Economic Integration in South East Asia and the Impact on...

Economic Integration in South East Asia

and the Impact on the EU

Final Report

23 March 2011

Economic Integration in South East Asia

and the Impact on the EU

This report has been prepared by CARIS, Centre for the Analysis of Regional Integration at Sussex for European Comission‟s Directorate General for Trade under the framework contract TRADE 07/02.

The work on this study was led by Wojciech Paczyński (CASE) and Michael Gasiorek (CARIS) who also edited this report. The following authors contributed to the study:

Minako Morita Jaeger (chapter 2)

Kamala Dawar (chapter 3)

Javier Lopez Gonzalez, CARIS (chapter 4)

Maximiliano Méndez Parra, CARIS (chapter 5)

Dirk Willenbockel, IDS, University of Sussex (chapter 6)

Wojciech Paczyński, CASE – Center for Social and Economic Research (chapter 7, executive summary, contributions to chapter 2).

The authors have benefitted from discussions and comments received from Christopher Dent, Peter Holmes, ZhenKun Wang and the participants of the European Commission DG TRADE, 28th Chief Economist Seminar in Brussels, 18 February 2011. The usual disclaimer applies.

This report was commissioned and financed by the Commission of the European Communities. The views expressed are those of the consultant and do not represent the official view of the Commission.

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Contents

Executive summary ................................................................................................................................... 9

1. Introduction ......................................................................................................................................... 12

2. Introduction to State of Economic Integration in South East Asia ....................................................... 17

2.1 Dynamic rise of FTAs involving South East Asia .......................................................................... 19

2.2 FTAs involving ASEAN and ASEAN countries – an overview ...................................................... 22

2.2.1 Geographic coverage ........................................................................................................... 22

2.2.2 Major features of selected existing FTAs .............................................................................. 24

2.3 Motivation for and utilisation of FTAs ........................................................................................... 30

2.3.1 Bilateral and plurilateral FTA strategies of ASEAN countries ............................................... 31

2.3.2 Utilisation of FTA preferences .............................................................................................. 32

2.4 The outlook for regional integration – prospective FTAs .............................................................. 34

2.4.1 Towards consolidation and harmonization of FTAs in Asia? ................................................ 37

2.5 ASEAN internal economic integration process ............................................................................. 41

2.5.1 Background .......................................................................................................................... 41

2.5.2 ASEAN Economic Community (AEC) Blueprint .................................................................... 42

2.5.3 Implementation of the AEC Blueprint .................................................................................... 44

3 Comparative Analysis of Regulatory Issues in South East Asia FTAs ................................................. 47

3.1 An overview .................................................................................................................................. 48

3.2 Services Provisions ...................................................................................................................... 51

3.3 Intellectual Property Provisions .................................................................................................... 52

3.4 Investment Provisions .................................................................................................................. 53

3.5 Summary of Safeguard Provisions ............................................................................................... 56

3.6 Overview of Rules of Origin .......................................................................................................... 56

3.7 Competition Policy Provisions ...................................................................................................... 57

3.8 Government Procurement Provisions........................................................................................... 58

3.9 Overview of Environmental Regulation ........................................................................................ 58

3.10 Overview of Labour Regulation .................................................................................................. 59

4 Assessing the Effects of East Asian Integration on the EU – Sussex Framework Approach ............... 60

4.1 Introduction .................................................................................................................................. 61

4.2 Tariff barriers to trade ................................................................................................................... 63

4.3 The Evolution of Trade in the Region ........................................................................................... 67

4.4 Export similarity, competitive pressures ....................................................................................... 70

4.5 Terms of trade effects .................................................................................................................. 76

4.6 Disaggregated analysis of EU export flows to ASEAN ................................................................. 78

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4.7 Sensitive Products........................................................................................................................ 85

5 Partial equilibrium simulations .............................................................................................................. 92

5.1 Model setup .................................................................................................................................. 94

5.2 Elasticities .................................................................................................................................... 96

5.3 Data.............................................................................................................................................. 98

5.4 Simulation exercises .................................................................................................................... 99

5.5 Results ....................................................................................................................................... 101

5.6 Concluding comments ................................................................................................................ 108

6 Computable General Equilibrium analysis ......................................................................................... 110

6.1 Introduction ................................................................................................................................ 111

6.2 The GLOBE Model ..................................................................................................................... 111

6.3 Patterns of Trade and Production in the Benchmark Equilibrium ............................................... 114

6.4 Simulation Analysis .................................................................................................................... 117

6.4.1 The Simulation Scenarios ................................................................................................... 117

6.4.2 Results in the Absence of a Completion of the Doha Round .............................................. 119

6.4.3 Results under a Successful Completion of the Doha Round .............................................. 126

6.5 Conclusions ................................................................................................................................ 134

7 Conclusions ....................................................................................................................................... 135

References............................................................................................................................................ 138

Appendix 1. Overview of characteristics of South East Asian FTAs ..................................................... 141

Appendix 2. Regulatory provisions in selected ASEAN‟s FTAs ............................................................ 148

Appendix 3. Details on tariff reduction schedules ................................................................................. 167

Appendix 4. Partial equilibrium analysis – additional results and sensitivity analysis ............................ 170

Appendix 5. Additional tables for Chapter 6 .......................................................................................... 191

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List of figures

Figure 1.1 ASEAN countries in Asia-Oceania region ............................................................................................ 13

Figure 2.1 Timescale of selected FTAs in South East Asia ................................................................................... 20

Figure 2.2 Dynamics of SEA FTAs –agreements in force in 2005, 2010 and possible future agreements ........... 21

Figure 2.3 Geography of ASEAN/ASEAN countries‟ FTAs in force as of end-2010 .............................................. 22

Figure 2.4 Geography of prospective ASEAN countries‟ FTAs – signed/under negotiation/ consultation and study, 2010 ...................................................................................................................................................................... 34

Figure 2.5 Changing geography of ASEAN countries‟ FTAs – reaching outside Asia-Oceania ............................ 35

Figure 2.6 Number of prospective FTAs by ASEAN member countries ................................................................ 35

Figure 2.7 Map of ASEAN Plus Three / ASEAN Plus Six ...................................................................................... 38

Figure 4.1 ASEAN import shares from main partners 2002-2008 ......................................................................... 68

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List of tables

Table 1.1 Selected indicators for ASEAN and other Asian economies ................................................................. 14

Table 2.1 Dynamic trend of SEA FTAs: 2010 compared to 2005 (number of FTAs) ............................................. 20

Table 2.2 FTAs in which ASEAN/ASEAN member(s) are involved (in force as of end-2010) ............................... 23

Table 2.3 ASEAN‟s trade with its FTA partners and the EU (% shares, 2009 data).............................................. 24

Table 2.4 Prospective FTAs (as of end-2010) ....................................................................................................... 36

Table 3.1 Overview of Regulatory Issues in Selected Asian FTAs........................................................................ 50

Table 4.1 ASEAN country average MFN tariffs 2001-2007 ................................................................................... 64

Table 4.2 individual ASEAN country average MFN Tariff at SITC 1 digit level (2007) .......................................... 65

Table 4.3 ASEAN tariffs by GTAP sector in a Post-Doha scenario after full implementation of FTAs (baseline 2007) ..................................................................................................................................................................... 66

Table 4.4 EU exports 2003-2009 (USD billion & % shares in total extra-EU exports) ........................................... 68

Table 4.5 ASEAN imports by SITC 1 digit sector 2007 (% shares in total ASEAN imports from a given country) 69

Table 4.6 Market Shares in ASEAN sectoral imports 2007 (% shares in total ASEAN imports of a given sector) 70

Table 4.7 Partner Country Export Shares to ASEAN by Height of MFN tariffs, 2007 ............................................ 71

Table 4.8 EU exports to ASEAN cross-classified by market share and MFN tariff 2007 ....................................... 72

Table 4.9 FK index of export similarity to the world and ASEAN 2009 .................................................................. 73

Table 4.10 EU export similarity in the ASEAN market by tariff height 2007 .......................................................... 74

Table 4.11 EU RECPI cross classified by size of MFN tariff 2007 ........................................................................ 75

Table 4.12. Summary of competitive pressures by origin ...................................................................................... 76

Table 4.13 Scope for terms of trade effects – EU exports to ASEAN by tariffs and market shares of ASEAN‟s FTA partners (2007 data) .............................................................................................................................................. 77

Table 4.14 Top 20 ASEAN imports from the world in 2007 ................................................................................... 80

Table 4.15 Top 20 ASEAN imports from the EU 2007 .......................................................................................... 83

Table 4.16 Top 20 products by market concentration and share of imports .......................................................... 86

Table 4.17 Sensitive products derived from previous analysis .............................................................................. 88

Table 4.18 Descriptive statistics for products analysed in the partial equilibrium model (Chapter 5) .................... 90

Table 5.1 Elasticity of substitution between origins in the standard specification .................................................. 98

Table 5.2 Elasticities of substitution for Translog specification ............................................................................. 98

Table 5.3 Simulation scenarios ............................................................................................................................. 99

Table 5.4 List of products considered in the partial equilibrium model ................................................................ 101

Table 5.5 Value of ASEAN imports modelled (USD million) in 2007 ................................................................... 103

Table 5.6 Percentage change in the value of the EU‟s exports to ASEAN by scenario ...................................... 104

Table 6.1 Sectoral and Regional Aggregation ..................................................................................................... 113

Table 6.2 EU-ASEAN+6 Total Trade Flow Matrix 2004 in a Global Perspective ................................................. 115

Table 6.3 Commodity Composition of EU Production, Exports and Export-Output Ratios (in %) ....................... 116

Table 6.4 Shares of ASEAN+6 Countries in Total EU Exports by Commodity Group 2004 (in %) ...................... 117

Table 6.5a ASEAN Tariff Rates on Imports from FTA Partners (in percent) ....................................................... 118

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Table 6.5b FTA Partner Tariff Cuts on ASEAN Imports (in percent) ................................................................... 119

Table 6.6 Aggregate Welfare Effects by Region (Percentage Changes) ............................................................ 122

Table 6.7 Real Exchange Rate Effects by Region (Percentage Changes) ......................................................... 122

Table 6.8 Effects on Aggregate Export Volume by Region (Percentage Changes) ............................................ 123

Table 6.9 Effects on EU Export Volume to ASEAN+6 Regions (Percentage Changes) ...................................... 123

Table 6.10 Effects on EU Output by Sector (Percentage Changes).................................................................... 124

Table 6.11 Effect of All ASEAN+1 FTAs on EU Exports by Commodity (Percentage Changes) ......................... 125

Table 6.12 Effects of ASEAN+6 FTA on EU Exports by Commodity (Percentage Changes).............................. 126

Table 6.13 Doha-Round Bound Tariff Cut Schedule for Agricultural Goods ....................................................... 127

Table 6.14 Aggregate Real Absorption Effects by Region (Doha Baseline) (Percentage Changes) ................... 129

Table 6.15 Real Exchange Rate Effects by Region (Doha Baseline) (Percentage Changes) ............................. 129

Table 6.16 Effects on Aggregate Real Exports by Region (Doha Baseline) (Percentage Changes) ................... 130

Table 6.17 Effects on Real EU Output by Sector (Doha Baseline) (Percentage Changes) ................................. 131

Table 6.18 Effects of AllFTAs on EU Exports by Commodity (Doha Baseline) (Percentage Changes) .............. 132

Table 6.19 Effects of ASEAN+6 FTA on EU Exports by Commodity (Doha Baseline) (Percentage Changes) ... 133

Table A1.1a Scope and Coverage of FTAs in which ASEAN countries are involved -Intra Asia Bilateral FTAs . 141

Table A1.1b Scope and Coverage of FTAs in which ASEAN countries are involved -Intra Asia Bilateral FTAs (Cont‟d) ............................................................................................................................................................... 143

Table A1.2a Scope and Coverage of FTAs in which ASEAN countries are involved -Intra Asia Plurilateral FTAs ............................................................................................................................................................................ 144

Table A1.2b Scope and Coverage of FTAs in which ASEAN countries are involved - Intra Asia Plurilateral FTAs (cont‟d) ................................................................................................................................................................ 145

Table A1.3a Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional bilateral FTA ............................................................................................................................................................................ 146

Table A1.3b Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional bilateral FTA ............................................................................................................................................................................ 146

Table A1.4a Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional plurilateral FTAs ................................................................................................................................................................... 147

Table A1.4b Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional plurilateral FTAs ................................................................................................................................................................... 147

Table A2.1 Overview of services commitments in selected FTAs ....................................................................... 148

Table A2.2 Selected intellectual property rights provisions in Asian FTAs .......................................................... 153

Table A2.3 Overview of competition provisions in selected Asian FTAs ............................................................. 155

Table A2.4 Overview of government procurement provisions in selected Asian FTAs ....................................... 156

Table A2.5 Overview of investment provisions in selected Asian FTAs .............................................................. 157

Table A2.6 Overview of safeguards provisions in selected Asian FTAs .............................................................. 160

Table A2.7 Overview of rules of origin in selected Asian FTAs ........................................................................... 163

Table A3.1 ASEAN-China Normal track schedule for ASEAN 6 and China ........................................................ 167

Table A3.2 ASEAN-China FTA: number of tariff lines in the Sensitive Track ...................................................... 167

Table A3.3 ASEAN-Korea FTA: Normal Track schedule for ASEAN6 ................................................................ 167

Table A3.4 ASEAN-Korea FTA: number of tariff lines in the Sensitive Track ...................................................... 168

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Table A3.5 ASEAN-India FTA: Distribution of tariff lines into different reduction schedules ............................... 168

Table A3.6 ASEAN-Japan FTA: Distribution of tariff lines into different reduction schedules (% of all tariff lines) ............................................................................................................................................................................ 168

Table A3.7 ASEAN-Australia/New Zealand FTA: Percentage of tariff lines fully liberalised by year ................... 169

Table A4.1 Percentage changes in quantities of EU exports to ASEAN (standard elasticity specification) ......... 170

Table A4.2 Percentage change in the EU export price to ASEAN (standard elasticity specification) .................. 171

Table A4.3 Percentage change in the value of the EU‟s exports to ASEAN by scenario (Low substitution) ....... 173

Table A4.4 Parentage changes in quantities of EU exports to ASEAN (low substitution) ................................... 175

Table A4.5 Percentage change in the EU export price to ASEAN (low substitution)........................................... 177

Table A4.6 Percentage change in the value of the EU‟s exports to ASEAN by scenario (high substitution) ....... 178

Table A4.7 Percentage changes in quantities of EU exports to ASEAN (high substitution) ............................... 180

Table A4.8 Percentage change in the EU export price to ASEAN (high substitution) ......................................... 182

Table A4.9 Percentage change in the value of the EU‟s exports to ASEAN by scenario (translog specification) 183

Table A4.10 Percentage changes in quantities of EU exports to ASEAN (translog specification)....................... 186

Table A4.11 Percentage change in the EU export price to ASEAN (translog specification) ................................ 187

Table A4.12 Percentage change in the EU export value to ASEAN (large elasticity of supply of exports).......... 189

Table A5.1 Regional Aggregation of the Model and Concordance with GTAP 7.1 Regions ............................... 191

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List of abbreviations AD Anti-dumping AEC ASEAN Economic Community ACIA ASEAN Comprehensive Investment Agreement AFAS ASEAN Framework Agreement on Services AFTA ASEAN Free Trade Area AIA ASEAN Investment Area APEC Asia-Pacific Economic Cooperation ASEAN Association of South-East Asian Nations ASEAN6 Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and

Thailand ASEAN Plus Three ASEAN and China, Japan and South Korea ASEAN Plus Six ASEAN Plus Three and Australia, New Zealand and India ATIGA ASEAN Trade in Goods Agreement BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic

Cooperation BoP balance of payments BRICs Brazil, Russia, India and China CEPT Common Effective Preferential Tariff scheme CGE computable general equilibrium CLMV Cambodia, Lao PDR, Myanmar and Vietnam CTC change in tariff classification - RoO CTSH change in tariff subheading - RoO CVD countervailing duties EFTA European Free Trade Association EPA economic partnership agreement EU European Union EUR euro FOB free on board FTA free trade agreement FTAAP Free Trade Area of the Asia Pacific GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GPA Agreement on Government Procurement GTAP Global Trade Analysis Project HS Harmonized Commodity Description and Coding System HSL highly sensitive list

ICSID International Centre for Settlement of Investment Disputes IP intellectual property MERCOSUR Argentina, Brazil, Paraguay and Uruguay MFN most-favoured nation MRA mutual recognition agreement NAFTA North American Free Trade Agreement NTBs non-tariff barriers NTMs non-tariff measures RoO rules of origin RoW rest of the world RTA regional trade agreement RVC regional value-added (minimum value of) - RoO SEA South East Asia SG safeguard SITC Standard International Trade Classification SL sensitive list SPS sanitary and phytosanitary measures TBT technical barriers to trade ToT terms of trade TPP Trans-Pacific Partnership TR process rule or technical requirement - RoO TPSEPA Trans-Pacific Strategic Economic Partnership Agreement

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TRAINS Trade Analysis and Information System TRIMs Agreement on Trade-Related Investment Measures TRIPS Agreement on Trade Related Aspects of Intellectual Property Rights

UNCITRAL United Nations Commission on International Trade Law

UNCTAD United Nations Conference on Trade and Development US United States USD US dollars WTO World Trade Organisation

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Executive summary

South East Asia region has seen a wave of bilateral and regional free trade agreements in recent years. The near future is likely to see a continuation of this trend. This report aims at (1) describing and analysing the patterns of regional trade integration involving South East Asia, including the outlook for the future and (2) identifying the possible impacts on the EU arising from the main trade integration initiatives in the region.

In this report South East Asia is taken to mean all the ASEAN countries and the focus is on the effects on the EU from changes in market access conditions arising from closer economic integration between the ASEAN region and other key economies. While we note the potential importance also of the impact on the EU‟s exports to other Asian markets (such as China, Japan, India, etc.) resulting from these integration processes involving ASEAN, the focus of this study is intentionally more specifically on the impact on exports to ASEAN.

The EU trades heavily with the region with exports to ASEAN countries (EUR 50 billion in 2009) accounting for 4.6% of total extra-EU exports. Singapore is by far the most important ASEAN destination for the EU. Machinery and transport equipment and chemicals are key product groupings in the EU‟s exports to ASEAN. The combined size of ASEAN and its key FTA partners (China, Japan, India, South Korea, and Australia) in the EU‟s exports was around 22% in 2009.

ASEAN is becoming a regional FTA hub, having concluded agreements with all key regional players: China, South Korea, Japan, India and Australia and New Zealand. Some ASEAN members actively pursue a policy of engaging in bilateral FTAs with several partners in Asia-Oceania and beyond. Despite some attempts, notably the talks on the EU-ASEAN FTA that are currently on hold, so far the EU has remained little engaged in the Asian integration process.

With regard to the characteristics of South East Asian FTAs, the key findings of this report include:

The large majority of FTAs in the region are very recent implying that they are at the early stage of their implementation processes. While tariff reductions are generally introduced as planned, progress in implementation of deep integration provisions face more obstacles.

In view of this, it is not surprising that evidence on utilisation of FTA preferences is scarce and gives mixed messages. While there is evidence that at least for some products preferences are meaningful and are widely utilised, there is also a large heterogeneity in utilisation rates between products, and import and export partners, reflecting different preference margins, stringency of rules of origin, and other factors. Further progress in the FTA implementation process could lead to rising utilisation of preferences (in the form of lower tariff and especially non-tariff barriers) and larger scope for potential adverse impact on non-members, including the EU.

Intra-ASEAN integration has been gradually proceeding and by 2010, at least for the original six ASEAN members (ASEAN6, i.e. Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand), the task of abolishing internal tariff barriers was almost complete. Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) have also made substantial progress in removing tariffs to intra-ASEAN trade.

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Progress in the liberalisation of trade between ASEAN and ASEAN‟s partners varies considerably. ASEAN does not have a common external tariff and agreements of the ASEAN+1 format (ASEAN‟s FTAs with China, Korea, Japan, India, and Australia and New Zealand) contain separate tariff reduction schemes for each ASEAN member. ASEAN6 tariffs on non-sensitive imports from China have already been removed as of 2010. This applies to around 90% of tariff lines and similar magnitude of trade flows. Progress in tariff liberalisation for imports from South Korea and Japan is also advanced. Abolishing of remaining tariffs for non-sensitive imports from South Korea, Japan, India and Australia and New Zealand is expected to be take place over 2010-2013. In CLMV non-sensitive tariff reduction schedules are generally delayed by around 3 years, implying that the process should be mostly completed after 2016. The tariff provisions for sensitive products differ substantially between FTAs and countries.

There is a large heterogeneity across the FTAs in terms of their treatment of regulatory issues. Broadly speaking, plurilateral ASEAN+1 agreements appear less ambitious than the bilateral agreements analysed in this report, i.e. the FTAs between Japan and individual ASEAN countries and the three agreements Singapore has signed with key trading partners: the US, China and Japan. Japan‟s agreements are found to have the broadest scope given that they include provisions covering investment, competition and government procurement more frequently than other FTAs. The Singapore-US agreement is the most comprehensive in that its regulatory provisions are most ambitious.

All analysed bilateral agreements, ASEAN-China, ASEAN-Korea and ASEAN-Australia and New Zealand contain provisions on services, although the extent to which they go beyond GATS commitments varies significantly between FTAs. Among the plurilateral agreements only the agreement with Australia and New Zealand includes binding commitments on investment and intellectual property rights. Only the ASEAN-Korea FTA includes provisions to promote cooperation between the parties to protect intellectual property rights and to protect the environment.

All the analysed bilateral agreements of Singapore and Japan include provisions on services and investment, all but one on competition and intellectual property, and all but two on government procurement. Provisions related to environmental standards appear in more than half of the analysed bilateral agreements, while labour standard issues can only be found in Singapore-US and Philippines-Japan FTAs.

We are sceptical as to the medium-term prospects of the very ambitious initiatives to create unified regional FTAs covering a large part of East and South Asia or even the entire Asia-Pacific region – ASEAN Plus Three, ASEAN Plus Six or the Trans-Pacific Partnership. Their progress will be hindered by a combination of political and economic interests. Nevertheless, continued attempts to bring more order and transparency to the current FTA network and to engage new partners, notably the US may also lead to successful implementation of other initiatives that are currently not considered. It is instructive to bear in mind that barely a decade ago most of the FTAs currently in force were hardly conceivable.

It is difficult to predict to what extent current FTA provisions on regulatory issues and non-tariff barriers will be effectively implemented. Limited capacity especially on the side of less developed ASEAN countries and conflicting interest of various stakeholders are likely to hinder progress. At the same time, the declared general political ambitions of countries sometimes go further than is provided by the current

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format of FTAs and the agreements may further evolve incorporating new provisions. It is possible that over time the capacity to act and real commitment to deep economic integration could increase.

We use different methods to identify products and sectors where the potential adverse effects of integration processes involving ASEAN on the EU are most likely to materialise and attempt to quantify these results. The three complementary analytical approaches are (1) the Sussex Framework based on diagnostic indicators constructed from trade and tariff data, (2) partial equilibrium modelling applied to a range of key products exported by the EU to the ASEAN region and (3) a computable general equilibrium model. This analysis takes into account reductions or elimination of tariff barriers and is carried using actual FTA provisions for individual products (6-digit Harmonized Commodity Description and Coding System - HS). The key findings are as follows:

The magnitude of effects on the EU‟s production and exports is found to be very small at the aggregate level even under the most comprehensive prospective integration scenarios.

These small aggregate effects mask potentially non-negligible impacts which could occur in several sectors and products, which together account for a significant part of EU exports to ASEAN. The findings from the partial and general equilibrium models as well as the analysis based on the Sussex Framework indicators consistently point to products in HS chapter 87 (vehicles and parts and accessories thereof) as the ones where current EU exports are sizeable and where particularly significant export market losses could materialise.

The agreement between ASEAN and Japan is likely to be the most detrimental for the EU‟s export prospects in ASEAN. All other ASEAN+1 FTAs are associated with much weaker negative impacts for the EU, although some specific sectors or products may experience losses. This differentiated impact reflects a combination of factors, notably the (dis)similarity of export structures between the EU and ASEAN‟s FTA partners and the patterns of tariff preferences incorporated in the FTAs.

The importance of the successful completion of the Doha Round negotiations for the EU is evident. Assuming a realistic outcome of the Doha Round significantly limits or in some cases completely removes the potential detrimental effects of being excluded from South East Asian integration initiatives.

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1. Introduction

This report analyses the process of trade integration in South East Asia region and evaluates the possible impact on the European Union (EU). The South East Asia region is defined as comprising of the countries forming the Association of Southeast Asian Nations (ASEAN), i.e. Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Vietnam, Singapore, and Thailand (Figure 1.1).

The structure of the report is as follows. The remaining part of this introduction provides a few general facts about the ASEAN economies and sets up the conceptual framework for the analysis where we focus on the principles one should bear in mind in considering the effects of economic integration between a group of countries on an excluded party. Chapter 2 provides an overview of on-going and planned integration initiatives involving South East Asia analysing underlying forces driving regional integration. It also describes intra-ASEAN integration including the outlook for the ASEAN Economic Community.

Chapter 3 digs more deeply into the regulatory provisions of selected 13 FTAs in the region. The agreements selected for this analysis are the following ones:

- ASEAN-India - ASEAN-Australia - ASEAN-Japan - ASEAN-Korea - ASEAN-China - Singapore-United States - Singapore-China - Singapore- Japan - Vietnam-Japan - Indonesia-Japan - Philippines-Japan - Thailand-Japan - Malaysia-Japan

Chapter 4 uses the Sussex Framework for identification of sectors and products where EU exporters are most likely to face particularly strong competitive pressures arising from the process of shallow trade integration (i.e. abolishing of tariff barriers) between ASEAN counties and their FTA partners1.

Chapter 5 reports on the results of the partial equilibrium modelling of ASEAN‟s trade liberalisation in its agreements with China, Korea, Japan, Australia and New Zealand and India for close to 70 selected products (HS 6 digit level) that together account for 30% of EU exports to ASEAN.

1 The Sussex Framework provides an approach to the analysis of trade and regional integration which

is based on the careful application of economic theory to trade data, and to diagnostic indicators of trade without the use of formal modelling. The Framework has been applied widely in the context of analysing the impact of regional integration agreements both on partner countries and on excluded countries. Application of the Sussex Framework has been greatly facilitated by the development of the TradeSift software, based at the University of Sussex (www.tradesift.com).

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Chapter 6 applies a computable general equilibrium model to consider the effects of five ASEAN+1 agreements and a prospective scenario where an ASEAN Plus Six FTA is formed and fully implemented.

Chapter 7 provides brief conclusions.

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Figure 1.1 ASEAN countries in Asia-Oceania region

In 2009, the combined population of ASEAN was close to 600 million people with a GDP of some USD 1,500 billion (2.6% of world total at market exchange rates). If ASEAN was a single country, it would rank as the 9th largest economy in the world and the 3rd largest in Asia in terms of nominal GDP. Its share in global trade has been dynamically increasing in recent years reaching close to 8% of world imports and 9% of exports in 2009. ASEAN is a very diverse group of countries in terms of size, level of development, and production structures (Table 1.1). With respect to foreign trade issues Singapore stands out as being one of the most open economies globally with virtually no import tariffs.

The recent years have seen a proliferation of free trade agreements (FTAs) around the globe2. The East Asia region and South East Asia in particular, being relative newcomers to FTAs have become very active players in this trend. What emerges is a complicated pattern

2 See e.g. Baldwin and Jaimovich (2010) and references cited therein.

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of heterogeneous trade agreements (“noodle bowl” of FTAs) linking the ASEAN countries internally, with major partners in Asia-Oceania region (China, India Japan, South Korea, Australia and New Zealand) as well as with some other countries, notably the US. The EU appears to be less active in negotiating and/or signing FTAs in the region. The EU‟s earlier ambition to reach an agreement with ASEAN as a bloc has been switched to a bilateral agenda, though without giving-up the intention to eventually conclude a region-wide agreement. The EU is involved in FTA negotiations with Singapore and Malaysia.

Table 1.1 Selected indicators for ASEAN and other Asian economies

GDP (current USD billion)

GDP/capita (PPP international dollars)

industry (% share in value added)

agriculture (% share in value added)

imports (% of GDP)

FDI net inflows (USD billion)

Brunei Darussalam 11 51200 71 1 28 0.3

Cambodia 10 1820 23 35 63 0.5

Indonesia 540 3720 49 16 21 4.9

Lao P.D.R. 6 2200 28 35 44 0.3

Malaysia 193 13710 44 10 75 1.6

Myanmar 34 1196 n/a n/a n/a 0.3

Philippines 161 4060 30 15 31 1.9

Singapore 182 49780 26 0 203 16.8

Thailand 264 7640 43 12 58 6.0

Vietnam 90 2790 40 21 79 7.6

China 4985 6890 46 10 22 78.2

India 1310 3250 28 17 25 34.6

Japan 5069 33470 28 1 12 11.8

South Korea 833 27310 37 3 46 1.5

Notes: Data for 2009 with the following exceptions: For Brunei Darussalam 2006 data for GDP, 2007 data for GDP per capita , economic structure and imports of goods and services/GDP share. For Singapore 2008 data for industry and agriculture shares in GDP and imports of goods and services/GDP share. For Laos 2008 data on agriculture share in GDP and on imports of goods and services/GDP share. For Japan 2008 data for industry and agriculture shares in GDP. Source: World Bank, World Development Indicators database. GDP data for Myanmar are from IMF, World Economic Outlook database.

In view of this the key question concerns the potential effects on the EU stemming from its currently limited role in on-going trade integration of ASEAN and its other trade partners. Hence, the underlying conceptual framework of the report is the analysis of the impact of regional integration (involving ASEAN) on excluded partners (the EU).

The analysis of potential costs and benefits from regional trade integration for parties of such agreements is mostly related to the relative importance of trade creation and trade diversion

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effects3. Trade creation refers to additional trade that occurs between members of a preferential trading arrangement that replaces what would have been sourced in the importing country itself were it not for the FTA. It leads to welfare improvement for the importing country by reducing the cost of the imported good for consumers and allowing increased allocative efficiency in domestic resource use4. Trade diversion refers to trade that occurs between members of a preferential trading arrangement that replaces imports from a country outside of the FTA that was cost-competitive before tariff preferences were applied to imports from its competitor(s).

From the perspective of a country (C) excluded from a given FTA (say, between countries A and B) the potential concern is that it may lose part of its market share in countries A and/or B as they receive a preferential margin (lower tariff and possibly also non-tariff barriers) relative to C. The potential scope of these negative effects is likely to be primarily determined by the importance of A and B as C‟s export markets (in aggregate and for specific sectors / products) and the extent of the preferential margin extended to each other by A and B. To put it differently, the effect on country C will depend on the extent to which countries A and B are likely to increase their trade with each other as a result of their FTA, at the expense of country C.

Conceptually we can distinguish between two ways in which this may happen: trade diversion and trade re-orientation. There are then four possible scenarios regarding trade diversion and trade re-orientation which we detail below. For concreteness in the discussion below we consider the impact of improved access for country B into country A‟s market, but an exactly parallel analysis pertains to country A‟s access to country B‟s market:

Scenario 1: No negative effect on excluded country C: If prior to the FTA both the excluded country C and country B face zero tariffs on their exports to A (Singapore could be an example), then any agreement will not change the relative degree of access into country A‟s market for B relative to C.

Scenario 2: Trade re-orientation: This could occur when prior to the FTA between countries A and B, the excluded country C already benefits from zero or preferential tariff access to country A‟s market. As a result of the FTA country B matches this access, which improves country B's relative competitiveness. If country B is the most efficient supplier of a given good, matching the preferences will result in trade reorientation from previously inefficient sources towards country B‟s suppliers. This will result in an efficiency gain for country A but a loss to the excluded country C due to the loss in market share. If, on the other hand, country B is not a more efficient supplier of a given good, then matching preferences should not result in changes in trade patterns with excluded countries, i.e. no effect on country C.

Scenario 3: Trade diversion: This could occur when, before the FTA between countries A and B, the proposed preferential partner (country B) faces a tariff into country A‟s market equal to that faced by the excluded country C. The removal of the tariff on imports from country B makes it a less costly supplier and hence country B increases its exports to country A at the expense of country C. Country C therefore risks losing a market where it has previously been competitive.

3 The following paragraphs draw heavily from InterAnalysis (2010).

4 Welfare is the general concept, that in this report is defined as or measured by the sum of real

domestic demand in an economy at some baseline prices.

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Scenario 4: Trade re-orientation and trade diversion effect: A combination of these two effects could occur when, before preferences are granted, country B faces a higher tariff than excluded country C in country A‟s market as explained above. The magnitude of trade re-orientation is determined by the absolute difference between the tariffs, whilst the magnitude of trade diversion would depend on the height of the excluded country‟s (C) tariff. For the excluded country C, the effect of trade diversion and trade re-orientation is in principle the same: in each case it exports less to the FTA members. From a policy perspective however, there are important differences between the two. Where there is trade diversion away from country C, than in principle this is in sectors where (at least vis-à-vis country B), it is competitive. Attempting to sign an agreement with country A which would match those preferences could go some way to mitigating against possible negative welfare effects. In those cases where trade reorientation occurs, then in principle, these are in sectors were country C is not cost competitive with respect to country B. If these are sectors which are considered important to country C‟s exports there may need to be thought given to more fundamental policy regarding C‟s underlying competitiveness.

The discussion above concentrated on tariff measures, but many FTAs go well beyond simple tariff reductions focusing on reducing or eliminating a variety of non-tariff measures (NTMs), or „behind the border‟ barriers. The reduction in NTMs between countries A and B is also likely to affect excluded country C and the mechanisms of influence are typically more difficult to trace. For some NTMs the logic may be very similar to tariffs, with initial levels of barriers crucially important for the effects. In other cases, deep integration initiatives may primarily work through facilitating investment and technological spillovers, promoting greater fragmentation of the production process, outsourcing between countries A and B, etc.

A further issue that may possibly affect excluded countries concerns the terms of trade. Country C may find that it can still sell into countries A and B but in order to remain competitive with respect to intra-FTA suppliers, country C may need to lower its prices.

Finally, it is worth noting that the extent of product differentiation between country C‟s exports and intra-FTA products is likely to affect the impact on country C‟s exports. Should country C‟s products be significantly and positively differentiated from intra-FTA suppliers‟, they may be less adversely affected from improved intra-FTA market access and increased competition from country A and B suppliers. This applies both to the impact of changes in tariff preferences, changes in NTM‟s as well as possible terms of trade effects.

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2. Introduction to State of Economic Integration in South East Asia

This chapter provides a general introduction to the process of economic integration involving South East Asia. It provides a political economy perspective on these processes, presents the progress of tariff liberalisation and highlights some key regulatory features of selected FTAs. It also discusses the outlook for the deepening intra-ASEAN integration and considers the prospects for some larger integration initiatives involving ASEAN and its key partners in Asia-Oceania and beyond.

