The ASEAN Free Trade Area (AFTA) is a trade bloc agreement by the Association of Southeast Asian Nations supporting local trade and manufacturing in all ASEAN countries, and facilitating economic integration with regional and international allies. It stands as one of the largest and most important free trade areas (FTA) in the world, and together with its network of dialogue partners, drove some of the world's largest multilateral forums and blocs, including Asia-Pacific Economic Cooperation, East Asia Summit and Regional Comprehensive Economic Partnership.

The AFTA agreement was signed on 28 January 1992 in Singapore. When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. AFTA now comprises the ten countries of ASEAN. All the four latecomers were required to sign the AFTA agreement to join ASEAN, but were given longer time frames in which to meet AFTA's tariff reduction obligations.

The primary goals of AFTA seek to:

  • Increase ASEAN's competitive edge as a production base in the world market through the elimination, within ASEAN, of tariffs and non-tariff barriers; and
  • Attract more foreign direct investment to ASEAN.

The primary mechanism for achieving such goals is the Common Effective Preferential Tariff scheme, which established a phased schedule in 1992 with the goal to increase the region’s competitive advantage as a production base geared for the world market.

History

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1967

  • The Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967 when the foreign ministers of Indonesia, Malaysia, the Philippines, Singapore and Thailand signed the ASEAN Declaration.
  • The ASEAN Declaration announced the establishment of an Association for Regional Cooperation among the Countries of Southeast Asia, aiming to promote cooperation in the economic, social, cultural, technical, education and other fields.
  • It also aims to promote regional peace and stability through abiding respect for justice and the rule of law and adherence to the principles of the United Nations Charter.

1976

  • The first ASEAN Summit (also known as Bali Summit) was held on 23–24 Feb 1976 in Bali, Indonesia.
  • Economic cooperation among ASEAN members was emphasised as the justification for the Summit.
  • The establishment of AFTA was strongly resisted by President Suharto from Indonesia.

1977

  • The second ASEAN Summit was held in Kuala Lumpur, Malaysia.
  • There were post summit conferences with Japan, Australia, New Zealand and the United States which overshadowed the ASEAN Summit.
  • Economic growth became the central domestic political requirement and economic cooperation turned into the central focus.
  • The concept of “ASEAN Trade Area” refers to a harmonising custom union with internal free trade and external tariffs bound to ASEAN goods among member countries (Indonesia, Malaysia, Thailand, the Philippines, Singapore, Brunei).
  • Prime Minister Anand from Thailand and Prime Minister Goh Chok Tong from Singapore came up with the idea of AFTA in July 1991.
  • The CEPT scheme was introduced in the agreement to alleviate the tariff on a wide range of products traded within the region.
  • Under Vietnam's agreement with ASEAN on AFTA, Vietnam will meet the requirements on tariff and non-tariff reductions over a ten-year period, beginning on 1 January 1996.

1997

  • Laos and Myanmar joined the AFTA agreement on 23 July 1997.
  • Both Myanmar and Laos has been given time to reduce tariffs on the local goods to below 5% until 2008.

1999

  • Cambodia joined the AFTA agreement on 30 April 1999.
  • Cambodia agreed to begin tariff reduction on 1 January 2000 and the deadline to achieve AFTA was 2010. ASEAN members have the potential to reap significant benefits from investments in further trade facilitation reform, due to the comprehensive tariff reform already realised through the ASEAN Free Trade Agreement.

This new analysis suggests examining two key areas, among others: port facilities and competitiveness in the Internet services sector. Reform in these areas, the report states, could expand ASEAN trade by up to 7.5% ($22 billion) and 5.7% ($17 billion), respectively. By contrast, cutting applied tariffs in all ASEAN members to the regional average in Southeast Asia would increase intra-regional trade by about 2% ($6.3 billion).

Membership

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Countries that agree to eliminate tariffs among themselves:

Regular Observers

The most recent ASEAN meeting was observed also by:

  • Regional Comprehensive Economic Partnership
  • ASEAN–Australia–New Zealand Free Trade Area (AANZFTA) is a free trade area between ASEAN and ANZCERTA that was signed on 27 February 2009 and came into effect on 1 January 2010. Details of the AANZFTA agreement are available online.
  • ASEAN–China Free Trade Area (ACFTA), in effect as of 1 January 2010
  • ASEAN–India Free Trade Area (AIFTA), in effect as of 1 January 2010
  • ASEAN–Korea Free Trade Area (AKFTA), in effect as of 1 January 2010