1 Japan External Trade Organization Japan External Trade Organization (JETRO) (JETRO) Asia and Oceania Division, Overseas Asia and Oceania Division, Overseas Research Department Research Department Seiya Sukegawa Seiya Sukegawa November 11, 2008 Institute of Social Science, The University of Tokyo International Workshop for FY2008 by Contemporary China Research Base “Trade Team” Date: November 11, 2008 13:00-17:30 Venue: Center Conference Room (Room No. 549) FTA Strategies of ASEAN and FTA Strategies of ASEAN and China China ’ ’ s Advance Southward s Advance Southward
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Japan External Trade Organization Japan External Trade Organization (JETRO)(JETRO)
Asia and Oceania Division, Overseas Asia and Oceania Division, Overseas Research DepartmentResearch Department
Seiya SukegawaSeiya Sukegawa
November 11, 2008
Institute of Social Science, The University of TokyoInternational Workshop for FY2008 by Contemporary China Research Base“Trade Team”
Date: November 11, 2008 13:00-17:30Venue: Center Conference Room (Room No. 549)
FTA Strategies of ASEAN and FTA Strategies of ASEAN and ChinaChina’’s Advance Southwards Advance Southward
Table of ContentsTable of Contents
ASEAN: trying to intensify integrationASEAN: trying to intensify integrationASEAN+1 and the move to establish an ASEAN+1 and the move to establish an
extensive economic regionextensive economic regionThe possibility of a sharp rise in imports The possibility of a sharp rise in imports
from China due to the deregulation of AFTA from China due to the deregulation of AFTA rules of originrules of origin
Harmonization of intellectual properties systems and
competition policies
International trade agreement with the purpose of reducing or eliminating tariffs on goods and service trade barriers between certain countries and regions.
A mode (expanded form) of free trade agreement. In order to further liberalize and facilitate the flow of people, goods and money within the region, it eliminates national and border regulations and harmonizes different economic systems.
FTAEPA
Preparation of business environment Other
FTA (free trade agreement) and EPA (economic partnership agreement)
3
Em
erging markets
Em
erging markets
Export? Local production?OR
4
Association of Southeast Asian Nations (ASEAN)
Export Local productionAdvantage Avoids costs and risks associated with entry into the
marketRealizes short lead time and avoids trade risks
Dis-advantage
Transportation costs, lead time including customs clearing, certificates of origin, trade risks such as AD, exchange risks
Costs for entry into the market, operational risks
Reduction of CEPT by ASEAN countriesTariff reduction in AFTA (as of August 2008)
7
(Note) (1) Inclusion list (list of items to reduce tariff rate) (2) Temporary exclusion list (items that are not ready for reduction) (3) General exception list (items exempted from tariff rate reduction <security items, items with academic value, etc.>) (4) Sensitive list (items that are to be flexibly added to the inclusion list <unprocessed agricultural products>) (5) Highly
sensitive list <items related to rice>(Source) ASEAN Secretariat (Consolidated 2008 CEPT Package)
(2006) (2006) (2005) (2006) (2006) (2006) (2005)Import-weighted average
tariff rates
ASEAN (early member countries) ASEAN (later joined countries)
Simple average tariff rates of ASEAN countries (2007)
Note: Data for Thailand are as of 2006.Reference: World Tariff Profiles 2008 (WTO)
Utilization rate of AFTA among exports from Thailand to ASEAN countries
(Reference) Prepared by Seiya Suekgawa,JETRO based on materials from Thai Ministry of Commerce and the World Trade Atlas 9
Table of ContentsTable of Contents
ASEAN: trying to intensify integration ASEAN: trying to intensify integration ASEAN+1 and the move to establish ASEAN+1 and the move to establish an extensive economic regionan extensive economic regionThe possibility of a sharp rise in The possibility of a sharp rise in imports from China due to the imports from China due to the deregulation of AFTA rules of originderegulation of AFTA rules of origin
10
“ASEAN+1” Free-trade area in East Asia achieved through FTA
11
Under negotiation
Concluded Under consideration/research
AFTA (ASEAN Free-Trade Area)(2010/2015)
ASEAN-India FTA(2012/2017)
* Philippines from 2016
ASEAN・EU FTA
* Under negotiation