The main messages of this chapter can be summarised as follows:

ASEAN countries are relative newcomers in the global trend of rising FTAs. However, the boom in implemented and planned agreements involving ASEAN and its member countries is likely to give ASEAN the status of a regional FTA hub linking key partners in the Asia-Oceania region. The economic effects of this will depend on both the scope and depth of the agreements, and on the success in the implementation of the agreements.

Among ASEAN countries Singapore is the leader in terms of the number of FTAs and their geographic coverage. FTA partners accounted for close to 70% of Singapore‟s total trade turnover as of 2009. Thailand has been also active in building its network of agreements, followed by Malaysia. Less developed and smaller ASEAN member countries have relied more on ASEAN collectively engaging in FTA formation.

The large majority of FTAs involving South East Asian economies are very recent and hence agreements are at an early stage of the implementation process. While tariff reductions are generally introduced as planned, progress in implementation of deep integration provisions face more obstacles.

The recent FTA boom has led to the emergence of a noodle-bowl like pattern of FTAs involving South East Asia. In particular, plurilateral agreements between ASEAN and its partners („ASEAN+1‟ FTAs with China, South Korea, Japan, Australia & New Zealand, and India) coexist with a network of bilateral FTAs between some of ASEAN members and some of these partners as well as other countries. Japan has concluded bilateral FTAs with seven ASEAN member countries. The key characteristics of these agreements (scope, coverage, implementation periods, etc.) differ substantially. Discerning a clear picture therefore of the de facto state of regional integration in the region is extremely complicated.

Intra-ASEAN integration has been gradually proceeding and by 2010 the task of abolishing internal tariff barriers has been almost complete, at least for the original six ASEAN members (ASEAN6, i.e. Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand). Progress in the liberalisation of trade between ASEAN and ASEAN‟s partners varies considerably. ASEAN does not have a common external tariff and agreements of the ASEAN+1 format contain separate tariff reduction schemes for each ASEAN member. ASEAN6 tariffs on non-sensitive imports from China and to a lesser extent also from South Korea and Japan have been removed as of 2010. Abolishing of most of remaining tariffs for non-sensitive imports from South Korea, Japan, India and Australia and New Zealand is expected

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to occur between 2010-2013. In the remaining ASEAN countries, Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) non-sensitive tariff reduction schedules are generally delayed by around 3 years, implying that the process should be mostly completed after 2016. The tariff provisions for sensitive products differ substantially between FTAs and countries.

The existing empirical evidence on utilisation of FTA preferences is scarce and gives mixed messages. There appears to be large heterogeneity in utilisation rates between products, and import and export partners, reflecting different preference margins, stringency of rules of origin, and other factors. At least for some products preferences are meaningful and are widely utilised and forthcoming tariff reductions in line with the schedules agreed in FTAs may increase preference utilisation rates in the future.

The proposed ASEAN Plus Three / ASEAN Plus Six free trade agreements (i.e. with China, Japan and Korea or including also Australia, New Zealand and India) are motivated by a combination of political and economic features, including the interest in bringing more order to the complicated network of heterogeneous FTAs in East Asia broadly defined. The outlook for these initiatives hinges on both political and economic factors. Specifically, there is competition between the two initiatives with two major regional players proposing different visions. Japan promotes ASEAN Plus Six whereas China is more inclined towards the ASEAN Plus Three format. Such competition could block progress of any of the initiatives. At the economic level there is a question of whether it will be feasible to overcome differences in FTA provisions built in to the current ASEAN+1 agreements and whether India will be able to commit to an economically meaningful agreement in the Plus Six format, given the very shallow character of its current agreements. There is currently no timeframe for either ASEAN Plus Three or ASEAN Plus Six agreements.

The Trans-Pacific Partnership is the most ambitious of the prospective agreements in terms of its geographic scope as it would likely involve the US and other key partners from the entire Asia-Pacific region, including many APEC countries. Negotiations on this FTA proceed, and during 2009-2010 several countries expressed interest in participation. The process receives declared political support from various countries, and its prospects hinge on maintenance of the political commitment. However, the sheer size of the undertaking, the differences between the prospective parties, and their conflicting economic interests, for instance related to the approach to commercial regulatory solutions in several fields and with respect to agriculture limit the chances of real progress of this initiative in the medium to long-term.

ASEAN has a very ambitious agenda of going well beyond shallow integration and creating the ASEAN Economic Community (AEC) by 2015 and has adopted a policy roadmap (AEC Blueprint) towards this objective. The AEC is intended to cover the free movement of goods, services, investment, skilled labour and capital. However, the implementation process of the AEC Blueprint is very slow. Limited improvements can be observed in trade facilitation and mutual recognition of certain professional services. Particularly problematic is progress in areas concerning trade in services, investment, and NTBs. The AEC Blueprint appears to be more of a political declaration than a credible plan for creating a functioning economic community. The underlying difficulty is a very large heterogeneity of economic and institutional development levels between ASEAN members and hence little prospects of creating a regional institution tasked with enforcing the commitments.

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2.1 Dynamic rise of FTAs involving South East Asia

The origins of regional economic integration of South East Asian countries trace back to the Association of Southeast Asian Nations (ASEAN) established in 1967. Its founding members, Indonesia, Malaysia, Philippines, Singapore and Thailand were joined by Brunei Darussalam in 1984. The ASEAN Free Trade Area (AFTA) was enacted in 1993, and subsequently four new members joined: Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.

Intra-ASEAN trade amounts to just above ¼ of total trade (Table 2.3), less than in most other trading blocs (e.g. the EU). There are large differences in the relative importance of trade with ASEAN partners among the members. In Cambodia, Philippines, Vietnam and Brunei Darussalam intra-ASEAN exports account for around 15% of the total, while for Myanmar the share is around 50% and for Laos around 80% (2009 data). On the import side the role of ASEAN varies from around 20% in case of Vietnam and Thailand to above 50% in Myanmar and Brunei Darussalam and above 80% in Laos.

As regards FDI inflows to ASEAN, the leading source region has been the EU accounting for around 20% of total inwards FDI in ASEAN during 2006-2009. ASEAN (predominantly Singapore), Japan and the US were the other major source regions with a share of 10% or above in the same period5.

Thailand was the first ASEAN nation to consider starting an FTA policy, but these attempts were not successful6. Except for Singapore, ASEAN countries started to create FTAs only recently. In 2005, there were only 11 FTAs involving ASEAN or ASEAN members. During 2006-2010 ASEAN countries (except Cambodia and Myanmar) and ASEAN as a bloc accelerated engagement in regional trade arrangements. As a result, in end-2010 the number of FTAs in force reached 29 (31 if the figure includes signed FTAs). Figure 2.1 illustrates the timing of selected agreements entering into force. Additional 22 FTAs were under negotiation and further 16 FTAs were under consultation or study. If all these initiatives materialise, the total number of FTAs involving the economies of the region may reach 70 (Table 2.1).

Among ASEAN member countries, Singapore has been the driving force for the FTA trail and is likely to maintain its leading position in the future. Singapore has strategically built a network of FTAs with partners from all over the world trying to maximise the gains from its strategic geographic location, very open trade regime, well developed infrastructure and the fact that it hosts the headquarters of many MNCs. Nearly a half of FTAs involving ASEAN member countries that were in force as of end-2010 were concluded by Singapore. Thailand comes second in this ranking. Although it is a party of only four currently implemented FTAs, it is striving to negotiate another six FTAs and there are consultations or studies on potential four other 4 FTAs. Malaysia has also geared up creating FTAs over last several years (see Figure 2.2). In general, the larger and more developed ASEAN economies have been most active in forging bilateral agreements whereas poorer countries have pursued less bilateral initiatives. This comes as little surprise given differences in capacity and resources.

5 More information on FDI in ASEAN is available e.g. in the materials from the 1

st OECD-ASEAN

Investment Conference (Jakarta, Indonesia, November 2010) http://www.oecd.org/document/48/0,3343,en_2649_34893_45875824_1_1_1_37461,00.html. 6 See Dent (2006).

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Table 2.1 Dynamic trend of SEA FTAs: 2010 compared to 2005 (number of FTAs)

Country FTAs in force (2005)

FTAs in force (2010)

FTAs signed (2010)

FTAs under negotiation (2010)

FTAs under consultation or study (2010)

Expected FTAs in the future

ASEAN 1 5 0 0 2 7

Brunei Darussalam

0 2 0 1 2 5

Cambodia 0 0 0 0 0 0

Indonesia 0 1 0 1 5 7

Lao PDR 0 0 0 0 0 0

Malaysia 0 3 1 4 0 8

Myanmar 0 0 0 1 0 1

Philippines 0 1 0 1 1 3

Singapore 8 12 2 10 1 25

Thailand 2 4 0 6 4 14

Viet Nam 0 1 0 2 1 4

Total 11 29 2 23 16 70

Note: The row with totals takes into account the duplication of FTAs among ASEAN Member countries. AFTA between ASEAN counties is not included in calculations. The FTAs that are in force are typically still in the process of gradual implementation of provisions (e.g. tariff reductions). Source: ADB‟s Asia Regional Integration Centre FTA Database (http://aric.adb.org/FTAbyCountryAll.php)

Figure 2.1 Timescale of selected FTAs in South East Asia

1993 … 2003 2004 2005 2006 2007 2008 2009 2010

AFTA

ASEAN-China Goods Services Investment

ASEAN-Korea 9* Goods 10 Services

ASEAN-Australia &NZ 7

ASEAN-Japan 4 8

ASEAN-India 3 6

Singapore-US

Singapore-Japan Revised tariff concessions

Singapore-China

Thailand-Japan

Malaysia-Japan

Philippines-Japan

Malaysia-Japan

Vietnam-Japan

Notes: * figures denote the number of ASEAN members implementing a given agreement at a given point in time Light blue highlight denotes that the FTA is in force Sources: Websites of Japanese and ASEAN governments.

http://aric.adb.org/FTAbyCountryAll.php

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Several forces help to explain the rising trend of FTAs in the region.7 First, progressing economic regionalism in the Western hemisphere such as the creation of NAFTA and EU enlargement played a role with ASEAN countries not wanting to lag behind in the global trend of regionalism. Second, the Asian financial crisis of 1997-1998 made ASEAN countries realize the absence of a regional cooperative mechanism and motivated them to enhance economic relations and institutional cooperation. Third, the emergence of the BRICs in the world trade, especially China, emphasises the importance of maintaining and increasing ASEAN‟s competitiveness in the global economy (especially in key sectors such as electronics and labour-intensive manufacturing industries) – possibly in part through closer regional integration. Fourth, the deadlock of the Doha Development Agenda has accelerated ASEAN's drive to follow the FTA track as an insurance against a possible collapse of WTO multilateralism. And finally, as more ASEAN countries create bilateral agreements of their own, “a competitive bilateralism” among ASEAN countries arose and drove them to accelerate more advantageous FTAs with their non-ASEAN trade partners. This last effects is referred to as the domino theory of regionalism8. For example, Malaysia switched its position from being vehemently critical of FTAs up to early 2000s to embracing bilateralism thereafter.

Figure 2.2 Dynamics of SEA FTAs –agreements in force in 2005, 2010 and possible future agreements

Source: Table 2.1.

7 See ADB (2008), Dent (2010b) and Heydon and Woolcock (2009).

8 See Baldwin (1993).

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2.2 FTAs involving ASEAN and ASEAN countries – an overview

2.2.1 Geographic coverage

ASEAN and ASEAN countries are involved in 22 bilateral and seven plurilateral FTAs (Figure 2.3). Bilateral FTAs within Asia-Oceania dominate, mainly due to activity of Japan that implemented seven such agreements with ASEAN countries. Among all ASEAN trade partners, China was the first country to conclude an agreement with ASEAN as a bloc in 2005, followed by Korea (2007), Japan (2008), Australia and New Zealand (2010), and India (2010). Hence, one can talk about ASEAN countries' individual strategies in forging their bilateral relationships driven by specific interests but at the same time actions aimed at consolidating of the network of FTAs in agreements where ASEAN acts as a bloc (ASEAN+1 agreements). In this way, less developed ASEAN economies are also involved in the process.

Figure 2.3 Geography of ASEAN/ASEAN countries’ FTAs in force as of end-2010

Source: Table 2.2

Singapore is the only ASEAN country which widely extends a web of its bilateral FTAs outside Asia-Oceania, to countries such as Bahrain (2004), US (2004), Jordan (2005), Panama (2006), and Peru (2009). In addition to the bilateral FTAs, Singapore concluded two plurilateral FTAs with non-Asian trade partners (Trans-Pacific Strategic Economic Partnership Agreement and Singapore-EFTA). Thailand has FTAs with Australia (2005), New Zealand (2005), China (2006), and Japan (2007). Malaysia has agreements with Japan (2006), Pakistan (2008) and New Zealand (2010). Brunei, Philippines and Vietnam, each of them has only one bilateral FTA with Japan (Table 2.2).

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Table 2.2 FTAs in which ASEAN/ASEAN member(s) are involved (in force as of end-2010)

Within Asia-Oceania Interregional

Bilateral Malaysia – New Zealand, 2010 Singapore-China FTA, 2009 Vietnam-Japan FTA, 2009 Indonesia-Japan FTA, 2008 Malaysia-Pakistan FTA, 2008 (EC) Philippines-Japan FTA, 2008 Brunei-Japan FTA, 2008 Thailand-Japan, FTA, 2007 Malaysia-Japan FTA, 2006 Singapore-Korea FTA, 2006 Singapore-India FTA, 2005 Thailand-Australia FTA, 2005 Thailand-New Zealand, FTA, 2005 Thailand-China, FTA, 2003 (no WTO) Singapore-Australia FTA, 2003 Singapore- Japan, FTA, 2002 Singapore-New Zealand FTA, 2001

Singapore-Peru FTA, 2009 Singapore-Panama FTA, 2006 Singapore-Jordan FTA, 2005 Singapore-United States FTA, 2004 Singapore-Bahrain FTA, 2004 (no WTO)

Total: 17 Total: 5

Plurilateral

ASEAN-India FTA, 2010 (in force between India, Singapore, Malaysia, Thailand, Vietnam and Brunei) (EC) ASEAN-Australia, New Zealand FTA, 2010 (in force between Australia, New Zealand, Singapore, Malaysia, Myanmar, Philippines, Thailand, Vietnam and Brunei) ASEAN-Japan, FTA, 2008 (in force between Japan, Singapore, Laos, Vietnam, Myanmar, Cambodia, Thailand, Malaysia and Brunei) ASEAN-Korea FTA 2007 ASEAN-China FTA, 2005 (EC)

TRANS-PACIFIC Strategic Economic Partnership Agreement (Brunei, Singapore, New Zealand and Chile) FTA, 2006 Singapore-EFTA, FTA, 2003

Total: 5 Total: 2

Total 22 7

Note: NC denotes notification under the Enabling Clause. No WTO denotes that the agreement was not notified to the WTO. Other agreements have been notified under GATT Art. XXIV. Sources: http://aric.adb.org/FTAbyCountryAll.php, http://www.unescap.org/tid/aptiad/, http://rtais.wto.org/?lang=1.

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2.2.2 Major features of selected existing FTAs

There are substantial differences in tariff liberalisation scope and timing among the FTAs. Singapore‟s bilateral FTAs Australia and New Zealand immediately abolished all import tariffs. On the other hand, ASEAN-India FTA has large lists of exemptions from tariff liberalisation and some tariff reduction schedules extend into mid-2020s.

The tables in Appendices 1 and 2 show the scope and coverage of selected FTAs in which ASEAN/ASEAN countries are involved. On a first look most of the agreements appear to be of the “WTO-plus” character and indeed they are also presented in such a way by its signatories. The so-called “Singapore issues”, such as competition, investment, government procurement and trade facilitation, are included and almost all FTAs cover dispute settlement. However, a more careful look is necessary to assess the quality of the agreements as well as their implementation in practice, especially with respect to non-tariff measures (NTMs), and the degree of liberalisation of services trade and investment.

A more detailed assessment of regulatory provisions in selected agreements can be found in the Chapter 3. One observation here is that FTAs in the region have not yet led to substantial liberalisation of trade in services and investment. Also, little progress can be seen in the reduction of non-tariff barriers. Lack of coherence in terms of concept of FTAs and technical policy among existing FTAs in Asia is striking9. As an example rules of origin (RoO) differ considerably between agreements, and are often viewed as being complicated and fairly stringent by many of the firms that have to comply with them. The stringency of rules of origin varies between industries reflecting different import content of products and typical sources of imports of intermediate products10. As we discuss later, incoherency is likely to hinder the attempts to consolidate existing FTAs into a unified regional agreement in Asia in the future.

Table 2.3 ASEAN’s trade with its FTA partners and the EU (% shares, 2009 data)

Share in ASEAN‟s imports

Share in ASEAN‟s exports

ASEAN‟s share in partner‟s imports

ASEAN‟s share in partner‟s exports

China 12.8 9.9 10.4 7.9

Japan 11.4 9.9 14.6 14.7

South Korea 5.5 4.1 11.1 12.5

Australia & New Zealand

2.6 4.5 19.1 10.4

India 2.0 3.2 10.2 8.7

ASEAN 28.6 25.7 28.6 25.7

EU 10.8 11.7 5.7 4.6

Note: ASEAN‟s trade shares include intra-ASEAN trade in the denominator. Shares in EU‟s trade consider extra-EU trade only. Source: Based on data reported by http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/statistics/.

9 Dent (2010a) categorises the heterogeneous nature of existing FTAs in Asia into (i) ideational

conception of FTAs, and (ii) technical policy variance. 10

For example, Corning (2009) analyses the restrictiveness of RoO of ASEAN‟s FTAs with Japan.

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Below, we review the main features of selected FTAs focusing on the trade relations between the ASEAN countries and their major trade partners in the region: China, Japan, South Korea, Australia, New Zealand and India that together account for around one third of ASEAN‟s foreign trade (including intra-ASEAN trade). The relative importance of trade flows between these countries and regions is summarised in Table 2.3.

This discussion primarily concentrates on underlying motivations for FTA formation, liberalisation of tariffs and linkages between FTAs between partner countries with ASEAN as a bloc and with individual ASEAN members. Deep integration issues (i.e. beyond tariff cuts) are only mentioned briefly. An in-depth legal analysis of regulatory issues in selected FTAs can be found in Chapter 3.

With regard to tariff cuts foreseen in the analysed FTAs the discussion focuses on market access to ASEAN, i.e. on schedules of ASEAN countries rather than their non-ASEAN partners. Therefore Singapore‟s bilateral FTAs are not considered given effective lack of nonzero tariffs in Singapore. The schedules of bilateral FTAs between Japan and respective ASEAN countries appear to be very similar to the schedules incorporated into the later ASEAN-Japan FTA. Hence, below, we discuss the schedules of ASEAN plurilateral agreements.

For ASEAN+1 agreements it is important to note that tariff reduction schedules are country-specific. Hence, while there are common rules and in effect the schedules are similar to a certain extent, each of the ASEAN+1 agreements could be considered as 10 FTAs, each with somewhat different tariff cuts and tariff reduction schedules. The complexity of provisions make the aggregate analysis rather difficult and there no apparent trends are visible. Coverage varies significantly between agreements and between ASEAN countries. With respect to timing of reductions, for the agreement with China and to a lesser extent also with Korea and Japan, the 6 original ASEAN members (ASEAN6, i.e. Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand) should have already removed tariffs for non-sensitive products (the target date was January 2010). Abolishing of remaining tariffs for non-sensitive imports from Korea, Japan, India and Australia and New Zealand is expected to be concentrated between 2010-2013. In the remaining ASEAN countries, Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) non-sensitive tariff reduction schedules are generally delayed by around 3 years, implying that the process should be mostly completed after 2016.

ASEAN-China

Motivation. China was the first country in Asia which concluded an agreement with ASEAN as a group. For China, the agreement with ASEAN was the first such major FTA after the country joined the WTO in 2002. The initial framework agreement was signed already in November 2002 and the FTA entered into force from 2005 onwards. The agreement reflects long-term Chinese ambitions of building security and political confidence in Southeast Asia and good economic relations with ASEAN as a whole11. From the ASEAN perspective, China was both a threat as a more powerful and more dynamic force in the global trade and investment patterns as well as a potential export market opportunity given the size and dynamics of the internal Chinese market12.

11 See Kwei (2006), Park et al (2008).

12 See Severino (2009).

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Coverage. The ASEAN-China FTA comprises separate agreements on trade in goods (in force since 2005), services agreement implemented in 2007, and an investment agreement implemented in 2010.

Tariff reductions have been carried according to different schedules13. The so-called Early Harvest Programme covered certain products allowing for the accelerated reduction of tariffs before the onset of the FTA – tariffs on products covered by this schedule went to zero in 2006. Most products (some 90% of tariff lines) are covered by the so-called Normal track. In ASEAN6 countries (Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand) as well as in China tariffs for products included in the Normal track were gradually eliminated between 2005 and 2010 (Table A3.1 in Appendix 3). The remaining ASEAN countries, Cambodia, Lao PDR, Myanmar and Vietnam (CLMV), have until 2015 to bring tariffs down to zero. Of the 400 (500 for CLMV) products that the parties were originally allowed to place in the sensitive list, actual numbers of HS6 products varies between 1 in Singapore, below 100 in Brunei and Lao PDR, 178 for China up to 250-350 for other countries (Table A3.2 in Appendix 3). Cambodia, China and Malaysia put the largest number of products in the highly sensitive lists (100-150). According to reduction schedules tariffs for products in the Sensitive List must not be greater than 5% by 2018 (2020 for CLMV). Tariff in the Highly Sensitive List shall be reduced by 50% by 2018 (2020 for CLMV).

The FTA does not cover some important elements, such as technical regulations, trade facilitation, competition, government procurement and dispute settlement. Singapore is the only ASEAN country that concluded the bilateral FTA with China (Singapore-China, in force since 2009). However, the Singapore-China FTA still falls short of a truly comprehensive agreement, and in fact, apart from some additional provisions in the services sector does not appear to add much value to the ASEAN-China FTA. In particular, the Singapore-China agreement excludes issues related to intellectual property (IP), competition and government procurement which are deemed to be particularly important for business activities with China. This is due to China‟s aforementioned reluctance to commit to these issues within an FTA framework.

ASEAN-South Korea

Motivation. Although South Korea's share of foreign trade of ASEAN is less than half the figure for China and Japan, the importance of South Korea for ASEAN is related to geopolitical factors and the balance of power within East Asia. For South Korea, the economic relations with ASEAN are of key importance (Table 2.3). In 2009, ASEAN was the second largest trade partner of Korea after China and ahead of the EU and Korea‟s large multinational corporations (chaebol) have extensive regional supply chain operations in ASEAN. However, non-economic motivations also matter. ASEAN-China FTA and proliferation of FTAs between Japan and ASEAN economies triggered South Korea to conclude the negotiation with the bloc14.

Coverage. The agreement on trade in goods entered into force in mid-2007, followed by the agreement on services and investment, in force since 2009.

13 The summaries of tariff schedules for ASEAN-China and other agreements draw from materials

available at the website of the government of Singapore (http://www.fta.gov.sg/sg_fta.asp). 14

See Aggarwal and Urata (2006).

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Tariff reductions are carried for products classified under 2 schemes: Normal Track and Sensitive Track with the latter divided into Sensitive and Highly Sensitive lists. For goods under Normal Track (around 90% of all tariff lines) gradual tariff elimination schedule is contingent upon the originally applied MFN rate. For ASEAN 6 and Korea tariffs were originally to be reduced to zero by 2010 (Table A3.3 in Appendix 3), but later entry into force of the agreement implies some delay in the schedules (till 2012). The schedule of Normal Track elimination extends till 2016 for Vietnam and till 2018 for the remaining three ASEAN countries.

For products placed in the Sensitive List (200-350 products for most countries, with much lower figures in Singapore and Brunei), the ASEAN6 and Korea are committed to reduce the tariff to not more than 20% by 2012 and subsequently reduce to not more than 5% by 2016. For Vietnam, identical target tariff ranges become relevant in 2017 and 2021 and for the remaining three countries in 2020 and 2024. The number of products that parties are allowed to place in the Highly Sensitive List is bounded (200 tariff lines or 3% of all tariff lines at the selected HS aggregation level in most cases). These limits are used to a significant extent by most countries, apart from Singapore and Brunei (Table A3.4 in Appendix 3). Obligations for tariff cuts for products put on the Highly Sensitive Lists are quite limited. Schedules are further divided into five different categories with up to 40 products allowed for which no tariff concessions are to be made.

The ASEAN-South Korea FTA does not include provisions on intellectual property rights, competition and government procurement. Apart from the Singapore-Korea FTA that came into force in 2006, ASEAN countries have no bilateral agreements with South Korea.

ASEAN-Japan

Motivation. In contrast to China and South Korea, Japan took a strategy of creating bilateral FTAs with ASEAN countries at the first stage, and then concluded a collective ASEAN-Japan FTA in 2008. The idea behind this was the interests of the Japanese business to rapidly conclude bilateral agreements with major ASEAN trade partners in accordance with their business priority15. ASEAN countries have played important roles in regional supply chains of the Japanese manufacturing companies since 1980s. However, institutional background was lacking to enhance de-facto economic integration. Hence, institutional integration in the form of an FTA made a perfect sense16. In addition to the importance of facilitating trade and investment relation with Japan, ASEAN wanted to maintain geopolitical balance with China and Japan which are two most important regional partners in East Asia. This geopolitical consideration became a driving force of an ASEAN-Japan FTA17.

Coverage. The ASEAN-Japan FTA (ASEAN-Japan Comprehensive Economic Partnership Agreement) entered into force in 2008. It was originally expected to widen the scope and quality of the existing bilateral FTAs between ASEAN countries and Japan, especially in the field of services, technical regulations and investment. However, in effect the ASEAN-Japan FTA turned out very limited in scope lacking provisions related to intellectual property rights,

15 Nippon Keidanren, a major Japanese business association, feared trade divergent effects caused

by FTAs involved by major ASEAN trade partners and lobbied for swift conclusion of bilateral FTAs in conjunction with proceeding negotiations towards FTA with ASEAN as a whole (http://www.keidanren.or.jp/english/news/index.html). 16

See Pempel and Urata (2006) and UNCTAD (2008). 17

See Heng (2007).

28

competition and government procurement.18 Trade in service and investment issues were still negotiated during 2010.

The agreement is characterised by very large heterogeneity of tariff cut commitments, both between countries and between categories of products. The five broad categories of products and their respective tariff schedule rules are as follows:

Category A: Tariff eliminated immediately

Category B: Tariff are eliminated in instalments

Category C: No reduction

Category R: Special arrangements

Category X: No commitments

For ASEAN6 (apart from Singapore) around half of tariff lines falls into category A implying that tariffs were removed from 2009. Myanmar and Cambodia have placed a substantial number of tariff lines in category C where no tariff reductions are foreseen and Vietnam and Indonesia have many good in category X. Details on the distribution of tariff lines between categories can be found in Table A3.6 in Appendix 3.

Among ASEAN countries, Singapore, Malaysia, Thailand, Brunei, Philippines, Indonesia and Vietnam concluded independent bilateral FTAs with Japan. Among them, Singapore-Japan FTA is the most comprehensive one followed by Malaysia-Japan FTA. The commercial regulatory content of the agreements differ considerably. For example, coverage of technical regulations (TBT and SPS) in the Vietnam-Japan, Indonesia-Japan, Philippines-Japan and Thailand-Japan FTAs reflect the nature of bilateral trade with Japan19.

One should also note that the relation between the existing bilateral FTAs and the ASEAN-Japan FTA is complicated for two reasons. One is that as of end-2010 Indonesia and Philippines have not yet acceded to the ASEAN-Japan FTA. Both Indonesia and Philippines have bilateral FTAs with Japan. In contrast, Laos and Myanmar have no bilateral agreements with Japan whereas they are implementing the Japan-ASEAN FTA. The other reason is the unique interpretation of the legal relation between ASEAN-Japan FTA and Japan‟s bilateral agreements with ASEAN countries. According to the Japanese government, the relation between ASEAN-Japan FTA and ASEAN bilateral FTAs with Japan should be considered as “independent agreements without any legal priority”. In other words, the principle of the international law, “a later law prevails over an earlier law”, is not applied in this case. Based on this legal interpretation, the Japanese government advises companies to decide which FTA would be the most suitable for a particular business case.

Under ASEAN-Japan FTA, there is an integrated RoO and the cumulative rules of origin are applied to the productions inside the ASEAN countries and Japan. On the other hand, tariff reduction schedules are bilateral. The countries with bilateral FTAs with Japan (e.g. Vietnam, Indonesia, Malaysia, Philippines, Brunei, Thailand, and Malaysia) have separate tariff reduction schedules for their bilateral agreements and for the ASEAN-Japan FTA. Whether the two provide for identical preferential rates (and reduction schedules) is not

18 Corning (2009) analyses the coverage and the level of liberalisation of the ASEAN-Japan FTA in

comparison with bilateral agreements. 19

See Table A1.1, Appendix 1. For the more detailed comparison of the agreements, see Chapter 3.

29

clear. The Japanese government simply advises the users to check a preferential rate under the ASEAN-Japan FTA and bilateral FTAs item by item as they might be different20.

ASEAN-Australia and New Zealand

Motivation. For Australia and New Zealand, ASEAN is a very important trade partner, comparable to China and Japan (Table 2.3). Beside this, following negotiations on ASEAN‟s FTAs with China, South Korea and Japan, the political economic factors (domino effect) compelled Australia and New Zealand to create an FTA with ASEAN. This was also a geopolitically crucial step for Australia and New Zealand to reassure their position in the process towards ASEAN Plus Six and/or Asia Pacific FTA in the future21.

Coverage. ASEAN-Australia and New Zealand FTA is the most comprehensive among the ASEAN+1 agreements concluded so far. It contains ambitious provisions for trade in services, intellectual property rights, competition and investment in addition to trade in goods.

The agreement entered into force in January 2010 with tariff reductions schedules running up till 2025 (Table A3.7 in Appendix 3). For ASEAN6, large number of tariff lines go down to zero till around 2013. For CLMV between 1.7% and 6.3% of all tariff lines is foreseen to stay unchanged (i.e. no reductions). Some countries have unbounded tariffs, meaning that some products are excluded from the agreement.

Australia and New Zealand separately concluded bilateral FTA with two ASEAN countries, Singapore and Thailand, before the first ASEAN-Australia & New Zealand FTA negotiation took place. New Zealand‟s FTA with Malaysia entered into force in mid-2010, while Australia was still negotiating its agreement with this country as of end-2010. The bilateral agreements Australia-Singapore and New Zealand-Singapore (in force since 2003 and 2001, respectively) are the most comprehensive FTAs signed by ASEAN members with Asia-Oceania partners and in particular they cover complete elimination of all tariffs. Although FTAs with Thailand do not cover government procurement, their coverage and depths is still larger than for other bilateral FTAs signed by Thailand.

ASEAN-India

Motivation. Since India initiated its Look East Policy in the early 1990s, the relations with ASEAN have gradually deepened. In general, India‟s approach to FTA has been motivated by foreign policy more than by pure economic interests22. India is involved in different regional integration initiatives with other developing countries in Asia such as SAFTA (South Asian Free Trade Agreement including India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) and BIMSTEC (Bengal Initiative for Multi Sectoral, Technical and

20 See http://www.meti.go.jp/policy/trade_policy/epa/epa_katsuyo/080730EPA_QA.html (in

Japanese). 21

For both Oceanic nations, the link with ASEAN is part of their wider strategies to weave various economic and political linkages with Asian nations, their most important trading partners and with whom they have strengthening socio-cultural ties through immigration, foreign students, etc. There are various new security issues too to consider, e.g. environment, energy, health pandemics. More generally, there is the context of the emerging „East Asia Community-building‟ process and East Asia Summit grouping, which Australia and New Zealand are members of. 22

See Sen (2006).

http://www.meti.go.jp/policy/trade_policy/epa/epa_katsuyo/080730EPA_QA.html

30

Economic Cooperation grouping Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal), but these agreements are weak in terms of their coverage and level of market liberalisation23. ASEAN‟s FTAs with China, South Korea, Japan and Australia & New Zealand have motivated India to create ASEAN-India FTA to avoid discrimination against their exports to the ASEAN countries.

Coverage. In comparison to other ASEAN+1 agreements the ASEAN-India FTA (2010) is rather shallow with large list of exemptions in tariff reduction, stringent rules of origin and no provisions for competition issues or government procurement. This partly reflects India‟s protectionist stance. In particular, India‟s position on RoO has been a significant problem for most of its FTA partners.

Tariff reductions depend on classification of products into Normal Tracks 1 and 2, Sensitive and Highly Sensitive tracks, and Exclusion list. ASEAN tariffs for goods under Normal Track 1 go down to zero starting in 2010 and not later than by end-2013 for Brunei, Indonesia, Malaysia, Singapore, and Thailand, by end-2018 for Philippines and also by end-2018 for as well as Cambodia, Laos, Myanmar and Vietnam. In Normal Track 2 the years for respective groupings are 2016, 2019, and 2021. Tariffs for products in the Sensitive Track are to decline to maximum 5% by 2016, 2019, and 2021 in the same country groups. Highly Sensitive list (up to 400 tariff lines in case of Philippines, much less in other countries) will see proportional tariff reductions (by a quarter or by half). The exclusion list is fairly long in several countries (e.g. in excess of 1,000 tariff lines for Brunei, Malaysia and Philippines). In this case the agreement foresees annual tariff reviews with a view to improving market access. The number of tariff lines falling into respective categories for some ASEAN countries is included in Table A3.5 (Appendix 3).

One peculiarity of the agreement in terms of market access for ASEAN exporters is that India offers different schedules towards Philippines than towards remaining ASEAN countries. India‟s tariff reductions and elimination for imports from Philippines mirror the Philippines schedules that are delayed by around 3-5 years compared to other ASEAN6 countries, This delayed Indian schedule can be seen as a compensation for the leeway in tariff liberalisation that was given to Philippines compared to other members of ASEAN6 group. India also placed a few products (palm oil, coffee, black tea and pepper) in a “special products” category with their own tariff reduction schedule.

India concluded an FTA with Singapore (2005) and a framework agreement with Thailand (2004). Currently, an FTA with Malaysia is under negotiation and one with Indonesia is under consultation/study.

2.3 Motivation for and utilisation of FTAs

In South East Asia, FTAs tend to be driven by the geopolitical relationship and diplomacy rather than pure economic strategy24. As most of Asian countries are latecomers to FTAs,

23 See UNCTAD (2008).

24 One illustrative example concerns the Singapore-Peru FTA that can be more attributed to

Singapore‟s efforts to expand its political presence in Latin America rather than to any real foreign trade interests. The value of Singapore-Peru trade (around USD 40-50 million in the recent years) was well below 0.01% of Singapore‟s total trade.

