ASEANs Trade

Policy

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Session Outline
1. Brief overview of ASEAN
2. Brief history of ASEANs trade
policy
3. ASEA Free Trade Area (AFTA)
4. ASEANs Trade Performance 19932005
5. Lessons from AFTA
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Overview: ASEAN
ASEAN Association of South East Asian Nations

Established in 8 August 1967 in Bangkok

Original members: Indonesia, Malaysia, Philippines
Singapore, Thailand
Added Members
Brunei Darussalam 8 Jan
1984
Vietnam 28 July 1995
Lao PDR 23 July 1997
Myanmar 23 July 1997
Cambodia 30 April 1999
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Overview: ASEAN
Forces behind formation of ASEAN
1. Political
instability
2. Regional security issues
Territorial disputes between some
of the member nations
External communist threats following
Vietnam war
Domestic communist insurgency problems
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Overview: ASEAN
Objectives of ASEAN

1. to accelerate economic growth,

social progress and
cultural development in the regi
2. to promote peace & stability

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Overview: ASEAN

ASEAN has gone a long way

It has taken center stage during
the past few years in view of
its emerging role as the hub of
bilateral & regional FTAs in East Asia

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Figure
1

Rate of GDP Growth in ASEAN 5, 1996 2004

Source: ASEAN Statistical Yearbook, 2005

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Figure
2

Rate of GDP Growth of BCLMV, 1996 2004

Source: ASEAN Statistical Yearbook, 2005

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Table 1

GDP per Capita at Current Market Prices in USD, 1996 2004

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ASEANs trade policy:

background

Before 1990s, inconceivable to talk about

economic integration, much less a
free trade area (FTA), in Southeast Asia.
Why?
Economic structures are competitive
rather than complementary.

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ASEANs trade policy:

background

Similar resource endowments and

levels of technological development;
thus, resulting in the production and
export of similar primary and
labor-intensive products.

Heavily dependent on developed countr

(particularly USA, Europe, Japan)
for their export markets and sources
of investment and technology.
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ASEANs trade policy:

background
ASEAN leaders avoided the term
integration and preferred cooperation
during official discussions and
meetings until the late 1980s.
It was a major political decision then when
the leaders finally decided to establish the
ASEAN Free Trade Area (AFTA) in 1992.
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AFTA: its beginning

Economic cooperation was never part of ASEANs age

until the formation of the ASEAN
Preferential Trading Area (PTA) in 1977

Margin of preferences were granted to import

among ASEAN members
PTA, however, did not promote intra-ASEAN tr
Implementation problems
AFTA established in 1992, a major political decision
for ASEAN Leaders
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What led to
AFTA?
Internal factors
Political stability & security in the region
Domestic policy reforms since the mid1980s
thru trade liberalization & export
Domestic efficiency, improved
promotion
competitiveness & high growth rates
Idea of regional integration became
more acceptable
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What led to AFTA?

External factors
Rise of regional trading arrangements in
North America & Europe
End of Cold War brought many new
competitors to the ASEAN in terms of
exports
and sources of foreign direct investment
(FDI)
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Goals of AFTA
To increase ASEANs competitive edge as a
production base for the world market
Mechanism Common Effective
Preferential Tariff (CEPT), where intra-regional
tariff rates will be reduced to 0-5%
within 15 years beginning 1993

To establish a free trade area, with ASEAN members

giving a common preferential tariff to each other
while at the same time, giving each member a free ha
on the tariff rate they will grant to non-members
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AFTA achieved in
2002

Deadline has been accelerated from 2008 to 2002

Coverage has been expanded
Scope has been widened: AFTA-plus measures
Harmonization of standards
Reciprocal recognition of tests &
certification of products
Investment/services liberalization
Goal deepened to zero tariff by 2010/2015

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Figure 3

Trend of ASEAN 6 Total Exports and Imports, 1993 2004

Source: ASEAN Statistical Yearbook, 2005

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Figure
Trend of ASEAN 6 Total
4 Exports and Imports, 1993 2004

Source: ASEAN Statistical Yearbook, 2005

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Table 3 Intra - + Extra-ASEAN Exports, 2005

Intra-ASEAN
Country

Value

Brunei Darrussalam

Extra-ASEAN

Shareto

Value

Shareto

countrytotal

countrytotal

1,529.0

24.0

4,840.3

76.0

Cambodia

144.5

4.7

2,947.0

95.3

Indonesia

15,823.7

18.5

69,836.2

81.5

Lao, PDR

147.6

84.8

26.5

15.2

Malaysia

36,633.7

26.1

103,836.8

73.9

Myanmar

1,559.7

49.9

1,564.1

50.1

The Philippines

7,149.9

17.3

34,104.7

82.7

Singapore

71,976.4

31.3

157,827.7

68.7

Thailand

23,867.0

21.8

85,755.6

78.2

Viet Nam

5,030.9

17.6

23,545.6

82.4

163,862.5

25.3

ASEAN

484,284.6

74.7

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Table 4 Intra - + Extra-ASEAN Imports, 2005

Intra-ASEAN
Country

Value

Brunei Darrussalam

Extra-ASEAN

Shareto

Value

Shareto

countrytotal

countrytotal

738.5

49.1

764.6

50.9

Cambodia

1,026.8

36.4

1,797.9

63.6

Indonesia

17,329.5

30.0

40,371.4

70.0

Lao, PDR

362.4

51.6

339.5

48.4

Malaysia

29,164.0

25.5

85,049.1

74.5

Myanmar

896.6

54.9

736.2

45.1

8,874.3

18.7

38,543.9

81.3

Singapore

52,148.6

26.1

148,014.2

73.9

Thailand

21,552.4

18.3

96,438.5

81.7

Viet Nam

8,937.7

27.4

23,656.2

72.6

141,030.7

24.5

The Philippines

ASEAN

435,711.6

75.5
24

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Figure 5 ASEAN 6 Export Market, 1993 - 2004

Source: ASEAN Statistical

Yearbook, 2005

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Figure 6
ASEAN Import Origin,
2004

Source: ASEAN Statistical Yearbook, 2005

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Figure 7
Trend of ASEAN 6 Intra ASEAN Exports
by Country, 1993 - 2004

Source: ASEAN Statistical Yearbook, 2005

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Figure
8
Trend of ASEAN 6 Intra - ASEAN Imports
by Country, 1993 - 2004

Source: ASEAN Statistical Yearbook, 2005

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Lessons from AFTA

Domestic policy environment
AFTAs principle of open regionalism
Complementary vs substitutability
argument
Similarity in economic structure injects a
new competitive spirit and dynamism
into the regional economy and
generates grater opportunities for intraindustrial trade and specialization
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Lessons from AFTA

Framework of AFTA

Free trade area (in contrast to customs uni

Gradual approach of expanding scope
AFTA-Plus measures

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Lessons from AFTA

Political will and commitmentencouraged investors to have longerterm perspective on the region
The ASEAN Way
Go-slow approach was necessary
during the formative years of
AFTA
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References
Austria, M., 2003. AFTA: Lessons Learned and
Challenges Ahead, in Park & Yavaprabhas
(editors), Regional Cooperation & Identity
Building in East Asia, Korean Assoc. of Southeast
Asian Studies, Korea.
Austria, M. 2006. ASEANs Extra Regional
Lingkages: Implications for an East Asian
Community, in Pong Ping, Siew Yean & Yu
(editors), The Emerging East Asian Community,
Universiti Kebangsaan Malaysia, Malaysia.
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CEPT
All tariff lines included except:

General Exception List (GEL) covering products that

were permanently excluded for the protection of
national security, public morals, human, animal or
plant life, and articles of artistic or archaeological valu
Temporary Exclusion List (TEL) covering products to
phased into CEPT tariff reduction schedule
within a given time frame
Sensitive List (SL) covering agricultural products
back
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