Association of Southeast Asian Nations (ASEAN) was established in August 1967. It was a Free Trade Agreement which consisted of 5 founding members. They were Indonesia, Malaysia, the Philippines, Singapore and Thailand. Afterwards, Brunei Darussalam joined ASEAN in January 1982.

At the Fourth ASEAN Summit meeting in Singapore in January 1992, ASEAN members signed the Singapore Declaration and the Framework Agreement on Enhancing Economic Cooperation, which resulted in the formation of ASEAN Free Trade Agreement (AFTA). The strategic objective of AFTA is to increase the ASEAN region’s competitive advantage as a single production unit. The elimination of trade barriers among member states is expected to promote greater economic efficiency, productivity and competitiveness.

The ASEAN Economic Ministers (AEM) also signed the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for AFTA. According to CEPT Agreement, each of member states agreed to eliminate quantitative restrictions and other non-tariff barriers. They also agreed to reduce tariff rates on intra ASEAN trade to 0–5% within 15 years commencing 1 January 1993.

Afterwards, the Fifth ASEAN Summit (Bangkok, December 1995) adopted the Agenda for Greater Economic Integration, which included the acceleration for realization of AFTA from the original 15-year time frame to 10 years, finishing by 1 January 2003 instead of 2008. At the Sixth ASEAN Summit (Hanoi, December 1998), because of the East Asian Financial Crisis, the six original member states agreed to advanced implementation of AFTA by one year to 2002, from 2003. This course of action was taken as a means of restoring business confidence, enhancing the economic recovery and promoting growth in the region.

CEPT Product Lists

Under the CEPT Agreement, the products are divided into 4 categories which are Inclusion List (IL), Temporary Exclusion List (TEL) Sensitive List and General Exception (GE) List. Products in IL have to undergo immediate liberalization through reduction in intra-regional tariff rates, removal of quantitative restrictions and other non-tariff barriers i.e. Tariffs on these products should be down to a maximum of 20% by the year 1998 and to 0-5% the year by 2002. By then, the CEPT Scheme will cover near 98% of all tariff lines in ASEAN by the year 2002.

Products in TEL can be protected from the trade liberalization for a temporary period of time. But starting on 1 January 1996, products from TEL had to transfer into the Inclusion List and began a process of tariff reduction down to 0-5%.

All sensitive products shall have ending tariff rates of 0-5%. Members States, except Cambodia, Laos, Myanmar and Vietnam, shall eliminate all quantitative restrictions and other non-tariff barriers on sensitive products by 1 January 2010.

Products in GE List are permanently excluded from the free trade area for reasons of protection of national security, public morals, the protection of human life and health, etc.

Now AFTA has 10 members including 4 new members i.e. Vietnam (joined in July 1995), Laos and Myanmar (joined in July 1997) and Cambodia (joined in April 1999). The requirement that CEPT rates have to reduce to 0-5% on at least 90% of member states’ tariff lines in the Inclusion List by 2002. As the 4 new member states joined AFTA in different time, the time frame of reaching the requirement of CEPT Agreement was adjusted. Under the terms of AFTA, Vietnam has to reduce the tariff rates to 0-5% by 2006, Laos and Myanmar have to meet this target by 2008 and Cambodia by 2010.

Historical and Foreseeable Development

For enhancing the economic cooperation, a series of proposal was introduced at the Fifth ASEAN Summit in Bangkok in December 1995. In order to enhance the efficiency of customs, the ASEAN member states agreed to the region wide adoption of the GATT Transactions Value System of customs valuation. To accelerate the clearance time of customs, the member states agreed to a Green Lane System which was launched in 1996. The subsequent surveys showed that the system was effective and can be significantly reduced the clearance time for eligible goods.

Other than the agreement on trade in goods, an ASEAN Framework Agreement on trade in services was adopted in 1995. The ASEAN countries negotiated intra-regional services liberalization in a number of sectors, including telecommunications, tourism, financial services, construction and maritime transport.

Besides, at the same Summit, ASEAN adopted a Framework Agreement on Intellectual Property Protection (IPR) which for increasing the cooperation in the field of IPR among government agencies as well as the private sectors and professional bodies of ASEAN.

The ASEAN industrial Cooperation Scheme (AICO) was approved by AEM in Singapore in November 1996. The AICO was designed to encourage technology-based investments in ASEAN and was opened to some kind of ASEAN-based companies.

For increasing the flow of investment into ASEAN, the concept of an ASEAN Investment Area (AIA) was endorsed at the Fifth ASEAN Summit, in which barriers to intra-regional investment would be lowered; regulations would be liberalized and incentives would be offered to boost regional investment. But AIA is currently in the conceptual stages and has to discuss continuously by the ASEAN senior Economic Officials.

ASEAN also set the goal of harmonizing national standards with international ones, such as International Standards Organization (ISO), International Electro-technical Commission (IEC) and International Telecommunications Union (ITU) standards, for 20 priority product groups by the year 2000.

In the foreseeable future, ASEAN member states will accelerate the progress of AFTA. The target of member countries is achieving the ultimate objective of a free trade area. They are working towards the total elimination of import duties on all products by 2015 for the six original ASEAN member countries and 2018 for the newer members. They also expected to create an integrated market where there is free flow of products within the region.

Leaders from the 10 member countries of the Association of Southeast Asian Nations (ASEAN) met in November 2000, and agreed to promote further economic integration in the region. Leaders from China, Japan, and South Korea also joined in these discussions in the “ASEAN-plus-three” meetings. In this meeting, officials discussed proposals to form FTA that would include all 10 ASEAN as well as these 3 additional East Asian countries. One of the proposals is to study the impacts of creating an ASEAN free trade area that including China, Japan and South Korea. During these meetings, agreements reached included accelerating construction of the Trans-Asian Railway between Singapore and the Chinese city, Kunming. The e-ASEAN framework agreement on electronic commerce agreed aims at to narrow the divide between higher and lower tech ASEAN countries, increasing Internet connectivity, further development of e-commerce and the liberalization of trade in information and communication technology.