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they have adopted the „learning through practice‟ approach, where FTAs incorporate review and revision processes allowing for potential adjustment of original provisions25. Among Asia and Oceania countries, Singapore, Australia and New Zealand endeavour to achieve ambitious deep and comprehensive FTAs to open trade and investment while they are also flexible in negotiating less ambitious arrangements with developing country partners. Less developed ASEAN countries (Cambodia, Indonesia, Laos, Myanmar, Philippines and Vietnam) are hesitant to commit to deep liberalisation, and not ready to expose the agriculture, textiles and clothing sector to competition. Hence they are reluctant to engage in commercial regulatory issues of more ambitious agreements26. While Japan and South Korea are keen to strengthen institutional integration in the manufacturing sector to enhance existing regional supply chains, these countries tend to stick to persistent protectionism in agriculture. China is not ready to commit to commercial regulatory issues, such as intellectual property and government procurement and competition because of its on-going privatisation reform and a lack of institutional and technocratic capacity to enforce regulatory commitments at home27.

2.3.1 Bilateral and plurilateral FTA strategies of ASEAN countries

One important question is on the incentives and motivations driving the dual track strategy of completing both plurilateral and bilateral FTAs by some ASEAN countries. The forces behind this approach differ between cases. Bilateral agreements may be easier to negotiate and hence can be implemented faster, not an unimportant issue given the speed at which other regional FTAs are being formed. Examples include FTAs between Japan and some ASEAN countries that entered into force before the ASEAN-Japan agreement. Another example is the Thailand-China FTA from 2003 that was limited in scope to some agricultural products and in fact could be considered as a bilateral “early harvest” deal preceding the entry into force of the ASAEN-China FTA.

Also, from the perspective of individual ASEAN member countries, bilateral agreements may allow to negotiate certain provisions that partners would not be willing to extend to ASEAN as a whole. For example, under its FTA with Japan Thailand was granted favourable market access conditions for certain products (e.g. chicken, shrimps), something that Japan was not willing to extend to all ASEAN partners.

Bilateral FTAs may also allow to extend the coverage and depth of existing plurilateral agreements, a potentially attractive option especially for more developed ASEAN countries. Singapore can be taken as an interesting example with its bilateral FTA with China entering into force in January 2009 when the ASEAN-China FTA was already in place for some time. It would appear that the fairly limited scope of the plurilateral agreement could motivate Singapore to pursue a more ambitious bilateral deal. However, our analysis only identifies limited differences between the two agreements. The bilateral agreement provides some acceleration of tariff reduction schedules by China. The Singapore‟s services offer under the bilateral agreement extends to some sectors not covered in the ASEAN-China deal.

25 Dent (2010b) analyses the review process of Asia-Pacific FTAs.

26 See Dent (2010b) and Sally (2010).

27 Dent (2010b) analyses that China is open to ideas of regulatory “co-operation” where the focus is

on dialogue instead of commitment. See also Aggarwal and Urata (2006), Kawai and Wignaraja (2010), Park et al (2008).

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Examples include medical services, accounting, auditing and bookkeeping services, audiovisual services, and hotel and restaurant services. Beyond this, there may be political motivations driving Singapore or some other ASEAN countries to extend networks of bilateral agreements even if their value added relative to existing ASEAN+1 agreements is limited.

The formation of plurilateral agreements can be a way to introduce more coherence and transparency to the pre-existing network of bilateral deals. For instance, the ASEAN-Japan agreement introduced less product specific rules of origin than was the case in Japan‟s bilateral agreements. However, some rules of origins in the ASEAN-Japan agreement are more restrictive than in some bilateral agreements and the companies have a freedom to choose between applying a rules from a bilateral or a plurilateral agreement for any given transaction. This hardly amounts to simplification and harmonisation of the existing FTA system,

There are different forces explaining the formation of bilateral FTAs by ASEAN countries. One is a wide development gap among ASEAN member countries. While the highly developed liberal economies such as Singapore prefer comprehensive and high standard FTAs with its trade partners, less developed members which maintain relatively high tariffs with protected sectors and industries prefer trade-light FTAs with more focus on economic cooperation. Second, there exists some bilateral FTA rivalry among ASEAN countries. After some ASEAN members concluded bilateral FTAs with important partners (this applies in particular to Japan) their neighbours wanted to form their own bilateral agreements to avoid trade diversion (the “domino effect”). Third, ASEAN is not a customs union and does not have a common external tariffs. Since countries are not bound by common trade policy, each member can play as an independent actor of Asian regionalism to pursue its national economic and political objectives.

There are also different forces driving the plurilateral approach where ASEAN acts as a bloc. First, collective activity of ASEAN can strengthen its bargaining power as an actor in regional trade negotiations in Asia and Asia-Pacific regions. Given the various problems hindering the establishment of FTAs between some of ASEAN partners (e.g. China-Japan, Korea-China, etc.) ASEAN is likely to maintain its position as a regional FTA hub for some years to come. Finally, there is an issue of domestic resources and capacity of less developed ASEAN countries to negotiate and conclude FTAs. For them, the format where ASEAN as a bloc is a party of agreements is particularly favourable.

2.3.2 Utilisation of FTA preferences

One important and controversial issue concerns the degree to which companies involved in trade across borders make use of preferences available under FTAs, the utilisation rate of FTAs. Overall, existing empirical evidence is scarce and results differ, possibly partly reflecting alternative methodologies and partly time, geography, firm size and other variation in utilisation rates. At one extreme there are some very alarming figures like the widely cited 3% utilisation rate for intra-ASEAN trade referred to by Baldwin (2006). However, this figure refers to late 1990s, i.e. when AFTA was implemented to a limited extent only. Studies

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based on more recent data point to significantly higher, but not very high utilisation rates. Their accuracy may be hindered by lack of availability of relevant data28.

Kohpaiboon (2010) analyses the utilisation of preferences in intra-ASEAN trade (AFTA) by Thai exporters during 2003-2008 based on administrative records. The results suggest an increase in utilisation over the period to the range of 25-60% for exports to Malaysia, Vietnam, Philippines and Indonesia, i.e. such a proportion of total Thai exports to these countries applied for preferential treatment under AFTA. An important observation is that this average utilisation rate is driven by very high utilisation of preferences for just a few products (top 10 products account for between one third to half of total preferential exports). Stringent rules of origins, the nature of trade between Thailand and other ASEAN countries, largely driven by the product fragmentation phenomenon, the presence of tariff exemption schemes, and the relatively limited size of preference margins are the key explanatory factors for underutilization of the scheme. Hayakawa et al (2009) report the results based on a 2007 survey of a specific group of companies, namely Japanese affiliates from the ASEAN region. Among exporters, 23% report using FTA preferences, and these are mostly affiliates based in Singapore, Indonesia and Thailand primarily utilizing AFTA (i.e. exporting to other ASEAN countries), as well as Indonesia-Japan FTA and ASEAN-China FTA. The major reasons for not utilizing FTA preferences is the existence of other schemes eliminating tariffs (e.g. ASEAN countries apply investment promotion schemes reducing or eliminating tariffs for imports of parts and materials for assembly).

Overall, it seems that average FTA utilisation rates may provide little useful information on the trade effects of FTAs. Instead, the analysis should be carried at a more disaggregate level. There is likely large heterogeneity in utilisation between products and directions of trade reflecting specific conditions (e.g. other tariff reducing/eliminating schemes, very low preference margins due to low MFN tariffs, NTBs, cumbersome RoO). Interestingly, the evidence for RoO as being the primary hindrance for FTA utilisation is not universally supported29. However, this may also be partly related to incomplete implementation of tariff preferences at the time when these studies were carried. RoO may become a relatively more important hindrance once preference margins increase in line with tariff reduction schedules.

While ASEAN countries certainly have a large reform agenda to improve the effectiveness of their FTAs from the perspective of this report an important remark is that at least some preferences are being used to a significant extent. Furthermore, one should remember that several significant FTAs in the region only entered into force very recently and hence available utilisation data cover periods before any sizeable tariff cuts were implemented under these agreements.

28 See Kawai and Wignoraja (2010) for discussion. These authors only mention Thailand as a country

where administrative data using certificates of origins is available to some researchers. 29

Other relevant studies include Takahashi and Urata (2009) analysing the Japanese exports to Malaysia, Pomfret et al (2010) analysing exports from Singapore and Thailand to Australia and Kawai and Wignaraja (2009) for Philippines and some other Asian countries. On the other hand, Kohpaiboon (2010) estimates the costs of complying with RoO requirements by Thai exporters as equivalent to 5-8% tariff, a fairly high figure.

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2.4 The outlook for regional integration – prospective FTAs

Figure 2.4 shows the continued drive towards regionalism of ASEAN countries. There are currently 31 bilateral and 11 plurilateral prospective FTAs involving ASEAN or its members. These are agreements that are signed but not yet ratified, that are currently negotiated or studied and consulted among potential partners. Bilateral FTAs dominate also among prospective agreements. An interesting feature is that ASEAN countries appear to be trying to extend the web of FTAs reaching to partners outside Asia, including trade-blocs such as the EU, EFTA and MERCOSUR.

Figure 2.4 Geography of prospective ASEAN countries’ FTAs – signed/under negotiation/ consultation and study, 2010

Source: Table 2.3

Table 2.4 shows all prospective FTAs as of end-2010. These can be categorized into four types: (i) bilateral FTAs within the Asia Pacific region as well as reaching outside it, (ii) plurilateral FTAs between ASEAN countries regional groups from outside Asia Pacific (e.g. EU, EFTA, MERCSUR and Gulf Cooperation Council), (iii) plurilateral FTA where some ASEAN countries participate in regional initiatives (e.g. TPP and BIMSTEC), (iv) plurilateral FTA between ASEAN as a group and other partners (e.g. ASEAN Plus Three, ASEAN Plus Six).

Looking at the situation from ASEAN‟s trade partner‟s point of view, while US and EFTA take the bilateral approach to enhance FTA relation with ASEAN member countries, until recently the EU had tried to start creating an FTA with ASEAN as a bloc. Stalemate of negotiations with ASEAN has led to a switch to a bilateral approach. At the turn of 2010/2011 the EU was negotiating with Singapore and Malaysia.

Figure 2.5 shows the proliferation of the inter-regional type of FTAs. At this stage, most of existing FTAs of ASEAN countries is concluded inside Asia-Oceania. But ASEAN countries are trying to expand the web of FTAs to intra-regional level. If the prospective FTAs are concluded in the future, almost a half of FTAs will be of inter-regional character.

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Figure 2.5 Changing geography of ASEAN countries’ FTAs – reaching outside Asia-Oceania

Source: Table 2.3

As is the case with already implemented FTAs larger and/or more developed ASEAN members (Singapore, Thailand, Malaysia, and Indonesia) are most active in forging new agreements, in contrast to Lao PDR, Cambodia and Myanmar (Figure 2.6).

Figure 2.6 Number of prospective FTAs by ASEAN member countries

Source: Table 2.4.

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Table 2.4 Prospective FTAs (as of end-2010)

Intra-Asian Interregional

Bila

tera

l

[Signed] Malaysia-India FTA (2007-)

[Signed] Singapore-Costa Rica FTA (2010) Malaysia-Chile FTA (2010)

[Under negotiation] Malaysia-Korea FTA (2005-) Malaysia-Australia FTA (2005-) Singapore-Pakistan FTA (2005-) Thailand-India FTA (FA since 2004-, FTA under negotiation)

[Under negotiation] Vietnam-Chile FTA (2008-) Singapore-Ukraine FTA (2007-) Indonesia-USA FTA (2006-) Malaysia-USA FTA (2006-) Philippines-USA FTA (2006-) Singapore-Kuwait FTA (2004-) Singapore-Qatar FTA (2004-) Singapore-Egypt FTA (2004-) Thailand-USA FTA (2004-) Thailand-Peru FTA (FA signed 2004, FTA under negotiation) Thailand-Bahrain FTA (FA signed 2002, FTA under negotiation) Singapore-Canada FTA (2001-) Singapore-Mexico FTA (2000-)

[Under consultation/study] Brunei-Pakistan FTA (2007-) Indonesia-Australia FTA (2007-) Indonesia-India FTA (2005-) Indonesia-Pakistan FTA (FA signed 2005, FTA under negotiation) Thailand-Pakistan FTA (2004-) Philippines-Pakistan FTA (2004-) Singapore-Sri Lanka FTA (2003-) Thailand-Korea FTA (2003-)

[Under consultation/study] Indonesia-Chile FTA (2009-) Thailand-Chile FTA (2006-) Brunei-United States FTA (2002-)

Total:13 Total:18

Plu

rila

tera

l

[Signed] Singapore-Gulf Cooperation Council FTA: Singapore, Bahrain, Oman, Saudi Arabia, Kuwait, Qatar, and United Arab Emirates (2008)

[Under negotiation] BIMSTEC (Bengal Initiative for Multi Sectoral, Technical and Economic Cooperation) FTA: Myanmar, Thailand, Bhutan, Sri Lanka, Bangladesh, India, Nepal, (FA signed 2004, FTA under negotiation)

[Under negotiation] Singapore-EU, FTA (2010-) Malaysia-EU, FTA (2010-) Thailand-EFTA FTA (2005-) Trans-Pacific Partnership Agreement: Brunei, Malaysia, Singapore, Vietnam, Australia, Chile, Peru,

USA and New Zealand (FA signed 2010, FTA under negotiation) ASEAN-EU FTA (2007-)

[Under consultation/study] ASEAN Plus Six (2005-) ASEAN Plus Three (2004-)

[Under consultation/study] Vietnam-EFTA FTA (2010-) Thailand-MERCOSUR FTA (2006-) Indonesia-EFTA FTA (2005-)

Total: 3 Total: 9

Total 16 27

Notes: FA stands for a Framework Agreement. Some of the FTAs listed are essentially „dormant‟ projects, e.g. Singapore – Mexico or Singapore – Canada, where the last round of negotiations took place many years ago. Sources: http://aric.adb.org/FTAbyCountryAll.php, http://www.unescap.org/tid/aptiad/

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2.4.1 Towards consolidation and harmonization of FTAs in Asia?

The formation of ASEAN/ASEAN countries FTAs can be seen as a part of trend towards consolidation and harmonization of FTAs in Asia. Two major forces are ASEAN Plus Three / ASEAN Plus Six (based on the East Asia Summit grouping30) and Trans-Pacific Partnership (TPP).

ASEAN Plus Three involves ASEAN as well as China, Japan, and South Korea

ASEAN Plus Six (also referred to as East Asia Summit (EAS) group and Comprehensive Economic Partnership for East ASIA (CEPEA)) involves ASEAN as well as China, Japan, South Korea, India, Australia, and New Zealand

Trans-Pacific Partnership (TPP) grew out of the existing FTA involving Brunei, Chile, New Zealand and Singapore which is called Trans-Pacific Strategic Economic Partnership Agreement. Additional countries, including Australia, Malaysia, Peru, United States, and Vietnam, are negotiating to join the group, while several other countries are also considering this option, including Canada, Japan and South Korea. The TPP may eventually become an agreement involving many Asia-Pacific economies.

The prospects of these potential agreements are discussed below.

ASEAN Plus Three / ASEAN Plus Six

The idea of creating a consolidated FTA, whether in the form of ASEAN Plus Three or ASEAN Plus Six (Figure 2.7), was formally put on the high-political agenda since the first East Asia Summit in 2005. The motive behind is the idea that a consolidated single FTA would generate substantial welfare gains in Asia by addressing trade diversion and other market-distorting effects of the noodle bowl situation of existing overlapping bilateral and plurilateral FTAs in Asia31.

The prospects of ASEAN Plus Three / ASEAN Plus Six are somewhat difficult to predict due to various economic and political factors. First complication is the political rivalry between China and Japan. While China supports ASEAN Plus Three, Japan opts for ASEAN Plus Six fearing a Chinese domination in the ASEAN Plus Three model. ASEAN Plus Six is the way to mitigate China‟s growing influence in East Asia by incorporating India, Australia and New Zealand. Second is the different approach towards regionalisation. While China has the idea of enhancing regional economic cooperation through ASEAN Plus Three, Japan has more ambitious idea of incorporating commercial regulatory measures (e.g. IP, competition and investment) and substantive commercial liberalisation through an ASEAN Plus Six FTA.32 Third is the role of the US as a security anchor in the region.33 From the security perspective, there is a fear among Japan, South Korea and some ASEAN countries that exclusion of the

30 The US and Russia will become new members of the East Asia Summit starting from 2011.

31 See ADB (2008), Kawai and Wignaraja (2010), Kimura (2007) and others.

32 See Dent (2010a).

33 See Kawai and Wignaraja (2010).

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US from Asian integration processes (ASEAN Plus Three or ASEAN Plus Six) would yield more security leverage to China. Thus, it cannot be excluded that neither ASEAN Plus Three nor ASEAN Plus Six will get full support from participating countries if any unexpected political tensions with China arise34. The prospects for ASEAN Plus Three and/or ASEAN Plus Six would appear therefore to depend heavily on the politico-economic balance in Asia and Asia-Pacific.

Figure 2.7 Map of ASEAN Plus Three / ASEAN Plus Six

To form ASEAN Plus Three and ASEAN Plus Six, several scenarios for the formation can be considered. The precondition would be the formation of an FTA among China, Japan and South Korea. Whereas Chinese government supports the idea, both Japanese and South Korean governments are hesitant to create bilateral FTAs or a trilateral FTA with China. For Japan, competitiveness of the Chinese manufacturing sector and agriculture products are the threats. There are also strong concerns among Japanese companies about implementation of the WTO commitments in China, especially the intellectual property rights. And the Japanese consumers are concerned about safety of Chinese food products.35 For

34 For example, as a result of instable relations between China and Japan after the September 2010

fishing-boat incident near Senkaku Islands, Japanese government started to emphasize joining the TPP. 35

With regard to possibility of China-Japan Bilateral FTA, Dent (2010a) claims that FTAs between two large economies in unlikely due to: (i) the scale of economic, social and political impacts as a result of such a bilateral agreement, and (ii) opposition from third parties fearing trade diversion effects.

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South Korea, there are concerns about competitiveness of the China‟s agricultural products and excessive economic dependence on the Chinese market. A Japan-South Korea bilateral FTA entered the joint study phase in 1998 and has been under negotiation since 200336. However, talks have been stalled since November 2004 over minor agricultural products and other issues. A major general obstacle here is that two economies see themselves as being competitive rather than complementary. For example, South Korea has concerns that imports from the Japanese competitive intermediate manufacturing industry would be increased as a result of the bilateral agreement and enlarge trade deficits with Japan37.

As for ASEAN Plus Six, one challenge is India‟s ability to form FTAs with Australia, China, and New Zealand38. Among potential ASEAN Plus Six members, currently only South Korea and Japan have bilateral FTA with India. To date, India has taken a fairly protectionist stance related to its domestic structural and regulatory reforms and hence the chances for India's engagement in a deeper and more comprehensive FTAs with the partners appear slim.

Even if bilateral/plurilateral FTAs mentioned above are concluded, the process of consolidating these towards ASEAN Plus Three and/or ASEAN Plus Six would therefore require enormous political efforts due to lack of consistency and compatibility among the agreements. In addition, comprehensive coverage of agriculture products, wide and substantial coverage of “WTO-plus” elements are likely to provide substantial political and economic challenges.

Trans-Pacific Partnership (TPP)

The Trans-Pacific Strategic Economic Partnership Agreement (TPSEPA) entered into force in 2006 as an FTA among Brunei, Chile, New Zealand and Singapore. This agreement is also referred to as P4. It is the only Asia-Pacific FTA to date that has evolved from a bilateral or small group to a plurilateral arrangement. It is a relatively comprehensive agreement that could potentially become a model and catalyst for much broader integration covering Asia Pacific region39.

The negotiations of expanding TPSEPA to Trans-Pacific Partnership (TPP) started in late 200840. In March 2010, Brunei, Singapore, Vietnam, Australia, Chile, New Zealand, Peru and the US started negotiating such an expanded agreement and Malaysia joined in October 2010. Given the number of countries involved the potential TPP could be a very broad agreement in geographic terms eventually covering large part of the Asia-Pacific region and including the US. Among the four ASEAN countries involved in the process (Brunei, Singapore, Vietnam and Malaysia), only Singapore has bilateral FTAs with the US, Australia and New Zealand. Malaysia has signed agreement with Chile and New Zealand and is negotiating with the US and Australia. Vietnam is currently negotiating a bilateral FTA with Chile.

36 See MOFA Japan website (http://www.mofa.go.jp/mofaj/gaiko/fta/j_korea/genjo.html).

37 See Kawai and Wignaraja (2007, 2010) and Aggarwal and Urata (2006).

38 See Kawai and Wignaraja (2010).

39 Dent (2006, 2007) discusses the agreement in more detail. TPSEPA takes negative list approach

for tariff reduction and services liberalisation. It covers a wide range of commercial regulations such as technical regulations, IP, trade facilitation, competition, government procurement and dispute settlement. It also covers labour and environment standards (See Appendix 1). 40

Dent (2010a) explains the negotiations process of TPSEPA expansion to TPP.

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In addition to nine current members, Canada, Japan, and South Korea are considering participating in the negotiation of TPP. From the Asian countries point of view, the formation of an Asia-Pacific FTA could be economically and politically feasible in principle. In economic terms, the US is the most important market for Asian countries. Politically, many Asian countries are under the US‟s security umbrella which is especially important to cope with the delicate security situations in the region41. However, countries preferring maintenance of agricultural protection measures such as Japan and South Korea could face difficulties in fitting into the TPP42.

From the ASEAN countries perspective, prospects look uncertain due to the US‟s hard-stance towards FTAs based on market-liberal tradition43. The US (specifically the US Congress) is likely to lobby for inclusion of strong commercial regulation measures (especially on intellectual property, investment policy and possibly also competition policy and government procurement) and higher market opening in certain service sectors (e.g. financial services and telecoms). Moreover, the US will insist on inclusion of substantive standards in the areas of labour and environment which may not be acceptable for most ASEAN countries44.

The TPP also holds an ambitious blueprint towards the formation of the Free Trade Area of the Asia Pacific (FTAAP) the idea that was first proposed by APEC Business Advisory Council in 2004, then by the US administration in 2006, and subsequent APEC Summits in 2007, 2008 and 200945. It is theoretically possible to think of expansion of TPP to FTAAP covering all APEC members in the very long-term. However, in reality, there are likely too many stumbling blocks to make this happen within the next several years at least. From ASEAN point of view, it might be impossible for the less developed economies, such as Cambodia, Laos and Myanmar (not being APEC members) to join the comprehensive and high standard FTA.

Will consolidation and harmonisation happen in the future?

Through the discussions on the three options of FTA convergence in Asia and Asia-Pacific in the future, there are some inherent difficulties which are likely to impact on the likelihood of these projects materialising. These include:

Rivalry between the ideas of converging to regional FTA: While China supports ASEAN Plus Three, Japan promotes ASEAN Plus Six. Many ASEAN countries are opposed to comprehensive and high standard TPP/FTAAP.

41 For example, unsolved territory issues between some Asian countries and China and North Korea‟s

missile attacks on South Korea in 2010. 42

Among TPP negotiation participants, the US also keeps protectionist position on agriculture. 43

A difference in the approach towards FTAs between East Asian countries and Asia-Pacific countries is explained as “ideational aspects to FTA heterogeneity” by Dent (2007 and 2010a). One approach is “market–liberal US model” (supported by Australia, New Zealand and Canada) which focuses on substantial market access and other is East Asian “development cooperation model” incorporating economic partnerships aspects to FTAs, the concept of which is originated from “developmentalism” in the East Asia. 44

Currently, the US Congress is not inclined to make much compromise on the issue of labour and environment. 45

See Dent (2007, 2010a).

41

Political and economic diversity of Asia and Asia-Pacific region: Most of ASEAN countries, India and China can be classified as developing countries whereas Australia, New Zealand, Japan, South Korea and the US are highly industrialized countries. Also, national political regimes vary substantially.

Different approaches towards FTA formation: The US, Australia, New Zealand and Canada have been in favour of “market-liberal” approach of high liberalisation commitments and substantive commercial regulatory provisions while most East Asian countries are against high liberalisation and inclusion of strong commercial regulatory commitments46.

Protected sectors: Most of countries have more or less protected sectors difficult to be liberalised. Agriculture is the foremost stumbling-block to creating a consolidated FTA with wide sectoral coverage because of the protectionist positions of certain countries such as Japan, Korea and US.

In addition to the points mentioned above, changes in the international political economic environment might possibly affect the progress47. One is related to the effects of the recent global financial and economic crisis on the approaches to trade liberalisation in different countries. Second is the protectionism rather than free trade approach of Obama Administration on trade policy which directly relates to TPP/FTAAP negotiations. Last is the prospect of the suspended WTO Doha Development Round which has potentially been at major force behind East Asian regionalism. If the WTO multilateral negotiations regain the momentum, it might decelerate the regionalism.

2.5 ASEAN internal economic integration process

2.5.1 Background

Since launching a regional economic integration process with the ASEAN Preferential Trade Arrangement in 1977, regional economic cooperation was given higher priority on the ASEAN agenda. In 1992, the ASEAN Free Trade Area (AFTA) agreement was signed which enabled gradual tariff reductions in the region under CEPT (Common Effective Preferential Tariff). According to ASEAN data, by January 2010, 99.65 percent of all tariff lines of the six original ASEAN members have been brought down to zero. Positive tariffs remain for some agricultural products, and especially rice included in the so-called Sensitive and Highly-Sensitive Lists, as well as products included in the General Exclusion List (e.g. weapons, opium, etc.). For the newer ASEAN Member States – Cambodia, Lao PDR, Myanmar and Viet Nam (CLMV), 98.96 percent of total tariff lines were brought to the 0-5 percent range48. In May 2010, ASEAN Trade in Goods Agreement (ATIGA) entered into force. Its main role is consolidation of several ASEAN‟s existing initiatives, obligations and commitments on intra-ASEAN trade in goods, including both tariff and non-tariff elements, into a single comprehensive document.

46 Japan esteems economic partnership aspects, it also highlights the importance of commercial

regulatory provisions such as IP, investment, and competition reflecting Japanese private sector‟s commercial interests. 47

See Dent 2010a. 48

See the Joint Media Statement of the 42nd ASEAN Economic Ministers‟ Meeting (AFTA Council - Related Section), 24-25 August 2010, http://www.aseansec.org/25051.htm

42

However, economic integration in other areas such as trade in services, investment and NTBs has progressed little despite a range of political initiatives. For example, the ASEAN Framework Agreement on Services (AFAS) signed in 1995 aimed establishment of free trade in services by 2020, but no schedule to achieve the goal was attached to the agreement49. In the area of investment, the 1998 Framework Agreement on the ASEAN Investment Area (AIA agreement) was not a comprehensive framework and allowed ASEAN members to maintain exemptions in primary sectors (e.g. agriculture and mining).50 ASEAN's ten member countries are very diverse in terms of the level of development, ethnicities, religions, and political systems and regimes. These basic factors have always constituted a challenge for the ASEAN economic integration process.

On the other hand, the wave of globalisation, and especially the rise of China and India potentially threatening ASEAN countries‟ global competitiveness in certain sectors became a strong driving force accelerating ASEAN internal integration process. In 2006, an agreement was reached to establish the ASEAN Community by 2015, and 2008 saw entering into force of the ASEAN Charter which provides the bloc with a legal identity, hence strengthening the ASEAN‟s institutional framework.

2.5.2 ASEAN Economic Community (AEC) Blueprint

The ASEAN Economic Community (AEC) is one of three pillars of ASEAN Community51. For the formation of the AEC, the ASEAN Blueprint was adopted in November 2007. It is a short to medium-term master plan towards a single market to be completed by 2015. The AEC Blueprint and its strategic schedule shall be a legally binding document. ASEAN aims at developing an economic community in four areas: (i) Single market and production base, (ii) Competitive economic region, (iii) Equitable economic development and (iv) Integration into global economy. The integration plan in the AEC Blueprint is scheduled along with these four objectives. Among these, this report focuses on the “single market and production base” to examine the market integration process in the region.

The ASEAN single market includes the area of free movement of goods, services, investment, movement of skilled labour and flow of capitals (see the highlights explained in Box 2.1). No new agreement on services was signed as part of the AEC. Based on the AFAS signed in 1995, the AEC Blueprint provides actions, targets and timelines for free flow of services and integration of trade in services in the region. ASEAN selected air travel, e-ASEAN, healthcare and tourism as four priority sectors for services trade integration52. The AEC Blueprint attaches a strategic schedule for its implementation divided into four phases: 2008-2009, 2010-2011, 2012-2013, and 2014-2015.

49 See AFAS (http://www.aseansec.org/6628.htm).

50 In 2009, ASEAN introduced ACIA (ASEAN Comprehensive Investment Agreement) covering

investment in five sectors: manufacturing, agriculture, fishery, forestry, mining and quarrying and services incidental to these sectors (http://www.aseansec.org/Fact%20Sheet/AEC/2009-AEC-024.pdf). 51

ASEAN Community consists of three pillars: (i) political and security cooperation, (ii) economic cooperation, and (iii) socio-cultural cooperation. 52

Logistics services was added to the list at the later stage.

43

BOX 2.1 Highlights of the strategic approach for “Single Market and Production base” in the AEC Blueprint

(i) Free flow of goods53

(1) Tariffs: The Common Effective Preferential Tariffs for ASEAN Free Trade Area (CEPT-AFTA) will be reviewed. Internal tariffs will be eliminated in accordance with the CEPT-AFTA agreement.

(2) NTBs: “Full” removal of NTBs. Enhance transparency and establish a Surveillance Mechanism.

(3) CEPT Rules of Origin: Reform and enhance the CEPT ROO. Simplify the operational certification procedures for the CEPT ROO (e.g. electronic processing of certificates of origin and harmonisation or alignment of national procedures). Review ROO implementation by member countries (e.g. explore possible cumulation mechanisms, where possible).

(4) Trade facilitation measures: ASEAN Trade Facilitation Framework and its Work Programme is adopted. Develop and implement a comprehensive trade facilitation (e.g. simplification, harmonisation, standardisation of trade and customs, processes and procedures). Improve transparency. Enhance institutional building (e.g. a regional trade facilitation cooperation mechanism and ASEAN Trade Facilitation Repository).

(5) Customs Integration: The 2005-2010 Strategic Plan of Customs Development, establishment of AEAN Single Window.

(6) TBTs: Harmonisation of standards, technical regulations and conformity assessment procedures through the conformity with international practices. Develop and implement sectoral MRAs on Conformity Assessment for specific sectors.

(ii) Free flow of services

Remove substantially all restrictions in the four priority services sectors (air transport, e-ASEAN, healthcare and tourism) by 2013. Remove substantially all restrictions in all other services sectors by 2015.

Undertake consecutive services rounds of negotiations in 2008, 2010, 2012, 2014 and 2015.

“Target to schedule” minimum numbers of new sub-sectors for each round based on the GATS classification.

No restriction for Mode 1 and 2 with some exceptions such as public safety.

Mode 3: Gradual liberalisation of foreign equity participation (allowing for foreign (ASEAN) equity participation of not less than 70% by 2010 in the four priority areas and by 2015 for all service sectors) and removal of other market access limitations by 2015.

1 MRAs: Complete MRAs in the architectural services, accountancy services, surveying qualifications, medical practitioners by 2008 and dental practitioners by 2009. Identify and develop MRAs for other

53 ASEAN endorsed some sectors as priority sectors for integration: wood-based products,

automotives, rubber-based product, textiles & apparels, agro-based products, fisheries, and electronics.

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professional services by 2012 and to be completed by 2015.

(iii) Free flow of investment

2 ASEAN Comprehensive Investment Agreement (ACIA) shall be drafted and finalised.

3 Liberalisation: (a) progressive reduction/elimination of investment restrictions and impediments, (b) free and open investment regime with minimal investment restriction, and (c) harmonisation of investment measures.

4 Promotion of investment facilitation and protection.

1. Freer flow of capital

Strengthen ASEAN capital market development and integration specifically in the area of harmonisation in capital market standards (e.g. rules for debt securities, disclosure requirements, and distribution rules), mutual recognition agreement/arrangement for qualification, education and experience of market professionals.

Liberalisation of foreign direct investment, portfolio investments, other types of capital flows (e.g. long-term foreign borrowing and lending).

2. Free flow of skilled labour54

(1) For entry, facilitate the issuance of visas and employment passes for ASEAN professionals and skilled labour.

(2) Promote harmonisation and standardization: enhance cooperation among ASEAN university network, develop core competencies for job/occupational trainers skills required in the priority services sectors.

Source: ASEAN Economic Community Blueprint, http://www.aseansec.org/5187-10.pdf

2.5.3 Implementation of the AEC Blueprint

There is no institution charged with assessment and evaluation of progress of the AEC Blueprint implementation by ASEAN countries. The ASEAN secretariat conducts a so-called “AEC scorecard mechanism” evaluating implementation every two years. The first such evaluation covered the period 2008-2009. Although it can provide useful information as a benchmark for the areas where further liberalisation is needed, most evaluations except for tariff elimination and reductions appear overly optimistic and providing little links to hard economic data. The ASEAN Secretariat has a difficulty in pursuing more extensive and objective evaluations due to lack of political independence and limited human and financial resources.

Overall, the implementation process of the AEC Blueprint has been very slow. There is least progress on AFTA-plus items such as services, investment, NTBs and mutual recognition and harmonisation. The following is a preliminary evaluation of the current status of implementation of the AEC Blueprint in the area of trade in goods and services.

54 Skilled labour means natural persons engaged in trade in goods, services and investments.

45

Trade in goods

Tariff reduction/elimination: As discussed above, apart from some sensitive products (unprocessed agricultural goods such as rice, cane sugar, etc., alcoholic drinks, etc.), liberalisation of tariffs is almost complete for ASEAN6. The process is also very advanced in CLMV.

Rules of Origin: The rules themself are deemed to be not complicated in theory55. However, complex administrative procedure and consequent transaction cost increase companies‟ cost of compliance and limit the benefits of tariff reduction/elimination under CEPT in practice56. There have been recent attempts to revise and simplify the ASEAN RoO, e.g. by the introduction of Change in Tariff Classification (CTC) method as a substitute criterion for an increasing number of products and the introduction of the back-to-back Certificate of Origin arrangement and third party invoicing. Further reforms towards a more trade friendly approach (e.g. allowing duty drawback, self-certification process) are expected to reduce compliance cost57.

NTBs: The paths to tackle NTBs addressed in the Blueprint are far from explicit58. ASEAN adopted the working definition of Non-Tariff Measures (NTMs) developed by UNCTAD and is only starting the process of data collection59. According to the ASEAN Secretariat, custom surcharges, technical measures and product characteristic requirements and monopolistic measures are identified as major type of NTBs60. It would require more internal preparations to take legislative actions (e.g. mutual recognition or harmonisation and introducing pro-competitive regulatory measures) to eliminate NTBs at the ASEAN level.

Trade Facilitation: Trade facilitation has been showing steady progress. Some trade facilitating measures (e.g. ASEAN Customs Declaration Document and ASEAN Cargo Processing Model) have been implemented. Member countries have started to introduce National Single Window to set up the ASEAN Single Window for the purpose of reducing transaction costs.

