Concerned about the Asean FTA? There’s not much you can do about it.

The implementation of a zero-tariff regime in Asean from 1 Jauary 2010 has raised concerns among polymer producers in Indonesia and the Philippines about intense competition from Singapore and Thailand leading to a erosion in market shares.

Producers from these two countries are lobbying to defer or block implementation of zero tariffs. But a trade lawyer says the going will be difficult.

“I have heard that Indonesia is pushing for a postponement of the new duty structure. Even if the government agrees the customs department is not prepared as [new] forms are not ready,” says one Singapore-based exporter.

But Edmund Sim, partner with Appleton Luff, points out that it would be difficult for Indonesia to renegotiate as the agreement has already been ratified. “It is pretty much impossible,” he says.

Pic source: Fotopedia

“What is allowed under the free trade agreement (FTA) terms is for a country to suspend tariff concessions if it can be determined that increased imports have caused injury or economic damage to local companies. But in the history of FTAs this has very rarely been implemented. And even if this is put place it would be a temporary measure – say for a period of 3-5 years,” says Sim.

The second option is to go for antidumping action.

“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,” says Sim.

But this is an expensive option because of high legal fees and it takes time 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 points out.

“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 adds.

Besides the Asean FTA, Indonesian media has reported that companies are also asking for a delay in the implementation of the Asean-China FTA, which comes into force from 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, points out Sim.

It is also uncertain whether China and other Asean countries will 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,” says Sim.

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