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ASEAN Free Trade Area (AFTA)A General Overview

Jakarta, 10 March 2010

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ASEAN Free Trade Area (AFTA)is an Economic Cooperation in ASEAN

which covers only Trade in Goods

Other Economic Cooperation: Trade in Goods: ASEAN PTA; Customs; Standard &

Conformance Industry: AICO

Trade in Services: AFAS

Investment: AIA

Others: IT & Telecommunication, Intellectual Property, SMEs, etc.

ASEAN Economic Community (AEC) ASEAN External Economic Cooperation: China

(ACFTA), India (AIFTA), Korea (AKFTA), Japan (AJCCEP), AANZ

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ASEAN PTA

Agreement on ASEAN Preferential Trading Arrangement (PTA): signed by ASEAN Ministers of Foreign Affairs on 24 February 1977 in Manila

Preferential tariff: MOP, as of 31 Dec 2002.

Local ASEAN Content: CEPT Rules of Origin. (Initially 50%)

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AFTA

Establishment: 28 January 1992 (Singapore)

The 4th ASEAN Summit: the Leaders signed the Framework Agreement on Enhancing ASEAN Economic Cooperation; which contains amongst others, agreement to establish AFTA.

The main legal basis to implement AFTA is the Common Effective Preferential Tariff (CEPT) Agreement signed by ASEAN Economic Ministers on 28 Jan 1992.

1 January 1993AFTA was officially started with time frame of 10 years

(initially 15 years)

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Objectives of AFTA

To increase ASEAN’s competitiveness as a production base geared for the world market

To attract more foreign direct investment into ASEAN

To expand intra-ASEAN trade

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Benefits of AFTA

ASEAN companies can benefit by:Being able to import production inputs from

other ASEAN countries at lower costsBeing able to export to other ASEAN countries

at lower tariffs and less trade barriers ASEAN consumers can benefit by:

Having more choice of products for consumption at lower prices

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CEPT Scheme

CEPT (Common Effective Preferential Tariff) Scheme is the main mechanism for AFTA 

It covers all manufactured and agricultural products (processed or unprocessed);

Products must have a 40% ASEAN content to enjoy tariff preferences or CTH

The legal basis: CEPT Agreement

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CEPT Agreement Gradual reduction of intra-ASEAN tariff rates to 0-5%: ASEAN-6: 2003 Viet Nam: 2006 Laos & Myanmar: 2008 Cambodia: 2010

Elimination on intra-ASEAN tariff: ASEAN-6: 2010 CLMV: 2015

Granting of concessions on a reciprocal basis Elimination of quantitative restrictions upon

enjoyment of the concessions Gradual elimination of other non-tariff barriers within

a period of 5 years after the enjoyment of CEPT concessions.

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CEPT Product List

Four categories of products in the CEPT Scheme: Inclusion List (IL) Temporary Exclusion List (TEL) Sensitive List (SL) General Exception List (GEL)

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Rules of Origin

General Rules:

Regional Value Content of 40% (RVC(40))

to

Regional Value Content of 40% (RVC(40)) or Change in Tariff Headings (CTH)

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Rules of Origin

Product Specific Rules (PSR) Implementation: Each sub-heading (HS 6-

digit) has its rules.

1st step: Look at PSR List; 2nd step: if not listed in the PSR, look at

the ROO RVC40 or CTH

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Rules of Origin

Formula for calculating Regional Value Content of 40% (RVC(40)):

Value of Imported Non-ASEAN

Materials, Parts or Produce

+

Value of Undetermined

origin Materials, Parts or Produce

≤ 60%________________________________________

FOB Price

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Ultimate Target of AFTA

3rd Informal Summit in November 1999 (Manila), the Leaders agreed to eliminate all import duties. Protocol to Amend the CEPT-AFTA Agreement for the Elimination of Import Duties was signed on 30 January 2003:

By 2010 for six original members; By 2015 for the new members, but allowing some sensitive

products by 2018. Not applicable for products listed in Protocol on Special

Arrangement for Sensitive and Highly Sensitive Products

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ASEAN Economic Community (AEC)

Decision: 9th ASEAN Summit, 7-8 Oct 2003 in Bali

The declaration of ASEAN Economic Community (AEC) by the Leaders

AEC: A single market and production base, with free flow of goods, services, investment and labor, and freer flow of capital. This is the realisation of the end-goal of economic integration as outlined in the ASEAN Vision 2020

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ASEAN Framework Agreement on the Integration of Priority Sectors

10th ASEAN Summit, 29-30 November 2004 di Vientiane:

Towards the ASEAN Economic Community (AEC), the ASEAN Leaders agreed to accelerate the integration of 11 priority sector (electronics, e-ASEAN, healthcare, wood-based products, automotives, rubber-based products, textiles and apparels, agro-based products, fisheries, air travel and tourism).

Import duties of these products will be fully eliminated by 2007 for ASEAN-6 and 2012 for the new members

ASEAN TRADE IN GOODS AGREEMENT (ATIGA)

signed by all Member States on 26 February 2009

Objective: to achieve free flow of goods in ASEAN as one of the principal means to establish a single market and production base for the deeper economic integration of the region towards the realisation of the AEC by 2015

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Other ASEAN FTAs

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ASEAN-China (ACFTA)

Framework Agreement on Comprehensive Economic Cooperation Between the Association of South East Asian Nations and the People’s Republic of China Signed by the Leaders in ASEAN-China

Summit, Phnom Penh, 4 November 2002 To strengthen and enhance economic,

trade and investment co-operation

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ASEAN-China (ACFTA)

AGREEMENT ON TRADE IN GOODSsigned by Economic Ministers at the 10th ASEAN Summit, 29-30 November 2004 in Vientiane.

Normal Track: eliminate Import duties by 2010 (with some flexibility to 2012) for ASEAN-6;

Sensitive Track: reduce to 0-5% of import duties by 2018 (ASEAN-6);

Highly Sensitive: reduce to 50% of import duties by 2015 (ASEAN-6);

Longer time frame for CLMV

2020

ASEAN-India (AIFTA)

Framework Agreement on Comprehensive Economic Between the Association of Southeast Asian Nations and the Republic of India Signed in ASEAN-India Summit in Bali, 8

October 2003 To enhance close economic cooperation

and to work towards an ASEAN-India Regional Trade and Investment Area

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ASEAN-Japan (AJCEP)

Framework for Comprehensive Economic Partnership between ASEAN and Japan

Signed by the Leaders in ASEAN-Japan Summit in Bali, 8 October 2003

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ASEAN-Korea (AKFTA)

Framework Agreement on Comprehensive Economic Cooperation Among the Governments of ASEAN and Korea, signed by the Leaders in ASEAN-Korea Summit in Kuala Lumpur, 13 December 2005

Agreement on Trade in Goods (TIG), signed in August 2006. The implementation is after the ratification by at least one ASEAN Member and Korea.

ASEAN-Australia-New Zealand (AANZ)

Agreement Establishing the ASEAN-Australia New Zealand Free Trade Area

Signed in Cha-am, Thailand on 27 February 2009

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Further Information

ASEAN website:

www.aseansec.org

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Thank You