Trade in services

Except for Singapore, ASEAN member countries are protective in trade in services. Under the ASEAN Framework Agreement on Services (AFAS), five successive rounds of negotiations have taken place since 1995. One negotiation round (2007-2009) took place after the ASEAN Blueprint was adopted. As for the market access, the commitments of

55 See Medalla and Yap (2008) and Medalla and Balboa (2009). For example, if at least 40 percent of

contents originate from any ASEAN member countries, it is considered as ASEAN products under AFTA CEPT RoO. Value-added criterion is used for almost all products. 56

Medalla and Yap (2008) and UNCTAD (2008) show that cost of compliance and administration hinders companies to use AFTA. 57

See Medalla and Balboa (2009). 58

See OECD (2008). 59

The source of ASEAN NTMs data is: (i) submissions made by Member Countries, (ii) the WTO Trade Policy Review, (iii) submissions by the ASEAN Chambers of Commerce & Industry (ASEAN-CCI) and (iv) the UNCTAD's Trade Analysis and Information System (TRAINS) database. 60

See ASEAN website: http://www.aseansec.org/10114.htm

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ASEAN member countries generally go further than their GATS commitments61. Under the ASEAN Blueprint, ASEAN are currently focusing on promoting mutual recognition of authorisation, licensing or certification of professional services. So far, only MRAs in the engineering services, nursing services, architectural services, accountancy services, medical practitioners and dental practitioners were signed. There exists limited information on the degree of liberalisation of trade in services. A review of situation in selected sectors confirms very limited progress in meeting Blueprint targets in air transport, maritime and telecommunication services62. Internal market for services in ASEAN is still far behind the free flow of services which was planned to be achieved by 2015.

Economic community by 2015?

Taking into account the observations above, one can ask whether the AEC Blueprint can be a vehicle for liberalisation towards the economic community. In reality, the AEC appears to be more a political declaration, rather than a treaty and AEC Blueprint could be little more than a paper exercise towards the market integration of ASEAN. Why is that? First, the governments of the ASEAN countries seem to lack a strong political will to effectively implement commitments and achieve the “single market of ASEAN” where free movement of goods, services and investment take place by 2015. Second, there is no regional institution to enforce the commitments, unlike in the case of other regional integration initiatives such as the EU. There is no institution representing supra-nationality, that could be to some extent equivalent to the European Commission, European Parliament and European Court of Justice. Instead, the mechanisms for ASEAN economic integration include the economics ministerial level meetings, sectoral level committees and working committees. In fact, implementation mostly relies on coordination between each ASEAN member government and stakeholders (e.g. seminars for educational purpose and conferences with the private sector). The ASEAN‟s institutional process to implement AEC Blueprint is therefore somewhat weak. Finally, the development divide between ASEAN6 and CLMV (Cambodia, Laos, Myanmar and Vietnam) is potentially a fundamental problem. Under such conditions, it is extremely difficult to change the commercial facts on the ground, especially on non-tariff regulatory barriers.

61 It should be noted that the level of GATS commitments made in 1995 was de-facto unilateral

liberalisation level. See also Fink and Molinuevo (2008). 62

See ERIA (2009).

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3 Comparative Analysis of Regulatory Issues in South East Asia FTAs

To complement the political economy analysis and overview of tariff liberalisation in South East Asian FTAs provided in the previous chapter here we examine in more detail the regulatory features of South East Asian FTAs. The resource constraints necessitate the selection of the sample of agreements for this analysis. Hence, this chapter focuses on 13 FTAs that were selected so that to include all plurilateral agreements in the ASEAN+1 format, a number of agreements signed with different partners by the most active ASEAN FTA player, i.e. Singapore, and several agreements of an important external partner, i.e. Japan with different ASEAN countries. The 13 agreements are:

- ASEAN-India; - ASEAN-Australia and New Zealand; - ASEAN-Japan; - ASEAN-South Korea; - ASEAN-China - Singapore-United States; - Singapore-China; - Singapore- Japan; - Vietnam-Japan; - Indonesia-Japan; - Philippines-Japan; - Thailand-Japan; - Malaysia-Japan

The relevant tables to this analysis are set out in Annex 2. Although some comments can be made about the policy preferences and priorities identified in this examination, the generality of these comments is limited, inter alia, by the limited number of FTAs covered. For instance, Singapore, a party to three FTAs analysed in this chapter has also concluded several other agreements with other partners63. Where possible, other existing analyses of regulatory issues in Asian FTAs are also drawn upon.

The general conclusions emerging from the analysis are as follows:

There is a large heterogeneity of FTAs in terms of their treatment of regulatory issues. All bilateral agreements, ASEAN-China, ASEAN-Korea and ASEAN-Australia & New Zealand contain binding provisions on services, although the extent to which they go beyond GATS commitments varies significantly.

There is some regional harmonization between agreements because all of the FTAs examined incorporate some existing multilateral agreements by reference. These are

63 Apart from FTAs between Singapore and Japan (2002), the US (2003) and China (2008) analysed

here, Singapore also has bilateral agreements with New Zealand (2000), EFTA (2002), Australia (2003), Jordan (2004), India (2005), Korea (2005), Panama (2006), Peru (2008), and The Gulf Cooperation Council (2008 – not yet notified to the WTO).

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the WTO Sanitary and Phytosanitary Agreement and the GATT/WTO Technical Barriers to Trade Agreement and WTO Safeguards provisions.

Of the selected FTAs examined here, Japan‟s agreements generally have the broadest scope because they include provisions covering investment, competition and government procurement more frequently than other FTAs.

In comparison to the analysed bilateral agreements, ASEAN‟s FTAs appear to be more limited in scope by containing less behind the border regulation than Japan‟s and Singapore‟s bilateral FTAs. None of the five ASEAN FTAs contains provisions on competition, government procurement, or labour. Only the agreement with Australia and New Zealand includes binding commitments on investment and intellectual property rights. Only the ASEAN- Korea Framework Agreement on Comprehensive Economic Cooperation include provisions to promote cooperation between the parties to protect intellectual property rights and to protect the environment.

All the bilateral agreements of Singapore and Japan include provisions on services

and investment, and all but one on competition, government procurement and

intellectual property rights. Provisions related to environmental standards appear in

more than half of the analysed bilateral agreements, while labour standard issues

can only be found in Singapore-US and Philippines-Japan FTAs.

3.1 An overview

This overview indicates that of the selected Asian FTAs examined here, Japan‟s agreements generally have the broadest scope because they include provisions covering investment, competition and government procurement more frequently than the ASEAN or Singapore FTAs (Table 3.1). Plurilateral agreements signed with the ASEAN include less behind the border regulation than bilateral FTAs of which the Japan and Singapore are parties.

There is some regional harmonization because all of the FTAs examined incorporate some existing multilateral agreements by reference. These are the WTO Sanitary and Phytosanitary Agreement and the GATT/WTO Technical Barriers to Trade Agreement. These two multilateral agreements incorporate a basic obligation to use international standards as the basis for national technical regulations64. Furthermore, the trade remedies negotiated by the parties are converging to some extent because all thirteen agreements examined also incorporate by explicit reference the safeguard provisions set out in the GATT Article XIX, the WTO Agreement on Safeguards including its Article 42 setting out the investigation processes, and Article V the Agreement on Agriculture. In addition to this, the agreements all incorporate bilateral safeguards, discussed below in section 3.5.

64 If parties do not use international standards because they are deemed ineffective or inappropriate

and if national standards differ among FTA members, then governments are required to consider accepting the technical regulations of another FTA party as equivalent to their own measures. The same is true of differing conformity assessment procedures. These provisions promoting “equivalence” are important to business because they have as their objective the avoidance of multiple and costly testing of products to different standards.

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The rest of the regulatory issues examined indicate much more variety. For example most but not all of the analysed FTAs include binding provisions on services. Two ASEAN agreements with Japan and India do not incorporate binding commitments to liberalise services markets. The agreement with Japan includes best endeavour provisions65, while the ASEAN - India FTA does not contain any provision on services.

The agreements signed with the ASEAN include less behind the border regulation than the Japan‟s and Singapore‟s bilateral agreements. For example, none of the five ASEAN FTAs contain provisions on competition, government procurement, environment or labour and only the ASEAN FTA with Australia and New Zealand contain binding commitments on investment and intellectual property. The ASEAN – Japan FTA is limited to best endeavour provisions for investment and cooperation provisions in intellectual property rights while, the ASEAN FTAs with China and India contain no regulations covering competition, government procurement, environment, labour and intellectual property rights.

Singapore‟s FTAs selected here all include comprehensive provisions covering services and intellectual property. The Singapore-Japan and Singapore-US FTAs also include provisions on competition, government procurement and investment. However, the Singapore agreement with China is similar to the ASEAN-China FTA (see Section 2.3.1) and does not contain any regulation covering competition, government procurement, environment or labour. The broadest in scope by far is the Singapore-US agreement that also includes provisions on the domestic regulation of environmental and labour standards.

The six bilateral Japanese FTAs examined (including Japan-Singapore but excluding Japan ASEAN), contain provisions on services, intellectual property, and competition. As noted above, in the Japan-ASEAN FTA these provisions are limited to best endeavour and cooperation principles. Japan has included government procurement provisions in all of these six bilateral FTAs except Japan-Malaysia. Japan has also included investment provisions in all six bilateral FTAs except with Vietnam. This bilateral investment regulation also includes a provision to maintain environmental standards in all agreements except with Singapore and Vietnam. Additionally, the Japan-Philippines FTA, also contains a provision in the investment chapter on maintaining labour standards.

65 “Best endeavour” clauses in an FTA do not impose an obligation to achieve a particular objective,

but they introduce a requirement on parties to “do their best” towards achieving that objective.

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Table 3.1 Overview of Regulatory Issues in Selected Asian FTAs

FTA Safeguards Services Competition Gov‟t procurement Investment Labour Environment IP

ASEAN - India 4 0 0 0 0 0 0 0

ASEAN - Japan 4 1 0 0 1 0 0 2

ASEAN - ANZ 3 4.5 2 0 3 0 0 4

ASEAN - Korea 4 4 0 0 3 0 2 2

ASEAN - China 4 4 0 0 3 0 0 2

Singapore - China 4 4 0 0 3 0 0 0

Singapore - US 3 4.5 4 4 4 4 4 4

Singapore - Japan 3 4 3 4 4 0 0 3.5

Japan - Indonesia 4 4 2 2 3 0 2.5 4

Japan - Malaysia 4 4 2 0 3 0 2 4

Japan - Philippines 4 4 1 2.5 4 3 2 4 .5

Japan – Thailand 4 4 2 2 3 0 2 4.5

Japan - Vietnam 4 4 2 2 3 0 0 4.5

Notes: The scale ranges from 0 to 5 in all dimensions. The evaluation uses the following benchmark criteria in respective areas: Bilateral safeguards: 0= no safeguards, 3= incorporating global safeguards, 4=longer safeguard duration, 5= exceptionally strong safeguards Services: 0 = no provisions, 1=best endeavour, 2=cooperation, 3=GATS commitments, 4=limited GATS + commitments, 5=substantial GATS+ commitments Competition: 0=no provisions, 1= best endeavour, 2= cooperation 3= requirement for fairness and non-discrimination; 4=requirement for effective domestic competition regime with competition authority; 5=regional competition law and authority Government procurement: 0=no provisions, 1=best endeavour, 2=cooperation, 3= requirement for fairness and non-discrimination, 4=WTO GPA commitments, 5=total liberalization of procurement markets Investment: 0 = no provisions, 1=best endeavour, 2=cooperation, 3= domestic enforcement of TRIMs, NT, MFN and dispute settlement requirements, 4 = TRIMs+ commitments, 5=total liberalization of investment markets Labour: 0 = no provisions, 1=best endeavour, 2=cooperation, 3=labour provision in investment chapter, 4= chapter regulating domestic application of labour standards, 5=regional body to enforce labour standards Environment: 0 = no provisions, 1=best endeavour, 2=cooperation, 3=environmental provision in investment chapter, 4= chapter regulating domestic application of environmental standards, 5=regional body to enforce environmental standards. Intellectual property rights: 0=no provisions, 1=best endeavour, 2=cooperation,3= incorporation of TRIPS commitments, 4=TRIPS+, 5=substantial TRIPS+ requirements

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3.2 Services Provisions66

ASEAN‟s agreement with China, South Korea and with Australia/New Zealand, include binding provisions on services. The coverage of the ASEAN-ANZ expands on the parties‟ GATS commitments, although the provisions carve certain areas out of the coverage – government procurement; air transport services, traffic rights and immigration measures. The services chapter of the ASEAN-China agreement does not go much beyond their GATS commitments, although for selected business and transport services, China has offered full foreign ownership and has eliminated economic needs tests. The chapter exempts core air transportation services. The ASEAN-Korea Services Agreement expands somewhat on its GATS commitments, but as with the ASEAN-ANZ, it includes carve outs in the areas of government procurement, air-transport services, traffic rights and immigration and naturalisation services. Additionally, ASEAN has included some soft commitments in the area of services in its agreements with Japan, while the comprehensive services agreement was still negotiated as of end-2010. This indicates interest in promoting future services trade with ASEAN through incorporating a best endeavour statement regarding the trade in services.

Singapore‟s FTAs with the US and China include a services chapter. The Singapore - US FTA is distinct in that it commits Singapore to open its market to US banks and offers deeper market access in telecommunication services. In both agreements the scope of the services provisions excludes government procurement, and the Singapore-China FTA, also excludes traffic rights. The scope of services chapters in the Singapore-US and Singapore-Japan agreements both exclude core air transportation services, and the Singapore Japan FTAs also excludes cabotage in maritime transport.

In addition to these FTAs‟ provisions protecting transportation services and traffic rights from liberalisation, Singapore‟s agreements with China and Japan also contain major restrictions in the form of nationality requirements. While the Singapore-Japan services chapter does improve on Singapore‟s GATS commitments – it is limited to extending the periods of stay for business visitors and intra-corporate transferees.

Japan‟s FTAs with Thailand, Philippines, Malaysia, Indonesia and Vietnam also exclude air transport services, some traffic rights, cabotage in maritime transport services; government procurement and state subsides, and nationality measures relating to immigration, citizenship, residence or permanent employment from the coverage of the services chapter. Having said this, in the Japan-Malaysia services chapter, Malaysia also offered small increases in the number of certain types of foreign natural persons allowed. Malaysia‟s commitments also only extend slightly on its GATS commitments in the areas of business, communication, construction, and tourism services. While some Malaysian commitments raise foreign equity limitations (from 30 to 35 percent), they still do not allow for majority foreign ownership.

Japan, on the other hand, offers both Malaysia and the Philippines some new commitments relative to the GATS in certain service categories. These include offering greater foreign equity ownership in telecommunications and providing for full liberalization in a number of sub-sectors and modes that were categorized as “unbound due to lack of technical feasibility” under the GATS. Neither the Japan-Malaysia and Japan-Philippines services

66This section draws upon Fink and Molinuevo (2008).

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commitments offer majority foreign ownership or control, with exceptions of certain energy and distribution services for which full foreign ownership is allowed. Philippines‟ commitments go beyond GATS in professional services, computer services, educational services, and value-added telecom services. Most Mode 3 commitments relax foreign ownership and control requirements, but fall short of allowing full foreign ownership. In the Japan-Thailand FTA, Thailand‟s commitments slightly extend upon its GATS commitment in Mode 3 with a new horizontal foreign equity limitation of 49 percent.

3.3 Intellectual Property Provisions

Most of analysed agreements (11 of 13) include provisions covering intellectual property (IP). Only the ASEAN-India and Singapore-China agreements do not have any IP provisions. The ASEAN-China, ASEAN-Korea, and ASEAN-Japan agreements are limited to cooperation activities in the field of IP.

Among plurilateral agreements only the ASEAN - Australia and New Zealand FTA contains binding IP provisions. These are relatively broad because in addition to affirming the TRIPS commitments, it provides for:

ensuring transparency

information exchange,

regulations on copyrights,

trademarks,

geographical indicators,

government use of software,

genetic resources, traditional knowledge and folklore. Singapore‟s agreement with the US stands out among the analysed FTAs as it contains a relatively comprehensive IP chapter. It is largely drawn from US‟s own domestic IP legislation, so the Singapore-US FTA is an example of the US extending its commercial regulatory influence into Asia. Indeed, following the entry into force of this agreement Singapore introduced a range of legislative acts or amendments to existing regulations stemming primarily from the FTA obligations67. Many of the chapter‟s provisions are not covered in other FTAs that ASEAN has signed as a group or individually, such as Internet domain names, protection of encrypted programme-carrying satellite signals, regulated products (pharmaceuticals, agri-chemicals), and recourse for judicial review and compensation from IP rights infringement provisions that are much stronger than in case of other analysed agreements. The FTA affirms the TRIPS agreement but excluding:

harmonization of procedural matters,

government use of software,

genetic resources,

traditional knowledge and folklore,

the protection of undisclosed information and

the control of anticompetitive practices The Singapore-Japan FTA affirms the TRIPS Agreement and provides for cooperation activities and establishing a sub-committee. The main reason for inclusion of only a relatively

67 Dent (2010b) discusses these issues in more detail.

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short IP chapter in this agreement is that it was negotiated long time ago (entry into force in end-2002) when both countries were only starting expansion of their FTAs.

Japan‟s FTAs with Thailand, Indonesia, Malaysia, Philippines and Vietnam are far broader than its agreements with Singapore or ASEAN. As with the other FTAs with binding IP provisions, they all state their compliance with TRIPS agreement, in addition to provisions covering:

Cooperation Activities

Patents

Transparency and information exchange

Copyrights

Trademarks and geographical indicators

Establishing a subcommittee

Industrial designs

Control of anti competitive practices

Judicial review, compensation and enforcement measures In addition, Japan‟s FTAs with Thailand, Vietnam and Philippines also provide for a harmonization of procedural matters. Interestingly, all of Japan‟s FTAs with binding IP provisions foresee the protection of plant varieties except for the agreement with Malaysia. Japan‟s agreements with Thailand and Indonesia also include a provision protecting undisclosed information and the latter agreement also includes a provision covering broadcasting. This therefore suggests that Japan is more frequently incorporating comprehensive IP protection into its FTAs than Singapore or ASEAN. Japan appears to be adaptive in demonstrating greater accommodation of the development capacity constraints facing many of their FTA partners68. Taking IP as an example, Japan puts more emphasis on general principles of regulatory practice and much less on highly defined rules, and hence less specific regulatory alignment to Japan‟s national IP regime. Hence, this examination confirms Dent‟s (2010b) contention.

3.4 Investment Provisions

Investment is clearly an area of major importance in South East Asia. Of the agreements studied, only ASEAN-India have not negotiated investment provisions, although the ASEAN-Japan agreement is limited to cooperation in investment only, with an outlook for a comprehensive deal yet to be negotiated.

Of the 11 agreements that have negotiated investment provisions, the obligations of the ASEAN-China investment agreement is incorporated by reference into the Singapore-China agreement, promoting harmonization.

Nine out of 11 agreements with investment provisions (i.e. all except ASEAN-Korea and ASEAN-Australia and New Zealand define investment broadly to cover a wide range of types of investment. The narrow definition of investment typically includes only:

68See Dent (2010a).

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“investment in its territory of an investor of another Party, in existence as of the date of entry into force of this Agreement or established, acquired or expanded thereafter, and which, where applicable, has been admitted by the host Party, subject to its relevant laws, regulations and policies”

A broad definition typically further includes:

“every kind of asset invested by the investors of a Party in accordance with the relevant laws, regulations and policies of another Party in the territory of the latter including, but not limited to, the following: (i) movable and immovable property and any other property rights such as mortgages, liens or pledges; (ii) shares, stocks and debentures of juridical persons or interests in the property of such juridical persons; (iii) intellectual property rights, including rights with respect to copyrights, patents and utility models, industrial designs, trademarks and service marks, geographical indications, layout designs of integrated circuits, trade names, trade secrets, technical processes, know-how and goodwill; (iv) business concessions conferred by law, or under contract, including concessions to search for, cultivate, extract, or exploit natural resources; and (v) claims to money or to any performance having financial value”

All 11 investment regimes include provisions covering national treatment, MFN, performance requirements, expropriation and compensation, transfers and dispute settlement mechanisms.

All 11 investment regimes also exclude sectors from the coverage of the provisions, in addition to public policy and security exceptions. These exclusions are typically

government procurement;

subsidies or grants provided by a Party;

any taxation measure (excluding transfers and compensation)

government services

existing non-conforming measures

IPs

Measures effecting the movement of natural persons.

However, Japan‟s agreements tend to have more extensive exclusions listed in annexes. For example, the agreement with Vietnam details horizontal and sectoral exemptions excluding, for example, primary industries, transportation, telecommunications from Japan‟s investment obligations and even more extensive areas from Vietnam‟s coverage, for example, fertilizer, beer, cigarettes, automobile manufacturing and some processing industries.

Of the 11 investment regimes examined here, six reference the WTO TRIMs provisions prohibiting performance requirements (Japan-Vietnam, Japan-Thailand; Japan-Malaysia; ASEAN-Korea; ASEAN-China; Singapore-China). The remaining five can be described as TRIMs+, typically setting out more extensive prohibitions on performance requirements69.

69 For example, the US Singapore investment chapter ARTICLE 15.8 : states that:

1. Neither Party may impose or enforce any of the following requirements, or enforce any commitment or undertaking, in connection with the establishment, acquisition, expansion,

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All of Japan‟s investment regimes except the Japan-Singapore agreement include provisions to ensure that environmental standards are not relaxed with the aim of attracting investment. Japan‟s investment agreement with Philippines also includes an analogous provision to protect labour standards. Singapore only includes a provision to ensure environmental standards from investment in its agreement with the US. None of the ASEAN agreements include such environmental or labour provisions.

All 11 investment regimes include strong dispute settlement mechanisms, typically incorporate through explicit reference the option of using international arbitration bodies – International Centre for Settlement of Investment Disputes (ICSID) and United Nations Commission on International Trade Law (UNCITRAL), along with „other‟ international arbitration bodies that the parties have agreed to use in the case of a dispute. The Philippines-Japan agreement is distinct however, because beyond offering national treatment in access to national courts, other arbitration was left to be defined. The Malaysia-Japan agreement is also distinct in setting up a regional body for investment disputes arising under the agreement - the Kuala Lumpur Regional Centre for Arbitration (KLRCA).

management, conduct, operation, or sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory:

(a) to export a given level or percentage of goods or services;

(b) to achieve a given level or percentage of domestic content;

(c) to purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory;

(d) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment;

(e) to restrict sales of goods or services in its territory that such investment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;

(f) to transfer a particular technology, production process, or other proprietary knowledge to a person in its territory; or

(g) to supply exclusively from the territory of the Party the goods that it produces or the services that it supplies to a specific regional market or to the world market.

2. Neither Party may condition the receipt or continued receipt of an advantage, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment in its territory of an investor of a Party or of a non-Party, on compliance with any of the following requirements:

(a) to achieve a given level or percentage of domestic content;

(b) to purchase, use, or accord a preference to goods produced in its territory, or to

purchase goods from persons in its territory;

(c) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment; or

(d) to restrict sales of goods or services in its territory that such investment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.

(d) Paragraphs 1(a), (b), and (c), and 2(a) and (b), do not apply to qualification requirements for goods or services with respect to export promotion and foreign aid programs.

(e) Paragraphs 1(b), (c), (f), and (g), and 2(a) and (b), do not apply to government procurement.

(f) Paragraphs 2(a) and (b) do not apply to requirements imposed by an importing Party relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas.

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3.5 Summary of Safeguard Provisions

All of the FTAs studied include global safeguards, i.e. the ones governed by the General Agreement on Tariffs and Trade (GATT) Article XIX and the WTO Agreement on Safeguards. This is done by explicit incorporation of these agreements and Art V the Agreement on Agriculture. This also includes the investigation processes set out in Article 42 of the Agreement on Safeguards. However, four of the FTAs explicitly exclude quantitative restriction measures from the coverage of the global safeguards. These are ASEAN-China, ASEAN-Korea, Japan-Philippines and Japan-Vietnam.

Some FTAs explicitly set the safeguard threshold at 3%. This means a safeguard measure must not be applied against an originating good of an FTA party if its share of imports of the good concerned in the importing party is less than this stated percentage (3%).

Most of the agreements set out a safeguard transition period within which a party to the agreement has the right to initiate safeguard measures. The transition period begins from the date of entry into force of the FTA in question. The shortest safeguard transition period is of three years for the ASEAN Australia/New Zealand FTA. The ASEAN FTAs with China and India and the Singapore-China agreement foresee five year transition periods. The ASEAN-Korea sets a seven year transition period, while the ASEAN-Japan and Singapore-US FTAs foresee ten years for potential application of safeguards. The other agreements examined set a time for reviewing the bilateral safeguards ranging from a five year review in the Japan-Indonesia FTA to 15 years review in the case of Japan-Thailand FTA.

The duration of the safeguard measures varies between two years with a conditional one year extension (ASEAN-Australia & New Zealand) to five years in the Japan-Indonesia FTA and the four years with a conditional one year extension in the Japan-Malaysia FTA.

All of the agreements allow for compensation or equivalent effects and all of the agreements except for the Singapore-US include provisions to safeguard balance of payments shocks.

3.6 Overview of Rules of Origin

All of the FTAs considered adopt the internationally accepted RoO principle identifying the economy of origin as the economy where the last „substantial transformation” took place. There are three basic criteria used to determine whether a substantial transformation has occurred:

(i) a change in tariff classification (CTC) at the 2-, 4- or 6-digit level

(ii) a minimum content of national or regional value-added to the manufactured product, whichever applies (RVC)

(iii) a process rule or technical requirement (TR).

This examination suggests that RoO regimes in South East Asia are dominated by a simpler, broader value-added rule, which sometimes involves an alternative rule based on the change in tariff classification (CTC) criterion. ASEAN has adopted product specific rules for many products in these agreements, which creates a flexible free-standing value added rule.

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Among the examined FTAs, the Singapore RoOs are the most variable. The intercontinental RoO regime of the US-Singapore agreement has introduced additional complexity to the Asia-Pacific origin rules. Singapore‟s bilaterals have different local content requirements that usually range from 30 to 60 percent. The product-specific rules for the US-Singapore FTA are structured more along the lines of NAFTAs RoO. These are relatively much more detailed and complex than in most Asian FTAs, following a change in tariff classification at the chapter, heading, subheading or item level, assessed on a product by product basis. It is also possible for products to combine a change in tariff classification requirement with an exception, regional value content or technical requirement. The Singapore-Japan RoOs include a change in tariff classification criteria at the 4-digit HS level. However, for 264 categories, there is a choice of a change in tariff classification or 60 per cent or more of cumulative added value, with a statement that this will be reduced to 40 per cent.

However, all of these FTAs except the agreement between Singapore and the US follow the RoO approach of using i) RVC and usually ii) a change in tariff classification, or in the case of Singapore-China combination of the RVC and iii) some product specific rules. Further, the most common RoO identified is either the 40 per cent or more of RVC or a change in tariff classification, most usually at the 4-digit HS level. This is the case for ASEAN-Japan, ASEAN-Korea and ASEAN-Australia/New Zealand agreements, along with Japan‟s FTAs with Indonesia, Malaysia, Thailand, Vietnam and Philippines. The ASEAN-India FTA‟s RoO differs in having an RVC of 35% as well as a change in tariff sub heading. Not all the RoOs held a de minimis rule. These are only included in the ASEAN Agreements with Australia/New Zealand, Japan and Korea, the Singapore-US, Singapore-China and the Japan-Vietnam and these are all subject to detailed rules.

3.7 Competition Policy Provisions

This overview suggests that competition is not yet a priority for the parties in most of the Asian FTAs examined here. Only the Singapore-Japan and Singapore-US competition provisions both include the obligation to have an effective domestic competition law and of these two agreements, only the latter requires the parties to have a domestic competition authority with an independent tribunal70. However, the Singapore-US agreement permits designated monopolies and public enterprises with an obligation to reduce these public enterprises.

None of the plurilateral ASEAN FTA‟s considered here includes competition provisions except for the ASEAN-Australia / New Zealand FTA. And in this latter agreement, the competition provisions are limited to cooperation, expertise, information exchange and establishing a contact point. Nevertheless, ASEAN FTAs are not the only agreements considered here that choose not to include competition provisions; the Singapore-China FTA also omits any such regulation.

The Japan FTAs with Thailand and Indonesia also fall shy of providing for effective domestic competition laws and agencies. These two agreements are limited to unspecified procedural

70 Singapore did not have competition policy legislation before these FTAs were negotiated. Its

Competition Act 2004 was passed by Parliament on 19 October 2004 and was modelled on the UK Competition Act 1998. This can be taken as another example of how the FTA with the US had obliged Singapore to adopt a whole new framework of commercial legislation.

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fairness and non-discrimination requirements. Japan‟s agreements with Indonesia, Malaysia and Philippines are limited to the promotion of non-discrimination, procedural fairness in domestic competition laws, without including time frames or specific legal obligations.

3.8 Government Procurement Provisions

Of the countries that are parties of the analysed agreements only Singapore, Japan, South Korea and the US are parties to the WTO Government Procurement Agreement (GPA). However, the bilateral agreements between Singapore-US and Japan-Singapore are the only ones among the analysed FTAs to explicitly incorporate parties‟ commitments set out in the WTO GPA and its accompanying Schedules.

Beyond this, our analysis suggests that government procurement is even less of a priority topic in most Asian FTAs than competition issues. Specifically, none of the ASEAN FTAs include government procurement provisions and neither do the Singapore-China and Japan-Malaysia agreements.

While far from being comprehensive procurement provisions, the Japan‟s bilateral FTAs do offer some legislative push in the area of government procurement regulation. The Japan-Indonesia, Japan-Philippines and Japan-Thailand agreements for example, require that the parties establish a government procurement subcommittee. Japan‟s agreement with Thailand goes further to additionally establish a government procurement contact point. The Japan-Vietnam agreement establishes a broader subcommittee covering business environment. Nevertheless, its provisions specifically include best endeavour principles on transparency and fair and effective procurement systems.

The Japan-Philippines FTA is interesting because it not only recognizes the principles of non-discrimination and transparency in government procurement, but also demands fair and effective implementation of domestic measures. Furthermore, the agreement states that negotiations on extending these commitments must take place within five years of the agreement entering into force, and must also include the topics of non-discrimination, transparency, bid challenge mechanisms and WTO GPA conformity.

3.9 Overview of Environmental Regulation

Environmental regulation is not a priority issue in analysed FTAs. Of the five ASEAN FTAs only one – between ASEAN and Korea - addresses the environment in a provision in the separate cooperation framework agreement. Singapore‟s FTA with the US includes comprehensive environment provisions, which are mandated in US trade policy. While Japan‟s FTA‟s do not include specific environmental regulation, five of the six agreements (with Thailand, Philippines, Indonesia, Vietnam and Malaysia) include provisions in the investment chapter which prohibit the relaxation of environmental standards in order to attract foreign investment. This is not the case for the Japan-Singapore agreements.

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3.10 Overview of Labour Regulation

Labour regulation is even less of a concern for Asian FTAs than the environment. Again, the Singapore–US FTA is the only agreement to contain substantive provisions regulating labour standards, in line with US trade policy. Again, none of the five ASEAN agreements address labour standards. The only FTA Japan has signed which references labour standards is the agreement with the Philippines and this is included in the investment chapter, as is the case with environment issues.

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4 Assessing the Effects of East Asian Integration on the EU – Sussex Framework Approach

This chapter makes a first step towards assessing the potential effects of trade integration involving South East Asian economies on the EU. Here, we are primarily concerned with the identification of the amount of trade in goods and the sectors that may be negatively impacted. The estimation of the magnitudes of these impacts is left to the partial and general equilibrium analysis of subsequent chapters71. Our identification is based on the simple premise that sees a potential for negative impacts where significant competitors of the EU in the ASEAN markets receive strong relative preference margins vis-à-vis the EU.

The analysis undertaken is based on a very detailed examination of trade and tariff data. It focuses on the static effects of the shallow integration initiatives in the region on the trade in goods. It does not take into account general equilibrium effects, exchange rate adjustments, etc. For the sake of tractability and presentation, certain assumptions are made. Firstly, we assume that preferences are fully utilised across all FTAs. Secondly, we assume that ASEAN tariffs for imports from FTA partners are all eliminated. We also treat ASEAN as a region with a common external tariff that is calculated as the country-product average across ASEAN partners discounting Singapore. Some of these assumptions are relaxed a later stage of analysis and implications of taking specific assumptions are discussed.

The main observations of this chapter are as follows:

There is strong heterogeneity in aggregate tariff barriers to trade to the ASEAN region. Average MFN tariffs of Vietnam, Thailand and Cambodia‟s exceed 10% whilst the remaining countries tend to have tariffs below this threshold with Singapore applying virtually no tariffs. Currently, around 16% of EU exports to ASEAN face a tariff higher than 10%.

The aggregate analysis of market shares and tariffs suggests that the negative potential effects to the EU should predominantly be located in the manufacturing

71 The distinction between the identification of the amount of trade impacted and the actual size of the

impact is an important one. The former refers to the share of EU exports which is likely to suffer from increased competitive pressures as a result of SEA integration. These pressures can be strong or mild depending on a set of factors such as the preferential margins or the market presence of both EU and close preferential competitors. However, when we want to look at the actual size of the impact we have to undertake a modelling exercise which in turn requires taking on board a set of assumptions (mainly in terms of the elasticities of substitution of supply and demand). We approach the calculation of the impact in section 5 by way of a Partial Equilibrium model, It is however important to briefly detail the main difference between these two approaches. The analysis undertaken in this section can qualify the impact using qualitative adjectives where no assumption on the elasticities is needed. The analysis in the PE section actually quantifies the impact under a set of assumptions on these elasticities. To the extent that these assumed elasticities represent those of the real world, then the PE gives a more precise quantification of the impact. However to the extent that elasticities of substitution can vary, and in particular as a result of changes in demand, then the analysis undertaken here can be further reaching even though it cannon give a quantitative response to the impact question. The approaches are complementary in the sense that the sectors identified in this section are then modelled in the following section.

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sectors. The EU‟s main regional competitors in the ASEAN market are China, Japan and South Korea.

EU exports to ASEAN are quite similar to exports of the EU‟s main competitors. This implies that these countries could capture an important amount of the EU‟s market share in these products if they can take advantage of preferences resulting from FTAs with ASEAN and /or individual ASEAN countries. Much of this similarity is in products which have relatively high tariffs and hence where there is room for ASEAN extending sizeable preferences to its FTA partners. In addition, the size of the EU‟s competitors is large in these sectors suggesting possibility of substantial competitive pressures facing the EU exporters.

The analysis of trade and tariff structures suggests that particularly strong competitive pressures may affect 3-16% of current EU exports to ASEAN, while somewhat milder may affect a further 19% of EU exports to the region. The examination carried at a fine level of disaggregation identifies motor and vehicle parts, motor vehicles, electric generating sets, other articles of iron and steel, taps, cocks, valves and similar appliances as those where the impact could be more substantial. For these products the most significant competitive pressure is expected to come from Japan and China. A range of other products exported by the EU is also likely to see substantial competitive pressure from the various ASEAN FTA partners. While individually these products account for a small share of total EU exports to ASEAN, taken together they represent up to16% of exports.

