ASEAN-China Free Trade Area: ASEAN-China Free Trade Area 05 October 2006 Bureau of International Trade Relations Department of Trade and Industry


Presentation Outline: Presentation Outline Background Framework Agreement Early Harvest Programme (EHP) EO 485 Agreement on Trade in Goods Tariff Reduction Modality Normal Track EO 487 Sensitive Track Application of Reciprocity


ASEAN-China Summit 2002: ASEAN-China Summit 2002 Signed the Framework Agreement on Comprehensive Economic Cooperation Between the Association of South East Asian Nations and the People’s Republic of China Shall serve as the fulcrum for establishing the free trade area (FTA) by year 2010 for ASEAN-6 and year 2015 for the Cambodia, Lao PDR, Myanmar and Vietnam, with flexibility on sensitive sectors and commodities


Early Harvest Programme (EHP): Early Harvest Programme (EHP) Provides for tariff elimination on a list of agreed products, particularly unprocessed agriculture products in Chapters 01 – 08, prior to the establishment of ACFTA Implementation began on 1 January 2004 for ASEAN (except Philippines) and China Philippines’ Executive Order No. 485 was issued on 29 December 2005 to implement EHP


Executive Order No. 485 (EHP):Who will Benefit?: Executive Order No. 485 (EHP): Who will Benefit? Applicable Rate of Duty: 0% Annex A – All ASEAN Member Countries and China 318 unprocessed agriculture products Exports of same products shall enjoy reciprocal rate of 0% Annex B – China 8 processed products Exports of same products shall enjoy reciprocal rate of 0%


Agreement on Trade in Goods: Agreement on Trade in Goods Signed in 2004 by the ASEAN Economic Ministers and China’s Minister of Commerce Implementation began on 1 July 2005 for ASEAN (Brunei Darussalam, Indonesia, Myanmar, Malaysia, Singapore, and Thailand) and China Covers substantial reduction or elimination of tariffs and other barriers to establish the ASEAN-China Free Trade Area (ACFTA) by 2010, under the following tracks: Normal Track – 2005-2010, with flexibility up to 2012 Sensitive Track – 2012 up to 2018


Normal Track: ASEAN-6 & China Tariff Reduction Modality: Normal Track: ASEAN-6 & China Tariff Reduction Modality


Sensitive Track: Tariff Reduction/Elimination Modality: Sensitive Track: Tariff Reduction/Elimination Modality ASEAN-6 and China Two tracks : Sensitive (SL) and highly sensitive items (HSL) Initial target : For SL, tariffs will be reduced to 20% in 2012 : For HSL, no commitment in 2012 Ending rate : 0-5% (SL) : 50% (HSL) Ending date : 2018 (SL) : 2015 (HSL)


Comparative Tariff Reduction/Elimination Modality: Comparative Tariff Reduction/Elimination Modality


Executive Order No. 487: Coverage: Executive Order No. 487: Coverage Philippines’ legal enactment to implement Normal Track commitments, which was issued on 12 January 2006 Covers the first tranche of tariff reduction schedule (i.e. 2005 – 2008) Products whose tariff rates are at x ≥ 20 and therefore reduced to 20% Products whose tariff rates are at 5 < x < 10 and therefore reduced to 5% For other products which are not included in EO 487, the applicable rate of duty is the current applied MFN rate


Executive Order No. 487:Who will Benefit?: Executive Order No. 487: Who will Benefit? A product can enjoy preferential tariff rate if: It is placed under the Normal Track of both the importing and exporting countries; and At least 40% of the local content complies with the rules of origin under the ASEAN-China Free Trade Area Sensitive products whose tariff rates have been reduced to 10% or below


How can Sensitive Products Enjoy Preferential Tariff Rates?: How can Sensitive Products Enjoy Preferential Tariff Rates? Applicable Rate of Duty of such Sensitive Product has been reduced to 10% or below Applicable Tariff Rate: - NT rate or EHP rate of the importing Party for the same product; or - Tariff rate of the exporting Party, provided that this is lower than the importing Party’s MFN rate * Nothing in the paragraph prevents the importing Party from granting to the exporting Party the Normal Track or Early Harvest Programme rate even if such rate is lower than the exporting Party’s tariff rate.


Reciprocal Tariff Rate Arrangement: Reciprocal Tariff Rate Arrangement [1] For Thailand and Viet Nam, paragraph 6(iii) of the TIG Agreement (i.e. “The importing Party can, on its discretion, apply its NT or EHP tariff rate even if such rate is lower than the tariff rate of the exporting Parties.”), shall apply. Notes: EHP – Early Harvest Programme NT – Normal Track ST – Sensitive Track (covers both Sensitive & Highly Sensitive Lists)


Contact Address: Contact Address Bureau of International Trade Relations Department of Trade and Industry 4/F Department of Trade and Industry - International Bldg. 375 Sen. G. Puyat Avenue Makati City Tel. No. 897 – 8289 / 897-8292 / 897 – 8290 Fax. No. 890-5149


Slide15: Thank You!