FocusNo easy escape for ASEAN petchems under FTA in '10 - lawyer

21 December 2009 06:30  [Source: ICIS news]

(Recasts fourth paragraph)

By Malini Hariharan

MUMBAI (ICIS news)--Southeast Asian petrochemical producers have limited legal options to defer or block the implementation of a zero-tariff regime that will take effect next year, a trade lawyer said on Monday.

Indonesian polyolefin producers were actively pushing for a postponement of the new trade policy, fearing competitive imports from Thailand and Singapore.

Six of the 10 members of the Association of Southeast Asian Nations (ASEAN) will implement the zero-tariff next year, including Brunei, Malaysia and the Philippines.

But it would be difficult for Indonesia to renegotiate as the agreement has already been ratified, said Edmund Sim, a Singapore-based partner at law firm Appleton Luff.

“It is pretty much impossible,” he said.

Polymer producers in the Philippines echoed the sentiments of their Indonesian counterparts, citing possible erosion in their market shares, but they would have to live with the ASEAN free trade agreement (FTA) which would come into force on 1 January 2010.

FTA terms allow suspension of tariff concessions by a country only “if it can be determined that increased imports have caused injury or economic damage to local companies,” said Sim.

“But in the history of FTAs this has very rarely been implemented. And even if this is put in place it would be a temporary measure – say for a period of 3-5 years,” he added.

Seeking antidumping actions from their respective governments is a second option available to petrochemical players wary of the new trade regime.

“If the industry is worried about a flood of imports they can go in for this option by proving that pricing was unfair and that the local industry suffered material injury. This type of action is possible and can be extended for an indefinite period,” Sim said.

This route, however, entails high legal fees and would take a while to enforce. Companies also have to wait for a few months before they can initiate action.

“You have to build a record. You cannot say on 2nd January that there is dumping. You need time to build the case; usually 6-8 months is enough to get data to make a claim,” he added.

“The simple option [of raising import duties] ended when the FTA was signed. Now they have the safeguard option, which is untested, or antidumping, he added. 

Meanwhile, the Indonesian media has reported that the country was seeking to delay the implementation of the ASEAN-China FTA that would likewise come into force on 1 January 2010.

There is a provision in the ASEAN-China FTA for a temporary delay in tariff reduction by reclassifying goods as ‘sensitive’ and ‘highly sensitive’ products. The duty elimination could then be delayed to 1 January 2015.

But the problem for Indonesia is that there are limits on the number of ‘sensitive’ and ‘highly sensitive’ products and the deadline for classifying goods was back in 2004, said Sim.

It was also uncertain whether China and other ASEAN countries would allow Indonesia to deviate from the FTA.

“Either way, for Indonesia to delay tariff elimination will require some agreement by the other ASEAN members and China [in the case of the China-Asean FTA] otherwise Indonesia will be in breach of its legal obligations,” said Sim.

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By: Malini Hariharan
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