ASEAN・CER (Australia-NZ) FTA
* Under negotiation
ASEAN-Japan CEP
ASEAN-South Korea FTA (2010/2018)
* Vietnam from 2016
ASEAN-China FTA(2010/2015)
ASEAN+6
* Remarks: Inside frames are the names of FTATariff elimination (early member countries/later joined countries)
USA・ASEAN FTA* Under
consideration
Agreed Aug. 2008Sign Dec. 2008
Agreed Aug. 2008Sign Dec. 2008
Effective from Dec. 2008
12
Premises (Note)By Jan. 1,
2004By Jan. 1,
2005By Jan. 1,
2006By Jan. 1,
2007By Jan. 1,
2009By Jan. 1,
2010By Jan. 1,
2012By Jan. 1,
2015By Jan. 1,
2018
Over 15% 10% 5%
More than 5% – 15% orless
5%
Less than 5%
-
20% or more - 12% 5%
15% or more – less than20% - 8% 5%
10% or more – less than15% - 8% 5%
Over 5% – less than10% - 5%
5% or less -
Sensitive List400 items (HS Code 6 digit)
and within 10% of grossimports
0-5%
HighlySensitive List
Whichever is less: 40% ofthe number of items on theSensitive List, or 100 items
Less than 50%
Eliminated
Current rate maintained
Current rate maintained
Current rate maintained
20% or less
20%
15%
10%
Eliminated
0-5% tariff rate for 40% oftotal items
0-5% tariff rate for 60% oftotal items
Eliminated
Completely eliminated
SensitiveTrack
Early Harvest(agricultural and fisheries
products)
Normal Track
Eliminated
Eliminated
5%
Eliminated(however, nomore than 150items will be
undermoratoriumuntil 2012)
(Note) MFN is based on the rate as of July 1, 2003. Reduction of Normal Track tariff in 2005 started on July 20.(Reference) Prepared by JETRO based on the “Goods Trade Agreement Under the China-ASEAN Comprehensive Economic
Cooperation Framework Agreement”
ASEAN-China FTA◇ Tariff reduction schedule of the original member countries
of ASEAN ◇Tariff rate as of July 1, 2003
13
No later thanJul. 1, 2006
No later thanJan. 1, 2007
No later thanJan. 1, 2008
No later thanJan. 1, 2009
No later thanJan. 1, 2010
No later thanJan. 1, 2012
No later than Jan. 1, 2016
0-5% tariff ratefor 50% of total
items
Eliminated formore than 90%of total items
0% (however,5% of items can
retain theirtariffs until
20 13 10 5 0
15 10 8 5 0
10 8 5 3 0
5 5 3 0 0
0 0
Sensitive List 20% or less 0-5%
Group A 50% or less
Group BReduce tariff rate by at least
20%
Group CReduce tariff rate by at least
50%
Group DAccording to AKFTA
Quarter Schedule
Group EExempted from tariff
reduction (40 items) * HSCode 6 digit
Within 10% of total items andwithin 10% of gross imports
Completely eliminatedNormal Track
10% or more – less than 15%
Over 5% – less than10%
5% or less Current rate maintained
Current rate maintained
SensitiveTrack
Either 200items or 3%,
and within 3%of grossimports
HighlySensitive List
Current rate maintained
Current rate maintained
Current rate maintained
Current rate maintained
Current rate maintained
Premises (Note)
20% or more
15% or more – less than 20%
(Note) MFN is based on the rate as of January 1, 2005. Reduction in 2006 started from July 1.Sensitive items are defined as within 10% of both the total number of items and imports (statistics of 2004).(Source) Prepared by JETRO based on various information
ASEAN-South Korea FTA◇ Tariff reduction schedule of the original member countries
of ASEAN ◇Tariff rate as of January 1, 2005
14
2005 2006 2007 First half of2008
Australia 67.3% 62.6% 66.2% 67.8%China 6.7% 12.3% 11.1% 11.2%India 17.6% 18.1% 14.0% 13.5%Japan - - 18.1% 20.4%[Note] Because the EPA with Japan became effective in November 2007, the usagerate for 2007 was calculated based on the data from November to December.[Reference] Prepared by Seiya Sukegawa,JETRO based on materials from theDepartment of Foreign Trade, Thai Ministry of Commerce and the World Trade
Thailand’s China trade and FTA utilization rate
2005 2006 2007
Australia 14.7% 13.8% 11.4%China 0.2% 0.7% 2.3%India 2.9% 2.8% 1.7%New Zealand 14.8% 38.5% 37.7%[Reference] Prepared by Seiya Sukegawa, JETRO based on materials from theDepartment of Foreign Trade, Thai Ministry of Commerce and the World Trade Atlas
<Export><Export>
<<輸入輸入>>
57.9
2.0
24.3
60.6
24.528.5 29.6
34.935.5
10.0
32.8
23.1
34.9 36.4
22.4
28.9
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2000 01 02 03 04 05 06 07
Exports to China
Import from China
(%)
(年)
<Import><Import>
[Top five items FTA is used in terms of value in export [Top five items FTA is used in terms of value in export to China] to China]
Q. ASEAN countries’ currently important partner countries.
China Japan U.S.
