Taking ASEAN step forward

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    Taking ASEAN+1 FTAs towards the RCEP

    Ikumo Isono

    Economist

    Economic Research Institute for ASEAN and East Asia (ERIA)October 30, 2013, S.C. Tsiang Memorial Hall, CIER, Taipei

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    What is RCEP?

    New FTA negotiation among the ASEAN+6 countries.

    oASEAN10, Australia, China, India, Japan, Korea and New Zealand

    Negotiation starts in 2013.

    Conclusion in 2015, as an ambitious goal.

    Three official documents have been issued:

    o ASEAN Framework for Regional Comprehensive Economic Partnership

    (November 2011)

    o Guiding Principles and Objectives for Negotiating the Regional Comprehensive

    Economic Partnership (August 2012)

    o Joint Declaration on the Launch of Negotiations for the Regional ComprehensiveEconomic Partnership (November 2012)

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    Why we want RCEP?

    RCEP can

    Economic Reasons

    1. Deepen the liberalization commitments (goods, services and ROO);

    2. Ease the noodle-bowl situation (not only in ROO but huge number of tariff

    schedules, and different rules) and thus enhance the utilization of FTA;3. Further ease the use of FTAs via accumulation;

    4. Deepen economic cooperation for facilitation measures; and,

    5. Prevent the potential loss from competing initiatives (e.g., CJK FTA).

    + Political Reason for ASEAN

    1. Maintain and strengthen the ASEAN Centrality (politically) under the pressure

    from TPP and CJK.

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    AANZFTA ACFTA AIFTA AJCEP AKFTA AverageBRN 99.2% 98.3% 85.3% 97.7% 99.2% 95.9%

    CAM 89.1% 89.9% 88.4% 85.7% 97.1% 90.0%

    IDN 93.7% 92.3% 48.7% 91.2% 91.2% 83.4%

    LAO 91.9% 97.6% 80.1% 86.9% 90.0% 89.3%

    MLS 97.4% 93.4% 79.8% 94.1% 95.5% 92.0%

    MYA 88.1% 94.5% 76.6% 85.2% 92.2% 87.3%

    PHI 95.1% 93.0% 80.9% 97.4% 99.0% 93.1%

    SGP 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

    THA 98.9% 93.5% 78.1% 96.8% 95.6% 92.6%

    VTN 94.8% n.a. 79.5% 94.4% 89.4% 89.5%

    AUS 100.0%

    CHN 94.1%

    IND 78.8%

    JPN 91.9%KOR 90.5%

    NZ 100.0%

    Average 95.7% 94.7% 79.6% 92.8% 94.5%

    Notes: HS2007 version, HS 6-digit base. Data on Viet Nam under the ASEAN-China are missing.

    Data on Myanmar under the ASEAN-China FTA are also missing for HS01-HS08.

    Source: ERIA FTA Mapping Study

    Tariff Elimination 1)All the ASEAN+1 FTAs (except AIFTA) provide higher than 90% tariff elimination.

    Yet, there are room for improvement when it comes to country-specific.

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    Tariff Elimination 2)

    Common concessionis a key feature in the ASEAN+1 FTAs.

    (a) common concession --- e.g., Indonesia has single tariff schedules giving the

    same preferences to all the RCEP members.

    (b) non-common concession--- e.g., Indonesia gives different preferences to RCEP

    members (max. 15 different tariff schedules).

    Common concession will bring additional liberalization even if the level of

    ambition remains the same (e.g., 90%).

    Thus, ASEAN can gain additional liberalization even though it has FTAs withall the RCEP members .

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    Tariff Elimination 3)

    % of "eliminated to

    all" products

    % of "depends on

    FTA" products

    % of "protected to

    all" products

    Brunei 84.1 15.9 0.0

    Cambodia 64.3 35.3 0.4

    Indonesia 46.0 52.8 1.2

    Lao PDR 68.0 31.6 0.4

    Malaysia 76.0 22.9 1.1

    Myanmar 66.6 31.8 1.6

    Philippines 74.6 24.4 1.0

    Singapore 100.0 0.0 0.0

    Thailand75.6 24.3 0.1

    Viet Nam 78.1 19.1 2.8

    Average 73.3 25.8 0.9

    Note: Based on HS2007 version, HS 6-digit base. Data on Viet Nam under the ASEAN-China FTA are

    missing. Data on Myanmar under the ASEAN-China FTA are also missing for HS01-HS08.

