ASEAN, China to phase out most bilateral trade tariffs by 2010

Asian Economic News, Nov 29, 2004

VIENTIANE, Nov. 29 Kyodo

China and the 10-member Association of Southeast Asian Nations will

phase out tariffs on most goods traded between them during the five-year period starting in July 2005, leaving only some 500 items under tariff protection, ASEAN officials said Sunday.

High-tariff items that include rice, automobiles and some petrochemical products will be listed as ''highly sensitive,'' thereby allowing both sides to reduce their tariffs to 50 percent only in 2015, according to the officials.

On Monday, economic ministers of ASEAN and China will sign a full-fledged free-trade agreement after ASEAN leaders hold annual talks with Chinese Premier Wen Jiabao in the Lao capital.

China additionally reserves some iron and steel as ''sensitive products,'' while ASEAN countries put automobiles, rice, sugar and vegetable oil in the ''highly sensitive'' list.

In addition to jeeps, motorcycles and some certain automotive parts, Thailand also listed tea, coffee, tobacco, silk, crude oil, and certain farm commodities that are exceeding tariff quotas including garlic, onion and shallots in its ''highly sensitive'' list.

Other ''sensitive'' products for Thailand include air conditioners, refrigerators, washing machines, microwave ovens, lifts and certain toys.

Goods other than those listed in the ''sensitive'' or ''highly sensitive'' lists are in the ''normal'' category. It is for those items that ASEAN and China will begin to slash tariffs from July 1. Total elimination of tariffs on these products will have to be completed by 2010.

Each country will be allowed to maintain tariff barriers on ''normal'' goods only until 2012, and the delayed tariff elimination could be made only for up to 150 items, according to officials who said the lists would be made public only after the signing of the agreement Monday.

China and every ASEAN country will be allowed to list up to 400 items in the category of ''sensitive goods,'' for which tariff reduction will begin in 2012 with initial tariff cuts of 20 percent in the first year. Tariff barriers in this category will have to be reduced to between zero and 5 percent by 2018.

For the ''highly sensitive'' list, both sides will keep tariff barriers on no more than 100 items at a maximum 50 percent tariff by 2015.

Cambodia, Laos, Myanmar and Vietnam are given five more years after China and the six other ASEAN members that are more economically advanced -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand -- to follow suit in each of the categories.

As a down payment to the trade liberalization pledge, ASEAN and China began on Jan. 1 this year initial tariff cuts on farm products in eight categories -- live animals, meat, fish, dairy produce, other animal products, trees, vegetables, and fruits and nuts -- and completely eliminate the tariffs within three years.

The establishment of the ASEAN-China free-trade area will create an economic region with 1.7 billion consumers, a regional gross domestic product of about $2 trillion and total trade estimated at

$1.23 trillion. The FTA is projected to increase ASEAN's exports to China by 48 percent and China's exports to ASEAN by 55.1 percent, according to simulations conducted by the ASEAN Secretariat.