4.1 Introduction

The process of South East Asian integration (SEA integration) is underway, and as in any process of preferential liberalisation, excluded countries have reason to be concerned by a possible loss of relative market access72. Put simply, if a close competitor in the ASEAN market receives a substantial preferential margin, they might be able to capture a sizeable proportion of an excluded country‟s market share. In this chapter, we document the conditions which may lead to this occurring for the EU. Before turning to the analysis at hand we begin with a discussion of some of the underlying assumptions which permeate throughout this section.

Assessing the effects of preferential liberalisation on third countries is not an easy task and it requires some careful considerations. The first, and in line with the assumptions made by both the partial equilibrium and general equilibrium models presented in subsequent chapters of this report, is that we assume full utilisation of preferences in the agreements. Whilst this may be a strong assumption, we currently lack detailed comparable data on preference utilisation by tariff line to feed into the analysis73. It is however worthwhile noting that this first assumption is undermined by the noodle-bowl-like structure of ASEAN preferential liberalisation. As in any conglomeration of FTAs, the degree of use of preferences is likely to depend on the stringency of the rules of origin and the preference margin afforded by the agreement. Given both the important levels of fragmentation of production structures in the region and the presence of stringent RoO regimes (see sections

72 We use the term SEA integration to loosely refer to integration processes involving South East

Asia. This primarily refers to integration between ASEAN economies and its major trade partners in the Asia-Oceania region: China, Korea, Japan, India, Australia and New Zealand. 73

Section 2.2.2 contains a discussion of preference utilisation in the region.

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2.3 and 3.6), the cost of taking advantage of preferential tariffs may be high. In addition, where preference margins are low, then countries may find the costs of proving origin to outweigh the benefits derived from using the preferences granted.

Our second assumption throughout this chapter is that the process of SEA integration will see all tariffs between ASEAN and its six partners in the Asia-Oceania region falling to zero. We do not consider tariff schedule sequencing and special provisions for excluded goods. Again, this is a strong assumption, but it is made both for presentational purposes and to allow us to focus on upper-bound effects in the remainder of the discussion. There are two important consequences to be noted. The first is that in reality competitive pressures are likely to arise progressively rather than abruptly, leaving time for adaptation. The second, that we do not consider that high tariffs may identify highly sensitive products which might be left out from the various agreements. The implications of this are that we are likely to over-estimate de degree of competitive pressures befalling the EU74.

The third simplification considers treatment of the ASEAN region as a single country composed of 9 of its 10 members. Leaving Singapore out of the analysis is a relevant shorthand motivated by the lack of positive tariffs in the country. This means, from a purely static modelling exercise, that there are no tariff preferences to be extended to any partner and hence there should be no third party shallow integration effects on the EU. In addition, leaving Singapore out of the analysis is useful given that it absorbs a considerable amount of transit and transhipped trade. Proceeding with the analysis including Singapore as a member of ASEAN could inflate the perceived effects of closer SEA integration on the EU. The implicit consequence of treating ASEAN as a country is that we assume both no tariffs between ASEAN members (which is not very far from reality – see section 2.5) and also the existence of a common external tariff (CET). This is calculated as the product weighted average of its components MFN tariffs.

Bearing these considerations in mind, our methodology relies on descriptive trade indicators calculated at high levels of data disaggregation (generally at 6-digit HS which identifies over 5,000 products). This type of analysis is to be taken as a strong complement to the partial and general equilibrium analysis carried out in the subsequent chapters of this study. It is based on simple rules of thumb and seeks to identify the EU sectors and products which might be worse hit by the process of SEA integration.

In broad terms, the negative effects of SEA integration on the EU are likely to arise where the EU suffers a considerable preference disadvantage relative to a strong competitor. Two broad effects will arise. The first is the traditional trade diversion effect where trade is diverted away from EU sources to new preferential sources as a result of the preferences granted. Suppliers from new preferential partner markets become more competitive solely because of the preferences, despite them not being the least cost producers. The internal implications of this are that consumers in ASEAN countries will pay a higher price than they would under MFN liberalisation for a given product. This will reduce consumer welfare75. The external implication is then that EU producers, and indeed other strong non-preferential suppliers, might lose market shares (or relative market access) in the ASEAN region.

74 In the final section of this chapter we relax this assumption somewhat by considering the degree of

actual scheduled ASEAN liberalisation with respect to regional partners for a selection of identified sensitive products. 75

Consumers are likely to face lower prices than under no liberalisation, however, there will be a welfare loss in the form of lost government revenue.

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The second external third-country effect that may arise as a result of SEA integration occurs through the terms of trade (ToT) channel. A preferential agreement is likely to divert demand from excluded to included countries which in turn can result in a decline in the prices of the former. This decline in price will mean a move down producers‟ supply curves thus affecting the sale of all goods in the target market. It is important to note that the above outlined effects will depend on the substitutability between goods of different origins or in other words the degree of product differentiation.

This chapter is organised as follows. The next section analyses the MFN tariffs and tariff liberalisation schedules under the ASEAN‟s FTAs with China, Korea, Japan, Australia and New Zealand and India at the fairly aggregated level. The purpose here is to determine the extent of the preference margins awarded to preferential partners in the region at both aggregate and sectoral level. Section 4.3 then adds the trade flow dimension where the magnitude of ASEAN imports from its FTA partners and that from the EU are investigated in addition to the market shares held at an aggregate sectoral level. Section 4.4 provides an assessment of potential competitive pressures on the EU by analysis of market shares and the measures of export similarity of the EU and ASEAN‟s FTA partners. These measures can be calculated for different MFN tariff brackets allowing for drawing conclusions on the likely strength of competitive pressures on the EU from different ASEAN‟s FTA partners. Section 4.5 identifies the potential size of the terms of trade effects than can affect the EU. Finally, sections 4.6 and 4.7 attempt to identify individual products at HS 6-digit level where the most significant effects on the EU exports to ASEAN are likely to materialise. This is first done by the analysis of tariffs and trade shares for the products that are major ASEAN‟s imports (section 4.6) and then for products with very intense competition between different foreign suppliers (section 4.7).

4.2 Tariff barriers to trade

A natural starting point for the analysis of the effects of closer South East Asian integration on the EU is to consider the size and evolution of the MFN tariff in the region. This is because any process of preferential liberalisation is likely to have trade diverting impacts on excluded countries the magnitude of which can be proxied by the size of the relative preference. By virtue of Article XXIV of the GATT, new preferential partners will receive near duty free access in each other‟s market whilst the EU will continue facing the MFN tariff76. This will give the former a competitive edge equal to the height of the prevailing tariff possibly causing trade to be diverted away from EU suppliers77. In Table 4.1 we look at the evolution of average MFN tariffs in each of the ASEAN 10 countries78. Two preliminary observations emerge. The first is that tariffs are relatively low and have not changed much in time. The second is that there is significant heterogeneity in the levels of these tariffs. At one extreme, Vietnam charges an average tariff of 16% whilst at the other, Singapore has a near zero tariff. In the case of the latter, and as discussed in the introduction, we can assume that, where shallow integration effects are concerned, the EU should witness no adverse effects of closer South East Asian integration in its trade with Singapore. However, where

76 The ASEAN agreement with Korea, Australia & New Zealand, and Japan are notified under GATT

Article XXIV. The ASEAN-India and ASEAN China are notified under the enabling clause. 77

Assuming that all preferential tariffs fall to zero. In case where tariffs are gradually removed, the MFN gives an upper bound measure of the competitive edge. 78

Mapping the weighted MFN tariffs reveals a very similar height and evolution.

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the other countries are concerned, the scope for trade diversion against the EU will be positively correlated with the height of the tariff and the size of the trade flows to these countries. A successful Doha round of negotiations and its corresponding tariff reductions would mitigate the negative impact on excluded countries. This issue is further investigated in the modelling sections of this report.

Table 4.1 ASEAN country average MFN tariffs 2001-2007

2001 2002 2003 2004 2005 2006 2007

Brunei 2.63 2.63 2.63 2.61 2.61 2.61 2.61

Myanmar 5.51 5.51 5.51 5.51 5.6 5.6 5.6

Indonesia 6.89 6.9 6.9 6.95 6.95 6.95 6.9

Lao 9.63 9.64 9.71 9.71 9.71

Malaysia 8.34 8.33 8.35 7.31 7.18 7.18

Philippines 7.3 5.72 4.74 6.27 6.27 6.26 6.26

Singapore 0 0 0 0 0 0 0

Vietnam 16.47 16.41 16.81 16.82 16.81 16.81 16.81

Thailand 16.08 15.38 11.92 11.92 9.74

Note: No data is available for Cambodia. Source: Trains.

Table 4.2 then looks at the current MFN tariff at a more disaggregated level so that we can pick up any evidence of targeted protection. The first column shows the country weighted average MFN tariffs for the entire ASEAN region (discounting Singapore). Tariffs remain high in the „Beverages and Tobacco‟ sectors (34%). Where manufacturing sectors are concerned SITC sectors 7 (Manufactured goods) and 9 (Miscellaneous Manufactures) have the highest tariffs (11% to 13% respectively). With the exception of the „Food and Live Animal‟ sectors (11%), tariffs are generally low and below 10%. Where country differences are concerned Thailand, Vietnam and Cambodia have the highest tariffs with food, beverages & tobacco and manufacturing sectors remaining highly protected. On the other side of the spectrum Brunei and the Philippines show relatively low tariffs all round. The broader implications of this are that the larger negative impacts on the EU would arise in the EU‟s trade with the higher tariff countries (Cambodia, Thailand and Vietnam) provided these meet important trade flows. These will, however, depend on both the EU‟s share of trade in those markets and the market presence of direct competitors.

The working assumption seeing all tariff lines being liberalised between partners in the SEA integration process is used for both tractability and convenience, but it is important to understand the extent to which this is a justifiable assumption. In Table 4.3, we look at the composition of ASEAN tariffs with respect to its preferential partners taking into account the actual liberalisation schedules. Using each agreement‟s actual liberalisation schedules and lists of exceptions, we calculate the average tariff that preferential partners will face in the ASEAN market after full implementation of each agreement. We report the post-Doha preferential margins that partners will enjoy in the ASEAN market by GTAP sector. The first entry tells us that the current MFN tariff faced in the region for paddy rice is 38.5. Under a

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Doha scenario liberalisation following tiered formula reductions this would fall to 26.479. The subsequent entries show the tariffs faced by ASEAN partners following the full implementation of the respective FTAs. Hence for Paddy Rice, Australia and New Zealand would face a tariff of 5.6% in the ASEAN market affording them a preferential margin of 20.8 percentage points (26.4% - 5.6%)with respect to non preferential partners under a post-Doha scenario. Japan and Korea would only benefit from a 8.3 percentage point margin with respect to non-preferential partners facing an 18.1% tariff. For presentational purposes, we identify preferential margins above 5 percentage points with a light grey shade in the table.

Table 4.2 individual ASEAN country average MFN Tariff at SITC 1 digit level (2007)

Description ASEAN

Brunei

Cambodia

Indonesia

Lao PDR

Malaysia

Myanmar

Philippines

Thailand*

Vietnam

1.Food & live animals 11.3 0.0 18.7 5.2 20.6 2.9 9.8 11.4 25.2 28.7

2.Beverages and tobacco 34.0 0.0 31.9 78.5 31.8 15.9 27.9 8.8 56.2 77.6

3.Crude mater.ex food/fuel 3.2 1.3 10.4 3.7 8.7 1.2 3.0 2.8 5.7 4.2

4.Mineral fuel/lubricants 2.7 0.0 7.3 3.9 6.2 0.3 0.8 2.9 3.0 4.2

5.Animal/veg oil/fat/wax 6.5 0.0 7.6 4.4 11.3 2.4 1.6 5.2 18.4 15.7

6.Chemicals/products n.e.s 4.0 0.2 10.1 5.0 6.5 2.8 1.9 3.6 4.7 4.3

7.Manufactured goods 11.1 1.0 11.0 7.9 8.4 13.0 5.9 7.0 8.7 19.8

8.Machinery/transp equipmt 5.9 9.5 17.3 4.5 7.5 5.2 3.0 3.6 8.0 9.9

9.Miscellaneous manuf arts 13.0 3.0 19.7 10.2 10.5 9.4 9.9 8.9 22.7 28.5

10.Commodities nes 1.3 0.0 2.3 3.3 5.0 0.8 13.5 4.2 3.3 7.7

Notes: * Values for Thailand 2006. Singapore is left out as all tariffs are zero. Source: Trains.

79 The Tiered formula foresees reduction to agricultural tariffs of ANNEX I of the Agreement on

Agriculture: tariffs 0-30% = 33% reduction; 30-80% = 38% reduction; 80-130%= 42.6%; >130% = 46.6% reductions.

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Table 4.3 ASEAN tariffs by GTAP sector in a Post-Doha scenario after full implementation of FTAs (baseline 2007)

MFN tariff Tariff level after full implementation of an FTA with ASEAN

GTAP GTAP Sector Description Pre Doha

Post Doha CHN KOR ANZ JAP IND

1 PDR - Paddy rice 38.5 26.4 15.1 18.1 5.6 18.1 0.6

2 WHT – Wheat 1.1 1.1 0.0 0.0 0.0 0.0 0.4

3 GRO - Cereal grains n.e.c. 5.8 4.5 0.2 0.3 0.5 0.7 0.8

4 V_F - Vegetables, fruit, nuts 12.1 11.7 0.2 0.1 0.6 0.5 0.3

5 OSD - Oil seeds 7.4 6.2 0.1 0.1 0.6 0.5 1.2

6 C_B - Sugar cane, sugar beet 5.0 5.0 0.0 0.0 0.0 0.0 0.0

7 PFB - Plant-based fibers 2.9 2.9 0.0 0.0 0.0 0.0 0.0

8 OCR - Crops n.e.c. 5.2 4.7 0.1 0.0 0.4 0.2 0.3

9 CTL - Bovine cattle, sheep and goats, horses 1.5 1.1 0.0 0.0 0.3 0.4 0.0

10 OAP - Animal products n.e.c. 5.8 5.0 0.0 0.4 0.0 0.0 0.1

12 WOL - Wool, silk-worm cocoons 1.9 1.4 0.0 0.0 0.0 0.0 0.0

13 FRS – Forestry 4.5 4.1 0.0 0.0 0.0 0.0 0.0

14 FSH – Fishing 7.7 6.7 0.0 0.0 0.1 0.1 0.0

15 COA – Coal 2.1 2.1 0.0 0.0 0.0 0.0 0.0

16 OIL – Oil 2.8 2.8 0.0 0.0 0.0 0.0 0.0

17 GAS – Gas 2.5 2.5 0.0 0.0 0.3 0.0 0.0

18 OMN - Minerals n.e.c. 2.0 2.0 0.0 0.0 0.0 0.0 0.0

19 CMT - Bovine meat prods 5.5 4.8 0.0 0.0 0.2 1.2 0.0

20 OMT - Meat products n.e.c. 12.5 10.3 1.3 1.1 1.8 0.1 2.9

21 VOL - Vegetable oils and fats 6.2 5.3 0.1 0.0 0.1 0.1 0.7

22 MIL - Dairy products 6.2 5.9 0.0 0.0 0.6 0.7 0.4

23 PCR - Processed rice 104.4 64.2 52.1 64.0 60.4 62.5 20.0

24 SGR – Sugar 42.8 27.5 18.9 22.5 22.5 22.7 1.9

25 OFD - Food products n.e.c. 11.1 10.2 0.1 0.1 0.3 0.2 0.5

26 B_T - Beverages and tobacco products 31.1 25.2 0.3 10.3 11.8 7.7 1.1

27 TEX – Textiles 13.7 12.9 0.0 0.0 0.0 0.0 0.3

28 WAP - Wearing apparel 22.1 14.6 0.0 0.0 0.5 0.0 0.4

29 LEA - Leather products 13.1 9.4 0.0 0.0 0.2 0.0 0.0

30 LUM - Wood products 11.0 8.4 0.0 0.0 0.0 0.0 0.0

31 PPP - Paper products, publishing 8.7 7.8 0.0 0.2 0.1 0.0 0.1

32 P_C - Petroleum, coal products 2.6 2.6 0.1 0.1 0.6 0.3 0.0

33 CRP - Chemical, rubber, plastic products 4.8 4.3 0.0 0.0 0.1 0.1 0.3

34 NMM - Mineral products n.e.c. 11.7 9.6 0.6 0.0 0.1 0.2 1.0

35 I_S - Ferrous metals 7.8 6.7 0.8 1.7 0.7 1.1 1.5

36 NFM - Metals n.e.c. 2.9 2.4 0.0 0.0 0.0 0.0 0.4

37 FMP - Metal products 11.2 9.9 0.0 0.6 0.2 0.5 0.3

38 MVH - Motor vehicles and parts 20.5 18.6 3.7 3.3 2.7 3.7 2.5

39 OTN - Transport equipment n.e.c. 6.4 6.3 1.0 1.1 0.2 0.0 0.3

40 ELE - Electronic equipment 4.9 4.0 0.0 0.3 0.0 0.0 0.0

41 OME - Machinery and equipment n.e.c. 4.8 4.2 0.1 0.1 0.1 0.1 0.0

42 OMF - Manufactures n.e.c. 10.6 9.6 0.1 0.0 0.1 0.3 0.0

43 ELY – Electricity 0.6 0.6 0.0 0.0 0.0 0.0 0.0

44 GDT - Gas manufacture, distribution 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Notes: Gray shading denotes sectors which will benefit from a preferential margin not less than 5 percentage points. Source: Own calculations from Trains and liberalisation schedules.

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The first observation from Table 4.3 is that there is substantial liberalisation with respect to preferential partners which suggests that our working assumption does not derail too far off the reality of the liberalisation schedules in the agreements. However, there are some exceptions. These occur predominantly for: rice products; sugar and tobacco; and beverages where there are substantial preferential margins but partners continue to face large positive tariffs. A notable sector is that of Motor Vehicles where the post-Doha MFN stands at 18% with preferential margins for partner countries to the tune of around 15 percentage points. Textile and apparel sectors are likewise significantly liberalised as is the manufactures n.e.c. sector. Overall, the table suggests that, except for some evidence of targeted protection in primary products, the liberalisation commitments cover most products and provide preferential partners a significant preference margin with respect to the EU.

4.3 The Evolution of Trade in the Region

A priori, the maximum magnitude of trade that can be diverted away from the EU as a result of closer SEA integration will be determined by the existing levels of trade with the region. Although this maximum is highly unlikely, the current levels of trade can serve as a yardstick to the rest of the analysis in this chapter. Table 4.4 maps the evolution of EU exports to the region from 2003 to 200980. It shows that the value of exports to ten ASEAN countries has grown substantially during this period (50% increase), even though the share of these markets has remained relatively constant. The table also underlines the importance of China as a destination market where the value of export flows has more than doubled in 6 years (despite the financial crisis). This contrasts with the largely unchanged export shares to the other partners in the region. Whilst the ASEAN market represents 4.6% of total EU exports, the ASEAN+3 region absorbs a non-negligible 17.5% of total EU exports. Hence the EU may have reason to be concerned about the impact of an ASEAN+3 regional agreement, particularly if these countries closely compete with EU exports in these markets. When we remove Singapore from the above, the ASEAN market represents 2.7% of total exports.

Figure 4.1 then looks at the evolution of aggregate ASEAN imports from main partners. The purpose of this exercise is to identify the EU‟s competitors in the region. The figure shows a growing dependence on both intra-regional and Chinese imports but a falling reliance on imports from the US and Japan. Where the EU‟s market presence is concerned there is a slight decrease equating to 2.5 percentage points, although this is due to faster growth in imports from other sources rather than declining import values. What one is to take from this figure is that new or existing preferential partners to the ASEAN region occupy around 50% of imports (28% discounting intra-ASEAN trade), nearly three times more than the EU‟s share of the market.

80 We have chosen the year 2009 on purpose despite the financial crisis as it allows us to identify

whether trade with the region went down by more than the average. From Table 1 we see that exports to the RoW fell from 2007-2009 by 22% but exports to ASEAN countries only went down by 9.2%

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Table 4.4 EU exports 2003-2009 (USD billion & % shares in total extra-EU exports)

Partner/year 2003 2005 2007 2009

China 43.893 60.221 94.181 103.104

4.5% 4.7% 5.6% 7.6%

Japan 43.992 51.882 56.777 45.200

4.5% 4.0% 3.3% 3.3%

Korea 17.581 23.974 32.106 27.185

1.8% 1.9% 1.9% 2.0%

ASEAN 41.796 53.155 69.638 63.223

4.3% 4.1% 4.1% 4.6%

RoW 820.090 1,095.826 1,443.961 1,126.473

84.8% 85.3% 85.1% 82.5%

Source: Own calculations based on Comtrade data.

Figure 4.1 ASEAN import shares from main partners 2002-2008

Source: Own calculations using Comtrade

In Table 4.5 we analyse the composition of ASEAN imports from the above partners by SITC 1 digit categories. This affords us a preliminary understanding of the trade patterns in the region. In addition by comparing the EU‟s trade structures with those of ASEAN‟s main partners we should be able to determine the sectors where the EU might be most affected by SEA integration. This will occur where large trade flows meet high tariffs81. From the table below we see that nearly 60% of EU exports to the region are in the „Machinery and transport equipment‟ sectors which currently face an average tariff near 6%. Looking at the

81 We calculate an ASEAN MFN tariff using the country weighted average imports across each

product.

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importance of this sector in competitors‟ export patterns to the region we see how China, Japan and Korea are also heavily skewed in their exports of these products to the region. Although the aggregate preference margin that could be afforded to these countries as a result of implementation of FTAs is relatively low (6 percentage points), where competition is fierce, these countries may be able to exploit this advantage and gain important market shares to the detriment of the EU. Where the „Manufactured Goods‟ sector is concerned, the average preference margin would be of 11 percentage points and the table reveals that this is a relatively strong sector for competitor‟s trade to the region which then suggests that there may be substantial competitive pressures facing EU exports. On the other hand, and despite the EU having a higher market share in the „Chemical products‟ sectors, the low tariff suggests small competitive pressures.

Table 4.5 ASEAN imports by SITC 1 digit sector 2007 (% shares in total ASEAN imports from a given country)

Description

ASEAN MFN tariff ASEAN AUS CHN EU25 IND JPN KOR NZL USA RoW

0.Food & live animals 11.31 12.3 17.9 3.9 4.1 19.4 0.5 0.9 71.2 6.8 6.5

1.Beverages and tobacco 34 1.6 0.4 0.3 0.8 0.8 0.0 0.1 0.1 0.3 0.3

2.Crude mater.ex food/fuel 3.2 2.1 10.1 0.9 2.6 6.1 1.3 1.4 14.0 9.0 5.6

3.Mineral fuel/lubricants 2.67 19.4 19.4 3.6 0.4 8.2 0.6 10.4 2.9 1.0 27.6

4.Animal/veg oil/fat/wax 6.45 1.1 0.2 0.0 0.1 0.5 0.0 0.0 0.3 0.0 0.6

5.Chemicals/products n.e.s 3.96 14.5 5.9 9.6 13.5 19.6 9.4 11.8 2.7 8.9 9.3

6.Manufactured goods 11.05 17.0 31.0 26.5 12.6 29.5 24.1 27.1 5.2 6.4 15.0

7.Machinery/transp equipmt 5.91 28.4 6.2 48.1 58.8 14.2 56.9 44.5 2.9 60.6 29.4

8.Miscellaneous manuf arts 13.01 3.5 1.3 7.0 6.6 1.8 6.2 3.5 0.7 6.8 3.4

9.Commodities nes 1.25 0.0 7.6 0.0 0.4 0.0 1.0 0.3 0.0 0.2 2.3

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note: The correspondence tables between SITC and HS nomenclatures at the product level are provided by the UN Statistics Division at http://unstats.un.org/unsd/cr/registry/regdnld.asp?Lg=1. The HS nomenclature is more disaggregated than HS at 1 digit level, being divided into 21 sections (see e.g. http://www.wcoomd.org/home_hsoverviewboxes_tools_and_instruments_hsnomenclaturetable2007.htm. Source: Own calculations from Comtrade and Trains.

The above can be further complemented by looking at the market shares across each sector rather than the shares across countries. In Table 4.6 we examine the distribution of market shares across SITC 1 digit sectors in 2007. Here we see that the EU has a strong market presence (23%) in the „Beverages and Tobacco‟ sectors which enjoys substantial protection (MFN of 34%). Looking across the columns we identify that China also has a strong market presence (14.7%). This combination suggests that the competitive pressures in this sector could be strong, however they will, at most affect only 0.8% of EU exports to the region (as seen in Table 4.5). In addition these competitive pressures will further depend on product differentiation with respect to main competitors. For instance, with respect to alcoholic beverages, one can expect little trade diversion as alcoholic beverages sold by China are likely to be significantly different to those sold by the EU. Turning then to the „Chemical products‟ sectors we see that the EU also has a relatively strong market presence (13.2% of

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the market). Here the main competitors will be Japan, China and Korea with 16.3%, 15.5% and 8% of the market respectively. However the low potential average preference as depicted by the MFN suggests that competitive pressures resulting from tariff preferences to non-EU partners will be relatively weak.

This contrasts with the „manufactured goods‟ sectors where the cumulative market share of these three countries is of 55% and the average preference they are likely to receive is of 11%. This suggests that the EU‟s 6.6% market share could fall considerably both due to trade diversion and terms of trade effects. To a lesser degree, the EU is also likely to suffer important competitive pressures in the „machinery and transport equipment‟ sector. Recalling that this sector occupies near 60% of EU exports to the region, the EU‟s market share (13.5%) remains modest when compared to that of China (18.5%) and Japan (23.1%). And despite a relatively low average MFN tariff applied to the sector, its dynamism may produce strong forces in favour of these producers to the detriment of the EU. Similarly, the „Miscellaneous manufactured articles‟ sectors are also likely to suffer from competitive pressures again due to the strong market presence of ASEAN preferential partners and the relatively high average MFN tariff that the EU will have to pay in this market. Overall, Tables 4.4 and 4.5 suggest that the negative effects of SEA integration on the EU will most likely be concentrated in the three manufacturing sectors which occupy more than 80% of EU‟s exports to the region.

Table 4.6 Market Shares in ASEAN sectoral imports 2007 (% shares in total ASEAN imports of a given sector)

Description

ASEAN MFN tariff ASEAN AUS CHN EU25 IND JPN KOR NZL USA RoW

0.Food & live animals 11.31 8.1 9.0 11.7 7.4 7.0 1.6 1.1 6.6 11.9 35.8 100

1.Beverages and tobacco 34 15.9 2.9 14.7 23.0 4.6 0.7 1.0 0.2 7.5 29.6 100

2.Crude mater.ex food/fuel 3.2 2.0 7.3 4.0 6.6 3.1 5.7 2.4 1.9 22.4 44.6 100

3.Mineral fuel/lubricants 2.67 6.2 4.7 5.3 0.3 1.4 0.9 6.2 0.1 0.9 74.0 100

4.Animal/veg oil/fat/wax 6.45 15.9 2.4 3.0 4.7 3.7 1.9 1.1 0.6 1.8 65.1 100

5.Chemicals/products n.e.s 3.96 5.2 1.6 15.6 13.2 3.8 16.3 7.9 0.1 8.5 27.9 100

6.Manufactured goods 11.05 3.2 4.5 23.1 6.6 3.1 22.2 9.7 0.1 3.2 24.2 100

7.Machinery/transp equipmt 5.91 2.4 0.4 18.4 13.5 0.7 23.1 7.0 0.0 13.6 20.9 100

8.Miscellaneous manuf arts 13.01 2.5 0.7 23.1 13.1 0.7 21.5 4.8 0.1 13.1 20.5 100

9.Commodities nes 1.25 0.1 17.7 0.0 3.4 0.0 15.4 2.0 0.0 1.6 59.9 100

Source: Own calculations from Comtrade and Trains.

4.4 Export similarity, competitive pressures

In this section, we continue looking at the competitive pressures that may arise from closer SEA integration but we turn to a more disaggregate analysis by considering data at the 6-digit level. In Table 4.7 we show the distribution of ASEAN imports from selected partners

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according to the height of ASEAN‟s MFN tariff82. Assuming that the preference margin that preferential partners will receive can be captured by the height of the MFN, this table allows us to make a first approach to investigating the preliminary competitive pressures that may arise from SEA integration. As way of example, the first entry of the table tells us that if Australia were to face the MFN tariff in 2007, 74% of its trade would enter under a tariff between zero and 5%.

Table 4.7 Partner Country Export Shares to ASEAN by Height of MFN tariffs, 2007

T=0 0<T<5 5<T<10 10<T<15 15<T<20 T>20

Australia 0.04% 74.06% 15.37% 5.11% 2.36% 3.05%

China 0.12% 53.58% 19.80% 11.46% 8.66% 6.38%

EU25 0.16% 64.90% 19.04% 5.68% 4.91% 5.30%

India 0.03% 57.45% 27.98% 7.16% 2.87% 4.51%

Japan 0.19% 51.86% 19.71% 11.67% 6.07% 10.51%

Korea 0.04% 49.99% 26.41% 9.93% 6.91% 6.72%

New Zealand 0.10% 28.10% 66.51% 3.36% 1.46% 0.46%

USA 0.08% 76.98% 14.09% 4.43% 2.86% 1.58%

WLD 0.20% 61.15% 18.58% 8.13% 5.43% 6.52%

Source: Own calculations, COMTRADE and TRAINS 6 digits

Two important observations can be made. The first is that most of ASEAN‟s imports face a positive tariff between zero and 10% under the MFN regime. The second is that it is likely that new ASEAN preferential partners receive favourable preferential margins in products which compose 98% of the EU‟s exports to the region83. However, looking at the line for the EU, we note that in 65% of EU exports to the region the preference that competitors are likely to receive is low (between zero and five percentage points). Then taking a closer look at the Chinese entry we see that China could receive a preference margin of over 10 percentage points with respect to the EU for over 25% of its exports (this is the sum of the three last columns for the Chinese entry)84. Turning then to the corresponding figures for India, Japan and Korea we see that these stand at 15%, 28% and 24% respectively (i.e. these are the shares of these countries exports to ASEAN with MFN tariff of 10% or higher). The amount of EU trade competing in these categories is around 16% of total EU exports to the region. This is the amount of trade that would be subject to the strongest competitive pressures provided that preferential partners receive duty free access to the ASEAN market in these products.

Table 4.8 then adds a further dimension to Table 4.7 by looking at the distribution of EU exports to the region cross-classified by the EU‟s market share (by product) and the

82 These calculations are aggregated representations of 6-digit level calculations

83 This value is the sum of the rows for the EU entry where tariffs are above zero (i.e. 100%-0.16%)

and is a very crude measure of competitive pressures as it does not take into account the similarity of composition of EU exports to ASEAN and those of other preferential partners. 84

This is under the assumption that China receives duty free access in the ASEAN market for all these products and hence is an upper bound estimate. In reality, in 2007 some tariff cuts were already implemented in line with ASEAN-China FTA schedules (see section 2.2).

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prevailing MFN tariff in ASEAN. The table essentially decomposes ASEAN imports from the EU at the 6-digit level by the MFN tariff that the EU would face and the market share that the EU holds calculated on a 6-digit product basis. Hence reading down the columns and turning to the >70% entry we can say that 2% of total ASEAN imports from the EU are in products where the EU holds a market share of over 70% of total ASEAN imports of a given 6-digit product. The table reads as above across the rows where we capture the share of ASEAN imports from the EU facing the different MFN tariffs. Taking the sum of the first row of the table we see that the EU has a market share in the region ranging between 0 and 10% for 21.2% of its exports. Looking down the last column in the table we note that the EU has substantial market shares in the ASEAN market. Around 55% of its total exports enjoy a market share that is higher than 20%. Then taking the columns we can read the amount of trade facing the different tariff ranges85.

What is of particular interest in this table is identifying the share of trade that faces both high tariffs (greater than 10%) and where the market share is high (greater than 30%). In these products, which are shaded in dark grey in the bottom right-hand panel of Table 4.8, the EU might suffer market share loss if markets are competitive and competing countries take advantage of the high preferences afforded to them. This occurs for 3.3% of the EU‟s total exports to the region (i.e. the sum of all the shares in the dark grey square on the bottom right of the table). Where the market share is greater than 20% and the tariff is greater than 5% this applies to over 15% of the EU‟s export to the region.

Table 4.8 EU exports to ASEAN cross-classified by market share and MFN tariff 2007

EU

MFN Tariff Sum across market shares 0% 0-5% 5-10% 10-15% 15-20% >20%

EU

Ma

rke

t S

ha

re in

AS

EA

N 0-10% 0.0% 12.8% 3.4% 2.3% 1.7% 1.0% 21.2%

10-20% 0.0% 12.2% 6.2% 1.7% 0.8% 2.5% 23.4%

20-30% 0.0% 23.7% 4.3% 1.0% 1.2% 0.4% 30.7%

30-40% 0.0% 5.0% 1.0% 0.4% 0.1% 0.5% 7.0%

40-50% 0.0% 2.6% 3.1% 0.1% 0.3% 0.0% 6.1%

50-70% 0.0% 7.7% 0.8% 0.2% 0.7% 0.2% 9.6%

>70% 0.1% 0.9% 0.2% 0.0% 0.2% 0.6% 2.0%

Sum across tariffs 0.2% 64.9% 19.0% 5.7% 4.9% 5.3% 100.0%

Source: Own calculations, COMTRADE 6-digits.

However, it is important to bear in mind that this will only transpire if competitor‟s products are close substitutes to EU originating products. The more differentiated are the products the less likely is the impact likely to be. Identifying the actual degree of competition between two partners in a given market for products can be complicated, but it can be approximated on average using the FK indicator of export similarity86. This is because the more similar two

85 Note that the sum across tariffs in Table 4.8 is the same as the entry for the EU in Table 4.7.

86 The F-K index of import similarity between country m and n can be defined, in general, as FKmn =

∑min(sim, sin), where sim and sin are the share of imports from country m in product i and the share of imports from country n in product i, respectively. This index essentially captures the minimum share of

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country‟s export structures are (and by extension production structures), the more competition these countries could face from each other.

Table 4.9 FK index of export similarity to the world and ASEAN 2009

Exports to the World

CHN IND JPN KOR EU ASEAN

CHN 1.00

IND 0.26 1.00

JPN 0.34 0.22 1.00

KOR 0.37 0.27 0.49 1.00

EU 0.39 0.31 0.45 0.36 1.00

ASEAN 0.37 0.30 0.37 0.41 0.39 1.00

Exports to ASEAN

CHN IND JPN KOR EU ASEAN

CHN 1

IND 0.25 1

JPN 0.40 0.22 1

KOR 0.42 0.32 0.48 1

EU 0.37 0.22 0.45 0.34 1

ASEAN 0.43 0.33 0.46 0.48 0.42 1

Source: Own calculations using country export data from Comtrade. HS-02, 6-digits.

