Thursday, 9th August, 2001

Local Sectors Can Seek 'Protection' Under AFTA
By: Chris Maskilone and Kassim Sangi

Kota Kinabalu: Countries in the Asean Free Trade Area (AFTA) may invoke Article 6 of the Common Effective Preferential Tariff (CEPT) if imports of particular products eligible under the Scheme cause or threaten to cause serious injury to domestic industry.

If such of situation arises, the agreement allows countries to impose or suspend concession, said Principal Assistant Director of the Asean Economic Co-operation, Ministry of International Trade and Industry (MITI) Muthafa Yusof.

In this instance, those who are affected must inform the Government about it before the measure could be taken, he said in his paper "Definition and Current Updates on the AFTA" at the IDS seminar here on Tuesday.

However, he said this is the only meant as a temporary measure as it is subjected to annual review.

Local industries are also protected from anti-dumping protection under the Countervailing and Anti-Dumping Duties Act 1993 and Countervailing and Anti-Dumping Duties Regulation 1994.

Muthafa also explained that under Article 5 of the CEPT agreement, member states shall eliminate all Quantitative Restrictions (QR) such as quotas and licenses on the CEPT products upon enjoyment of the concessions applicable to those products.

Under the same Article, other Non Tariff Barrie (NTB) are also eliminated, which restrict trade on a gradual basis within five years after enjoyment of concessions applicable to their products.

Among the example of NTBs are additional charges, single channel for imports, marketing requirements, Customs uplift of price for imported goods, complex import registration requirements, technical regulations and special products characteristic requirements.

The CEPT Scheme, he said covers all manufactured and processed agricultural products categorised under the Temporary Exclusion List (TEL), which is phased into the scheme beginning 1993 and "as of Jan, 1 2000, the original six countries should not have anymore TEL products."

Also covered are the unprocessed agricultural products such as poultry, swine, tropical fruits, tobacco, tea, coffee and vegetables, categorised under the Sensitive List / Highly Sensitive List (SL / HSL).

He said these products were phased in at an applied rate beginning 2001 but no later than 2003 where the tariff would be reduced to 0-5 percent by January 1, 2010, when all the Quantitative Restrictions (QR) and NTBs are removed.

At the moment, Malaysia has placed rice in the HSL, to provide some form of protection, to be phased into the CEPT Scheme by 2005, and the ending tariff rate in 2010 is 20 percent when all QR are also removed.

The time frame of eight years would allow those in the SL and HSL as well as the Government together with institutions such as IDS to think about the measures and brace for the changes, he said.

Apart from that, he said there were also products permanently excluded from the CEPT Scheme for protection of national security, plants, animals, health and public morals, which are listed under the General Exception List (GEL).

"So don't think that beers or any alcoholic drinks would be cheaper," he said, adding other examples of excluded products were arms, weapons, articles with artistic, historic and archeological value.

He said Malaysia is fully committed to the scheme and that based on the trade figures, Asean has taken over as the country's largest trading partner absorbing 25.3 percent of its global trade last year.

"AFTA is in our favour and Malaysia is the second leading beneficiary in intra-Asean after Singapore," he said.

He had earlier explained that the AFTA promulgated in January 1992 at the fourth Asean Summit in Singapore has several objectives namely to increase Asean's competitive edge, promote intra-Asean trade, encourage foreign direct investment (FDI) and the intra-Asean investment as well as tap full potential of regional economic Cupertino and market opening.

"It would provide largest "domestic" market with more than 500 million population, bigger base and cheaper source of raw materials and benefiting consumers," he said.

The time framed for AFTA varied with the six original signatories (countries), Malaysia, Singapore, Thailand, Indonesia, Philippines and Brunei Darussalam, accelerated to 2002 from its original schedule in 2008.

While new members namely Vietnam would be by 2006 from 1996, Laos and Myanmar (1998 - 2008) and Cambodia (2000 - 2010).

He said the core of AFTA is the CEPT Scheme whereby tariffs to be gradually reduced to 0 - 5 percent over a 10 year period.

Criteria for CEPT concessions is granted on a reciprocal basis and given on condition that tariff rate on products in CEPT Scheme is at or below 20 percent, and must satisfy Rule of Origin criteria. Certificate of Origin (COE) would be issued at time of exportation by MITI.

The 40 percent Asean content's ruling was to safeguard from non-Asean countries getting control of the Asean market through AFTA.

Muthafa said those who intend to trade in AFTA must first apply for the CEPT Scheme or their goods would not be eligible.

"The forms can be obtained through MITI web page at or Asean at," he said, adding the processing is slightly longer for first time applications but subsequent application would be fast.

He said among the MITI roles in facilitating with the Scheme are issuance of CEPT Form D, verification of tariff rates, resolve implementation problems faced by the industries and undertake policy matters relating to CEPT, AFTA and other economic Cupertino activities within Asean.

On the tariff reduction for Malaysia, he said we are already competing within the AFTA environment and that 97 percent of the country's products have been offered for CEPT tariff concession, 91.7 percent at 0 - 5 percent and 60.4 percent with zero duties.

Products which have yet to be included into the Scheme are 2.1 percent of CKD / CBU automotive products in the TEL, 0.8 percent of unprocessed agricultural products in the SL and 0.5 percent in the GEL, he said.

He pointed out that 24 chapters in the Customs HS Code are agriculture products comprising of 1,250 tariff lines and at the moment, slightly more than 80 percent of agriculture products were already in AFTA.

At the same time, he said the original six signatories are also committed to achieve 85 percent of the products at tariff 0 - 5 percent by 2000, 90 percent this year and 100 percent next year, with flexibility on some products.

In conclusion, he said there is need for structural adjustment to deal with increased competition through products development, quality enhancement, consolidation and relocation, reverse investment, while in order to survive, SMIs need to be innovative, competitive and efficient.