Asean to push for free trade talks with Australia, NZ

(SINGAPORE) Asean economic ministers wrapped up a meeting in Singapore yesterday with a proposal for the regional grouping to start talks with Australia and New Zealand on a free trade deal – signaling a policy shift brought about by more favourable circumstances.

The Association of South-east Asian Nations – which has already kicked off similar talks with China, Japan and India – also took steps yesterday to further boost linkages among its 10-member countries in a move towards an Asean Economic Community, a goal spelt out by Asean leaders last year in Bali.

The economic ministers inked an accord to trim tariffs under the Asean Industrial Cooperation (AICO) scheme, from 0-5 per cent currently to as low as 0 per cent for six of its member countries (see table).

The move is also necessary to maintain the scheme's relevance, because tariffs under the Asean Free Trade Agreement were lowered to 0-5 per cent in January last year.

AICO, introduced in 1996, aims to encourage resource-sharing within Asean and sharpen its competitive edge in manufacturing by encouraging production integration across borders through preferential tariffs.

As of January this year, Asean has approved 118 applications under AICO which are expected to generate about US$1.2 billion worth of transactions yearly.

On the proposal for a free trade agreement (FTA) with Australia and New Zealand – which already have a trade deal between them in the form of Closer Economic Relations – the economic ministers recommended inviting the two countries' leaders to the Asean leaders' summit in Laos in November to launch the negotiations.

Australia, whose two-way trade with Asean totalled US$26 billion in 2002/03, has long sought an FTA with Asean. But it had to settle in 2001 for talks on a closer economic partnership – a looser trade framework shorn of tariff cuts – because of opposition from some Asean members.

But Cambodian Commerce Minister Cham Prasidh, who chaired yesterday's meeting, told reporters after yesterday's meeting that times have changed. 'The situation is much more favourable than in previous years.'

Singapore's Trade and Industry Minister George Yeo said the FTA proposal follows a visit to Canberra last week by Asean's Secretary-General Ong Keng Yong, who found Australia very keen to move beyond closer economic partnership with Asean.

'So (in a way) we are responding with the FTA proposal,' he said. 'Asean believes this will be good for both sides economically.'

In pushing for an FTA with Australia and New Zealand, BG Yeo stressed the need to weave another strand in a thickening web of two-way and regional market-opening pacts in the Asia-Pacific region.

'If you look at it from the viewpoint of the way the world is going and the way the economic pieces are put in place, this is the natural next step for us to take,' he said.

Asean's FTA with China, India and Japan are due to go into force in 2010, 2011 and 2012 respectively. But BG Yeo said it's too early to say when an agreement with Australia and New Zealand might take effect.

Australia already has a free trade deal with Asean members Singapore and Thailand. New Zealand also has an FTA with Singapore. The other Asean members are Malaysia, Indonesia, the Philippines, Brunei, Cambodia, Vietnam, Laos and Myanmar.