Association of Southeast Asian Nations
In January 1992, the ASEAN member states signed the Singapore Declaration, marking the commitment to intensify economic cooperation in the entire region. At the heart of the Declaration is the creation of the ASEAN FREE TRADE AREA (AFTA) IN 15 YEARS.
A Free Trade Area in ASEAN means the removal of obstacles to freer trade among member states. This includes the abolition of high tariffs or taxes on traded goods and the scrapping of quantitative restrictions (QRs) and other nontariff barriers (NTBs) that limit the entry of imports. At the same time, each member is still free to set its own level of tariffs o imports from nonmembers.
Chronology
1990
Oct. 29-30 22nd ASEAN Economic Ministers Meeting (AEM) in Den Pasar, Bali
agrees to apply a common effective preferential tariff on selected industrial products
which initially include cement, fertilizer and pulp.
1991
Oct. 4-6 ASEAN Seniors Economic Official Meeting (SEOM) in Kuala Lumpur agree
on amendments to the Thai proposal to establish AFTA.
Oct. 7-8 23nd ARM in Kuala Lumpur agree to form a regional free trade area within 15 years.
1992
Jan. 27-28 At the 4th ASEAN Summit in Singapore, the ASEAN heads of
government formally agreed to establish an ASEAN Free Trade Area and sign the Singapore
Declaration and the Framework Agreement on Enhancing ASEAN Economic Cooperation. AEM sign
the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade
Area.
Sept. 11 ASEAN inaugurates the AFTA council to speed up the implementation of AFTA.
Oct. 22-23 24th AEM in Manila reiterated to launch AFTA as scheduled on 1 January 1993.
Dec. 11 AFTA Council meets in Jakarta. Three documents (Operational Procedures for CEPT, Rules of Origin for CEPT, and Interpretative Notes to the Agreement on the CEPT Scheme for AFTA) are approved. The ASEAN countries exchange summary of products included and excluded and tentative list of product inclusion or temporary exclusion. AFTA Council approved each country's general formula of tariff reduction schedule.
1993
Jan. 1 The ASEAN Free Trade Area (AFTA) officially starts
April 30 Target date of each ASEAN country to submit final lists exceptions, temporary exclusions, quantitative restrictions, and barriers as well as the tariff reduction schedules.
July 12-13 Submission off to CEPT inclusion list was completed.
Oct 7-8 AEM in Singapore finalized CEPT offers of Member Countries CEPT implementation for January 1, 1994.
Mechanism of AFTA
The Common Effective Preferential Tariff (CEPT) scheme is the main implementing mechanism of AFTA. Under the CEPT member countries gradually lower tariffs on each other's imports
ASEAN will truly be a free trade area once obstacles to trade are removed and taxes or tariffs on goods traded among member countries are reduced to zero to five percent.
This will be achieved gradually over a 15-year period or by the year 2008 through a schedule of tariff reductions under the Common Effective Preferential Tariff (CEPT) scheme.
At the same time, CEPT allows each country to exclude certain products under the following categories: (1) unprocessed agricultural products; (2) general exceptions, particularly those with health and security reasons; and (3) temporary exclusions for "sensitive products" that would be subject to review by the eight year or year 2001.
AFTA involved other areas of cooperation, including the harmonization of standards, the reciprocal recognition of tests and certification, the removal of barriers to foreign investments, macroeconomic consultations, rules for fair competition, and the promotion of venture capital.
There are two forms of tariff reductions under the CEPT:
Tariffs above 20 percent will be reduced to 0-5 percent within ten years.
Tariffs 20 percent and below will be reduced to 0-5 percent within seven years.
Product-groups under the fast-track program are the following
| Vegetable Oil | Cement |
| Chemicals | Pharmaceutical |
| Fertilizers | Plastics |
| Rubber Products | Leather Products |
| Textiles | Ceramic and Glass Products |
| Gems and Jewelry | Copper Cathodes |
| Electronics | Wooden and Rattan Furniture |
Tariffs above 20 percent will be reduced in two stages: a) a cut within 5-8 years; b) a final reduction to 0-5 percent after another seven years, or a total of 15 years.
Tariffs of 20 percent and below will be reduced to 0-5 percent in ten years.
Each ASEAN member may exclude certain products from CEPT coverage under the various exclusion lists.
Unlike other ASEAN members, the Philippines did not have to start implementing CEPT as scheduled last January 1, 1993. CEPT for the Philippines takes effect only after tariff reforms under Executive Order 470 are completed.
A member country enjoys the rates under CEPT if at least 40 percent of the value of its products originates from any one or more member states.
Once a product is included in the CEPT, quantitative restrictions should be eliminated immediately upon the enjoyment of concessions whlle other non-tariff barriers should be removed with in 5 years from the enjoyment of concessions.
Once a product is included in the CEPT, other forms of trade restrictions (ie., quantitative restrictions and foreign exchange restrictions and other nontariff barriers ) are removed within five years.
For the Philippines, the good news is that most of its top exports are included in the CEPT. And even if a top exporter like automobile parts is temporary excluded, it is not a clear loser because other ASEAN countries have likewise excluded this same product group.
Potential exports, however, such as cocoa products and fruit juices, which have potential competitive advantages, are excluded. Garment manufacturers, on the other hand, are potential winners, but could not develop the export market as only textile, an input, is included while finished goods are excluded. This situation is similar in footwears, inputs like raw hides, were included but shoes were excluded, this preventing shoe manufacturers from exporting freely to ASEAN.