ASEAN Free Trade Area
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ASEAN Free Trade Area (AFTA) is an agreement by the Association of Southeast Asian Nations, of local manufacturing in all ASEAN countries (Ywin, 2003).
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 the goals given above is the Common Effective Preferential Tariff (CEPT) scheme, which established a schedule for phased tainitiated in 1992 with the self-described goal to increase the "region’s competitive advantage as a production base geared for the world market".
The proposal to set up a Free Trade Area in Asean was first mooted by the Thai Prime Minister Anand Panyarachun and the Thai proposal was agreed upon with amendments during the ASEAN Seniors Economic Official Meeting (AEM) in Kuala Lumpur. In January 1992, the ASEAN members then signed the Singapore Declaration at the heart of which was the creation of AFTA in 15 years. This is a comprehensive program of tariff reduction in the region, which is to be carried out in phases through the year 2008. This deadline was subsequently moved forward and AFTA became fully operational on January 1, 2003.
The disparity of economic development in the Asean countries and difference in political systems, for example, the Philippines follows a democratic system while Vietnam is a communist country, would initially suggest that the region is not exactly an ideal region for economic and political integration. However, Dent (1998) pointed out some factors, which may suggest just the opposite. There are several similarities as well as points of common interest between several of the Asean countries. AFTA was established with the aim of eliminating intra-regional tariffs, attracting direct foreign investment and improving the efficiency and competitiveness riff reductions within ASEAN, while leaving members free to set their own tariff levels against non-members. According to this mechanism, tariffs on goods traded within the ASEAN region, which meet a 40% ASEAN content requirement was supposed to be reduced to 0-5% by the year 2002/2003 (2006 for Vietnam, 2008 for Laos and Myanmar, and 2010 for Cambodia).
ASEAN members have the option of excluding products from the CEPT in three cases:
- Temporary exclusions
- Sensitive agricultural products
- General exceptions (ASEAN Secretariat, 2004).
The CEPT scheme covers nearly 98% of all tariff lines in ASEAN. The only products not included in the CEPT Scheme by then, will be those in the General Exceptions category and sensitive agricultural products.
Over the course of the several years, the initial program of tariff reductions was broadened and accelerated and other "AFTA Plus" activities were initiated. This includes efforts to eliminate non-tariff barriers, harmonization of customs nomenclature, valuation, and procedures and development of common product certification standards among others.
With a population of over 450 million, Asean is larger than the European Union and companies now can exploit the opportunities presented by an integrated market of increasingly prosperous consumers
Developments as of November 2004
On November 29th, at the ASEAN summit in Laos, the Free Trade Zone timeline was accelerated [1] (http://news.bbc.co.uk/1/hi/world/asia-pacific/4050563.stm). The new timeline is described below.
Countries that agree to eliminate tariffs among themselves:
Countries, to join in 2012:
The ASEAN meeting was observed also by the Template:PRC, Template:INDIA, Template:KOR, Template:JPN, Template:AUS and Template:NZL.
See also
| Association of Southeast Asian Nations (ASEAN) | Missing image ASEAN_Flag.gif ASEAN flag |
|---|---|
| Brunei | Cambodia | Indonesia | Laos | Malaysia | Myanmar | Philippines | Singapore | Thailand | Vietnam | Papua New Guinea (Observer) |