Table 4.9 maps the FK indicator of export similarity, calculated at the 6-digit level, in two destinations. In the first panel we look at the similarity in export structures to the world whilst in the second panel we investigate the similarity of export structures to the ASEAN region. If we turn to the entry for the EU and China in the first panel we see that the overlap in exporting structures stands at 0.39. This suggests that the EU and China export relatively similar products to the world which in turn might imply that they are close competitors. In fact looking at the similarity of exporting structures to the world we see that for the EU it ranges from 0.31 with India, to 0.45 with Japan. This could mean that the EU may have reason to be concerned about these countries receiving preferences in the ASEAN markets. Turning now to the second panel of Table 4.9 where we have the ASEAN market as the common destination, we see generally similar values for export similarity as in the case of exports to the world. India‟s exports to ASEAN are slightly less similar to the EU‟s than in the case of exports to the world. In contrast, another issue that emerges from this Table is the similarity of export structures of ASEAN and the EU where the overlap is 0.39 globally and 0.42 to ASEAN markets.

trade by tariff line and then gives us an aggregate measure of the similarity of composition of imports from two different partners into one economy. As a point of reference, the FK index of export similarity between EU and US exports to the world stands at 0.61, which is considered high. At the other end of the spectrum, the FK index of export similarity between what the EU and the Central African region export to the world is 0.08 which is considered as being quite low. The indicator is good at capturing the structural overlap between countries but it does not take into account the size of the different countries. In this respect, two very different sized countries can share a high degree of similarity even when one is 5 times bigger than the other.

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Whilst identifying the similarity of composition of export structures is key to gauging the possible competitive pressures that may arise, these pressures will only come to pass in sectors where new preferential partners will receive a substantial preference margin with respect to the EU. To investigate this issue in more depth we then calculate the degree of similarity of export structures of the EU to ASEAN and cross-classify this measure by the height of the ASEAN MFN tariff.

Table 4.10 EU export similarity in the ASEAN market by tariff height 200787

All 0<T<5 5<T<10 10<T<15 T>20 T>5

AUS 0.179 0.078 0.065 0.025 0.011 0.101

43.7% 36.5% 13.9% 5.9% 56.3%

CHN 0.388 0.218 0.087 0.064 0.019 0.170

56.2% 22.5% 16.4% 4.9% 43.8%

IND 0.205 0.101 0.068 0.027 0.009 0.104

49.2% 33.1% 13.3% 4.5% 50.8%

JPN 0.456 0.275 0.093 0.055 0.033 0.181

60.3% 20.3% 12.1% 7.3% 39.7%

KOR 0.360 0.220 0.069 0.051 0.020 0.140

61.2% 19.1% 14.1% 5.6% 38.8%

NZL 0.088 0.038 0.033 0.014 0.003 0.050

43.3% 37.7% 16.2% 2.8% 56.7%

USA 0.561 0.408 0.089 0.052 0.012 0.153

72.8% 15.8% 9.2% 2.2% 27.2%

Note: The percentage terms show the distribution of the degree of overlap so as to allow the reader to better grasp at what tariff lines the highest overlap of structures occurs. Source: Own calculations using ASEAN import data from COMTRADE. HS-02, 6-digits

The first entry in Table 4.10 tells us the overall degree of export similarity between the EU and the partner country in the ASEAN region. The subsequent entries then show us the overlap across the different tariff heights. The percentage figures sum up the share of the total FK allocated to the different categories. Hence for the second Australian entry we see that 43.7% of the total overlap is in trade that would face a tariff, or a preference margin, between 0 and 5 percentage points. Turning to the entry for China we see that 56.2% of the initial 0.38 overlap occurs in tariff headings where China is likely to receive a tariff preference over the EU between zero and five percentage points. It follows then that nearly 45% of the overlap in trading structures between the EU and China in the ASEAN market is in products likely to receive a preference margin above 5 percentage points. The last column summarises this and shows us that the overlap in exports of products that are likely to get a substantial preference over the EU in the ASEAN market stands at 0.17. Going down the table we note non-negligible values for all proposed preferential partners (Australia, China, India, Japan and Korea). This implies that the EU could face important competitive

87 Note that the FK figures reported here differ slightly from those in the preceding table. This is

because in Table 4.9 we use export data and in Table 4.10 we use import data. The interpretations derived remain unaffected by this.

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pressures in the region as a result of closer South East Asian integration. A mitigating factor is that as we move towards the higher levels of possible preferences the similarity indicators fall which in turn would suggest somewhat smaller effects at the highest preference margins. This is however to be expected because, as we saw from Table 4.7, most of ASEAN imports are in products which face tariffs between 0 to 10%.

Whilst the above table gives us an indication of the similarity in export structures, it does not tell us about the size of the trade flows involved. If we are to grasp the degree of competitive pressures that may result from closer SEA integration we need to have a metric of how much bigger competitors are in the products where preferential margins are likely to be high. This is because larger partners in terms of trade volumes are likely to incur higher pressures on competitors (both through trade diversion and negative terms of trade effects). We use the RECPI indicator to gauge these.

The RECPI indicator is designed to compare the competitive significance of 2 countries in a third country‟s market. For country A, seeking to assess the competitive strength of country B in country C‟s market. it will compare the overall market share of country B in country C‟s markets with that of A, with B‟s export profile re-weighted according to the importance of each product in A‟s exports. It is intuitively similar to averaging the relative sales of A and B in market C using A‟s trade proportions.

Table 4.11 EU RECPI cross classified by size of MFN tariff 2007

T=0 0<T<5 5<T<10 10<T<15 15<T<20 T>20

ASEAN 0.000 0.010 0.133 0.285 0.272 0.706

AUS 0.000 0.006 0.178 0.084 0.061 0.066

CHN 0.375 0.299 0.396 1.633 0.744 0.328

IND 0.027 0.007 0.105 0.094 0.030 0.026

JPN 0.322 0.714 0.526 1.842 1.149 2.788

KOR 0.024 0.216 0.334 0.655 0.280 0.297

NZL 0.005 0.000 0.074 0.007 0.017 0.002

USA 0.057 1.359 0.320 0.812 0.592 0.156

WLD 1.996 4.361 3.865 8.313 5.262 6.693

Source: Own calculations, COMTRADE 6-digits

This indicator benefits from the usefulness of the FK indicator but also takes into account the relative size of competing countries. It captures how much bigger (smaller) a competing country is in a given market relative to the EU. As way of example, the results in Table 4.11 tell us that China is 1.6 times bigger than the EU in terms of exports to ASEAN of products that will receive a preference between 10 and 15 percentage points. This then suggests that the EU is likely to face strong competitive pressures from China in these products. However, we know from Table 4.7 that in this category, these competitive pressures will only affect 6% of total EU exports to the region. Where the 0-10% category which occupies 85% of EU exports to the region is concerned, the RECPI‟s suggest milder competitive pressures from ASEAN‟s regional FTA as ASEAN‟s preferential partners are relatively large exporters in these sectors but not as large as the EU is. Where these partners and higher levels of preference margins are concerned the table reveals that the competitive pressures will be strong.

In particular we draw attention to the size of Japanese exports to the region. These are 1.8 times bigger than those of the EU in sectors where Japan is likely to receive a preference

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margin between 10 and 15 percentage points relative to the EU. Japan is also seen to be 1.1 times bigger in sectors that may benefit from a preference margin of 15 to 20 percentage points and almost three times as big in sectors that are likely to receive a preference margin above 20 percentage points. Recalling that over 25% of Japanese exports to the region are in these sectors and that these represent around 16% of EU exports to the region, it is likely that Japan will incur the most significant competitive pressures on the EU as a result of the preferences awarded.

Overall, the table suggests that the EU faces considerable competition in the region, in particular where high preferences are concerned. However, the results obtained from Table 4.7 suggest that this would occur on 16% of total EU exports to the region where the preference margins are above 10 percentage points. The RECPI‟s are lower for preference margins ranging from 5 to 10 percentage points hence so should be the competitive pressures.

In this section we have shown that the aggregate competitive pressures that could arise from closer SEA integration may be non-trivial. However, it is useful to provide a summary of where these pressures are likely to originate before we move to a more disaggregate analysis. We do this in Table 4.12 where we compile the most useful information from Tables 4.6 to 4.10. Table 4.12 delimits the share of trade; export similarity; and RECPI for the EU‟s competitors in those sectors where they are likely to receive a preferential margin above 5 percentage points. Hence the first row tells us that in those sectors where the EU pays a tariff in the ASEAN market above 5% China‟s exports to ASEAN occupy 46.3% of its total exports to the region. Similarly, China‟s export similarity with respect to the EU in tariff lines likely to receive a 5 percentage point preference margin equals 0.17. The competitive pressures in these tariff lines suggest that China is nearly half the size of the EU in its exports in these tariff lines.

Table 4.12. Summary of competitive pressures by origin

For MFN Tariffs >5 AUS CHN IND JPN KOR NZL USA EU25

Share of partner exports in total exports to ASEAN 25.89% 46.30% 42.52% 47.96% 49.97% 71.79% 22.96% 34.9%

Export similarity in ASEAN wrt EU 0.101 0.170 0.104 0.181 0.140 0.050 0.153

RECPI 0.148 0.450 0.087 0.988 0.335 0.056 0.328

Source: Own calculations, COMTRADE and TRAINS

The preliminary conclusion is that China is likely to be a strong competitor of the EU in the ASEAN market and could benefit strongly from SEA integration to the detriment of the EU. However the competitive pressures are most likely to come from Japan where the similarity in exports to the region is highest and where the size of the export market is close to that of the EU (i.e. a RECPI of near 1). Non negligible are also the competitive pressures that will come from Korea. ASEAN‟s other preferential partners are more dissimilar and smaller in the ASEAN market than the EU and are hence preferences granted to them not likely to have too great an impact on EU exports to the region.

4.5 Terms of trade effects

Another likely negative impact on the EU as a result of closer SEA integration can arise via the terms of trade (ToT) effect. Preferential partners receiving important preferences are

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likely to displace non-preferential ones via price effects. Lower prices in the ASEAN market as a result of preferences could force EU suppliers to move down their supply curve thus causing an adverse producer welfare effect in the EU. We can grasp these effects using a simple cross classification of trade and tariff patterns,

Table 4.13 Scope for terms of trade effects – EU exports to ASEAN by tariffs and market shares of ASEAN’s FTA partners (2007 data)

AUS JPN

MFN Tariff Sum across MS

MFN Tariff Sum across MS 0%

0-10%

10-20% >20% 0%

0-10%

10-20% >20%

Ma

rke

t S

ha

re

0% 0.1% 8.6% 0.5% 0.1% 9.4%

Ma

rke

t S

ha

re

0% 0.0% 0.6% 0.1% 0.1% 0.8%

0-10% 0.0% 71.6% 9.9% 5.0% 86.5% 0-10% 0.1% 31.2% 5.0% 2.0% 38.3%

10-20% 0.0% 2.4% 0.1% 0.0% 2.5% 10-20% 0.0% 27.7% 1.6% 0.2% 29.6%

>20% 0.0% 1.4% 0.1% 0.2% 1.7% >20% 0.0% 24.5% 3.9% 3.0% 31.4%

Sum across MFN 0.2% 83.9% 10.6% 5.3% 100.0%

Sum across MFN 0.2% 83.9% 10.6% 5.3% 100.0%

CHN KOR



0-10%

10-20% >20% 0%

0-10%

10-20% >20%

Ma

rke

t S

ha

re

0% 0.0% 0.3% 0.0% 0.0% 0.4%

Ma

rke

t S

ha

re

0% 0.0% 7.1% 0.2% 0.1% 7.5%

0-10% 0.0% 50.3% 3.4% 3.5% 57.2% 0-10% 0.2% 63.7% 8.5% 4.8% 77.1%

10-20% 0.2% 16.2% 2.9% 0.4% 19.6% 10-20% 0.0% 9.9% 1.3% 0.2% 11.5%

>20% 0.0% 17.1% 4.3% 1.3% 22.8% >20% 0.0% 3.2% 0.6% 0.1% 3.9%

Sum across MFN 0.2% 83.9% 10.6% 5.3% 100.0%

Sum across MFN 0.2% 83.9% 10.6% 5.3% 100.0%

IND NZL



0-10%

10-20% >20% 0%

0-10%

10-20% >20%

Ma

rke

t S

ha

re

0% 0.0% 9.3% 0.8% 0.5% 10.5%

Ma

rke

t S

ha

re

0% 0.1% 25.8% 3.0% 1.7% 30.6%

0-10% 0.2% 72.8% 9.7% 4.8% 87.4% 0-10% 0.0% 56.8% 7.5% 3.6% 68.0%

10-20% 0.0% 0.9% 0.2% 0.0% 1.1% 10-20% 0.0% 0.5% 0.0% 0.0% 0.5%

>20% 0.0% 1.0% 0.0% 0.0% 1.0% >20% 0.0% 0.9% 0.0% 0.0% 0.9%

Sum across MFN 0.2% 83.9% 10.6% 5.3% 100.0%

Sum across MFN 0.2% 83.9% 10.6% 5.3% 100.0%

Source: Own calculations, COMTRADE and TRAINS

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In Table 4.13 we cross-classify EU exports to ASEAN according to a) the likely preferential margin by country and b) the market share that preferential partners have in the ASEAN market. The intuition of this exercise is that where preference margins and market shares are high, the potential negative ToT impact on EU producers should also be high. We mark these instances with a dark shade of grey where a lighter shade identifies those instances where ToT pressures are muted.

Turning to the Japanese case, Table 4.13 tells us that around 32% of EU exports to ASEAN are unlikely to suffer important ToT shocks (the non-shaded area) However 8.6% of EU exports to ASEAN are in products where Japan holds both a significant market share and currently faces significant tariffs, i.e. is likely to benefit from an important preferential margin vis-à-vis the EU (the dark grey shaded area). Reading through the table we note that there is evidence of potential ToT pressures in particular but not exclusively from Japan and China which could affect an average of around 9% of EU exports to ASEAN.

4.6 Disaggregated analysis of EU export flows to ASEAN

We now turn to a more disaggregated analysis of exports to the region as so far we have not identified the product composition of the potential adverse effects. We begin, in Table 4.14, by looking at ASEAN‟s top imports from the world in 2007 where we also look at how the market share is distributed across our selection of countries. The left panel identifies the shares that these products represent in total exports to ASEAN whereas the right hand panel looks at the market shares of countries across imported products. As way of example, we can read, from the left hand panel, that the top 20 imports from the world represent 33.6% of ASEAN total imports. These top 20 products then represent 32.4% of ASEAN imports from the EU.

The panel on the right then analyses the distribution of total ASEAN imports for a given product across the selected origins. Taking the first product, we see that 87% of ASEAN‟s top import (petroleum) comes from sources in the RoW category. To facilitate the reading of the table we mark (with a grey fill), in this panel, products where competitors‟ market shares are higher than EU market shares and where the ASEAN MFN tariff is above 5%. One can then look at the table from left to right by firstly spotting the products with high tariffs (those in grey) and then turning to the left panel to see each competitor‟s export share in these sectors. Turning first to the second entry in the table (parts of electronic integrated circuits) we see how this product occupies 15% of total EU exports to the region. The right hand panel then shows that the EU holds a 24.1% share of the ASEAN market in this product. The US has a significant market share of nearly 35% which suggests it is the strongest competitor. The tariff on this product is positive but very close to zero suggesting that despite Japan holding an 18% of the market, it will not be able to seriously harm EU exports given the small scope of the preference that would be afforded to Japan.

Looking for products where both the EU and preferential partners hold a substantial proportion of the market and where MFN tariffs are high we find product 870899 (parts and accessories of the motor vehicles) where the tariff stands at 22.7%. Even though this product only represents 1% of total EU exports to the region, the EU‟s market share stands at 13.5% which is much smaller than that of its strongest competitor (Japan with 47.5% of the market). Closer SEA integration, following our working assumption, would imply that Japanese imports face no tariff whereas imports from the EU are still levied a 22.7% tariff which may result in the EU losing a substantial share of the market. In a different vein, the EU‟s market share for product 300490 (medicaments) is 47% (and the product accounts for

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2.5% of total EU‟s exports to ASEAN) and the tariff it faces is of 5.4%. Looking across the panel we see that proposed preferential partners have very little market presence in ASEAN which in turn suggests that the competitive pressures that these will exert on the EU in this product will be small, this despite the potential preference margin being of 5.4%. Similarly, for product 880240 (aeroplanes and other aircrafts) representing 5% of total EU exports to the region, the market share is high for the EU (63%), but there is both a low MFN and a low market share for preferential partners which implies little competitive pressures on the EU.

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Table 4.14 Top 20 ASEAN imports from the world in 2007

product description

ASEAN MFN tariff

Share of imports by country Share of product, by origin, in ASEAN total imports

Product Asean AUS CHN EU IND JPN KOR NZL US WLD ASEAN AUS CHN EU IND JPN KOR NZL US RoW

270900 Petroleum oils 0.5 11.4% 15.1% 0.5% 0.0% 0.1% 0.0% 0.0% 2.5% 0.0% 7.5% 5.5% 5.5% 1.2% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 87.6%

854290 Parts(electronic integrated circuits) 0.0 0.3% 0.0% 1.9% 14.9% 0.1% 5.9% 3.5% 0.0% 22.0% 6.1% 0.2% 0.0% 5.2% 24.1% 0.0% 16.8% 3.9% 0.0% 34.6% 15.2%

847330 Parts (automatic data processing machines) 0.1 0.4% 0.1% 7.6% 1.1% 0.1% 3.5% 3.6% 0.1% 3.4% 3.4% 0.5% 0.1% 37.2% 3.1% 0.1% 18.4% 7.2% 0.0% 9.8% 23.7%

854229 Other (electronic integrated circuits) 0.0 0.3% 0.0% 1.1% 2.7% 0.0% 4.0% 6.8% 0.0% 7.8% 3.3% 0.3% 0.0% 5.5% 8.0% 0.0% 21.2% 13.9% 0.0% 22.7% 28.4%

271019 Petroleum oils & oils obt. from bituminous mins… 6.3 4.3% 0.5% 0.4% 0.3% 1.8% 0.4% 8.9% 0.0% 0.3% 1.7% 9.0% 0.8% 3.9% 1.7% 2.0% 4.4% 35.1% 0.0% 1.5% 41.5%

271011 Light oils and preparations 6.1 2.9% 0.3% 1.9% 0.0% 6.1% 0.1% 1.2% 0.4% 0.0% 1.3% 7.9% 0.6% 23.4% 0.1% 9.1% 0.9% 6.2% 0.2% 0.3% 51.3%

854260 Hybrid integrated circuits 0.0 0.0% 0.0% 0.7% 0.7% 0.0% 0.8% 2.5% 0.0% 2.0% 1.1% 0.0% 0.0% 11.6% 6.5% 0.0% 12.7% 16.0% 0.0% 17.7% 35.4%

854221 Digital (electronic integrated circuits) 0.0 0.0% 0.0% 1.0% 1.0% 0.0% 0.4% 2.1% 0.0% 1.5% 1.0% 0.0% 0.0% 16.1% 9.5% 0.0% 6.1% 14.2% 0.0% 14.1% 39.9%

852520 Transmission apparatus incorporating recep 3.0 0.3% 0.0% 2.8% 1.0% 4.2% 0.1% 1.4% 0.1% 0.1% 0.9% 1.2% 0.1% 51.9% 11.0% 9.4% 1.7% 10.6% 0.0% 1.4% 12.6%

870899 Other (parts of motor vehicles) 22.7 2.4% 0.4% 0.2% 1.1% 0.2% 2.2% 0.4% 0.0% 0.1% 0.8% 10.8% 1.2% 3.9% 13.5% 0.4% 47.4% 3.4% 0.0% 1.7% 17.6%

880240

Aeroplanes and other aircraft, of an unladen weigh 0.6 0.0% 0.0% 0.0% 5.1% 0.0% 0.0% 0.0% 0.0% 2.1% 0.8% 0.2% 0.0% 0.1% 63.0% 0.0% 0.0% 0.0% 0.0% 24.9% 11.7%

852990 Other (transmission/ reception apparatus) 1.9 0.3% 0.1% 1.3% 0.6% 0.1% 0.7% 2.4% 0.0% 0.2% 0.8% 1.5% 0.3% 26.9% 8.2% 0.2% 15.6% 20.6% 0.0% 2.2% 24.5%

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product description

ASEAN MFN tariff


Product Asean AUS CHN EU IND JPN KOR NZL US WLD ASEAN AUS CHN EU IND JPN KOR NZL US RoW

853400 Printed circuits. 0.4 0.1% 0.0% 1.1% 0.2% 0.0% 1.0% 1.0% 0.0% 0.6% 0.7% 0.6% 0.1% 25.2% 2.7% 0.1% 24.2% 9.5% 0.0% 7.5% 30.1%

710812 Other unwrought forms 0.1 0.0% 7.4% 0.0% 0.3% 0.0% 0.1% 0.1% 0.0% 0.1% 0.7% 0.0% 30.7% 0.0% 4.8% 0.0% 3.5% 0.8% 0.0% 1.3% 59.0%

740311 Cathodes and sections of cathodes 1.1 0.0% 7.6% 0.0% 0.0% 5.5% 0.6% 1.2% 0.0% 0.0% 0.6% 0.1% 32.4% 0.6% 0.1% 17.0% 15.2% 12.3% 0.0% 0.0% 22.1%

230400 Oilcake and other solid residues, whether or not g 1.7 0.0% 0.0% 0.0% 0.0% 8.2% 0.0% 0.0% 0.0% 0.3% 0.6% 0.0% 0.0% 1.0% 0.1% 26.4% 0.0% 0.0% 0.0% 5.2% 67.3%

100190 Other (wheat) 2.0 0.0% 2.9% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 0.5% 0.0% 14.9% 11.4% 0.0% 0.0% 0.2% 0.0% 0.0% 35.9% 37.5%

300490 Other (medicaments) 5.4 0.3% 1.6% 0.1% 2.5% 1.3% 0.1% 0.3% 0.1% 0.4% 0.5% 2.2% 8.5% 2.4% 47.4% 5.0% 2.7% 3.4% 0.1% 8.0% 20.2%

710813 Other semimanufactured forms 0.4 0.0% 0.2% 0.0% 0.1% 0.0% 0.9% 0.3% 0.0% 0.1% 0.5% 0.2% 1.0% 0.1% 1.1% 0.0% 30.9% 3.5% 0.0% 1.9% 61.3%

847989 Other (mechanical appliances/machinery) 1.6 0.1% 0.1% 0.2% 0.8% 0.1% 1.1% 0.5% 0.0% 0.7% 0.5% 0.6% 0.4% 6.3% 17.3% 0.5% 39.2% 6.5% 0.0% 13.4% 15.8%

Sum of import shares by country of origin 23.3% 36.3% 21.3% 32.4% 27.9% 21.8% 35.9% 3.2% 43.8% 33.6%

Average Tariff 2.7

Notes: The left panel identifies the importance of each of the products in partner country total exports to the region. The right panel identifies the distribution of import market shares by origin so that the sum of these across a given row will always add up to 100. Source: Own calculations, COMTRADE and TRAINS.

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Where the previous table focused on top ASEAN imports from the world, we now look, in Table 4.15, at the top EU exports to the region. Again, we are concerned with the same issues, i.e. high tariffs meeting high competitor‟s market shares, and we highlight these instances in grey in the table. As a preliminary observation we note that there seems to be a relatively low degree of concentration of EU exports to the region. When we compare Table 4.14 to Table 4.15 we see how the shares that occupy top ASEAN imports and top EU exports to the region are comparable. The top 5 products in Table 4.15 occupy 26% of total EU exports to the region with subsequent products occupying a small share.

We have already discussed two of these 5 products where there should be competitive pressures so we turn to other products that may suffer from increased competitive pressures. First we consider sector 870323 which identifies motor vehicles of a certain cylinder capacity. This product has an MFN tariff of 42.8% with the EU holding 15% of the market representing 0.7% of its total exports to the region. Japan can be identified as the EU‟s closest competitor as it holds 31.5% of the market. Japan will receive a large preferential margin in this sector (over 30 percentage points, see table 4.17) hence competitive pressures on the EU are likely to be strong. Although one has to bear in mind that this is subject to the substitutability of these products. Going further down the table we see how competitive pressures on EU exports could also arise in: „electric generating sets‟ (product 850239) from China; Iron and Steel (732690) from both China and Japan; appliances for pipes (848180) from China; and Chemicals (382490) from Japan. These sectors individually represent a small share of EU exports to the region, but the competitive pressures are likely to be strong. The sum of the small effects can generate substantial market loss for the EU. As a general metric, we refer again to Tables 4.6, 4.7 and 4.10 which suggest that these strong competitive pressures could arise for 3-16% of EU exports to the region.

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Table 4.15 Top 20 ASEAN imports from the EU 2007

product description

ASEAN MFN Tariff


Product Asean AUS CHN EU IND JPN KOR NZL US WLD Asean AUS CHN EU IND JPN KOR NZL US RoW


880240 Aeroplanes and other aircraft, of an unladen weigh 0.6 0.0% 0.0% 0.0% 5.1% 0.0% 0.0% 0.0% 0.0% 2.1% 0.8% 0.2% 0.0% 0.1% 63.0% 0.0% 0.0% 0.0% 0.0% 24.9% 11.7%

854229 Other (automatic data processing machines) 0.0 0.3% 0.0% 1.1% 2.7% 0.0% 4.0% 6.8% 0.0% 7.8% 3.3% 0.3% 0.0% 5.5% 8.0% 0.0% 21.2% 13.9% 0.0% 22.7% 28.4%

300490 Other (medicaments) 5.4 0.3% 1.6% 0.1% 2.5% 1.3% 0.1% 0.3% 0.1% 0.4% 0.5% 2.2% 8.5% 2.4% 47.4% 5.0% 2.7% 3.4% 0.1% 8.0% 20.2%

870899 Other (parts of Motor vehicles) 22.7 2.4% 0.4% 0.2% 1.1% 0.2% 2.2% 0.4% 0.0% 0.1% 0.8% 10.8% 1.2% 3.9% 13.5% 0.4% 47.4% 3.4% 0.0% 1.7% 17.6%


852520 Transmission apparatus incorporating recep 3.0 0.3% 0.0% 2.8% 1.0% 4.2% 0.1% 1.4% 0.1% 0.1% 0.9% 1.2% 0.1% 51.9% 11.0% 9.4% 1.7% 10.6% 0.0% 1.4% 12.6%

854221 Digital (automatic data processing machines) 0.0 0.0% 0.0% 1.0% 1.0% 0.0% 0.4% 2.1% 0.0% 1.5% 1.0% 0.0% 0.0% 16.1% 9.5% 0.0% 6.1% 14.2% 0.0% 14.1% 39.9%

851790 Parts (apparatus for line telephony) 2.4 0.0% 0.0% 0.5% 0.9% 0.0% 0.1% 0.2% 0.0% 0.2% 0.3% 0.1% 0.4% 21.6% 26.9% 0.2% 5.3% 3.1% 0.0% 6.3% 36.0%

847989 Other (mechanical appliances/machinery) 1.6 0.1% 0.1% 0.2% 0.8% 0.1% 1.1% 0.5% 0.0% 0.7% 0.5% 0.6% 0.4% 6.3% 17.3% 0.5% 39.2% 6.5% 0.0% 13.4% 15.8%

854129 Other (diodes, transistors, semiconductors) 0.0 0.0% 0.0% 0.1% 0.7% 0.0% 0.3% 0.1% 0.0% 0.1% 0.2% 0.2% 0.0% 8.7% 40.0% 0.0% 30.4% 3.2% 0.0% 6.3% 11.1%

854260 Hybrid integrated circuits 0.0 0.0% 0.0% 0.7% 0.7% 0.0% 0.8% 2.5% 0.0% 2.0% 1.1% 0.0% 0.0% 11.6% 6.5% 0.0% 12.7% 16.0% 0.0% 17.7% 35.4%

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product description

ASEAN MFN Tariff



870323 Of a cylinder capacity exceeding 1,500 cc but not 42.8 1.6% 0.0% 0.0% 0.7% 0.0% 0.8% 0.5% 0.0% 0.1% 0.4% 13.1% 0.0% 0.5% 15.0% 0.0% 31.6% 8.2% 0.0% 2.3% 29.2%

850239 Other (electric generating sets) 9.6 0.0% 0.0% 0.6% 0.6% 0.0% 0.3% 0.2% 0.0% 0.1% 0.3% 0.0% 0.0% 37.0% 24.6% 0.3% 22.4% 5.5% 0.0% 5.1% 5.1%

852990 Other (transmission/ reception apparatus) 1.9 0.3% 0.1% 1.3% 0.6% 0.1% 0.7% 2.4% 0.0% 0.2% 0.8% 1.5% 0.3% 26.9% 8.2% 0.2% 15.6% 20.6% 0.0% 2.2% 24.5%

732690 Other (iron and steel) 10.0 0.4% 0.1% 0.5% 0.6% 0.2% 0.9% 0.2% 0.1% 0.5% 0.4% 3.7% 0.9% 20.0% 13.6% 0.7% 34.4% 3.8% 0.1% 10.6% 12.2%

210690 Other (food preps) 16.8 0.6% 0.2% 0.1% 0.6% 0.0% 0.0% 0.1% 0.4% 0.5% 0.2% 9.6% 2.4% 5.8% 27.6% 0.4% 2.2% 2.9% 1.0% 21.2% 27.0%

848180 Other appliances (appliances for pipes) 5.0 0.1% 0.1% 0.3% 0.5% 0.2% 0.2% 0.1% 0.1% 0.2% 0.2% 2.1% 1.0% 24.6% 22.3% 2.0% 18.2% 4.4% 0.1% 11.2% 14.1%

382490 Other (chemicals) 5.6 0.2% 0.2% 0.2% 0.5% 0.1% 0.4% 0.1% 0.1% 0.3% 0.3% 2.2% 1.9% 14.1% 18.6% 0.9% 29.7% 3.7% 0.1% 11.3% 17.6%

190110 Preparations for infant use, put up for retail sal 10.0 0.1% 0.2% 0.0% 0.4% 0.0% 0.0% 0.0% 1.0% 0.0% 0.1% 5.0% 6.6% 0.1% 59.8% 0.3% 0.0% 0.4% 7.4% 0.1% 20.2%


Average tariff 6.9

Notes: The left panel identifies the importance of each of the products in partner country total exports to the region. The Right panel identifies the distribution of import market shares by origin so that the sum of these across a given row will always add up to 100. Source: Own calculations, COMTRADE and TRAINS.

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4.7 Sensitive Products

In this section we derive other criteria to identify products that may be sensitive for the EU in the ASEAN market. This involves moving beyond a simple identification of the most important EU export sectors towards looking at sectors where competitive pressures may be strongest irrespective of their market share. We start by identifying 20 products which may be subject to strong competitive forces by simply looking at the degree of concentration of the different origin market shares (i.e. the right hand panel in the above tables). Our identification strategy follows our simple rule of thumb that sees competitive pressures arising where high trade volumes meet high preferences. Our hypothesis here is that competitive pressures will be strongest where preferential partners and the EU hold significant market shares for a given product in the ASEAN market. If, in these sectors, ASEAN‟s FTA partners that are EU competitors are to receive a substantial preference margin then the EU is likely to lose market share. The premise is that where these trade shares are very un-concentrated (or evenly distributed across all the selected partners) the competitive pressures on the EU will be largest. One can think of this exercise as a very crude identification of the possible elasticity of substitution across origins for a given product. Where trade shares are most similar, then the elasticity of substitution is likely to be higher and hence the preference margin afforded to preferential partners is likely to have a bigger effect on trade flows.

To identify these products we compute a Herfindahl index of concentration of market shares across a given product for all ASEAN‟s FTA partners and the EU88. This indicator allows us to grasp the concentration, at the product level, of suppliers from the selected origins. Given that we hold these origins constant, the indicator is bounded from below by the inverse of the number of partners selected (1/n where n=7) for a completely egalitarian distribution of imports across all selected origins. Once we have computed this measure on a product by product basis, we then rank all ASEAN imports and select the 200 with the lowest values of the Herfindahl index (i.e. those where the distribution of ASEAN imports by origin is most equal). We then order these 200 products by descending share that they represent in total EU exports to the region to arrive at Table 4.16. By way of shading, as in the previous tables, we identify the tariffs and the closest competitors of the EU across each tariff line. We highlight tariff lines where partners are likely to receive preferential margins above 5 percentage points and the two closest competitors of the EU (by market share in ASEAN).

The preliminary observations suggest high degrees of competition for heat exchange units, aluminium alloys and non alloys, and electrical transformers. There is significant variation as to the origin of these competitive pressures where for the first Japan and Korea are the main competitors whilst for the aluminium products it is Australia, Korea and China who compete more closely with the EU. Where electrical transformers are concerned, Japan is the biggest competitor. One salient observation from the table is that Japan appears to be a strong competitor in most products which supports the aggregate findings of Table 4.13. Another observation is that the RoW, or countries which will not receive preferences in the ASEAN market also have important market shares. The implications of this are that these countries could also suffer from important trade diversion as a result of SEA integration.

88 The Herfindahl index captures market concentration. It is calculated as a sum of squares of market

shares. In our specific example for each of the products at HS 6-digit level it is a sum of squares of market shares in ASEAN‟s imports from the selected 7 destinations. As an example if ASEAN only imports a given product from one of the seven regions the value of the index stands at 1. If three of the seven regions have equal shares in ASEAN imports, the value would be 0.33^2 + 0.33^2 + 0.33^2 = 0.33(3).

