Philippine Business Magazine: Volume 9 No. 4 - Agenda
Coming of Age
AFTA leads its Southeast Asian member-countries into regional economic integration
By Maricar T. Manuzon

In 1992, the six original members of the Assiciation of South East Asian Nations (ASEAN) signed a free trade agreement to bring down tariff levels within the region to 0-5% by 2002 and 2003. On January 1 this year, one of those milestones quietly passed almost unnoticed. ASEAN Secretary General Rodolfo Severino was in Manila recently to highlight the significance of the January 1, 2002 milestone.

We’ve Come A Long Way
According to Severino, member-nations’ subscription to free trade has enabled intra-regional trade to grow from US$44.2 billion in 1993 to US$97.8 billion in 2000; with the current average tariff on intra-ASEAN trade now down to just a little more than three percent from 12.76% in 1993.

Strength in Numbers
In light of such progress, Severino believes that AFTA can be the weapon of the developing economies of the Southeast Asian nations against “the disturbing trend of intensifying protectionism and trade distortion of developed countries.” He cited developments that are bane to free trade. These are: “tit-for-tat measures” against steel products that began with the US; massive agricultural subsidies in the European Union, Japan, and now the US; agricultural protection in the guise of quarantine regulations; preferential treatment by the US for tuna from the Andean nations and by the European Union for tuna from former colonies of some of its member-states; and the abuse of anti-dumping measures which impose on developing countries the prohibitive costs of litigation.”

Severino said “these short-sighted policies of developed countries fortify the forces of protectionism everywhere and undermine the multilateral trading system that has been so painstakingly put together and to which ASEAN remains strongly committed.” And this is where the relevance of ASEAN’s unity under AFTA comes to fore. “ASEAN members would have a better chance working together than moving separately in a harshly competitive world,” Severino stresses.

Beyond ASEAN
To further fortify AFTA’s role in opening up multi-lateral trade as well as investment opportunities for its members, ASEAN is trying to deepen its economic linkages with regions beyond Southeast Asia. Thus, the ASEAN is mulling over the creation of the East Asian Free Trade Area (which will be the result of the alliance of ASEAN and Northeast Asia), as well as the ASEAN-China free trade area. Moves are reportedly underway to form a network of deeper economic partnerships between Japan and individual ASEAN countries within a common framework. More or less the same thing is being worked out between ASEAN and Australia and New Zealand. As far as the Philippines is concerned, these are all well in line with what President Arroyo says is the country’s agenda to strengthen and deepen economic ties with countries and groups of countries beyond ASEAN.

In light of all these, Severino emphasizes the importance of ASEAN’s political cohesiveness and increasingly integrated economies. And this, he says, is being made possible by the continued relevance of AFTA.

Focus on Competitiveness
Peter Garrucho, as Secretary of Trade and Industry, signed for the Philippines the AFTA agreement of 1992. A decade later, Garrucho elucidated on the benefits of the past ten years of AFTA which he summarized as that “the intra-ASEAN trade numbers look good, the consumer is better off, and ASEAN cooperation in areas like intra-regional investments have been good also.”

Garrucho warned, however, that the country has to address the major challenge of country competitiveness. He pointed out that deteriorating competitiveness of local industries will weaken the country’s capability to produce enough goods for local and foreign markets. If the country cannot be competitive in merchandise trade, Garrucho fears that the country will end up exporting more of its people, some of them “our best and our brightest,” and that, he says, would be a setback to the overall achievement of AFTA and other trade liberalization programs.