ASEAN-China

Background

• Cooperation between ASEAN and China was elevated to a higher level with the signing of the Framework Agreement on Comprehensive Economic Cooperation by the ASEAN and China Heads of State / Government on 4 November 2002 in Phnom Penh, Cambodia.
  
• The Framework Agreement which came into force on 1 July 2003 is an umbrella Agreement which provides general provision on the establishment of an ASEAN-China Free Trade Area (ACFTA) within 10 years by pursuing:
  
  • progressive elimination of tariffs and non-tariff barriers;
    
  • progressive liberalisation of trade in services and investment;
    
  • strengthen trade facilitation measures; and
    
  • economic co-operation in areas of common interest.
• The following ACFTA Agreements has also being signed:
  

Early Harvest Programme (EHP)

• Tariffs have been reduced from 1 January 2004 by the six original ASEAN member countries (ASEAN-6) and China. Duties were eliminated on 1 January 2006.
  
• Malaysia 's products under the EHP:
  
  • 503 unprocessed agriculture products; and
    
  • 87 specific manufactured products such as coffee, animal and vegetable fats/oils, cocoa and cocoa preparations, mineral fuels (coal/coke), soap, stearic acid, article of rubber and glass envelope for Cathode-Ray Tube (CRT).
    

Trade in Goods

Normal Track

• Tariff liberalisation on all other products (other than EHP) has been implemented beginning 1 July 2005 and to be conducted in four tranches i.e. 2005, 2007, 2009 and 2010.
  
• ASEAN-6 and China is required to reduce tariffs to 0-5% on 40% of their products by 2005 and 60% of their products by 2007.
  
• Extended timeframe for tariff elimination of up to 2012 will be given for not more than 150 tariff lines. Malaysia 's 150 tariff lines include:
  
  • polyethylene, polypropylene and polystyrene;
    
  • rubber tyres and tubes;
    
  • textiles and fabrics;
    
  • footwear;
    
  • ceramic products;
    
  • articles of iron and steel; and
    
  • electrical products.
    
• Continuous improvements are being undertaken on the ROO and Operational Certification Procedures (OCP) to simplify the rules and trading procedures under the ACFTA. These include the possibility of adopting the:
  
• Back-to-Back Certificate of Origin arrangement to facilitate exports of partial shipments, of which the bulk-break activities are conducted in an intermediate ACFTA party; and
  
• Third-Party reinvoicing arrangement, whereby sales invoice to the importer are allowed to be issued by companies located in a non-ACFTA territory.
  
• ASEAN and China has also adopted Product Specific Rules (PSR) for the following products:
  
  • textiles and apparel;
    
  • plastic products;
    
  • footwear products;
    
  • iron and steel products;
    
  • preserved fish canned products;
    
  • palm oil and ice cream; and
    
  • jewelry product.
• With the adoption of PSR, ASEAN and Chinese exporters/ manufacturers now have the flexibility of choosing the most convenient rule in meeting the origin criteria of the products i.e., either 40% Regional Value Content (RVC) or PSR, in order to enjoy the ACFTA preferential rate.
  
• In order for Malaysian exporters to enjoy the tariff concessions offered by China under the ACFTA, Certificates of Origin (Form E) must be obtained from MITI.
  Benefits
  
• The establishment of an FTA between ASEAN and China will create an economic region with 1.7 billion consumers, regional GDP of about US$2 trillion and total trade estimated at US$1.23 trillion. It will be the biggest and largest FTA among developing countries.
  
• With a population of 1.2 billion, market access opportunities through preferential trade for Malaysian products will increase.
  
• The removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and strengthen the attractiveness of Malaysia and the region as a preferred investment destination.
  
  • Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.
    List of products offered for tariff reduction beginning 20 July 2005.
    
  • List of products listed under the Sensitive Track
    
  • Product Specific Rules under the ASEAN-China Free Trade Area.
    
  • ASEAN Consultation to Solve Trade Investment Issues (ACT).
    
  • Framework Agreement on Comprehensive Economic Cooperation between ASEAN and People's Republic of China.
    
  • Protocol to Amend the Framework Agreement.
    
  • Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.

Benefits

• The establishment of an FTA between ASEAN and China will create an economic region with 1.7 billion consumers, regional GDP of about US$2 trillion and total trade estimated at US$1.23 trillion. It will be the biggest and largest FTA among developing countries.
  
• With a population of 1.2 billion, market access opportunities through preferential trade for Malaysian products will increase.
  
• The removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and strengthen the attractiveness of Malaysia and the region as a preferred investment destination.
  
  • Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.
    
  • List of products offered for tariff reduction beginning 20 July 2005.
    
  • List of products listed under the Sensitive Track
    
  • Product Specific Rules under the ASEAN-China Free Trade Area.
    
  • ASEAN Consultation to Solve Trade Investment Issues (ACT).
    
  • Framework Agreement on Comprehensive Economic Cooperation between ASEAN and People's Republic of China.
    
  • Protocol to Amend the Framework Agreement.
    
  • Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China.
    

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