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Table 4.16 Top 20 products by market concentration and share of imports

product description

ASEAN MFN tariff



841950 Heat exchange units 5.6 0.0% 0.0% 0.0% 0.2% 0.1% 0.1% 0.2% 0.1% 0.0% 0.1% 1.1% 1.1% 9.5% 29.5% 2.2% 17.6% 23.6% 0.5% 2.8% 12.2%

390950 Polyurethanes 6.8 0.0% 0.1% 0.0% 0.2% 0.0% 0.1% 0.2% 0.0% 0.1% 0.1% 1.6% 2.0% 7.7% 20.3% 1.1% 17.7% 13.8% 0.0% 11.1% 24.7%

841989 Other (machinery…) 1.4 0.0% 0.0% 0.0% 0.1% 0.4% 0.1% 0.3% 0.0% 0.0% 0.1% 0.9% 0.3% 6.7% 17.4% 9.2% 14.0% 23.6% 0.1% 5.5% 22.2%

760612 Of aluminium alloys 8.3 0.0% 0.9% 0.1% 0.1% 0.1% 0.1% 0.4% 0.0% 0.1% 0.1% 0.0% 21.2% 11.0% 10.9% 1.0% 14.8% 24.0% 0.0% 8.8% 8.3%

730799 Other (tube of pipe fittings) 8.7 0.0% 0.0% 0.0% 0.1% 0.0% 0.1% 0.1% 0.0% 0.1% 0.1% 0.9% 2.0% 13.6% 22.4% 0.9% 21.2% 8.3% 0.0% 21.1% 9.5%

848190 Parts (appliances for taps and valves) 5.4 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.1% 0.1% 3.0% 2.4% 18.6% 21.9% 4.2% 21.6% 2.5% 0.1% 16.5% 9.3%

841391 Parts of pumps 2.2 0.0% 0.2% 0.0% 0.1% 0.0% 0.1% 0.0% 0.0% 0.1% 0.1% 2.2% 10.1% 10.5% 21.4% 1.5% 28.1% 4.0% 0.0% 12.1% 10.2%

410449 Other (bovine hides …) 3.4 0.1% 0.1% 0.1% 0.1% 0.3% 0.0% 0.1% 0.0% 0.1% 0.1% 4.1% 1.7% 10.4% 9.6% 6.1% 1.1% 3.3% 0.1% 10.1% 53.5%

392190 Other (plates of plastic) 15.6 0.0% 0.1% 0.1% 0.1% 0.0% 0.1% 0.1% 0.0% 0.1% 0.1% 1.9% 1.8% 15.8% 12.7% 1.2% 20.6% 11.7% 0.1% 8.7% 25.6%

847490 Parts of the mach… 0.4 0.0% 0.2% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.4% 16.1% 11.2% 22.5% 1.3% 10.5% 3.8% 0.0% 10.3% 22.7%

760611 Of aluminium, not alloyed 20.3 0.0% 0.4% 0.1% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.1% 21.9% 23.6% 17.6% 1.6% 21.3% 3.5% 0.0% 1.9% 8.3%

854210 Cards incorporating an electronic inte 0 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 2.0% 0.0% 15.3% 15.7% 0.0% 8.9% 19.2% 0.0% 3.6% 35.2%

390120 Polyethylene having a specific gravity of … 13.9 0.4% 0.0% 0.0% 0.1% 0.1% 0.1% 0.2% 0.0% 0.0% 0.2% 9.4% 0.0% 1.6% 4.7% 1.7% 6.3% 7.3% 0.0% 3.0% 65.9%

842129 Other (centrifuges) 4.6 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 2.8% 4.5% 14.8% 22.6% 2.4% 16.5% 5.0% 0.1% 17.0% 14.4%

481092 Multiply paper and. .. 12.8 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.1% 0.1% 0.0% 0.0% 0.1% 1.8% 16.1% 19.3% 1.4% 3.5% 11.5% 1.9% 4.8% 39.5%

845530 Rolls for rolling mills 1.2 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.9% 2.2% 17.5% 24.7% 3.0% 11.9% 9.3% 0.0% 7.7% 22.7%

850434 Electrical transformers; capacity >500 kVA 7.1 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.8% 1.0% 13.4% 14.4% 4.1% 32.0% 14.0% 0.0% 1.4% 18.9%

480511 Semichemical fluting paper 8.8 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.1% 0.5% 0.0% 0.0% 4.4% 1.0% 11.0% 21.2% 0.0% 7.4% 12.8% 9.6% 9.7% 22.9%

841940 Distilling or rectifying plant 2.3 0.0% 0.0% 0.0% 0.1% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.8% 4.4% 9.8% 20.8% 7.9% 7.7% 35.4% 0.0% 1.2% 12.1%

721990 Flat-rolled prods. of stainless steel 3.3 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 0.0% 15.8% 19.1% 1.5% 15.3% 11.7% 0.0% 0.2% 35.8%


Average tariff 6.6 23.7%

Notes: The left panel identifies the importance of each of the products in partner country total exports to the region. The right panel identifies the distribution of import market shares by origin so that the sum of these across a given row will always add up to 100. Source: Own calculations, COMTRADE and TRAINS

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The above identification strategy is useful as it is based on objective criteria, however, there several alternative identification strategies could also be followed. In Table 4.17, we compile a list of products that show the highest potential for adverse effects to EU exports based on results presented in Tables 4.12 to 4.15. We complement the analysis by looking at the actual degree of liberalisation with respect to ASEAN‟s FTA partners so as to determine the strength of these competitive pressures. Turning to the first entry of the table (product 870899) we see how Japan was identified as the main competitor of the EU in the ASEAN market with a market share nearing 50%. This export sector occupies 1.1% of total EU exports to the region and if there is little product differentiation then the EU is likely to lose an important share of the ASEAN market as a result of preference afforded to Japan when the MFN tariff of 22.7% goes to zero under the ASEAN-Japan FTA. Turning then to the second good (motor vehicles above a certain cylinder capacity) we see how the ASEAN market has an important MFN tariff but that liberalisation is not complete with respect to the new preferential partners. This suggests that the competitive effects arising from closer SEA integration on the EU are somewhat mitigated relative to our earlier interpretation. However, the preference margin remains high, of the order of 30 percentage points for Japan, the EU‟s closest competitor in this market which in turn continues to suggest the possibility of important EU export market loss in the ASEAN region.

As it turns out, it appears that for the sensitive sectors identified, our preliminary assumption of full liberalisation with respect to preferential partners is not far off from reality (with exceptions for cars and non-alloyed aluminium). Preferential partners with high market shares in the ASEAN markets are going to be afforded substantial preferential margins with respect to the EU which will exert strong competitive pressures on EU exports to the region.

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Table 4.17 Sensitive products derived from previous analysis

product description

ASEAN MFN tariff

Share in EU exports to ASEAN ASEAN tariff after full FTA implementation Share of product, by origin, in ASEAN total imports

Product AUS CHN IND JPN KOR NZL Asean AUS CHN EU IND JPN KOR NZL US RoW

870899 Parts & accessories of the motor vehicles, n.e.s. 22.7 1.11% 0.0 7.4 0.3 0.0 0.0 0.0 10.8 1.2 3.9 13.5 0.4 47.4 3.4 0.0 1.7 17.6

870323 Vehicles (…) of a cyl. cap. >1500cc but not >3000cc 42.8 0.67% 9.0 13.3 15.0 10.3 16.0 9.0 13.1 0.0 0.5 15.0 0.0 31.6 8.2 0.0 2.3 29.2

850239 Electric generating sets 9.6 0.65% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 37.0 24.6 0.3 22.4 5.5 0.0 5.1 5.1

732690 Articles of iron/steel, n.e.s. 10.0 0.61% 0.1 0.0 0.0 0.5 0.0 0.1 3.7 0.9 20.0 13.6 0.7 34.4 3.8 0.1 10.6 12.2

848180 Taps, cocks, valves & sim. appls. for pipes/boiler… 5.0 0.48% 0.1 0.0 0.0 0.0 0.3 0.1 2.1 1.0 24.6 22.3 2.0 18.2 4.4 0.1 11.2 14.1

841950 Heat exchange units 5.6 0.19% 1.0 0.0 0.2 0.0 0.0 1.0 1.1 1.1 9.5 29.5 2.2 17.6 23.6 0.5 2.8 12.2

390950 Polyurethanes 6.8 0.15% 0.0 0.0 0.0 0.0 0.0 0.0 1.6 2.0 7.7 20.3 1.1 17.7 13.8 0.0 11.1 24.7

760612 Of aluminium alloys 8.3 0.13% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 21.2 11.0 10.9 1.0 14.8 24.0 0.0 8.8 8.3

730799 Tube/pipe fittings of iron/steel 8.7 0.13% 0.0 0.0 0.0 0.0 0.0 0.0 0.9 2.0 13.6 22.4 0.9 21.2 8.3 0.0 21.1 9.5

392190 Plates, sheets, film, foil & strip of plastics … 15.6 0.10% 2.3 0.0 2.2 0.0 2.3 2.3 1.9 1.8 15.8 12.7 1.2 20.6 11.7 0.1 8.7 25.6

760611 Of aluminium, not alloyed 20.3 0.08% 0.0 0.0 8.7 0.0 0.0 0.0 0.1 21.9 23.6 17.6 1.6 21.3 3.5 0.0 1.9 8.3

481092 Multiply paper … 12.8 0.07% 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.8 16.1 19.3 1.4 3.5 11.5 1.9 4.8 39.5

480511 Semi-chem.fluting paper 8.8 0.06% 0.0 0.0 0.0 0.0 0.0 0.0 4.4 1.0 11.0 21.2 0.0 7.4 12.8 9.6 9.7 22.9

Sources: Own calculations from COMTRADE, TRAINS and tariff liberalisation schedules

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Going beyond the objective criteria for the identification of sensitive goods, we also use a list of other products analysed in the partial equilibrium modelling in Chapter 5 to see if we arrive at similar conclusions. Here we aim at providing complementary information to that of the partial equilibrium exercise. In the same guise as above, we use these products to identify both the origin and degree of competitive pressures on EU exports to ASEAN. The shades in the tariffs identify instances where the MFN tariff is beyond 5%. However, the market shares are now shaded so that darker shades of grey identify higher values. This allows us to grasp the degree of competition that arises from each origin. For tractability purposes we do not comment on individual products but we note that Japan appears, more often than not, as the main competitor in the sensitive products selected.

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Table 4.18 Descriptive statistics for products analysed in the partial equilibrium model (Chapter 5)

HS Product description

Share in EU exports to ASEAN

ASEAN MFN tariff CHN KOR ANZ JPN IND Asean AUS CHN EU IND JPN KOR NZL US RoW

870899 Parts And Accessories, For Tractors, Motor Vehicles 1.11% 22.7 7.4 0.0 0.0 0.0 0.3 10.8 1.2 3.9 13.5 0.4 47.4 3.4 0.0 1.8 17.6

847330

Parts And Accessories Of Automatic Data-Processing Machines 1.06% 0.1 0.0 0.0 0.0 0.0 0.0 0.5 0.1 37.2 3.1 0.1 18.4 7.2 0.0 9.8 23.7

852520 Transmission Apparatus For Radio-Telephony 0.99% 3.0 0.0 0.0 0.0 0.0 0.0 1.2 0.1 51.9 11.0 9.4 1.7 10.6 0.0 1.4 12.7

847989 Machines And Mechanical Appliances, N.E.S. 0.83% 1.6 0.0 0.0 0.0 0.0 0.0 0.6 0.4 6.3 17.3 0.5 39.2 6.5 0.0 13.4 15.8

854129 Transistors 0.71% 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 8.7 40.0 0.0 30.4 3.3 0.0 6.3 11.1

870323 Motor Cars And Other Motor Vehicles 0.67% 42.8 13.3 16.0 9.0 10.3 15.0 13.1 0.0 0.5 15.0 0.0 31.6 8.2 0.0 2.4 29.2

850239 Generating Sets 0.65% 9.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 37.0 24.6 0.3 22.4 5.5 0.0 5.1 5.1

732690 Articles Of Iron Or Steel, N 0.61% 10.0 0.0 0.0 0.1 0.5 0.0 3.7 0.9 20.0 13.6 0.7 34.4 3.8 0.1 10.6 12.2

382490 Chemical Products 0.47% 5.6 0.0 0.0 0.0 0.0 0.0 2.2 1.9 14.1 18.6 0.9 29.7 3.7 0.1 11.3 17.6

847990 Parts Of Machines And Mechanical Appliances, N.E.S. 0.42% 0.3 0.0 0.0 0.0 0.0 0.0 3.2 0.5 3.3 16.8 0.3 34.0 6.3 0.0 17.7 18.0

853710 Boards, Cabinets And Similar Combinations Of Apparatus 0.39% 10.8 0.0 0.0 0.3 0.0 0.1 0.7 1.0 16.1 15.9 0.4 25.4 3.5 0.0 21.6 15.4

841480 Air Pumps, Air Or Other Gas 0.36% 9.8 0.0 0.0 0.0 0.0 0.0 1.4 0.4 15.9 24.0 3.2 24.3 3.6 0.7 12.3 14.3

392690 Articles Of Plastics 0.35% 15.6 0.2 0.0 1.0 0.0 0.2 2.1 0.5 20.3 7.7 0.2 38.1 6.7 0.1 7.9 16.5

901890 Instruments, Appliances For Medical, Etc Science, Nes 0.31% 1.3 0.0 0.0 0.0 0.0 0.0 0.8 0.8 7.2 34.0 1.3 14.2 2.8 0.2 22.3 16.5

710231 Non-Industrial Diamonds Unworked 0.30% 0.1 0.0 0.0 0.0 0.0 0.0 1.3 0.0 0.3 22.2 0.0 0.0 0.0 0.0 0.1 76.1

271019 Medium Oils And Preparations 0.29% 6.3 0.4 0.0 3.3 2.9 0.0 9.0 0.9 3.9 1.7 2.0 4.4 35.1 0.0 1.5 41.5

853690 Electrical Apparatus For Switching Electrical Circuits, 0.27% 8.6 0.0 0.5 0.0 0.0 0.5 1.0 0.4 17.5 6.5 1.0 38.3 2.5 0.0 14.9 18.0

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Sources: COMTRADE, TRAINS, liberalisation schedule.

854140 Photosensitive Semiconductor Devices, 0.27% 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.2 13.8 21.4 0.3 25.8 1.8 0.0 11.1 25.4

890190 Vessels For The Transport Of Goods 0.26% 8.8 0.0 0.0 0.0 0.0 0.0 2.3 0.6 20.5 24.7 0.0 26.7 5.2 0.0 0.1 20.1

220820 Spirits Grape Wine Or Grape Marc 0.19% 56.6 0.2 9.5 9.9 0.0 1.6 2.3 0.1 0.1 92.4 0.0 0.2 0.1 0.0 4.3 0.6

110710 Malt (Excl. Roasted) 0.18% 9.3 0.0 0.0 0.1 0.0 0.2 0.0 59.1 9.2 28.5 0.0 0.0 0.0 0.0 0.2 3.1

840999 Parts Piston Engine, N.E.S. 0.17% 6.8 2.4 0.4 0.1 5.1 0.1 8.3 0.7 9.7 8.7 0.3 62.9 1.2 0.0 2.5 5.7

730410 Line Pipe For Oil Or Gas Pipelines 0.15% 21.0 0.0 0.0 0.0 0.0 0.0 0.4 0.1 24.5 10.3 1.1 49.0 3.0 0.0 1.2 10.5

853890 Parts 0.15% 5.9 0.0 0.0 0.0 0.0 0.1 0.5 0.6 13.5 12.6 0.6 48.2 2.7 0.2 5.0 16.3

870829 Parts And Accessories Of Bodies For Tractors, Motor Vehicles 0.08% 19.6 0.0 1.1 0.0 1.2 0.3 1.9 0.3 7.8 6.1 0.1 46.1 14.2 0.0 1.9 21.6

848210 Ball Bearings 0.08% 2.0 0.0 0.0 0.0 0.0 0.0 2.7 0.2 24.3 8.0 0.2 37.9 1.6 0.0 10.3 14.9

300210 Antisera And Other Blood Fractions And Modified Im... 0.05% 1.8 0.0 0.0 0.0 0.0 0.0 0.8 10.6 3.8 27.0 0.2 0.5 2.8 0.3 21.0 33.2

390210 Polypropylene, In Primary Forms 0.04% 7.5 0.0 1.7 1.7 2.1 2.3 7.9 1.1 1.3 1.8 8.2 12.8 20.0 0.0 10.1 36.8

870322 Other Vehicles, With Spark-Ignition Internal Combu... 0.02% 35.4 13.9 12.6 1.6 2.8 13.8 31.4 0.0 0.3 1.0 0.0 57.0 6.3 0.0 0.1 4.0

870332 Other Vehicles, With Compression-Ignition Internal... 0.01% 36.6 12.8 6.9 15.3 10.3 10.1 37.2 0.7 0.1 3.0 0.1 9.1 29.7 0.0 0.2 19.8

401199 Pneumatic Tyres, New, Of Rubber 0.01% 13.6 0.0 0.0 0.1 0.0 0.1 3.7 0.9 33.0 20.4 14.2 13.6 1.3 0.0 0.9 12.1

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5 Partial equilibrium simulations

This chapter applies the TAPES partial equilibrium modelling framework to analyse the effects of the different integration processes involving ASEAN on the European Union. The advantages of this method are that it allows an identification of trade effects (EU exports to ASEAN) at the very detailed level and that it is possible to ascribe these effects to specific free trade agreements. The key results are as follows:

The ASEAN-Japan FTA is found to generate the most significant effects for the EU. The simulations suggest that products in HS chapter 87 (vehicles and parts and accessories thereof) might be the most affected. The simulations suggest that the EU could lose almost half of its share in the ASEAN market in these products. EU exports to ASEAN of all analysed products taken together (accounting for close to 30% of total ASEAN imports from the EU) declines by 2.5% due to the ASEAN-Japan FTA. The strength of effects of ASEAN‟s agreement with Japan can be explained by the high degree of overlapping of products in the export structures of both partners (Japan and the EU) in the ASEAN market and the importance of Japan as a supplier in the ASEAN market.

The effects of all other FTAs appear to be rather small (negligible in the case of ASEAN-India), although for a few specific products more significant changes are foreseen for the EU exports to ASEAN.

Successful completion of the Doha round and implementation of commitments as they are currently foreseen is found to improve the prospects of EU exports compared to a no-Doha scenario. In particular, a scenario with Doha commitments implemented and no implementation of FTAs boosts EU exports of the products considered to ASEAN by 1.1%. The combined effect of all five FTAs and the Doha scenario is a 1.7% (USD 227 million) fall in EU exports to ASEAN for the analysed products. The bulk of these losses occurs in products in HS chapter 87 (vehicles and parts and accessories thereof).

The analysis carried out in Chapter 4 has identified products currently exported to ASEAN from the EU that may have to face intensified competition as third partners enhance their access into the ASEAN market following the removal of tariff barriers to their exports. We directly use this information below by analysing markets for several products identified in chapter 4 in the partial equilibrium modelling framework.

As it was mentioned in the previous chapter, the third country effects analysis in the Sussex Framework helps to identify the products where the most important part of the effect are most likely to take place. Partial equilibrium analysis reported below takes into account some important features of reality that were not accounted for by the Sussex Framework approach. First, the substitution between products of different origins is not complete. The EU producers may reduce their prices in order not to lose that market and also ASEAN consumers may simply not consider the EU and the partner product substitutes and they may decide to continue demanding the EU products despite the rise in their relative prices. Second, the existence of other non-preferential partners increase the size of the market and dilutes the importance of ASEAN‟s FTA partners. On the other hand, there exist other

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countries beside the EU and ASEAN‟s FTA partners that are also affected be ASEAN‟s FTAs. To obtain a more refined and precise estimates of the effects on the EU it is necessary to consider or control these issues.

These aspects are better handled in a partial equilibrium analysis since it allows to consider many products taking into account interactions between several producers selling a given product to the importing region (ASEAN). The substitution between products of different origins is explicitly considered by including elasticities and in this way introducing frictions that exist in real markets.

The model we use these regions: the European Union (EU), the United States (USA), Australia and New Zealand (AUSNZ), Japan (JPN), India (IND), Republic of Korea (KOR), ASEAN and Rest of the World (ROW). The analysis focuses on ASEAN imports from these regions and is carried at a very detailed HS 6-digit commodity disaggregation.

In the model, changes in the trade policy parameters (tariffs) imposed on some or all ASEAN partners affect ASEAN imports. These effects tend to be complex and require further interpretation. The implementation of an FTA could increase total imports (due to a falling aggregate import price) and/or it could lead to changes of import supply sources (a substitution across origins of imports). For example, an FTA with China could reduce the aggregate price of ASEAN imports but also would make China more attractive as a supplier for a particular good. As a consequence, ASEAN would reduce its imports from other suppliers in this scenario and increase its imports from China89. This is the main channel through which we analyse the effect of the different ASEAN integration process on the ASEAN imports from the EU i.e. on the EU‟s exports to ASEAN.

While in general, the sign of the effect can be easily characterised and defined, the magnitude of the change, particularly in terms of the substitution across origins, will depend on several factors. One important element to consider is the elasticity of demand. If the aggregate price of the product falls as a consequence of granting a preference to a partner, the ASEAN demand for that product will increase regardless of the origin90. This first effect is expected to be positive for all partners and its magnitude will depend on the size of that elasticity (plus, of course, the magnitude of the shock and other structural factors). Higher (in absolute value) values of the elasticity, lead to stronger effects on the quantity imported and higher imports, when a tariff is being reduced.

On the other hand, the effect on the party of an analysed FTA as well as on non-signatories (e.g. the European Union) will also depend on the degree of substitution between origins of imports. If agents perceive that a product originating in the EU, for example, is a very close substitute to a product originating in China (the country signing the FTA); imports from the EU will fall significantly (and imports from China will increase strongly) as agents substitute from a now relatively more expensive EU product to a product produced in China. This is the main channel through which EU exports will be affected as a result of the different ASEAN integration processes.

89 Given the focus of this analysis we do not discuss the welfare implications for ASEAN from these

changes. 90

Lack of data does not allow incorporation of domestic production in the model. Therefore, the model assumes that all the ASEAN demand is entirely supplied with imports.

94

At this point, there are two avenues to follow. The standard approach used in a number of partial equilibrium (and also in general equilibrium) models is to assume that the elasticity of substitution is constant across origins or basically, that all origins are equally substitutable. This is handled through the use of a constant elasticity of substitution (CES) function and the result is that imports will fall by the same proportion from each of the non-signing partners. This could be a preferred approach for analysis of longer term effect as in the long run, the substitution will tend to equate between origins.

An alternative approach is to assume that the degree of substitution varies across partners by using a transcendental logarithmic (translog) function. The idea is that agents could consider that imports from origins A (e.g. China) and B (e.g. India) are close substitutes but imports from A and C (e.g. the EU) are not. In this example, if ASEAN signs an FTA with China, the effects on imports of a given product from India will be significant, whereas the impact on imports from the EU will be less pronounced.

Finally, the third factor to consider is the reaction of partners against changes in the bilateral price or the elasticity of supply of ASEAN imports (the elasticity of supply of partner‟s exports to ASEAN). If the partner supply is very inelastic, any change in the demand from ASEAN will only affect the bilateral price without changing the quantities traded. Therefore and ceteris paribus, the value of imports from that partner will fall by the same percentage as the change in the price. On the contrary, if the supply elasticity is very high, prices will remain unchanged and quantities will adjust. In any case, we are implicitly making different assumptions about how world prices would behave. This will depend on the share of ASEAN and its partners in the world trade. We come back to this issue below when presenting the parameters used in the model.

5.1 Model setup

In this section we present the main equations used in the partial equilibrium model. The model as such is more general and can handle more complex supply and demand conditions and policies. Here, we only present the equations that are active or that explain the behaviour of the situation modelled and not the complete model.

(1)

Equation 1 establishes the border price or domestic price of product c coming from country

w, as a function of the world price of that product from that country and the

tariff applied to product c imported from the country w( ). The tariff is the parameter that

will be changed in each simulation exercise according to the scenario.

(2)

Equation 2 is the translog price index or the price aggregator. This equation explains how

the aggregate price of the imported product c, is formed out of the levels of the

different border prices and the substitution between them given by . A decrease in the

95

bilateral border price will decrease the aggregate price by the second term; but that effect will be dampened or increased by the third term that considers the interaction with the rest of the prices.

(3)

Equation 3 is the share to values equation and is one of the first order conditions of the optimization problem. It basically states that the value of the imports from country w of

product c ( w

c

w

c QMRPMR * ), must be equal to the share of country w in product c, in the total

value of imports of product c ( ). The share is endogenously determined by

(4)

Equation 4 states that the share of imports of product c coming from w is positively related to the price of product c coming from other countries wp adjusted by the elasticity of substitution. This equation determines how imports in quantities are distributed between origins. This is another of the first order conditions.

(5)

Equation 5 is the demand for imports of product c. In this case, with no domestic supply of c, it is equal to the total demand for product c. The total quantity imported depends on the ratio

of the aggregate price of imports, and the base price and the elasticity of demand

( c ). Therefore, any deviation of prices from the baseline value will trigger more or less total

imports. Finally, the supply of imports is defined by

(6)

The quantity of product c supplied by country w depends on the ratio of the border price of

product c and the base price, adjusted by the elasticity of supply. If , for example, the

quantity supplied by country w will stay constant and the only the border price will be affected. All the effect will be on the border price.

It is instructive to realise what is the relation between the model results and the concepts of trade creation, trade diversion and trade re-orientation as discussed in Chapter 1. The model, as it was specifically set up for this exercise, calculates the changes in the quantity of ASEAN imports from the EU and other key ASEAN trade partners. From the ASEAN perspective, these changes can be either classified as trade creation or trade diversion. Trade creation would happen if ASEAN‟s FTAs resulted in ASEAN imports being sourced from more efficient suppliers. It is also possible that FTA preferences lead ASEAN to source imports from less efficient suppliers that gain a competitive edge only thanks to lower tariffs. This would be the case of trade diversion.

96

From the EU perspective, no trade creation can take place as it is the party outside the analysed FTAs. The effects on the EU can be a combination of trade diversion and trade re-orientation. However, in this particular case, the model does not allow to distinguish these two effects for the EU.

In equations 2 and 4, plays a key role since it is the parameter that allows the

substitution across origins. Elasticities will play a key role and will determine the magnitude of changes. However, they will not be the only drivers. Other factors will also play an important role in the determination on how imports will respond to a change in tariffs. Particularly, the size of the original bilateral imports will also explain some of the effects. For example, if before the implementation of the FTA China is a marginal supplier of a given product to the ASEAN market, the model will not transform China into a major supplier of this product after the FTA has been implemented. Imports will grow strongly from China in relative terms but from a very low base and hence imports from the rest of the world will fall marginally in relative terms. One should remember that big percentage changes could be masking very small absolute changes and vice versa. On the other hand, if a product is not being imported from an FTA partner before the agreement is implemented, the model will not allow for creating new trade flow in this product.

Finally, the size of the shock also plays a key role – both in relative and in absolute terms. A 100% fall in the tariff may involve the small absolute change from an initial very low level and a 50% fall in the tariff may involve a sizable change if the initial tariff level was high. It is important to keep in mind these considerations at the time of evaluating the results coming from the model.

5.2 Elasticities

Choosing the appropriate values for elasticities is a hard task. The idea is that they reflect accurately how quantities react against changes in prices and vice versa. The value of elasticities is bound to depend on several factors including tastes, technology, etc. Unfortunately, there are few studies on values of trade elasticities. The paper by Kee, Nicita and Olarreaga (2008) provide estimations of import demand elasticities by country calculated on the basis of analysis of HS 6 digits products. For ASEAN countries, these average elasticities are in the range of -2.07 and -4.9 with a standard deviation ranging from 8.22 to 17.67 depending on the country. This is revealing that values of elasticities tend to vary enormously between products.

In an earlier and unpublished version of their paper, Kee, Nicita and Olarreaga (2005) present also the import elasticities classified according to a classification of goods due to Rauch (1999). They found the mean import demand elasticity for differentiated products of -1.59. For referenced price products the reported mean is -1.84 and for homogenous goods it is around -1.98. These elasticities are not reported at a country level. A general conclusion from this work confirms an intuition that more differentiated products are less substitutable and hence are characterised by the lower demand elasticity.

Given the differences in import demand elasticities for individual products, average values for countries will be affected by their import structures. If a given country‟s imports are dominated by differentiated products, its average import demand elasticity will tend to be lower. Considering this, we decided to use for the differentiated products the lowest elasticity of demand reported for an ASEAN country by Kee, Nicita and Olarreaga (2008). This is a value of -2.07 (the elasticity of import demand of Singapore)., For homogenous goods, we use the higher estimated elasticity of -4.9 (corresponding to the value reported for Indonesia)

97

and for the referenced priced goods, we use an average of the elasticities of Malaysia, Thailand and Philippines, which yields -3.2.

Such a choice of import elasticity assumptions is arbitrary, but alternatives are problematic. Taking the average for ASEAN countries individually for all product-specific elasticity estimates would e affected by different versions of HS classifications used by Kee, Nicita and Olarreaga (2008) and in this report. Besides, individual estimates of country- and product-specific elasticities are likely to contain several extreme values and be estimated very imprecisely, e.g. due to very low trade flows. Taking these selected individual point estimates (among above 300,000 parameters estimated in the study) could lead to the modelling results being primarily determined by outliers in Kee, Nicita and Olarreaga (2008) estimates. These are the major reasons for sticking to elasticities calculated as averages across countries and broad groups of products.

We do not perform sensitivity analysis with alternative values of import elasticities, but instead consider other values of elasticity of substitution – another key parameter where modelling assumptions have to be made (see Appendix 4). Sensitivity analysis involving both import demand and substitution elasticities would increase the number of scenarios to an extent making the analysis very hard to follow.

There is another type of problems concerning the elasticity of supply of ASEAN imports. Rather than an exact value for the elasticity, we are more interested in whether the supply curve is (almost) vertical or rather horizontal. As discussed above this matter crucially for the reaction prices of the ASEAN imports. ASEAN is an important player in world markets. Furthermore, it can be argued that changes in ASEAN policies will have effect not only on ASEAN terms of trade but also on their partners. As ASEAN is becoming a important world consumer in many products, its partners may experience significant reductions in demand that will lead to reductions in prices. Based on these considerations we fix the elasticity of supply of imports relatively low. However, we differentiate between developed countries with a somewhat higher elasticity of supply of imports (a value of 5) and developing countries with the elasticity of supply fixed at 2.5. The reason is that we should expect that the terms of trade effects should be higher for developing countries than for developed countries91. In the model, we consider India, ASEAN and ROW as developing regions.

The sensitivity analysis considers alternative values of elasticity of substitution. We consider two cases. The first case is the standard specification with fixed elasticities across origins. In this setting we consider three values of the elasticity. The middle value is set by following the rule of thumb of setting the elasticities of substitution across origins at the double of the elasticities of demand92. The low and high elasticities are set at half and double the base elasticity (Table 5.1).

The second case is where we allow for different elasticities of substitution for different origins. We assume that the substitution within developed countries and within developing countries is very high. However, the substitution between developed and developing countries is lower. The idea is that the production structures of developing countries are more similar within them than with developed countries. The same applies for the production

91 Baxter and Kouparitsas (2000) suggest that terms-of-trade fluctuations in developing countries are

twice as large as in developed countries. 92

The rule is based on the tiered demand structure that says that the substitution must be higher between origins than between domestic and imported products.

98

structures within developed countries. Moreover, quality often is seen different between developed and developing countries. In terms of the model, we use the substitution matrix as shown in Table 5.2.

Table 5.1 Elasticity of substitution between origins in the standard specification

Low substitution Middle substitution High substitution

Homogenous goods 4.9 9.8 19.6

Referenced priced 3.2 6.4 12.8

Differentiated goods 2.07 4.14 8.3

Source: Assumptions in the model.

Finally, we present a third type of sensitivity analysis where we change the value of the elasticity of supply of ASEAN imports. In particular, we assume the very high elasticity of supply (1000 for this exercise) to explore the potential maximum quantity effects. This amounts to assuming that ASEAN partner‟s exports are extremely sensitive to price fluctuations and, will be willing to supply any quantity demanded.

In a certain sense this could be considered a long term scenario since under these assumptions the partner‟s supply function becomes very sensitive to price fluctuations or putting it in a different way, partners can make full adjustments of their supplies given the new higher or lower demand. Therefore, in this model world, if the preference margin in favour of a given FTA partner is kept in the long run, non-FTA partners would reduce even further their exports as the demand towards them falls or even disappears. In other words, assuming that price differentials remain in place in the long run, likely leads to an outcome where non-FTA partners are replaced by FTA partners in the ASEAN market. However, it is important to note that this analysis is carried under the ceteris paribus assumption that may not be very reasonable in the long run. In reality other variables are likely to adjust as well. Therefore, the results of this scenario that are presented in Table A4.12 in Appendix 4 should be interpreted very carefully.

Table 5.2 Elasticities of substitution for Translog specification

ASEAN EU USA AUSNZ ROW CHN JPN KOR IND

ASEAN

5 5 5 10 10 5 5 10

EU

10 10 5 5 10 10 5

USA

10 5 5 10 10 5

AUSNZ

5 5 10 10 5

ROW

10 5 5 10

CHN

5 5 10

JPN

10 5

KOR

5

IND

5.3 Data

Trade data comes from UN Comtrade and uses 6-digit disaggregation of the 2002 version of the harmonised system (HS). It reflects 2007 trade flows with the exception of Cambodia

99

whose trade corresponds to 2008. Such a choice of the base year is determined by data availability to ensure that the analysis uses consistent trade flows and tariff data. Due to issues of data availability, Indonesian trade flows are taken from mirror statistics.

Singapore presented a problem at the time of designing the experiment. It is a country with zero tariffs in almost every product whose influence cannot be reduced by excluding re-exports and re-imports. Since we work in an aggregate partial equilibrium model, the inclusion of Singapore in calculating ASEAN tariffs would underestimate the current levels of protection of the region either using weighted or un-weighted tariffs. Therefore, we opt for excluding Singapore from the database as it allows for constructing more realistic tariffs and reductions.

Tariffs reductions in both Doha and the FTA scenarios (see below) were calculated at the country level. In the case of the Doha scenario, if the bound tariff after the implementation is below the MFN tariff, the new MFN is set at the new level of the bound. In the case of the FTA scenarios, the new preferential tariffs are obtained by applying the correspondent treatment to each product and country according to the agreements at the country level.

The model considers ASEAN as a single region. Therefore, initial MFN tariffs are constructed by calculating a weighted average tariffs by product of the original MFN, a new weighted MFN after Doha and a set of weighted preferential tariffs for each scenario considered. Therefore, the reductions on tariffs have been considered at the country level and only then aggregated to the ASEAN level. This explains why reductions in some products may not be complete.

5.4 Simulation exercises

We consider a wide range of scenarios that reflects the different integration processes that ASEAN is currently negotiating or implementing (Table 5.3).

Table 5.3 Simulation scenarios

Scenario Description

DOHA Doha Round reductions applied on ASEAN

DCK Doha Round reductions plus the China and Korea FTA implemented

JAPAN ASEAN-Japan FTA implemented

NZAUS ASEAN-Australia/New Zealand FTA implemented

INDIA ASEAN-India FTA implemented

JAPAN_DCK ASEAN-Japan FTA and DCK scenario implementad

NZAUS_DCK ASEAN-Australia/New Zealand FTA and DCK scenario implemented

INDIA_DCK ASEAN-India FTA and DCK scenario implemented

ALL ASEAN-Japan, ASEAN-AUS/NZL and ASEAN-India implemented

ALL_DCK All agreements implemented

SPECIAL 90% reduction on industrial and 25% reduction on agricultural products for all origins

The scenario DOHA tries to capture some likely outcome of the current WTO round of negotiations. This scenario is a “positive” scenario for the EU in the sense that reflects the liberalisation that ASEAN will undertake as a consequence of WTO commitments. For

100

Agricultural goods as defined in the Annex I of the Agreement on Agriculture, the following tiered formula is applied on ASEAN bound tariffs

Tariffs between 0 and 30%: 33% reduction (2/3 of the reduction of developed countries)

Tariffs between 30% and 80%: reduction of 38%

Tariffs between 80 and 130%: reduction of 42.6%

Tariffs greater than 130%: reduction of 46.6%

We are aware of numerous exceptions. Countries could have sensitive products and special products declared. For example, Vietnam is exempt of further commitments under Recently Acceded Member (RAM) provisions. However, in practical terms it would have been impossible to identify the products that countries will flag as sensitive or special. Therefore, we applied this formula to all agricultural goods.

