Introduction

The signing of AFTA in January 1992 was a welcome development. It breathed new economic life into ASEAN which, though originally established with an economic programme, had for the past two decades played a primarily political role. ASEAN also has a political aspect which has found expression in the Asian Regional Forum with its extended membership, but the chief objective of AFTA is trade liberalization. It is hoped that, within the Common Effective Preferential Tariff (CEPT), substantially free trade among ASEAN members will be achieved within fifteen years, and that more efficient allocation of resources within the wider ASEAN market will have trade-creating effects far beyond ASEAN borders. In addition to the phased reduction of tariffs and non-tariff barriers (NTBs) to trade, AFTA is embarking on a wide-ranging programme of co-operation on non-border measures to facilitate trade, such as harmonization of standards, and to remove obstacles to foreign investment (Lee 1993).

AFTA can undoubtedly make a useful contribution to trade and welfare in the region. But its CEPT, as is generally recognized, has significant limitations. The emphasis is on tariffs, which are becoming less important relative to regulatory NTBs as impediments to trade. It focuses on merchandise trade, which is declining in importance relative to service trade and investment. It aims to liberalize intra-ASEAN trade, which accounts for less than one-fifth of the trade of ASEAN countries and it covers only about one-third even of intra- ASEAN trade. It is a free trade area, which in its nature is discriminatory. And it has a slow timetable.

I hope I shall be forgiven if I make these limitations of AFTA the pegs on which to hang my discussion of issues and agenda.

Liberalization and Facilitation

Freeing of intra-ASEAN trade from remaining tariffs and quantitative restrictions (QRs) on trade in goods is still a worthy objective.