View of ASEAN countries towards China
Table of ContentsTable of Contents
ASEAN: trying to intensify integration ASEAN: trying to intensify integration ASEAN+1 and the move to establish ASEAN+1 and the move to establish an extensive economic regionan extensive economic regionThe possibility of a sharp rise in The possibility of a sharp rise in imports from China due to the imports from China due to the deregulation of AFTA rules of originderegulation of AFTA rules of origin
16
Move towards the revision of AFTA rules of origin
Revision and increase in flexibility of AFTA/CEPT rules of origin
17
Changed the AFTA rules to either the Changed the AFTA rules to either the ““cumulative value added criteria cumulative value added criteria of 40% or change of the 4of 40% or change of the 4--digit tariff code (CTH)digit tariff code (CTH)””
[Introduction] Formulation of rules by items to be finished by t[Introduction] Formulation of rules by items to be finished by the end of 2007. Rules are to he end of 2007. Rules are to be changed from January 1, 2008be changed from January 1, 2008
““Rules of origin within the ASEAN region (CEPT) should have Rules of origin within the ASEAN region (CEPT) should have higher degree of freedom than the FTA with ASEAN dialogue higher degree of freedom than the FTA with ASEAN dialogue partners (ASSEAN+1s FTA)partners (ASSEAN+1s FTA)””
・ASEAN-South Korea FTA (AKFTA): Value added criteria (ASEAN-South Korea accumulated) 40% or Change of the 4-digit tariff code (CTH)
・ASEAN-Japan EPA (AJCEP): Value added criteria (ASEAN-Japan accumulated) 40% or Change of the 4-digit tariff code (CTH)・ASEAN-China FTA (ACFTA): Value added criteria 40% (ASEAN-China accumulated)・ASEAN Free-Trade Area (AFTA): Value added criteria 40% (ASEAN accumulated) * (1) Change in tariff classification can also be applied to wheat flour, wood products, aluminum products, iron and steel (from fall of
2005). * (2) Change in tariff classification can also be applied to items in the 11 prioritized areas of integration (from summer of 2007,
excluding Myanmar). ・ASEAN-India FTA (AIFTA): Value added criteria (ASEAN-India accumulated) 35% and Change of the 6-digit tariff code (CTSH)
TighteningTightening
[The 21st AFTA Council] August 2007[The 21st AFTA Council] August 2007
[Current conditions]
。。Put into effect in virtually all member countries on August 1, 2Put into effect in virtually all member countries on August 1, 2008008(Rules of origin include De (Rules of origin include De MinimisMinimis rule of 10% or less)rule of 10% or less)
[The 20th AFTA Council] August 2006[The 20th AFTA Council] August 2006
Implemented
18
Invest
Change in tariff classification (in the case of a 4-digit code)
((ChinaChina))Wooden casesHS 4421 90
(China)(China)Diodes
HS 8541 10
(China)(China)Cone units
HS 8518 90(Domestic
procurement in Thailand)
Cone unitsHS 8518 90
(1) applicable(1) applicable◎◎
(2) applicable (2) applicable ◎◎
(3) inapplicable(3) inapplicable××
Rising possibility of the inflow of Chinese Products in accordance with the increasing flexibility of AFTA rules of origin
Assembly plant of Chinese-affiliated Company A
SpeakersHS 8518 22
AFTA-CEPTApply tariff rates
*: If assembly plant of Company A (Thai company) is approved as a promoted company by the Board of Investment (BOI) in Thailand, import tariff will not be applied for parts procured from China, or refund measures are applied under BIS Section 19. Exports from Thailand to ASEAN is available with AFTA-CEPT tariff rates.
Chinese-affiliated Company A
MFN: 10%AFTA: 5%
MFN: 20%AFTA: 5%
MFN: 15%AFTA: 0%
MFN: 10%AFTA: 0%
MFN: 0%AFTA: 0%
MFN: 10%AFTA: 1%MFN: 35%AFTA: 5%
MFN: 5%AFTA: 5%
MFN: 20%AFTA: 5%
(3)(3)’’ applicableapplicable◎◎
Tariff rates for home appliances in ASEAN6 Tariff rates for home appliances in ASEAN6 (TV set)(TV set)
19
[Note] China included the product in the Highly Sensitive List. Therefore, ASEAN actually does not need to grant the ACFTA preferential rate.
[Source] Prepared based on information from the World Tariff, Japan-Thailand EPA and implementation arrangements, ACFTA and AKFTA.
Japan Thailand Malaysia thePhilippines
Indonesia
Timing of tariffreduction April 1st April 1st January 1st April 1st January 1st
[Note] Tariff reduction date for each year differs by country.
Country Regular tariff rate Exported from 08 09 2010 11 12 13 14 15 16 17 18 RemarksThailand Within ASEAN 5 5 0
20% Japan (bilateral) 10 5 0Japan (AJCEP) 15 10 5 0China 20 20 20 20 20 20 20 20 20 20 5 SLSouth Korea (Same with regular tariff rates)
Malaysia Within ASEAN 030% Japan (bilateral) 18.75 15.63 12.50 9.38 6.25 3.13 0 25% B7
Vietnam Myanmar Cambodia LaosTiming of tariffreduction April 1st April 1st April 1st April 1st
[Note] Tariff reduction date for every year is as follows.
20
[Note] Thailand has not signed AKFTA.China included the product in the Highly Sensitive List. Therefore, ASEAN actually does not need to grant ACFTA preferential rate.[Source] Prepared based on information from the World Tariff, Japan-Thailand EPA and implementation arrangements, ACFTA