ASEAN Free Trade Area
The ASEAN Free Trade Area (AFTA) project was launched in 1993, whereby the objective is to create a Free Trade Area in the region. The AFTA laid out a comprehensive program of regional tariff reduction, which had to be achieved in phases through the year 2008. However, this deadline was moved forward to 2003.
When the AFTA agreement was originally signed, ASEAN had six members (Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand). Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999. All four countries were required to sign on to the AFTA agreement in order to join ASEAN, but were given longer time frames in which to meet AFTA's tariff reduction obligations.
The main mechanism to realize an AFTA is the Agreement of the Common Effective Preferential Tariff (CEPT) scheme, which was signed by the ASEAN ministers of economic affairs. The ultimate objective of AFTA is to increase the competitiveness of ASEAN as a production base geared for world market. ASEAN's manufacturing sectors will become more efficient and competitive by the elimination of intra-regional tariffs and non-tariff barriers. And with the larger size of the market, investors can enjoy economies of scales in production. The region will be able to attract foreign direct investments, which will stimulate the growth of supporting industries in the region for many foreign direct investments.
Over the course of the years the initial program of tariff reductions has been expanded, and the pace has been stepped up. Several "AFTA Plus" activities were initiated, such as elimination of non-tariff barriers and quantitative restrictions; harmonization of customs taxonomy, valuation, and procedures; development of common product certification standards. ASEAN signed as well a framework agreement for the intra-regional liberalization of trade in services, and for regional co-operation in intellectual property rights. An industrial complementation scheme was set up to stimulate intra-regional investment, and discussions were held on creating a free investment area within the region. During the financial crisis of 1997-98, ASEAN reiterated its commitment to AFTA, and agreed that the original six AFTA signatories would accelerate several of the planned tariff cuts by one year, to 2002 from 2003.
The financial crisis induced AFTA to undertake some bold measures, but it was as well the motor behind the formation of ASEAN plus Three (APT). The financial crisis, which erupted in Thailand and swept as far north as South Korea, underlined the mutual economic interdependence and vulnerability between Southeast and Northeast Asia. The crisis revealed as well the increasing economic gap between Southeast and Northeast Asia. The ASEAN states not only sought to remedy this through the AFTA and the ASEAN Investment Area, but also through connecting their economies to the Northeast Asian economies. Another repercussion of the crisis was that it created an ill feeling about the US and its dominant role in international economic and financial affairs. The financial crisis trigged the emergence of yet again another forum in the region, namely ASEAN Plus Three (APT). With the exception of Taiwan, North Korea and Hong Kong, it organizes all states of East Asia, thus the ten ASEAN states plus China, Japan and South Korea. The APT is not based on a treaty or on a formal, binding agreement between the participating states, nor has it a central secretariat. Notwithstanding this, the set of connections between the states has increased significantly since the first meeting of the heads of governments in 1997. Not only convene the heads of states meetings on a regular base, but also the ministers of economic, finance and foreign affairs, as well as the governors of the central banks have started meeting regularly. For instance, the APT foreign ministers have been meeting at least once a year to review and consult on political and security issues in East Asia.
In order to explore how the cooperation could be expanded in all sectors and at all levels among the East Asian countries, a "vision group" was set up by the heads of governments in 1998. The APT summit in Manila in 1999 resulted in an agreement to cooperate more closely on a wide range of issues (monetary, economic, social, security, technological and cultural), and within international organizations (UN and the World Trade Organization WTO). (Link to the Joint Statement on East Asia Cooperation 28 November 1999)
A year later they decided to examine the possibility of formalizing their ties and forming an East Asia Free Trade Area. In the same year APT reached an agreement to establish a regional currency swap facility to enable the states to better protect themselves against any future financial crises. In November 2001 the "vision group" submitted an ambitious plan for a regional bloc. It recommended that East Asia would move "from a region of nations to a bona fide regional community where collective efforts are made for peace, prosperity, and progress". The identified sectors of cooperation are: economic, financial, security, environmental, social and cultural. The group proposed an East Asian Free Trade Area, preferential treatment for the developing states in the region, and an expansion of the AIA to include all of East Asia.
China already negotiated a broad agreement with ASEAN in November 2001 with the objective to establish a Free Trade Area within the next 10 years uniting China and the ten ASEAN states. At the same time, the governments of China, Japan and South Korea agreed to hold regular meetings of their ministers of economic, finance and foreign affairs, hereby enhancing their economic and political cooperation. The three dialogue partners of ASEAN are looking for ways to transform the organisation into a broader East Asian economic and political forum. Beginning 2002, Japan proposed to expand the community, envisioning a free-trade zone, which would encompass ASEAN, China, South Korea, Hong Kong and Taiwan (ASEAN Plus Five). Japan called for a "comprehensive economic partnership" that would stretch "further than trade and investment to such areas as science and technology, human resources development, and tourism".
Not only has the APT emerged as the only setting for meetings between China, Japan and South Korea, which does not involve the US, but it also gives the East Asian countries the change to discuss issues of common regional interest from an "Asian" angle.
These developments illustrate that there is a real progress toward East Asian integration.
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