ASEAN-China Free Trade Area

05 October 2006 Bureau of International Trade Relations Department of Trade and Industry
1

Presentation Outline
Background Framework Agreement Early Harvest Programme (EHP) EO 485 Agreement on Trade in Goods Tariff Reduction Modality a. Normal Track EO 487 b. Sensitive Track Application of Reciprocity
2

ASEAN-China Summit 2002

Signed the Framework Agreement on Comprehensive Economic Cooperation Between the Association of South East Asian Nations and the Peoples Republic of China Shall serve as the fulcrum for establishing the free trade area (FTA) by year 2010 for ASEAN-6 and year 2015 for the Cambodia, Lao PDR, Myanmar and Vietnam, with flexibility on sensitive sectors and commodities
3

Early Harvest Programme (EHP)

Provides for tariff elimination on a list of agreed products, particularly unprocessed agriculture products in Chapters 01 08, prior to the establishment of ACFTA Implementation began on 1 January 2004 for ASEAN (except Philippines) and China Philippines Executive Order No. 485 was issued on 29 December 2005 to implement EHP
4

Executive Order No. 485 (EHP): Who will Benefit?

Applicable Rate of Duty: 0% Annex A All ASEAN Member Countries and China 318 unprocessed agriculture products Exports of same products shall enjoy reciprocal rate of 0% Annex B China 8 processed products Exports of same products shall enjoy reciprocal rate of 0%

Agreement on Trade in Goods

Signed in 2004 by the ASEAN Economic Ministers and Chinas Minister of Commerce Implementation began on 1 July 2005 for ASEAN (Brunei Darussalam, Indonesia, Myanmar, Malaysia, Singapore, and Thailand) and China Covers substantial reduction or elimination of tariffs and other barriers to establish the ASEAN-China Free Trade Area (ACFTA) by 2010, under the following tracks: Normal Track 2005-2010, with flexibility up to 2012 Sensitive Track 2012 up to 2018
6

Normal Track: ASEAN-6 & China Tariff Reduction Modality

Tariff Rate 2005 2007 2009 2010

x 20
15 x < 20 10 x < 15 5 < x < 10

20
15 10

12
8 8

5
5 5

0
0 0

5 Standstill

0 0

0 0
7

x5

Sensitive Track: Tariff Reduction/Elimination Modality

ASEAN-6 and China Two tracks : Sensitive (SL) and highly sensitive items (HSL) Initial target : For SL, tariffs will be reduced to 20% in 2012 : For HSL, no commitment in 2012 Ending rate : 0-5% (SL) : 50% (HSL) Ending date : 2018 (SL) : 2015 (HSL)
8

Comparative Tariff Reduction/Elimination Modality

REDUCTION / ELIMINATION TRACK Early Harvest Programme (EHP) Normal Track: a. Normal Track b. Normal Track 2 END RATE IMPLEMENTATION DATE ASEAN-6 Cambodia, Laos, Myanmar and Vietnam 2004 2010

0%

2004 2006

0% 0%

2005 2010 2012 2012 2018 2015

2005 2015 2018 2015 2020 2018

9

Sensitive Track: a. Sensitive List (SL) 0 5 % b. Highly Sensitive 50 % List (HSL)

Executive Order No. 487: Coverage

Philippines legal enactment to implement Normal Track commitments, which was issued on 12 January 2006 Covers the first tranche of tariff reduction schedule (i.e. 2005 2008) Products whose tariff rates are at x 20 and therefore reduced to 20% Products whose tariff rates are at 5 < x < 10 and therefore reduced to 5% For other products which are not included in EO 487, the applicable rate of duty is the current applied MFN rate 10

Executive Order No. 487: Who will Benefit?

A product can enjoy preferential tariff rate if:
It is placed under the Normal Track of both the importing and exporting countries; and At least 40% of the local content complies with the rules of origin under the ASEANChina Free Trade Area Sensitive products whose tariff rates have been reduced to 10% or below
11

How can Sensitive Products Enjoy Preferential Tariff Rates?

Applicable Rate of Duty of such Sensitive Product has been reduced to 10% or below

Applicable Tariff Rate: - NT rate or EHP rate of the importing Party for the same product; or - Tariff rate of the exporting Party, provided that this is lower than the importing Partys MFN rate * Nothing in the paragraph prevents the importing Party from granting to the exporting Party the Normal Track or Early Harvest Programme rate even if such rate is lower than the exporting Partys tariff rate.

12

Reciprocal Tariff Rate Arrangement

COUNTRY A (exporting Party) COUNTRY B (importing Party) EHP EHP NT ST EHP NT NT ST EHP ST A > 10% NT ST Applicable ACFTA rate EHP rate of Country B NT rate of Country B ST rate of Country B EHP rate of Country B NT rate of Country B ST rate of Country B MFN rate of Country B MFN rate of Country B ST rate of Country B or MFN rate of Country B EHP rate of Country B or ST rate of Country A whichever is higher
(provided, MFN rate of Country B is not less than ST rate of Country A)1

SENSITIVE TRACK

EHP

STA < 10%

NT

NT rate of Country B or ST rate of Country A whichever is higher

(provided, MFN rate of Country B is not less than ST rate of Country A)1

ST

ST rate of Country B

Notes:

EHP NT ST

Early Harvest Programme Normal Track Sensitive Track (covers both Sensitive & Highly Sensitive Lists)

For Thailand and Viet Nam, paragraph 6(iii) shall apply.

[1] For Thailand and Viet Nam, paragraph 6(iii) of the TIG Agreement (i.e. The importing Party can, on its discretion, apply its NT or EHP tariff rate even if such rate is lower than the tariff rate of the exporting Parties.), shall apply.

13

Contact Address
Bureau of International Trade Relations Department of Trade and Industry
4/F Department of Trade and Industry - International Bldg. 375 Sen. G. Puyat Avenue Makati City Tel. No. 897 8289 / 897-8292 / 897 8290 Fax. No. 890-5149

14

Thank You!

15