of 85% of the Inclusion List with tariffs of 0-5%. Each country would achieve a minimum of 90% of the Inclusion list in the 0-5% tariff range. 100% of items in the Inclusion List would have tariffs of 0-5%, but with some flexibility.

2001

2002

ASEAN has agreed on a firm timetable leading up to the full realisation of AFTA by the year 2002. By the year 2000, each country will have 85% of the items in its Inclusion List with tariffs of 0-5%. This will be increased to 90% of the Inclusion List by the year 2001 and then for the whole Inclusion List by the year 2002. The Inclusion List refers to those products, which are scheduled for tariff reduction, removal of quantitative restrictions and non-tariff barriers.

By 1 January 2000, the total number of tariff lines in the CEPT Inclusion List will reach 53,254 tariff lines, which represents about 82.78% of all tariff lines in the ten ASEAN countries. By then, the average tariff rate among ASEAN economies will be down to 3.87%. The average tariff was 12.76% when AFTA was launched in 1993. Trade Facilitation Initiatives Attention has also focused on trade facilitation activities in the areas of customs and the elimination of technical barriers to trade. These represent concrete, practical and business friendly initiatives that should lower the cost of doing business in the region. In customs, efforts are being directed at removing barriers to trade at customs points through the simplification and harmonisation of customs procedures and specifically, measures such as the harmonisation of tariff nomenclature and the accelerated implementation of the WTO Valuation Agreement. ASEAN has targeted the adoption of an ASEAN Harmonised Tariff Nomenclature by the year 2002 and is accelerating the adoption of the WTO Valuation Agreement (WVA) by the year 2000. ASEAN is now seeking to develop product-specific mutual recognition arrangements in conformity assessment so that product-related standards and regulations do not become technical barriers to trade. Several sectors have been identified for possible sector MRAs cosmetics pharmaceuticals, electrical and telecommunication products. ASEAN has also set the goal of harmonising national standards with international ones, such as International Standards Organisation (ISO), International Electrotechnical Commission (IEC) and International Telecommunications Union (ITU) standards, for 20 priority product groups by the year 2000. These 20 product groups are some of the most widely traded products in the region including such important consumer durables as radios, television sets, refrigerators, air conditioners and telephones. Strengthening the Rules and Disciplines of the CEPT Agreement Efforts are being made to strengthen the rules and disciplines of the CEPT Agreement. In November 1996, ASEAN adopted a dispute settlement mechanism (largely patterned after the WTO mechanism) covering all economic agreements. The provision on emergency measures under the CEPT Agreement has also been strengthened to make it consistent with the WTO Agreement on Safeguard Measures. A Protocol on Notification Procedures has been established to provide advance warning of actions or measures that can have an adverse effect on concessions granted under an existing ASEAN agreement. These protocols represent the evolution of ASEAN economic cooperation towards a more rule-based system. Growth of Intra-ASEAN Trade Trade among ASEAN countries has grown from US $ 44.2 billion in 1993 to US $ 73.4 billion in 1998, representing an average increase of 13.2%. Before the financial and economic crisis struck in mid 1997, intra-ASEAN exports had been increasing by 29.6%. This is significantly higher than the rate of increase of total ASEAN exports at 18.8%. But the advent of the financial and economic crisis has adversely affected intra-regional trade more than trade with the rest of the world. Intra-ASEAN trade contracted by 15.9% in 1998 compared to the 5.8% reduction in total ASEAN exports.

FIGURE 1 These Figures reflect the export of seven ASEAN countries - Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam. Ultimate Target for AFTA: Zero Tariff Rates Member Countries are working towards the total elimination of import duties on all products to achieve the ultimate objective of a free trade area. The AFTA Council has agreed that the target dates to achieve this objective will be in 2015 for the six original ASEAN Member Countries and 2018 for the newer Members. This move is expected to create an integrated market where there is free flow of goods within the region. Total elimination of import duties shall achieve a maximum impact in enhancing the ASEAN regions economic competitiveness vis--vis the rest of the world.