AEC Blueprint 2025 Analysis: Paper 2 | Liberalisation of the Trade in Goods

by Ken Li Yee | Originally published on 3 March 2016.


Summary

With the removal of tariff barriers defining a decade of success in liberalising the free flow of goods, the AEC Blueprint 2025 hopes to capitalise on past achievements whilst introducing new initiatives.

Foreword

The AEC Blueprint Analysis series is a publication which seeks to provide insight into the ASEAN Economic Community Blueprint (AEC) 2025. The publication will seek to do so by adopting a holistic approach in its analysis; creating context by examining past achievements, defining present challenges, and discussing future plans. The series will pay special attention to strategic measures outlined within the AEC’s new blueprint, providing insights with regards to the viability of regional economic integration under the AEC.

 

A. Past Plans

What were the targets in the AEC 2015 Blueprint?

img-aecpaper2-1

The goal of free flow of goods is a key element in achieving the AEC’s first pillar within the 2015 blueprint, which details the creation of a single market and production base. Since 1967, several key
agreements and actions were adopted in an effort to remove trade barriers and facilitate trade:

1. The ASEAN Free Trade Area (AFTA)
Signed in 1992, the AFTA detailed the implementation of a Common Effective Preferential Tariff (CEPT) scheme. This applied a 0%-5% tariff rate to goods traded between ASEAN member states.

2. The AEC Blueprint 2015
Adopted in 2007, the blueprint outlined strategic measures and also delineated a definitive timeline for the CEPT scheme to be implemented, which further enhanced AFTA.

3. The ASEAN Trade in Goods Agreement (ATIGA)
Ratified in 2009, ATIGA expanded on both the CEPT-AFTA and AEC Blueprint 2015. ATIGA also formalised the self-certification and ASEAN Single Window (ASW) concepts for trade facilitation and information sharing.

 

B. Past Achievements

What has been achieved?

Out of the targeted actions outlined above, the AEC’s most significant accomplishment to date lies with the removal of tariff barriers; as of 2015, 95.99% of intra-regional tariff lines have been liberalised, 99.2% in the ASEAN-6 and 90.8% for CLMV nations. Information sharing initiatives and the harmonisation of technical and regulatory standards have gained traction, whilst groundwork provided by the ROO and NTB has paved the way for future action.

img-aecpaper2-2

 

C. Present Challenges

What are the current issues?

img-aecpaper2-3

Whilst import duties between the ASEAN-6 have been virtually eliminated, it should be noted that tariff reductions for CLMV countries are still underway and have been given a deadline in 2018. Several key areas still require progress, as outlined below:

  • NTB Measures:
    ASEAN nations face issues with the common classification of NTB measures, which in turn has impeded the rollback and halting of NTBs. Institutional fragmentation has also played a large part in hindering progress. (Cadot, Munadi, & Ing, 2013)
  • Rules of Origin:
    Currently, an estimated 80% of intra-ASEAN trade occurs at Most Favoured Nation (MFN) tariff rates
    rather than CEPT rates. (Menon and Melendez May 2015) This means that CEPT has not been as effective as intended, as caused by classification and certification related issues for trade.
  • Customs/Regulatory Harmonisation:
    A key issue cited by multinationals operating in Southeast Asia is the lack of uniform customs
    procedures and cross-border regulatory recognition. (Wood & Tam, February 2013)

 

D. Future Plans

What new measures are included in the AEC 2025 Blueprint?

img-aecpaper2-4

The AEC Blueprint 2025 hopes to capitalise upon previous successes by finalising CEPT implementation
The AEC Blueprint 2025 focuses on several strategic planks when it comes to the free flow of goods:

  • At the foremost of those undertakings would be the facilitation of trade, which includes both information sharing and regulatory harmonisation initiatives
  • The addressing of NTBs remains largely undeveloped

These strategic measures are analysed in depth below.

 

E. AEC 2025 Blueprint Analysis

What do the measures entail?

img-aecpaper2-5

img-aecpaper2-6

img-aecpaper2-7

 

F. Conclusion

What does the AEC 2025 Blueprint mean in terms of the Trade in Goods?
Where the AEC 2015 Blueprint saw major strides in the removal of import duties, the AEC 2025 Blueprint places a greater focus on trade facilitation measures.

In particular, the AEC 2025 Blueprint’s two largest areas of focus will be the harmonisation of customs regulations and removal of technical and regulatory barriers. Whilst feasible, it should be noted that successful implementation of these two areas will require greater participation from CLMV nations in particular, as well as a firm commitment to regulatory transparency.

Meanwhile, the removal of NTBs still remains a large challenge, with the preliminary job of classifying NTBs being ASEAN’s greatest hurdle in the short term future. Long term aspirations in the full removal of NTBs are unlikely as examples of NTB elimination around the world have remained unsuccessful. (Majid November 2015)


References
ASEAN 2025: Forging Ahead Together, The ASEAN Secretariat (2015).
Majid, T. S. D. M. (November 2015). ASEAN Community in two or three parts [Opion]. Retrieved from http://www.cariasean.org/news/asean-community-in-two-or-three-parts/
Menon, J., & Melendez, A. C. (May 2015). Realizing an ASEAN Economic Community: Progress and Remaining Challenges.
Secretariat, T. A. (2008). ASEAN Economic Blueprint.
Secretariat, T. A. (2015). ASEAN Intergration Report 2015.
Secretariat, T. A., & UNCTAD. (2015). ASEAN Investment Report 2015 Infrastructure Investment and Connectivity.
Scretariat, T. A. (2015). A Blueprint for Growth ASEAN Economic Community 2015: Progress and Key Achievements.
Wood, J., & Tam, G. (February 2013). Riding the ASEAN Elephant; How business is responding to an unusual animal.
Cadot, O., Munadi, E., & Ing, L. Y. (2013). Streamlining NTMs in ASEAN: The Way Forward (ERIA-DP-2013-24).
Hamanaka, S. (December 2014). Trans Pacific Partnership Versus Regional Comprehensive Economic Partnership: Control Of Membership And Agenda Setting.


Unable to view it online? You may download the PDF file here: