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47. The Expansion of AFTA
- ISEAS–Yusof Ishak Institute
- Chapter
- Additional Information
220 Jayant Menon By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 47. THE EXPANSION OF AFTA JAYANT MENON Reprinted in abridged form from Jayant Menon, “The Expansion of AFTA: Widening and Deepening?”, Asian-Pacific Economic Literature 12, no. 2 (November 1998) (Canberra: Economics Division. Research School of Pacific and Asian Studies, Australian National University, 1998) by permission of the author and the publisher. THE WIDENING OF AFTA The decision to establish AFTA was taken at the summit meeting of the Association of Southeast Asian Nations (ASEAN) heads of state in January 1992. All six members of ASEAN (the ASEAN-6) would participate. At inception, the ASEAN-6 countries agreed to a deadline of 2008 for reducing tariffs to 0–5 per cent. At the 1995 ASEAN summit meeting held in Thailand this deadline was moved forward to the year 2005, and later to the year 2003. More recently, there have been calls to move the deadline to the year 2000. At their meeting in September 1995, the ASEAN economic ministers agreed to work towards the 2000 objective, without formally endorsing it as the new deadline.1 Within the current time-frame, more than 85 per cent of tariff lines in the Inclusion List will be in the 0–5 per cent range by the year 2000 (ASEAN Secretariat 1996). The first step in the widening of AFTA took place at the Fifth ASEAN Summit on 15 December 1995, when Vietnam acceded to the Common Effective Preferential Tariff (CEPT) Agreement. Vietnam agreed: • to extend, on a reciprocal basis, most favoured nation (MFN) and national treatment to ASEAN member countries; • to prepare a list for tariff reduction and start tariff reduction on 1 January 1996 leading to a 0–5 per cent tariff rate by 1 January 2006; • to include, in five equal instalments, temporarily excluded products, beginning 1 January 1999 and ending 1 January 2003; • to phase in agricultural products, beginning 1 January 2000 and ending 1 January 2006; and • to provide information on its trade regime whenever requested. Thus Vietnam, like the ASEAN-6, was given ten years to reduce its tariffs to 0–5 per cent. The second move in the widening of AFTA took place at the Seventh ASEAN 047 AR Ch 47 22/9/03, 12:48 PM 220 The Expansion of AFTA 221 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville Summit in Kuala Lumpur on 23 July 1997, when Lao PDR and Myanmar acceded to the CEPT agreement. The provisions were identical to those of Vietnam described above, except for the time-frame. Both countries will also have ten years to satisfy AFTA obligations, but they will begin their program on 1 January 1998 and conclude it on 1 January 2008. Cambodia was to join with Lao PDR and Myanmar in formally acceding to ASEAN on 23 July 1997. However, following the rupture of the coalition between Mr Hun Sen and Prince Ranaridh (formed after the 1993 UNbrokered elections) in June 1997, ASEAN decided to postpone Cambodia’s membership indefinitely. The question of Cambodia ’s membership is essentially one of timing. It is widely expected that Cambodia will move from its current observer status to full membership before the end of 1998 (assuming that the political uncertainty that currently stand in the way is resolved after the 1998 elections). Cambodia’s membership would complete the widening of AFTA to include all ten Southeast Asian nations. Thus far, widening of AFTA has been considered only in the context of expanding the number of its full members. A recent development associated with widening is the attempt to link up with other RTAs. AFTA has its closest link with the Australia– New Zealand Closer Economic Relations Agreement. The potential for explicit widening through a formal link, however, looks limited. Malaysia has promoted the East Asian Economic Caucus, which would exclude both Australia and New Zealand. There is a link between AFTA and the North American Free Trade Agreement (NAFTA), but this is also an informal arrangement, involving discussions and exchanges between officials over trade issues. Here too, widening through a formal link is unlikely, given ASEAN fears that such a link would be seen in Europe and Japan as co-option of ASEAN by the USA (Arndt 1996). The ASEAN-6 are also members of APEC but they have been resisting attempts to link AFTA too closely with APEC. This is indicated, for instance...