ASEAN and the Rest of the World

7/31/2019 ASEAN and the Rest of the World

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ASEANAND THE REST OF THEWORLD


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Integration in the global economy


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ASEAN Free Trade Area

Integration with Dialogue Partners- China - US- Korea - EU- Japan - Canada

- +3 (PROC, Japan, ROK) - Russia- India - Pakistan- Australia and New Zealand

The Future: The ASEAN Community

- ASEAN Political Community

- ASEAN Socio-Cultural Community- ASEAN Economic Community (AEC)

- AEC Blueprint provides 2015 as the date of realization


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Free Trade Areas: Timelines

Free flow of Goods2008 Priority Integration Sectors2010 CEPT-AFTA

ASEAN-China, flexibility to 2012ASEAN-Korea, flexibility to 2012 for RPand Indonesia

2011 ASEAN-India, 2016 for PH

2013 ASEAN-Australia and New Zealand2018 (or 10 years after entry into force)

ASEAN-Japan


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Free Trade Areas: Timelines

Free flow of Services

2010 Healthcare, e-ASEAN, Air Travel, Tourism

2013 Logistics

2015 AFAS for non-Priority Integration Sectors- Progressive liberalization (for all FTAs with dialogue

partners)

Free flow of Investment2010 AIA (ASEAN investors)

2020 AIA (non-ASEAN investors)

- Being negotiated (for all FTAs with dialogue partners)


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The ASEAN-China FTA

China has overtaken Japan as the

second largest economy

China is a market of 1.3 billionpeople with rising per capita

income

Chinas GDP stood at US$ 10.09trillion in 2010, growing by 10.3%

despite global recession


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How big is the China market?

3rd largest trading partner of ASEAN,accounting for 11.3% of total ASEAN trade in2008.

3rd largest export destination - with 10.1% ofASEAN s total exports going to China

3rd largest import source - with 13.3% ofASEAN s import requirements bought fromChina

How big is the China market?


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As a destination for Philippine exports

Note: 2010 trade data from UNCTAD/WTO ITC TradeMap

China is the Philippines

4rd largest export market


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As a source for Philippine imports

China is the Philippines 4th largest import source


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Top Philippine Exports to China(Value in US$ Million)

Products 2010 EXPORTS %Share

TOTAL 5,701.50 100.00

1 Electronics 3,249.34 56.99

2 Copper cathodes & sections of cathodes 219.67 3.85

3 Nickel ores and concentrates 176.46 3.09

4 Other coal 157.52 2.76

5 Copper ores and concentrates 115.57 2.03

6 Crude oil, coconut (copra) 76.08 1.33

7 Polymers of ethylene (in primary form) 57.51 1.018 Parts and accessories of motor vehicles 41.00 0.72

9 Propene (propylene) 36.34 0.64

10 Electrical transformers, static converters 34.76 0.61


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Top Philippine Imports from China(Value in US$ Million)

Source: National Statistics Office

Products 2010 IMPORTS %Share

TOTAL 4,608.83 100.00

1 Electronics 1,444.27 31.34

2 Parts and accessories for office machines 300.18 6.51

3 Liquefied petroleum gas (LPG) 87.44 1.90

4 Urea 63.51 1.38

5 Ceramic products 41.06 0.89

6 Diammonium phosphate 38.72 0.84

7 Fresh apples 35.05 0.768 Copper ores and concentrates 32.83 0.71

9 Flat-rolled products of iron or non-alloy steel 29.04 0.63

10 Flat-rolled products of iron or non-alloy steel, cold-

rolled

27.60 0.60


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ACFTA Benefits for Philippine Business

1 January 2010: More than 90% of Normal Track(NT) products traded between ASEAN and Chinaalready had zero duties

Tariffs on almost all NT tariff lines have beeneliminated by China and the ASEAN-6 (BruneiDarussalam, Indonesia, Malaysia, the Philippines,Singapore and Thailand)

For Cambodia, Laos, Myanmar and Viet Nam, tariffelimination will be completed by 1 January 2015


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The ASEAN-China FTA

Tariffs on products deemed sensitive will not beeliminated and will instead have end rates of 5%

in 2016.

Examples include poultry, cabbage, someplastics, pneumatic tires of rubber, terry

toweling and similar woven terry fabrics ofcotton, semi-finished products of iron or non-alloy steel, freezers and other appliances


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The ASEAN-China FTA

Longer timeframe for tariff elimination on 603lines in the NT by 2012.

