Asean to set up giant free trade zone

BALI, Indonesia – The Association of Southeast Asian Nations (ASEAN) put the finishing touches yesterday to an action plan to transform the region into a giant free trade zone that will be the centerpiece of this week’s annual summit of leaders.

To kickstart the region’s grand plan, trade ministers from the ASEAN and China, the world’s most populous nation, adopted a protocol paving the way for the implementation from Jan. 1, 2004 of a so-called "early harvest program" under the Free Trade Area (FTA).

The three-year program is largely a concession by China to give early benefits to the ASEAN states through tariff reductions on a host of agricultural and manufactured goods while the actual implementation of the FTA begins on Jan.1, 2005, officials said.

Trade and Industry Secretary Manuel Roxas II said ASEAN is on the verge of full realization of its free trade area.

"We now want to apply a second wave of liberalization to further integrate our members’ economies into a whole that will be Asean to greater than the sum of its parts," he said.

Roxas stressed the second wave of ASEAN integration is structured to be pragmatic and cognizant of the domestic situation of each member-country.

The FTA in goods will be established by 2010 for the six original members of ASEAN – Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand – and 2015 for the four other members.

Although China offered the early harvest plan, ASEAN reciprocated by giving tariff concessions to their giant neighbor under a so-called tariff harmonized system for agricultural products like meat, fish, fruit, vegetables and milk.

"This is the economic confidence building measure by Asean and China prior to the eventual implementation of their free trade area," Asean spokesman M.C. Abad said. "You can say that it is the opening salvo to achieve the FTA."

The Philippines, which has lately been cautious over opening up its market, expects to be the last ASEAN state to finalize its early harvest program with China, Roxas said.

He said although Manila adopted the protocol and was keen on arriving at a mutually satisfactory list with China, "if the bottom line positions are unsatisfactory for us, then we will not avail of an early harvest program."

"The beauty of the ASEAN process is that there is a structure allowing for differences while we move forward," Roxas said.

The Asean, which are in the midst of establishing their own free trade area, will also sign a FTA pact with India, the world’s second most populous nation, as well as an agreement with Japan with provisions for a FTA

Focusing On The Economy

ASEAN Secretary General Ong Keng Yong said the target date for a free trade area could be brought forward, and discussion among the leaders would consider accelerating the removal of tariff and non-tariff barriers to trade in a region with 500 million people and annual trade worth $720 billion.

With free trade agreements in the works with China, Japan and India that call for completion by 2017, ASEAN should consider advancing the 2020 deadline by three years, Ong said, adding that leaders would be asked to reduce non-tariff barriers within two years and to extend manufacturing sector benefits to services.

A report ASEAN commissioned from business consultants McKinsey has highlighted lack of integration, non-tariff barriers and disparate policies that favor competitiveness of single nations at the expense of the group as among problems the bloc must face. – Marianne V. Go, AFP, Reuters