Brick by Brick: The Building of an ASEAN Economic Community

4. A Review of Regional Tariffs and Trade in the ASEAN Priority Goods Sector

Regional Tariffs and Trade in the ASEAN Priority Goods Sectors 59 By: ROS Size: 6" x 9" J/No: 07-13802 Fonts: AGara, Aurora & Helv. 4 A Review of Regional Tariffs and Trade in the ASEAN Priority Goods Sector Rina Oktaviani, Amzul Rifin, and Henny Reinhardt 1. Introduction In 2003 the ASEAN Concord II (also known as the Bali Concord II) established the ASEAN Economic Community with a view to integrate the economies of the ASEAN countries. This is outlined in the document, ASEAN Vision 2020. To this end, there is to be a free flow of goods, services, investment and skilled labour, and freer flow of capital in order to promote economic growth and development and reduce socio-economic disparities within the region. Further details on the background to the Agreement can be found in Lloyd and Smith (2004). The Framework Agreement for the Integration of Priority Sectors was signed at the Tenth ASEAN Summit which was held in Vientiane, Laos on 29–30 November 2004. This Agreement outlined the steps to be taken to accelerate the integration of eleven major sectors in the ASEAN economies: agro-based products, air travel, automotive products, e-ASEAN, electronics, fisheries, healthcare, rubber-based products, textiles and apparel, tourism, and wood-based products. 04 BrickByBrick Ch 4 11/1/07, 12:37 PM 59 60 Rina Oktaviani, Amzul Rifin, and Henny Reinhardt By: ROS Size: 6" x 9" J/No: 07-13802 Fonts: AGara, Aurora & Helv. A number of previous studies have examined the impediments to the integration of the ASEAN economies. This chapter contains an overview of trade performance and tariff rates in the priority sectors of the ASEAN economies. It also seeks to measure the degree of integration in these economies using measures of comparative advantage and intra-industry trade in the priority sectors. To give a background, Table 4.1 compares the structure of the various ASEAN economies. In Cambodia, Laos, and Myanmar, the dominant sector is agriculture. Except for Singapore whose dominant sector is services, manufacturing is the dominant sector in the other countries. 2. Methodology 2.1. Data Sources Trade flows. The source of data is Comtrade (www.unstats.un.org) for the period 2002–2004 and ASEAN Secretariat (www.aseansec.org) for 2005. Trade flows are analysed for nine of the eleven priority sectors: agro-based products, automotive products, electronics, fisheries, healthcare, information and communication technology (ICT), rubber-based products, textiles and apparel, and wood-based products. Some commodities are included in more than one sector. Reporting by some countries is incomplete. For example, Singapore does not report all its trade flows with Indonesia. This can be overcome to some extent by examining the trade flows that are reported by the partner country. However, in some cases, goods passing through Singapore are simply re-exported. Data from Laos, Myanmar, Cambodia, and Vietnam are also problematic. CEPT and MFN tariff rates and intra-industry trade index. Tariff data are from the ASEAN Secretariat and are classified by the eight-digit ASEAN Harmonized Tariff Nomenclature (AHTN). The intra-industry trade index is calculated from the four-digit HS code. This is calculated by summing the six-digit HS code from products within the priority sectors. However, some products within this code are not within the priority sectors. 2.2. Method of Constructing Trade Matrices The priority sectoral trade matrix is constructed from each country’s exports to and imports from each of the other countries. For example, the value of agro-based exports by Brunei is derived from the total exports of Brunei to 04 BrickByBrick Ch 4 11/1/07, 12:37 PM 60 Regional Tariffs and Trade in the ASEAN Priority Goods Sectors 61 By: ROS Size: 6" x 9" J/No: 07-13802 Fonts: AGara, Aurora & Helv. Table 4.1 Composition of GDP by Economic Sectors, 2000–2004 Country 2000 2002 2003 2004 Agriculture Industry Services Agriculture Industry Services Agriculture Industry Services Agriculture Industry Services Brunei Darussalam 1.6 59.5 38.9 1.9 58.7 39.4 2.1 58.4 39.5 — — — Cambodia 39.6 23.3 37.1 35.6 27.9 36.5 36.8 27.9 35.4 — — — Indonesia 15.6 45.9 38.5 15.5 45.4 39.1 15.4 45 39.6 15.2 44.5 40.3 Laos 52.1 22.7 25.2 50.2 24.6 25.1 — — — — — — Malaysia 8.4 44.2 47...