ASEAN Strengthens Trade Ties

1 November 2007

The Association of Southeast Asian Nations has concluded new trade agreements with Japan and South Korea, as well as agreed on modest steps to mitigate climate change.

The ‘comprehensive’ economic partnership agreement inked between ASEAN and Japan during the November ASEAN summit in Singapore covers trade in goods and services, as well as investment and development co-operation.

Import tariffs on some 90 percent of trade between the two sides will be lifted within ten years. Rice, beef and dairy products will remain protected as sensitive products.

ASEAN’s more developed economies (Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) will reduce 90 percent of tariffs over the next 10 years on major Japanese products, such as consumer electronics and automobiles. The other four (Cambodia, Laos, Myanmar and Vietnam) will eliminate tariffs within 15 to 18 years.

ASEAN also signed a services agreement with South Korea, marking the second in a threestep process for a comprehensive FTA between the 10-nation trading bloc and Asia’s third largest economy. Korea’s offer to open its market to ASEAN companies goes beyond its commitments to the WTO in areas such as financial services, adult education and environmental consultancy.

Negotiations on investment rules, the last step in the FTA process, will continue next year. Seoul is eager to complete the deal with ASEAN soon, because the bloc has either signed or is pursuing FTAs with other major competitors, including the EU, China and India. While ASEAN’s agreement with China is expected to be fully operational in 2010, its talks with India have stumbled repeatedly on market access for farm goods, most recently over India’s wish to protect its palm oil sector.

ASEAN is also negotiating a free trade agreement with Australia and New Zealand, although the 2009 completion target may prove ambitious on account of New Zealand’s insistence on including labour, environmental and intellectual property right clauses in the pact.

On the South Korean side, FTAs are already in force with Chile and Singapore. Negotiations with the US concluded in June, but the deal still needs parliamentary ratification in both countries. The Korea-EU FTA will not be signed this year as originally hoped due to a persistent difference over EU access to the Korean automobile market.

Climate Change

ASEAN leaders and the heads of state of Australia, China, India, Japan, South Korea and New Zealand also issued a joint statement on energy, climate change and the environment. They promised to “participate actively in the process of developing an effective, comprehensive and equitable post-2012 international climate change arrangement under the UNFCCC process,” as well as to intensify co-operation to improve energy efficiency and the use of cleaner energy, “including the use of renewable and alternative sources.” The leaders vowed to enhance regional co-operation to develop cost-effective carbon mitigation technologies and to produce environmentally-friendly and sustainable biofuels. The statement also emphasised collaborative efforts to reduce deforestation, promote sustainable forest management and combat illegal logging.

At least two of the summit participants – China and India – face intense pressure to take on binding greenhouse gas reduction targets in the commitment period starting in 2012. Australia’s newly elected prime minister Kevin Rudd has ratified the Kyoto Protocol, thus leaving the United States the only developed country formally outside the UN-led effort to reduce, the amount of greenhouse gases in the earth’s atmosphere (see related article on 14).

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