19. Conclusion and Recommendations for an Effective AEC

ASEAN has made commendable progress on the road to an ASEAN Economic Community (AEC). It has worked in integrating the regional economy, notably, by eliminating tariffs on intra-ASEAN trade and laying the foundations for economic integration through measures pertaining to investments, customs, harmonized tariff nomenclatures, product standards, services, and infrastructure. In 2010 the ASEAN Six countries applied zero tariffs on 99 per cent of the goods traded within the region. The ASEAN Trade in Goods Agreement (ATIGA)1 came into effect on 17 May 2010. This is a significant achievement as it provides more coherence and transparency for businesses in ASEAN (Parsons 2010). It also addresses the issue of the complex linkages needed for doing business in an integrated market. Again, ASEAN leaders adopted the Master Plan on ASEAN Connectivity in October 2010 so as to speed up the ASEAN connectivity process both within and outside the region. The year 2010 also saw positive developments in the interactions between ASEAN members and East Asian countries in general. On 1 January 2010, ASEAN witnessed the realization of the ASEAN-China Free Trade Area (FTA) and ASEAN-Korea Free Trade Agreement, and the enforcement of the ASEAN-Australia-New Zealand FTA and the ASEAN-India Trade in Goods Agreement. The ten ASEAN members, in addition to their role in promoting cooperation and dialogue in the region, also became “bridge builders” among countries in the greater scope of Asia. Despite this progress, the implementation and utilization of initiatives under AEC has to date remained far from impressive. Indeed, a large percentage of intra-ASEAN trade is eligible for low or zero tariffs, but only a very small percentage of intra-ASEAN trade utilizes the lower AFTA preferential rates. This is because the region faces a number of other obstacles, the most important of which are the non-tariff barriers (NTBs) to trade. While some such barriers are necessary — for example, to protect the environment or the health of humans, animals, and plants — others unnecessarily distort trade flows and restrict competition.