These include orchids, margarine, tomato paste andpowder, pebbles, hand-made paper and paper board,flat rolled products of iron and steel, rice cookers andwooden furniture


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Sector Sample ProductsMFNRate

ACFTA

Rate

BananasCrude Coconut (copra) oilMineral oils and fuels Naphtha, reformate or preparations for preparing spirits Other fuel oils Other coal (e.g., briquettes)

Propylene, butylene and butadiene

10

9665

6

0

0050

0Selenium 5.5 0

Lauryl alcohol 7 0

Industrial fatty alcohols 13 0

Plastic scrap 6.5 0

Resourceand

agro-based

products

Chemicals

&Plastics

Substantial MFN and ACFTA tariff differential for

top Philippine exports to China


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Sector Sample ProductsMFNRate

ACFTA

Rate

Tinned iron or steel scrapCopper Copper cathodes Waste and scrap copper Copper foils, backed

2

21.57

0

000

Machinery and mechanical appliances Parts of air conditioners Parts of other machinery, plant & equip of heading 84.19

Electrical machinery and equipment Uninterrupted Power Supply (UPS) Parts of ballasts and other inductors

104

108

00

00

Vehicles incl. parts and accessories Other parts / accessories of motor vehicles

Other parts and accessories of other vehicles of 87.02 - .04

10

10

0

0

Metals

Machine

ry

Au

to

parts

Substantial MFN and ACFTA tariff differential for top

Philippine exports to China


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Benefits for Philippine Business

The Philippines enjoys duty-free treatment

for its top exports to Korea

Sector Sample Products MFNRate AKFTARate

Iron or steel nutsCopper cathodesCopper wireTin alloys

8383

0000

Parts for radio broadcast receiversParts for electric sound or visual signallingapparatusElectrical particle accelerators

88

8

00

0


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Philippines-Japan Economic Partnership Agreement (PJEPA)

PJEPA

PJEPA is the Philippines most

comprehensive bilateral agreementto date but it is currently beingreviewed by government

It aims to facilitate and promote free

trans-border flow of goods, persons,services and capital between twocountries

It was ratified by the Philippinegovernment in October 2008


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Major Markets of RP Merchandise Exports %

EU

17%

USA

17%

Japan16%ASEAN14%

China

11%

Rest of

the World25%

2008US$ 49.02B

ASEAN

22%

EU

14%

Japan

15%

USA

15%

China

11%

Rest of

the

World

23%

2010US$ 51.43B

EU

20%

USA

18%

Japan

16%

ASEAN

15%

China

8%

Rest of

the World

23%

2009US$ 38.33B

Major Suppliers of RP Merchandise Imports %


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Year Total

Trade

Exports to

Japan

% Share

to Total

Exports

Imports

from

Japan

% Share

to Total

Imports

Balance of

Trade

2006 15.19 7.92 16.50 7.27 13.60 0.65

2007 14.14 7.30 14.50 6.84 11.94 0.46

2008 14.28 7.68 15.67 6.60 11.64 1.08

2009 11.55 6.20 16.17 5.35 12.45 0.85

2010 14.57 7.82 15.22 6.75 12.33 1.08

Philippines-Japan Merchandise Trade(Values in US$ Billion)


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PJEPA Benefits for Philippine Business

Tariff Elimination Schedule

for Phil. exports

Tariff lines Sample Products

Immediate

Elimination ( A- zero duty

as of Dec.2008)

7, 476

(80%)

Electronics

Garments

Furniture

Metal manufactures

Certain jewelry items

Chemicals

Coconut ,papayas, mangoes

Minerals

Gradual (B3B15) 888

(9%)

Marine products (e.g. shrimp

and prawns)

Processed foods

Fruits and vegetables

Carpets and other textile floor

coverings

Roaster coffee

Footwear

Phased reduction / TRQ/

renegotiation

316

(4%)

Fresh pineapples

Pineapple and tomato juicesGround nuts

Certain Marine products (tuna,

marlin and swordish)Raw cane sugar

Cane molasses

Forest products

Opening up the Japan market to Philippine exports


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AJCEPA Benefits for Philippine Business

Integrates the Philippines into a regional market with a

population of more than 700 million. Manufacturing inputs from other ASEAN countries and

Japan are considered originating and may be used toqualify for passing the ROO and getting AJCEPpreference.

