The ASEAN Free Trade Agreement, or AFTA, is a regional trade agreement between the ten member states of the Association of Southeast Asian Nations (ASEAN). The agreement was signed in 1992 and came into effect on January 1, 1993.
The main objective of AFTA is to create a free trade area in Southeast Asia by reducing tariffs and promoting trade and investment within the region. Under the agreement, ASEAN member states commit to gradually reducing tariffs on goods traded within the region.
AFTA has been successful in increasing trade within the region. ASEAN’s intra-regional trade has grown from $121.7 billion in 1993 to $644.2 billion in 2019. Moreover, trade between ASEAN and its partners has also increased significantly over the years.
A key feature of AFTA is the Common Effective Preferential Tariff (CEPT) scheme. Under the CEPT scheme, ASEAN member states have agreed to eliminate tariffs on most goods traded within the region. The scheme covers all goods except for a small number of sensitive products that are subject to a longer period of tariff reduction.
To qualify for tariff preferences under the CEPT scheme, goods must satisfy certain criteria, such as being produced in an ASEAN member state and meeting the rules of origin requirements. The rules of origin are designed to prevent non-ASEAN goods from entering the region through a member state with a lower tariff rate and then being re-exported to other member states.
In addition to reducing tariffs, AFTA also includes provisions for trade in services and investment. ASEAN member states have committed to liberalizing trade in services by gradually reducing barriers to entry for service providers from within the region. The agreement also provides for the protection of foreign investment within the region.
AFTA has also paved the way for ASEAN to negotiate free trade agreements with partners outside the region. ASEAN has concluded free trade agreements with countries such as China, Japan, South Korea, India, Australia, and New Zealand, among others.
In conclusion, AFTA is a regional trade agreement that aims to promote trade and investment within Southeast Asia by reducing tariffs and eliminating non-tariff barriers. The agreement has been successful in increasing trade within the region and has paved the way for ASEAN to negotiate free trade agreements with partners outside the region.