    Source: ERIA FTA Mapping Study

    ASEAN countries have opened up 99.1% of products to at least one FTA Partner.

    ASEAN needs to streamline their commitment / protection in order to realize a regional FTA with

    common concession.

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    Total WTO+ Total WTO+ Total WTO+ Total WTO+

    Brunei 0.23 0.20 0.18 0.15 0.06 0.03 0.08 0.06

    Cambodia 0.41 0.04 0.51 0.14 0.38 0.01 0.38 0.01

    Indonesia 0.36 0.30 0.29 0.22 0.08 0.03 0.18 0.11

    Laos 0.34 NA 0.24 NA 0.04 NA 0.07 NA

    Malaysia 0.34 0.24 0.31 0.21 0.19 0.05 0.20 0.10

    Myanmar 0.36 0.33 0.26 0.23 0.07 0.04 0.06 0.03

    Philippines 0.33 0.23 0.26 0.17 0.18 0.09 0.17 0.08Singapore 0.39 0.28 0.44 0.33 0.37 0.26 0.33 0.22

    Thailand 0.50 0.26 0.36 0.12 0.29 0.06 NA NA

    Vietnam 0.38 0.11 0.46 0.19 0.34 0.06 0.32 0.05ASEAN

    Average 0.36 0.22 0.33 0.20 0.20 0.07 0.20 0.08

    Australia 0.52 0.18

    New Zealand 0.51 0.26

    China 0.32 0.07

    Korea 0.31 0.09

    AFAS(7) AANZFTA ACFTA (2) AKFTA

    Services Liberalization

    Notes: The higher the figure, the more liberal commitments are (min. 0; max. 1). AFAS is based on the 7thpackage.ACFTA is based on the 2ndPackage.Source: ERIA FTA Mapping Study

    Some ASEAN+1 FTAs provide only minimal WTO plus contents.

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    2.3

    9.5

    5.8

    3.0

    5.0

    3.3 2.9

    8.3

    13.4

    0.0

    2.0

    4.0

    6.0

    8.0

    10.0

    12.0

    14.0

    16.0

    ASEANCoexistence of Five ASEAN+1 FTAs

    Coexistence of Five ASEAN+1 FTAs and CJK FTA

    ASEAN+6 FTA (RCEP)

    Potential Economic Impact on GDP of RCEP

    Percentage Point, accumulated from 2011 to 2015)

    Note: Percentage Point, Accumulated from 2011 to 2015. Assumptions are: (a) complete elimination of the tariffs over the

    specified period of time, (b) reduction of ad valorem equivalents of service trade barriers, and (c) improvements in logistics

    cutting the ad valorem time.

    Source: Itakura for ERIAs AEC Mid-term Review Study

    RCEP will have the largest positive economic impacts on ASEAN.

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    How can we maximize the economic gains?

    Trade in Goods

    Common concession in tariff schedules: common in A+1 FTA

    Consolidated ROOs with co-equal rules

    Cumulation rules: common in A+1 FTA

    Higher level of tariff elimination, e.g., 95%

    Trade in Services Substantive WTO Plus components (more than A+1 FTAs)

    Trade Facilitation

    Meaningful programs (many in ASEAN; but rare in A+1 FTAs)

    Speed

    Speedy conclusion the key for ASEAN Centrality

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    Some more potential implications

    1. RCEP and TPP: Can we converge the two towards an FTAAP?Which one is higher quality? (common tariff schedule and liberal

    ROOs?)

    2. Expansion of ASEAN++ agreements in non-trade economic areas?

    3. RCEP Secretariat? Implication to the ASEAN Secretariat?

    4. Open accession in RCEP. Who may join? What are the conditions?

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    Thank You for Your Kind Attention!

    [email protected]