The decision of the 26th ASEAN Economic Ministers (AEM) to accelerate the implementation of AFTA front the initial target of 2008 to the year 2003 is a clear indication of the seriousness in which ASEAN regards the achievement of a free trade area in the region. This can be seen as part of ASEAN’s contribution to the general trend towards global trade liberalisation.
Now the most obvious implication of the 26th AEM decision is the acceleration of the tariff reduction program under the CEPT Scheme. Under the new time frame, the general schedule of tariff reduction for normal and fast track products under the CEPT Scheme have the following features.
Normal Track
- products with tariff rates above 20% will have their rates reduced to 20% by 1 January 1998 and subsequently from 20% to 0-5% by 1 January 2003;
- with tariff rates at or below 20% will have their rates reduced to 0-5% by 1 January 2000.
Fast Track
- products with tariff rates above 20% will have their rates reduced to 0-5% by 1 January 2000;
- products with tariff rates at or below 20% will have their rates reduced to 0-5% by 1 January 1998.
Figures 1 and 2 give a general picture of the effect of the 26th AEM decision on the tariff reduction schedule of the CEPT Scheme for normal track and fast track products.
In Figure 1, the dotted lines represent the tariff reduction schedule under the old time frame while the solid lines represent the tariff reduction schedule under the new time frame. Note that there are two dotted lines and two solid lines representing two possible cases. The first case is when a product has a tariff rate of 20% and below in the year 1993 (the base year). The second case is when a product has a tariff rate of above 20% in 1993. Under the new time frame, a product with a tariff rate of 20% and below in 1993 must be reduced to 0-5% by the year 2000. On the other hand, a product with a tariff rate of above 20% in 1993 must be reduced to 20% or below by 1998 and then to 0-5% by the year 2003.
In Figure 2, the dotted lines represent the tariff reduction schedule under the old time frame while the solid lines represent the tariff reduction schedule under the new time frame. Note that there are two dotted lines and two solid lines representing two possible cases. The first case is when a product has a tariff rate of 20% and below in the year 1993 (the base year). The second case is when a product has a tariff rate of above 20% in 1993. Under the new time frame, a product with a tariff rate of 20% and below in 1993 must be reduced to 0-5% by the year 1998. On the other hand, a product with a tariff rate of above 20% in 1993 must be reduced to 0-5% by the year 2000.
Some idea of the effect on average CEPT tariff rates of the new time frame is shown in Table 1 and Figure 3. They show the average CEPT tariff rate by country and for ASEAN as a whole from 1996 to 2003. The average tariff rates are for the 38,388 tariff lines in the CEPT Inclusion List (Normal and Fast Tracks) endorsed by the Seventh AFTA Council held in Brunei Darussalam on 6 September 1995. These represent 89.03% of all tariff lines in ASEAN. The ASEAN average for CEPT products falls from 7.76% in 1996 to 2.95% by the year 2003.
Table 1
AVERAGE CEPT TARIFF RATE
(New Time Frame)
| Country | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 |
|---|---|---|---|---|---|---|---|---|
| Brunei Darussalam | 2.46 | 2.29 | 1.91 | 1.74 | 1.39 | 1.39 | 1.39 | 1.39 |
| Indonesia | 11.63 | 10.61 | 8.84 | 7.91 | 5.81 | 5.70 | 5.00 | 4.25 |
| Malaysia | 5,93 | 5.14 | 4.42 | 3.67 | 2.90 | 2.83 | 2.83 | 2.83 |
| Philippine | 9.17 | 8.33 | 7.16 | 6.53 | 5.42 | 4.90 | 4.89 | 3.73 |
| Singapore | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Thailand | 14.10 | 12.69 | 10.15 | 9.28 | 7.00 | 6.99 | 5.78 | 4.63 |
| ASEAN | 7.76 | 7.00 | 5.79 | 5.19 | 3.97 | 3.88 | 3.47 | 2.95 |
Source: ASEAN Secretariat
A second effect of the 26th AEM decision is to broaden the coverage of the CEPT Scheme since both unprocessed agricultural products and products once in the Temporary Exclusion List are now included. Currently about 89.03% of all tariff lines in ASEAN are either in the Normal or Fast Track of the CEPT Scheme. Another 7.11 % are in the Temporary Exclusion List; about 2.87% are sensitive unprocessed agricultural products (including those classified as sensitive); and the rest are products in the General Exception category. The 26th AEM decision means that the CEPT Scheme would cover nearly 98% of all tariff lines in ASEAN by the year 2000. By then, the only products in ASEAN not included in the CEPT Scheme will be those in the General Exception category and sensitive agricultural products.
Products in the Temporary Exclusion List
The 26th AEM had agreed to phase in all products in the Temporary Exclusion List (TEL) to the Inclusion List of the CEPT Scheme. This was to be done in equal installments beginning 1 January 1996 to 1 January 2000. The Seventh AFTA Council held in Brunei Darussalam on 6 September 1995 endorsed the first installment of these products transferred into the CEPT Scheme. There was a total of 682 tariff lines transferred from the TEL and some of the products included inorganic chemicals, organic chemicals and plastics, which are among the fastest growing traded products in ASEAN. The Inclusion of these products is bound to accelerate the growth of intra-regional trade.
October 4th, 2012