More choices in sourcing imported inputs

Opening up the Japan market to Philippine exports


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Sector MFNAJCEP

APJEP

A

Lauryl alcohol

GlycerolOther plastic packaging materialsEpoxide resins

4.7

53.93.1

0

000

0

000

Copper foil, backed with refined copper

Copper foil, backed with copper alloysScrap, powders of other base metals

3

32.5 / 3

0

00

0

00

Other non-wired glass 4.2 0 0

Metals

Chemica

ls

&Plastic

s

Glass

PJEPA & AJCEPA Benefits for Philippine Business

Enhanced market access in Japan

for Philippine exports


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PJEPA & AJCEPA Benefits for Philippine Business

Sector

MFNAJCEP

APJEPA

Frozen poultry meat cutsYellowfin tunasShrimps and prawnsOther smoked fish- Tara

33.51

1010

03.50

7.37.3

01.80

6.32.5

Fresh MangoesFresh pineapples

317

017

0In Quota =0

(1,200 MT in 2010)

Refined coconut oilCrude coconut (copra) oil

4.5% or 5yen/kg

whicheveris greater;

0 0

Other plywood andveneered panelsBuilders' woodwork

3

3.9

0

0

0

0Resourceandagro-basedp

roducts


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Australia Tariff Reduction Commitment

%of Tariff Lines 0 % tariff by

Year

Products of Export Interest to RP

96.4% 2010 Processed food, beverages, minerals, inorganic/organic

chemicals, leather goods, footwear, basket ware,

ceramics, fine and costume jewelry, appliances, auto &

auto parts, ships & boats, furniture, women

sundergarments, cotton

jackets/blazers/dresses/skirts/trousers/ blouses/night

dresses, overcoats of wool, trousers of synthetic fiber,

hosiery, socks, gloves, shawls, ties

96.5% 2012 Cotton mens shirts/babies garments

96.8% 2015 Mens suit/dresses of synthetic fiber, womens

jackets/suits of wool

100.0% 2020 All other articles of apparel and clothing, carpets,

wooden office furniture


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AANZFTA Benefits for Philippine Business

With zero tariffs for Philippine cars, Australia becomes an

attractive export market for car and car partsmanufacturers.

Philippines becomes an alternative investment site forinternational car companies planning to export to

Australia. Australian car exports to the Middle East and even Africa

would constitute a valuable market for Philippine partsmanufacturers.

Export opportunity in Australia for the AutomotiveIndustry


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Australia expanded definition of Contractual ServiceSuppliers in their MNP commitment to cover both

professionals, including nurses, and skilled workers Australia will accord full working rights to spouses of intra-

corporate transferees, independent executives andContractual Service Suppliers if stay is greater than 12months

New Zealand committed Installers/Services andIndependent Professionals with advanced technical orprofessional skills

Provides broader market access and opportunitiesfor Filipino professionals and skilled workers


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Temporary Employment in New Zealand ofNurses, Farm Managers and EngineeringProfessionals

Working Holiday Scheme between NewZealand and the Philippines

Funding of Model Dairy Farms from NewZealand


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ASEAN-INDIA FTA

The AIFTA negotiation follows a phased approach, starting with thenegotiations on the Trade in Goods (TIG) Agreement followed by theTrade in Services and Investment Agreement.

The Agreement aims to improve and strengthen economic, trade andinvestment cooperation through progressive liberalization andpromotion of trade in goods and services and create a transparent,liberal and facilitative investment regime.

The signing of the Agreement paved the way for the creation of one of theworlds largest free trade area (FTA).


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How big is the India market?

In 2010

US$ 1.19 billion market size

US$ 4.06 GDP

US$ 3,500 GDP per capitaUS$ 225.4 billion total exports

US$225.4 billion exports (ranked 21 in world exports)

US$ 359billion imports (ranked 13 in worlds exports)

US$ 409.84 million PH exports to India

Source: CIA World Factbook 2010/NSO 2010


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AI Trade in Good Agreement

Tariff Elimination/Reduction Modality

1) Normal Track

Category Modality

NT1 Elimination by 31 Dec. 2013 for ASEAN 5 and India; 31December 2018 for the Philippines and India; and 31 December2013 for CLMV.

NT2 Elimination by 31 December 2016 for ASEAN 5 and India; 31

December 2019 for the Philippines and India; and 31 December2016 for India and 31 December 2021 for CLMV.


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2) Sensitive List

Category Modality

Category Modality

Reduction of tariffs to5%

ASEAN 5 and India by 31 December 2016; Philippines and India by 31December 2019; and CLMV by 2021.

Elimination of tariffs ASEAN 5 and India by 31 December 2020; Philippines and India by 31December 2023; and CLMV by 31 December 2025.

Standstill 50 TL at MFN 5% will be standstill; remaining TL will be reduced to4.5% upon EIF for ASEAN 6 and five (5) years from entry into force ofthe Agreement for CLMV. The AIFTA preferential tariff rate for these

tariff lines are further reduced to 4%.


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2) Sensitive List

Category Modality

Category Modality

Reduction of tariffs to5%

ASEAN 5 and India by 31 December 2016; Philippines and India by 31December 2019; and CLMV by 2021.

Elimination of tariffs ASEAN 5 and India by 31 December 2020; Philippines and India by 31December 2023; and CLMV by 31 December 2025.

Standstill 50 TL at MFN 5% will be standstill; remaining TL will be reduced to4.5% upon EIF for ASEAN 6 and five (5) years from entry into force ofthe Agreement for CLMV. The AIFTA preferential tariff rate for these

tariff lines are further reduced to 4%.


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Top Philippine imports to India

Products2010 ImportsUS $ Million

%Share

TOTAL IMPORTS 537.74 100.00

1. Meat of Bovine animals, frozen 101.11 18.80

2. Motorcycles and cycles fitted with auxiliary motor with orw/o side cars

27.23 5.06

3. Other medicaments consisting of mixed or unmixed

products for therapeutic or prophylactic treatment

23.01 4.27

4. Parts and accessories of vehicles of heading 87.11 to87.13

17.30 3.21

5. Other cellular phones, transmission apparatus for radiotelephony, radio telegraphy, radio broadcasting ortelevision

16.47 3.06

6. Oil cake and other solid residues whether or not groundor in the form of pellets

12.40 2.30

7. Components, parts and accessories of motorcycles andcycles fitted with auxiliary motor 9.36 1.74

8. CBU other motor cars and other motor vehiclesprincipally designed for the transport of persons 9.10 1.69

9.Slabs semi finished roducts of iron or non allo steel

7.33 1.36


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AIFTA prospects for Philippine business

FMCG (Fast Moving Consumer Goods) expectedto grow to US$ 340 Billion by 2025

- Opportunities exist in gourmet, ethnic, preparedconvenience food, snack food, health and organic food,personal care products, health beverages, etc.

- Food and grocery form the largest segment of thedomestic market with 59.5% share.

- Furniture and furnishings for homes, contract furniture forhotels have big potential as evidenced by high-endbrands in key cities of India.


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AIFTA prospects for Philippine business

Business opportunities exist in the internet ventures, outsourcingtechnology, e-commerce opportunities, software development, animation,computer graphics and designs.

The Indian automobile industry continues to show rapid growth and thesector presents opportunities for Filipino automobile manufacturersparticularly in the aftercare and replacement market and for productsdriven by a high degree of design.

Education - India

s big young population will continue to create a demandfor higher education. Reservation policies and quota system designed topromote education opportunities contribute to the large growth of Indianswho study abroad.


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ASEAN-EU FTA

1977 Special Meeting of ASEAN FMs proposes to establish ties withEEC

1980 EC ASEAN Cooperation Agreement Commercial, economicand technical cooperation Joint Cooperation Committee

1994 11th ASEAN-EU Ministerial Meeting in Karlsruhe Eminent

Persons Group (comprehensive approach 2000 and beyond)

2003 Communication New Partnership with SE Asia comprehensive framework (economic, political, security) TREATIand READI

2005 Partnership and Cooperation Agreements + EU-ASEAN AcehMonitoring Mission

2006 (Dec) EU/EC applied for accession to the ASEAN Treaty ofAmity and Cooperation of 1976

2007 (March) Nuremberg Declaration and Plan of Action

2007 Nov. EU/ASEAN Commemorative Summit


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ASEAN-EU Cooperation Programs

Package of EUR 70 million (2007-2013) ASEAN Programe for Regional Integration Support (APRIS II)EUR 7.2 million standards/SPS, C/TF, investment, capacitybuilding, dialogues

Enhancing ASEAN FTA Negotiation Capacity EUR 2.5 million

Vientiane Action Plan/AEC ASEAN Cooperation Project on the Protection of IntellectualProperty Rights ECAP III EUR 4.5 mn legal, administration,enforcement, awareness

ASEAN Air Transport Integration Project EUR 5 million

ASEAN Migration and Border Management Program

EUR 4.7million EU-ASEAN Statistical Capacity Building Program EUR 6 million ASEAN Centre for Biodiversity EUR 6 million Program to enhance National Human Rights Institutions EUR

900,000


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How big is the EU market?

In 2011

502.52 million market size

ASEANs 2nd largest trading partner

ASEAN is the EUs 5th largest trading partner


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ASEAN-EU FTA

ASEAN-EU Vision Group (2005/06) report Governing principles: comprehensive (goods,

services/investment, TF, Competition, GP, IPR); WTOcompatible; 90% trade in goods tariff-less in 7 years; broad

sectoral coverage and elimination of substantially alldiscrimination in area services/investment; SDT for lessdeveloped ASEAN and asymmetrical liberalization; singleundertaking

Gains to ASEAN MS up to 2% of GDP by 2020 bulk of

gains associated with liberalization in the area of services Cooperation support ASEAN integration


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EU-PHILIPPINES RELATIONS

Partnership since 1976 EUR 1 billion in cooperation +sectoral/political dialogue

EUR 130 million (2007-2013)

Comprehensive partnership:

Governance (support to Ombudsman, Anti-MoneyLaundering Council, Border Management, Access toJustice for the Poor)

Rural development (STARCM, UDP)

Health (DOH, ARMM)

Human rights (Death penalty, EJKs/EUJAM)

Peace (MTF, IFS)

Humanitarian aid (IDPs, disaster)

EU-PHILIPPINES PARTNERSHIP


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EU-PHILIPPINES PARTNERSHIPCOOPERATION AGREEMENT

Signing of the agreement will be on 12 July 2012 at thesidelines of the Association of Southeast Asian Nations(ASEAN) Regional Forum in Phnom Pehn, Cambodia

The PCA will broaden the scope of PH-EU relations inareas such as counterterrorism, fight against corruptionand organized crime, trade and investment, migration andenergy, competition, IP protection for design industries.

RP US FTA


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RP-US FTA

Trade and Investment Framework Agreement (TIFA)

(MOU signed in1989) Enterprise for ASEAN Initiative (EAI)

launched by US President George Bush on October 26,2002

US and individual ASEAN countries will jointly determineif and when they are ready to launch FTA negotiations

US-Singapore FTA Signed May 6, 2003 1st US FTA with an Asian nation and 1st FTA signed by

Bush Ongoing US FTA Negotiations Taiwan, Thailand, Indonesia, Japan and South Korea

Enhanced PH-US trade relations


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Enhanced PH US trade relationsunder ASEAN?

It encompasses issues involving investment, intellectual

property rights, various key services, harmonization ofproduct standards, mutual recognition of product testing,labor standards and environment issues

It will help the Philippines comply with internationally

recognized standards that will, in turn help install acompetition policy, reduce investment distortions,improve implementation of existing intellectual propertyprotection, and improve corporate and governmenttransparency. (Seiji, 2005:5)

It is expected to also pave the way for preferential accessfor exports to the US market for garments and textileproducts


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PH US ASEAN US FTA?


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PH-US vs. ASEAN-US FTA?

It encompasses issues involving investment, intellectual

property rights, various key services, harmonization ofproduct standards, mutual recognition of product testing,labor standards and environment issues

It will help the Philippines comply with internationally

recognized standards that will, in turn help install acompetition policy, reduce investment distortions, improveimplementation of existing intellectual property protection, andimprove corporate and government transparency. (Seiji,2005:5)

It is expected to also pave the way for preferential access forexports to the US market for garments and textile products

Ph special interest is greater access to US market foragricultural goods (e.g. sugar, fresh and canned fruits, etc.).

ISSUES AND CHALLENGES


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ISSUES AND CHALLENGES(internal to ASEAN)

- Divergent levels of development

- Level of experience in negotiating FTAs

- Divergent levels of ambition

- FDI recipient vs. FDI provider

- Harmonization of of rules of origin

- Harmonization of barriers to trade

- Homogeneity of ASEAN export products

- Displacement of workers and rationalization of industries

and firms- Adjustments by industries especially SMEs

- Possible trade diversion

- Implicit economic costs

- Loss of tariff revenues



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Political

Gainers and losers

Key issues Bilateral

Internal (domestic)

Across sectors

Negotiating strategy

Very tricky and complicated

Question of resources

ISSUES AND CHALLENGES(considerations for the Philippines)



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ISSUES AND CHALLENGES(necessary to ASEANs partners)

Trade barriers anddistortions

Trade in services Foreign investment

Intellectual Property Transparency Anti-Corruption Improvement of WTO

Regulatory practices Electronic Commerce

Reciprocal trade inAgriculture

Labor and theenvironment

Dispute settlement andenforcement WTO extended

negotiations Trade remedy laws Border taxes Textile negotiations Eliminating child labor

Strategic roadmap: 2015 and


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Strategic roadmap: 2015 andbeyond?

Where are we now? Are we ready to compete and harnessthe opportunities of an integrated regional economy?

What can we do and cannot do to take advantage ofASEAN economic community?

What policies we need to develop, support, amend orrepeal to move forward in our regional integrationstrides?

What are the sectors we need to support given theircompetitive advantage? What kind of support?

What safety net can the government and private sectorprovide to sectors and industries that will be affected bythe ASEAN integration?

How do we bring the PH SMEs in the stream of supply

ASEAN and the Rest of the World

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