For the rest of the goods, a Swiss formula with a coefficient of 25 was applied on the ASEAN bound tariffs, following the December 2008 draft modalities.

The DCK (Doha + China + Korea) scenario serves as the baseline. It is the scenario that contains the agreements where implementation started as of 2007 and the implicit assumption that the Doha Round is finalised and implemented. Therefore, besides the Doha scenario cuts, for the tariffs with China and Korea, further reductions are applied. The default treatment is that all tariffs applied to China and Korea will be set at zero. The exceptions are incorporated in the analysis based on a detailed analysis of exclusion lists in the annexes of the agreements signed93. It is important to highlight that there are different routes or lists

(see Section 2.2.2 for details). In general, the major differences are in the speed of convergence to the zero tariffs. In our scenarios all products that are to reach zero tariffs will have the same treatment regardless of timescale of reductions foreseen in the agreements. We considered as excluded products for which the agreements do not foresee a complete elimination of tariffs. These products receive the treatment as foreseen in agreements. For example, if an agreement says that the tariff will be reduced by 50%, we apply exactly this reduction in our scenario. Products subjected to tariff-rate quotas are treated as liberalised in FTA scenarios.

The JAPAN, AUSNZL and INDIA scenarios simulates the standalone FTAs. Construction of these scenarios in terms of tariff reductions is subject to identical considerations as explained above for the DHK scenario.

The JAPAN_DCK, AUSNZL_DCK, INDIA_DCK scenarios combine the FTAs, respectively, Japan, Australia and New Zealand and India with the DCK scenario. These three scenarios allow an analysis of the effect of these agreements over and above the implementation of earlier ASEAN FTAs (i.e. with China and Korea) and the Doha commitments. Finally, the ALL and ALL_DCK scenarios allow to provide a summary of all the integration process at the same time and their effect on the EU exports.

93 The list of exclusions can be found at http://www.aseansec.org/22935.htm

http://www.aseansec.org/22935.htm

101

Finally, the SPECIAL scenario serves as an additional reference point. It models the hypothetical situation in which ASEAN countries reduce their tariffs in industrial products by 90% and by 25% in agricultural products, regardless of the import origin.

5.5 Results

The analysis is applied to the list of products (HS 6-digit level) the selection of which was based on various consideration of these products‟ current and potential importance for the EU trade and production. In addition we consider products that have been identified in Chapter 4 (Table 4.17) as those for which potentially significant trade creation and diversion effects may materialise. Table 5.4 provides a full list of products considered in the partial equilibrium analysis with description of product codes94. Table 5.5 shows the value of the

ASEAN imports from the EU on these products as well as the value of imports on these products of the rest of the ASEAN partners.

Table 5.4 List of products considered in the partial equilibrium model

Product Description

110710 Malt (Excl. Roasted)

210690 Food preps., n.e.s.

220820 Spirits Obtained By Distilling Grape Wine Or Grape Marc

220830 Whiskies

271019 Medium Oils And Preparations, Of Petroleum Or Bituminous Minerals, N.E.S.

293399 Heterocyclic comps. with nitrogen hetero-atom(s) only…

300210 Antisera And Other Blood Fractions And Modified Im...

300490 Medicaments (excl. of 30.02/30.05/30.06) consisting of mixed/unmixed prods…

330499 Beauty/make-up preps. & preps. for the care of the skin (excl. meds…)

382490 Chemical Products And Preparations Of The Chemical Or Allied Industries, Incl. Those Consisting Of Mixtures Of Natural Products, N.E.S.

390210 Polypropylene, In Primary Forms

390950 Polyurethanes

392190 Plates, sheets, film, foil & strip (excl. cellular), of plastics, n.e.s. in 39.21

392690 Articles Of Plastics And Articles Of Other Materials Of Heading 3901 To 3914, N.E.S

401199 Pneumatic Tyres, New, Of Rubber (Excl. Having A 'Herring-Bone' Or Similar Tread And Pneumatic Tyres Of A Kind Used On Motorcars, Station Wagons, Racing Cars, Buses, Lorries, Motorcycles And Bicycles)

480511 Semichemical fluting paper

481092 Multiply paper & paperboard, coated on one/both sides with kaolin...

710231 Non-Industrial Diamonds Unworked Or Simply Sawn, Cleaved Or Bruted (Excl. Industrial Diamonds)

720449 Ferrous waste & scrap (excl. of 7204.10-7204.41)

730410 Line Pipe Of A Kind Used For Oil Or Gas Pipelines, Seamless, Of Iron Or Steel (Excl. Products Of Cast Iron)

94 In subsequent tables we identify products by codes only, without a description.

102

Product Description

730799 Tube/pipe fittings of iron/steel (excl. cast iron/stainless steel; excl. of ...

732690 Articles Of Iron Or Steel, N.E.S. (Excl. Cast Articles Or Articles Of Iron Or Steel Wire)

760611 Plates, sheets & strip, rect. (incl. square), of a thkns. >0.2mm, of aluminium, not alloyed

760612 Plates, sheets & strip, rect. (incl. square), of a thkns. >0.2mm, of aluminium alloys

840999 Parts Suitable For Use Solely Or Principally With Compression-Ignition Internal Combustion Piston Engine, N.E.S.

841112 Turbo-jets, of a thrust >25 kN

841191 Parts of the turbo-jets/turbo-propellers of 8411.11-8411.22

841199 Parts of the oth. gas turbines of 8411.81 & 8411.82

841480 Air pumps, air/oth. gas compressors & fans (excl. of 8414.10-8414.59); ventilating/recycling hoods incorp. a fan, whether or not fitted with filters (excl. of 8414.60)

841790 Parts of the industrial/laboratory furnaces & ovens of 8417.10-8417.80

841950 Heat exchange units

843149 Parts suit. for use solely/princ. with the mach. of 84.26/84.29/84.30 (excl ...

844390 Parts of the mach. of 84.43

847180 Other units of automatic data processing machines

847330 Parts And Accessories Of Automatic Data-Processing Machines Or For Other Machines Of Heading 8471, N.E.S.

847989 Machines And Mechanical Appliances, N.E.S.

847990 Parts Of Machines And Mechanical Appliances, N.E.S.

848180 Taps, cocks, valves & sim. appls. for pipes/boiler shells/tanks/vats or the like…

848210 Ball Bearings

850239 Generating Sets (Excl. Wind-Powered And Powered By Spark-Ignition Internal Combustion Piston Engine)

851722 Teleprinters

851730 Telephonic or telegraphic switching apparatus

851750 Other apparatus, for carrier current line systems or for digital line systems

851780 Electrical app. for line telephony/line telegraphy, n.e.s. in 85.17

851790 Parts of the app. & equip. of 85.17

852510 Transmission apparatus

852520 Transmission Apparatus Incorporating Reception Apparatus, For Radio-Telephony, Radio-Telegraphy, Radio-Broadcasting Or Television

853690 Electrical app. for switching/protecting electrical circuits,/for making connections to/in electrical circuits, n.e.s. in 85.36, for a voltage not >1000V

853710 Boards, Cabinets And Similar Combinations Of Apparatus For Electric Control Or The Distribution Of Electricity, For A Voltage <= 1.000 V

853890 Parts Suitable For Use Solely Or Principally With The Apparatus Of Heading 8535, 8536 Or 8537, N.E.S. (Excl. Boards, Panels, Consoles, Desks, Cabinets And Other Bases For The Goods Of Heading 8537, Not Equipped With Their Apparatus)

854129 Transistors With A Dissipation Rate >= 1 W (Excl. Photosensitive Transistors)

854140 Photosensitive Semiconductor Devices, Incl. Photovoltaic Cells Whether Or Not Assembled In Modules Or Made Up Into Panels; Light Emitting Diodes (Excl. Photovoltaic Generators)

854150 Other semiconductor devices

103

Product Description

854221 Monolithic integrated circuits, digital

854229 Monolithic integrated circuits, other than digital

854260 Hybrid integrated circuits

854890 Electrical parts of mach./app., n.e.s. in Ch.85

870322 Vehicles (excl. of 87.02 & 8703.10) princ. designed for the tpt. of persons, with spark-ignition int. comb. recip. piston engine, of a cyl. cap. >1000cc but not >1500cc

870323 Vehicles (excl. of 87.02 & 8703.10) princ. designed for the tpt. of persons, with spark-ignition int. comb. recip. piston engine, of a cyl. cap. >1500cc but not >3000cc

870324 Vehicles (excl. of 87.02 & 8703.10) princ. designed for the tpt. of persons, with spark-ignition int. comb. recip. piston engine, of a cyl. cap. >3000cc

870332 Vehicles princ. designed for the tpt. of persons (excl. of 87.02 & 8703.10-8703.24), with C-I int. comb. piston engine (diesel/semi-diesel), of a cyl. cap. >1500cc but not >2500cc

870829 Parts & accessories of bodies (incl. cabs) of the motor vehicles of 87.01-87.05, n.e.s….

870899 Parts & accessories of the motor vehicles of 87.01-87.05, n.e.s. in 87.06-8

880230 Aeroplanes and other aircraft, of an unladen weight exceeding 2,000 kg but not exceeding 15,000 kg

880240 Aeroplanes and other aircraft, of an unladen weight exceeding 15,000 kg

880330 Other parts of aeroplanes or helicopters

890190 Vessels for the tpt. of gds. & for the tpt. of both persons & gds. (excl. of 8901.10-8901.30)

901890 Instruments, Appliances For Medical, Etc Science, Nes

As requested by the terms of reference, we focus our analysis on the effects of different scenarios we are considering on EU exports to ASEAN. In the description that follows we use the middle values of elasticity of substitution. The results of the sensitivity analysis with alternative values of elasticity of substitution are reported in Appendix 4.

Table 5.5 Value of ASEAN imports modelled (USD million) in 2007

ASEAN import source Products selected Total imports

% share of products selected in total imports from a source

ASEAN 23,358 75,019 31.1

Australia-New Zealand 1,150 13,215 8.7

China 14,026 65,738 21.3

European Union 13,596 46,559 29.2

India 865 7,947 10.9

Japan 16,686 70,626 23.6

Korea 8,900 27,466 32.4

United States 11,586 39,053 29.7

Rest of the World 28,548 154,770 18.4

Total 118,717 500,393 23.7

Source: Calculations based on Comtrade data.

The effects on the value of trade are decomposed in a quantity and a price effect. Given the assumptions on the elasticity of supply of exports, prices are affected by changes in the

104

demand from ASEAN. Therefore, a reduction of ASEAN demand for EU exports will lead to a fall in the price of the European variety. In general, the existence of some price flexibility reduces the effect on quantities since part of the effect is absorbed by prices.

Table 5.6 presents the results of the considered scenarios on the EU‟s exports to ASEAN. In the second column, as a reference, we present the value of the current EU‟s exports to ASEAN and subsequent columns (corresponding to FTA scenarios) we present the percentage change in the value of exports of each product.

Table 5.6 Percentage change in the value of the EU’s exports to ASEAN by scenario

Product

Current exports (USD million)

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

SP

EC

IAL

110710 71 1.5 1.2 0.0 -10.3 0.0 1.2 -8.5 1.2 -10.3 -6.8 6.7

210690 260 2.5 0.6 -0.5 -1.1 -0.1 0.2 -0.4 0.5 -1.7 -0.5 7.5

220820 76 12.3 12.2 -0.1 0.0 0.0 12.1 12.2 12.2 -0.2 12.2 10.9

220830 157 10.3 10.1 -0.1 -0.2 0.0 10.0 9.9 10.0 -0.3 9.8 20.0

271019 125 0.0 -1.6 -0.1 0.0 -0.1 -1.7 -1.6 -1.7 -0.1 -1.7 17.2

293399 7 0.0 -0.2 -0.2 0.0 -0.1 -0.4 -0.2 -0.3 -0.3 -0.3 1.7

300210 30 0.0 0.0 0.0 -0.1 0.0 0.0 -0.1 0.0 -0.1 -0.1 1.2

300490 1,085 0.0 -0.5 -0.3 -0.7 -0.3 -0.7 -1.2 -0.7 -1.3 -1.5 16.0

330499 94 23.9 23.1 -2.6 -0.6 -0.2 21.3 22.7 23.0 -3.4 22.6 56.8

382490 239 2.4 1.4 -2.9 -0.2 -0.1 -1.2 1.2 1.3 -3.2 1.2 17.4

390210 19 0.0 -1.6 -0.9 -0.1 -0.3 -2.5 -1.7 -1.9 -1.3 -2.0 22.7

390950 74 0.0 -2.1 -2.1 -0.2 -0.1 -4.2 -2.4 -2.2 -2.4 -2.4 20.4

392190 48 0.4 -5.9 -7.8 -0.6 -0.2 -13.1 -6.4 -6.1 -8.6 -6.6 42.3

392690 157 8.9 1.1 -18.0 -0.3 -0.1 -13.8 0.9 1.1 -18.2 0.9 60.0

401199 3 0.0 -1.3 -1.4 -0.1 -0.7 -2.6 -1.3 -1.9 -2.1 -2.0 32.4

480511 23 0.0 -3.0 -1.2 -1.7 0.0 -4.1 -4.6 -3.0 -2.8 -4.6 28.4

481092 29 0.0 -2.8 -0.5 -0.5 -0.1 -3.2 -3.3 -2.9 -1.1 -3.4 27.0

710231 118 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4

720449 140 0.0 0.0 0.0 -0.1 0.0 0.0 -0.1 0.0 -0.2 -0.1 0.6

730410 63 0.0 -8.4 -23.4 0.0 -0.3 -29.3 -8.4 -8.6 -23.6 -8.7 54.2

730799 53 4.0 0.6 -5.2 -0.5 -0.1 -3.8 0.2 0.5 -5.8 0.1 29.5

732690 269 0.0 -3.2 -7.0 -0.2 -0.1 -9.9 -3.4 -3.3 -7.2 -3.5 25.7

760611 33 25.7 19.5 -12.6 -13.0 -0.3 11.7 11.4 19.5 -23.9 11.4 57.7

760612 65 8.8 2.2 -4.2 -5.9 -0.2 -0.6 -1.8 2.1 -9.9 -1.9 26.6

840999 92 0.1 -0.3 -1.0 -0.1 0.0 -1.2 -0.4 -0.3 -1.1 -0.4 14.7

841112 38 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

841191 123 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5

841199 172 0.0 0.0 -0.3 0.0 0.0 -0.3 0.0 0.0 -0.3 0.0 1.3

841480 152 0.0 -2.3 -4.5 -0.2 -0.3 -6.7 -2.5 -2.6 -5.0 -2.8 20.2

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Product


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841790 31 0.0 -0.1 -0.2 0.0 0.0 -0.4 -0.2 -0.2 -0.2 -0.2 1.3

841950 85 0.1 -2.9 -1.9 -0.1 -0.1 -4.7 -3.0 -3.0 -2.1 -3.2 10.5

843149 84 0.6 0.3 -0.9 -0.1 0.0 -0.4 0.2 0.3 -1.0 0.2 3.6

844390 47 0.0 -0.1 -0.2 0.0 0.0 -0.2 -0.1 -0.1 -0.2 -0.1 1.0

847180 25 0.0 -0.2 0.0 0.0 0.0 -0.2 -0.2 -0.2 0.0 -0.2 1.4

847330 428 0.0 -0.1 -0.1 0.0 0.0 -0.1 -0.1 -0.1 -0.1 -0.1 0.3

847989 369 0.0 -0.3 -1.2 0.0 0.0 -1.4 -0.3 -0.3 -1.2 -0.3 3.1

847990 191 0.1 0.1 -0.2 0.0 0.0 -0.2 0.1 0.1 -0.2 0.1 0.9

848180 227 0.0 -2.3 -2.4 -0.1 -0.1 -4.6 -2.4 -2.4 -2.7 -2.6 13.9

848210 34 0.0 -0.7 -1.8 0.0 0.0 -2.5 -0.7 -0.7 -1.8 -0.7 6.3

850239 260 0.0 -3.8 -3.4 0.0 0.0 -7.0 -3.8 -3.8 -3.4 -3.8 14.0

851722 0.11 0.0 0.0 -5.6 0.0 0.0 -5.6 0.0 0.0 -5.6 0.0 14.6

851730 110 3.1 2.3 -0.1 -0.3 0.0 2.2 2.1 2.3 -0.3 2.1 8.9

851750 241 0.0 -0.7 -0.1 0.0 0.0 -0.8 -0.7 -0.7 -0.1 -0.7 2.0

851780 155 7.8 5.4 -0.4 -0.1 0.0 5.3 5.4 5.4 -0.4 5.4 14.2

851790 695 0.0 -0.1 0.0 0.0 0.0 -0.1 -0.1 -0.1 0.0 -0.1 0.5

852510 36 0.2 0.0 -0.1 0.0 0.0 -0.1 0.0 0.0 -0.1 0.0 1.1

852520 419 0.3 -0.1 0.0 0.0 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 1.6

853690 127 7.6 6.1 -6.4 -0.1 -0.1 1.5 6.0 6.0 -6.6 1.4 23.3

853710 167 0.7 -2.2 -6.1 -0.3 -0.1 -7.9 -2.4 -2.2 -6.4 -8.0 27.9

853890 93 0.1 -1.5 -7.6 -0.1 -0.1 -8.8 -1.6 -1.5 -7.7 -8.9 18.2

854129 291 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1

854140 108 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

854150 48 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

854221 396 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

854229 1,244 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

854260 282 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

854890 11 0.1 -2.1 -2.4 0.0 0.0 -4.4 -2.1 -2.1 -2.4 -4.4 19.3

870322 7 1.9 -1.7 -42.8 0.0 0.0 -41.9 -1.7 -1.7 -42.8 -41.9 61.6

870323 284 5.3 0.7 -24.8 0.0 0.0 -21.4 0.6 0.7 -24.8 -21.4 86.9

870324 90 9.5 8.6 -12.4 -0.8 0.0 -0.9 7.9 8.6 -13.1 -0.9 76.4

870332 6 3.7 -25.1 -7.4 -0.7 0.0 -29.6 -25.6 -25.2 -8.1 -29.6 87.1

870829 34 3.4 -6.2 -22.7 -0.2 0.0 -25.6 -6.3 -6.2 -22.8 -25.6 64.0

870899 486 1.7 -0.8 -23.9 -0.7 -0.1 -23.7 -1.5 -0.9 -24.5 -23.7 62.3

880230 13 0.0 -1.6 0.0 0.0 0.0 -1.6 -1.6 -1.6 0.0 -1.6 5.3

880240 2,299 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6

880330 113 0.0 -0.1 0.0 0.0 0.0 -0.1 -0.1 -0.1 -0.1 -0.1 4.7

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Product


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890190 103 0.4 -1.7 -3.5 -0.1 0.0 -5.0 -1.8 -1.7 -3.6 -5.0 15.7

901890 143 0.0 -0.3 -0.6 0.0 0.0 -0.9 -0.3 -0.3 -0.6 -0.9 4.0

Total 13,596 1.1 0.2 -2.7 -0.3 -0.1 -2.2 -0.1 0.1 -3.0 -1.7 9.9

Note: Grey shading is used to indicate changes in excess of 5%. Source: Model calculations.

As could be expected the DOHA scenario is associated with positive effects on the EU exports as it represents a reduction on tariff applied to all WTO members. Hence, a combination of Doha implementation with other FTAs will dampen the negative effects on the EU of ASEAN FTAs. The second scenario combines implementation of the Doha Round and the agreements with China and Korea. It is interesting to in comparison with DOHA scenario, DCK reverts some signs of the effects or substantially reduces the effects. From the EU perspective it could be said that implementation of ASEAN FTAs with China and Korea will reduce substantially the gains from the Doha Round. By absolute change, we can see that the most affected product is the 850239 (generating sets) where EU exports fall by around USD 18 million. The most affected product in terms of losing the trade generated by the Doha Round is 870323 where the increase of exports of almost USD 15 million under DOHA is almost completely wiped out under the DCK scenario.

In the case of an ASEAN-Japan FTA, the effects suggested by the model are larger. This is mainly explained by the fact that Japan and EU‟s export structure to ASEAN are more similar than the Chinese or Korean exports to ASEAN and EU exports to this market. In relative terms, the most affected product is 870322 (motor vehicles) were exports are expected to fall by 43%. However, if we consider the change in value, the most affected product is 870899 (parts and accessories of the motor vehicles) where exports are expected to fall by around USD 116 million. The combined value of EU exports to ASEAN of the analysed products falls by 2.7% or around USD 362 million under the scenario of ASEAN-Japan FTA. Around half of this decline materialises in products belonging to HS 87 chapter (vehicles other than railway or tramway rolling stock, and parts and accessories thereof).

The ASEAN-Japan FTA is the scenario generating the most important effects on the European Union. Japan is a very important ASEAN supplier in the same products where the EU is also supplying this country. Hence, any change in the tariff applied to the main EU competitor in that product will generate important effects. We have seen before in Chapter 4 (Table 4.9) that among the ASEAN FTA partners Japan has the most similar export structure to the EU as measured by the FK index. Also, we have seen that the competitive pressure that Japan exerts on the EU in ASEAN is very high by considering the RECPI index. Therefore, given the similarity of the export structures and the size of Japan‟s exports to ASEAN, it is expected that this agreement will have the most important effects on the EU.

The scenario Japan-DCK combines the ASEAN-Japan FTA with Doha round and ASEAN-China and ASEAN-Korea FTAs.. The negative effects of JAPAN scenario are typically dampened or reversed, but in a few cases EU exports fall even more than under JAPAN. This is explained by the combination of forces acting in opposite directions: Doha round liberalisation improving the EU exports prospects and FTAs with China and Korea increasing the pressure on EU exporters to ASEAN.

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The effects of the implementation of the FTA between ASEAN and Australia and New Zealand (NZAUS) tend to be small for most products. This is driven by two factors. First, the overlapping between Oceania and the EU‟s export structures to ASEAN is rather low and second, Australia and New Zealand have a relatively low share in the ASEAN market. Therefore, the competitive pressure from Australia and New Zealand exerted on the EU is smaller and it generates much weaker price and quantity effects than in the case of an agreement with Japan. The effects tend to be more concentrated in some particular products where Australia and New Zealand have an important share of the ASEAN market.

The product most affected in relative terms is the product 760611 (aluminium plates, sheets and strip of certain characteristics) where the EU‟s exports to ASEAN fall by around 13%. On the other hand, the product most affected in absolute terms is the product 300490 (medicaments of a certain sort) where exports fall by around USD 8 million. Overall, the combined exports of the analysed products decline by around 0.3% or around USD 37 million.

The India-ASEAN FTA (INDIA) has very limited effects on the EU exports. This agreement is the most limited in terms of coverage of all the analysed FTAs leaving a substantial part of products without or with limited reduction. Moreover, as we have seen in Chapter 4, the export structures of India and the European Union to ASEAN are quite different with several products exported by the EU but not exported by India at all. Also, the sizes of the Indian exports to ASEAN are more limited and, therefore, the competitive pressure on the EU is substantially lower. Finally, the values of the elasticities chosen for the supply of exports (we assume that India does not react in the same way as developed countries) prevent India from reacting strongly making the EU less vulnerable to the ASEAN-India FTA. It can be seen that the most affected product in absolute value is the product 300490 (medicaments of a certain sort) with a fall of around USD 2.8 million and the most affected in relative terms is the product 401199 (pneumatic tyres) with a fall of 0.7%. Considering all analysed products, EU exports to ASEAN hardly react at all to the ASEAN-India agreement with a fall of below USD7 million or 0.05%.

To assess the combined effects of various FTAs we consider scenarios ALL (FTAs with Japan, India and Australia and New Zealand) and ALL_DCK (Doha round and all five FTAs – with China, Korea, Japan, India and Australia and New Zealand). In the ALL scenarios the effects of the FTA with Japan dominate so the observed effects are similar to JAPAN. The most affected product is 870322 where exports fall by around 43%. In absolute terms the most affected product is 870899 seeing a fall in exports of 119 million. Another major decline in EU exports (around USD 70 million) is for the product 870323. Exports of all analysed products decline by USD 402 million or almost 3%.

When we consider all FTAs as well as the Doha Round (ALL_DHK), the effects are substantially dampened relative to ALL and in some cases, the negative signs are reversed. The most negatively affected products are the same. Combined exports of all products analysed in the exercise fall by around USD 227 million or 1.7%.

It is interesting to see how these effects decompose into changes in quantities and prices. This reveals how important is the competitive pressure of other partners on the EU into the ASEAN markets; as well as revealing some terms of trade effects.

It is a standard practice in partial equilibrium (as well as general equilibrium) models to decompose values into quantities and prices by assuming that all prices are set to unity. Therefore, a value of exports of USD 1,000 is transformed into a quantity exported of 1,000 units at a price of USD 1. Table A4.1 in Appendix 4 presents the percentage change in the

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quantity of exports of the EU to ASEAN by scenario and Table A4.2 presents the price effects on the exports of the EU to ASEAN.

As could be expected the quantity changes tend to be stronger and explain most of the effects. Largely this is a feature of the model due to the setting of the elasticities of supply of exports. However, we can highlight some important price effects on the exports of ASEAN to the EU.

In the ASEAN-Japan FTA we can see that, besides a 37% fall in the quantity of exports of the product 870322, the export price of this product declines by almost 9%. In general, all the products in the chapter 87 see important price effects. In the DCK scenario, there is a combination of positive and negative price effects. While in the product 870332 the price drops by 4.7%, the export price of the product 760611 increases by 3% explained mainly by the liberalisation via the Doha Round. In the NZAUS scenario, important price effects are seen in the product 760611 (a 2.3% reduction).

5.6 Concluding comments

In Chapter 4, we identify products or sectors where there is the highest potential for trade effects due to tariff cuts implemented in line with ASEAN‟s FTA commitments. In this chapter, by using a partial equilibrium model, we arrive at specific estimates of the magnitude of these effects.

The partial equilibrium analysis suggests that the ASEAN-Japan FTA is likely to generate the most important effects for the EU exports to ASEAN of the range of selected products. This is consistent with the evidence from indicators reported in Chapter 4. The explanatory factors include the high degree of overlapping of products in the exports structures of both partners (Japan and the EU) in the ASEAN market and the importance of Japan as a supplier in the ASEAN market. In this case, the most affected products will be in the chapter 87 (vehicles and parts and accessories thereof). The EU could lose almost half of its share in the ASEAN market in these products. However, the negative effects are not limited to this set of products and some other important negative effects could be seen elsewhere. If our modelling assumptions are correct the EU exporters will also make some downward price adjustments to prevent larger effects on quantities. The agreement between ASEAN and Japan could make the EU exports to ASEAN fall by 2.5% considering the sample of analysed products accounting for around 1/3 of the total EU exports to ASEAN. The total effect, therefore, may be higher.

The effects of the ASEAN-Australia/New Zealand FTA are smaller, compared to the FTA with Japan. However, a few important negative effects can be identified in some products. This is explained mainly by the differences in export structures between the EU and Australia and New Zealand as well as the smaller size of these economies relative to the EU.

Finally, no important effects (at least in the products chosen) are seen in the case of the ASEAN-India FTA. Different export structures are explaining these results plus the lower amount of Indian exports to ASEAN. The assumption made about differences in the elasticity of supply of exports by India could also be playing role, but plausible changes in elasticities are not expected to alter substantially the results presented here.

The sensitivity analysis (see Appendix 4 for relevant tables) considers alternative values of the elasticity of substitution of origin of imports including a translog specification where it is possible to assign different elasticities of substitution between the countries considered.

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The results are robust to such modifications and only the magnitude of changes differs. In general, higher elasticities of substitution lead to stronger price and quantity effects. To consider an example, considering the ASEAN-Japan FTA and the product 870322 the estimated impact on EU exports to ASEAN ranges from 33% in the low elasticity of substitution case (Table A4.3) to 48% in the high elasticity case (Table A4.7) with a base result of 43% as discussed above. The translog specification with different substitution elasticties (Table A4.9) for developed and developing countries does not lead to major changes in results. In the scenarios of FTAs between ASEAN and developed countries (Japan and Australia/New Zealand) the effects tend to be very close to the ones obtained for a high elasticity of substitution. The effects of the FTA with India tend to be closer to those found in the standard exercise.

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6 Computable General Equilibrium analysis

This chapter presents general equilibrium simulations of the trade and welfare effects of the five agreed ASEAN+1 FTAs with China, India, Korea, Japan and Australia / New Zealand and of a prospective ASEAN Plus Six FTA among these partners. The main focus is on the consequences for EU exports to ASEAN and the other countries involved in these trade agreements. The key results are as follows:

In line with previous computable general equilibrium assessments of further economic integration involving the South East Asia region, the aggregate welfare impacts of the various ASEAN+1 FTAs for the EU are of a negligible order of magnitude. The potential formation of an ASEAN Plus Six FTA is projected to entail an aggregate EU welfare loss of the order of 0.01% in the absence of a successful completion of the Doha Development Round. Assuming an implementation of the Doha Round agreement reduces the potential welfare loss even further.

The EU export volume to ASEAN is projected to decline by 0.6% (USD 540 million) in the scenario where only the ASEAN-Japan FTA is implemented. Other ASEAN+1 agreements lead to very small negative or positive effects on EU exports to ASEAN. A combination of all five FTAs leads to 0.5% (USD 450 million) decline in EU exports to ASEAN, whereas a prospective ASEAN Plus Six agreement is projected to hit EU exports to ASEAN by 0.6%. In most cases the negative or positive impacts on EU exports to ASEAN markets are partly offset by gains or losses in exports to ASEAN FTA partners. In effect, the impact on EU exports to the whole ASEAN Plus Six region are small, ranging from negligible in the case of the ASEAN FTAs with India, Australia and New Zealand, South Korea and China to below -0.1% for the FTA with Japan, -0.1% (USD 360 million) for a combination of all five agreements and -0.3% (USD 1.07 billion) for the most comprehensive integration scenario (i.e. the proposed ASEAN Plus Six FTA).

At the sectoral level, a combination of all five ASEAN+1 agreements has the strongest negative effect on EU exports to ASEAN of motor vehicles and parts (-8.1%, USD 176 million), textiles (-5.1%, USD 48 million) and wearing apparel (-4.0%, USD 31 million). A prospective ASEAN Plus Six agreement has very similar projected sectoral effects. The percentage changes in EU exports to the whole ASEAN Plus Six region are generally smaller in magnitude. Textiles and wearing apparel are now most affected, followed by the motor vehicle and parts sector.

The sectoral EU real output effects at the CGE sector aggregation level remain generally well below 0.1% of baseline production in all scenarios. The only exceptions are the EU textile and wearing apparel sectors, which contract by up to 0.3% under the scenario combining all five ASEAN+1 agreements and by up to 0.8% under the ASEAN Plus Six FTA scenario. All the effects for these two sectors are primarily driven by the strong growth of Indian, Chinese and ASEAN apparel production and export to the EU and not by the EU losing its export shares in ASEAN.

When the impacts of the East Asian FTAs on the EU are compared to a post-Doha antimonde as opposed to a no-Doha baseline, aggregate and sectoral results follow a similar pattern but the magnitudes are muted.

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6.1 Introduction

The analytic framework for the analysis is the GLOBE model, a multi-regional and multi-sectoral CGE model of global production and trade developed by McDonald, Robinson and Thierfelder (2007). The model is calibrated to the new GTAP 7.1 database that reflects the global input-output structure of production and trade by origin and destination in 2004. The database distinguishes 113 geographical regions and 57 commodity groups and production sectors. For the present study, we use a 16-region 22-sectors aggregation of the GTAP database (Table 6.1).

The following section provides a brief non-technical description of the global multi-region model employed for the analysis and details its sectoral and regional aggregation structure. Section 6.3 presents selected key features of trade and production patterns in the benchmark equilibrium. Section 6.4 explains the design of the simulation scenarios and discusses the quantitative results, and section 6.5 concludes.

6.2 The GLOBE Model

GLOBE is a theory-grounded, comparative-static, multi-region, multi-sectoral CGE model of global production and trade developed by McDonald, Robinson and Thierfelder (2007).95 The

model version used here is calibrated to the new GTAP7 database that reflects the global input-output structure of production and trade by origin and destination in 2004.

International Trade

Domestically produced commodities are assumed to be imperfect substitutes for traded goods. Imported commodities from different source regions to a destination region are assumed to be imperfect substitutes for each other and are aggregated to form composite import commodities that are assumed to be imperfect substitutes for their counterpart domestic commodities The composite imported commodities and their counterpart domestic commodities are then combined to produce composite consumption commodities, which are the commodities demanded by domestic agents as intermediate inputs and final demand (private consumption, government, and investment). In each region and each sector, the model assumes product differentiation between goods produced for the home market and goods produced for export markets. Moreover, there is product differentiation between goods for different export destinations.

Domestic producers adjust their export supply decisions in response to changes in the relative prices of exports and domestic commodities. This specification is desirable in a global model with a mix of developing and developed countries that produce different kinds of traded goods with the same aggregate commodity classification, and yields more realistic behaviour of international prices than models assuming product homogeneity between goods for different destinations.

95 For recent peer-reviewed applications of this model see e.g. Robinson and Willenbockel (2009),

Polaski et al. (2009), World Bank (2008), McDonald, Thierfelder and Robinson (2008)

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Production, Input Demand and Factor Markets

On the production side, the model assumes imperfect substitutability among the primary factors of production (skilled and unskilled labour, capital, land and natural resources). Intermediate input requirements by commodity type, on the other hand, are assumed to be fixed proportions of commodity output in each sector. The determination of product supply and input demand is based on the assumption of profit maximizing behaviour. In the present application, a standard neoclassical factor market closure is adopted. Factor markets in all regions are characterized by inelastic factor supplies and the model solves for market-clearing factor prices. The primary factors except activity-specific natural resource endowments are mobile across production activities, but immobile across borders.

Final Domestic Demand by Commodity

The commodity composition of government consumption demand and investment demand is fixed, with demand patterns from the benchmark data set. Households are utility maximizers who respond to changes in relative prices and incomes. In this version of the model, the utility functions for private households take the Stone-Geary form and hence consumer demand by commodity is described by a linear expenditure system (LES) specification.

Macroeconomic Equilibrium

Current account balances for all regions are assumed to be fixed at initial benchmark levels in terms of a global numeraire and real exchange rates adjust to maintain external equilibrium. The assumption of fixed current account balances ensures that there are no changes in future “claims” on exports across the regions in the model, i.e. net foreign asset positions are fixed. In addition, we assume a “balanced” macro adjustment to the trade policy shocks within countries. Changes in aggregate absorption – that is the sum of private consumption, government consumption and investment demand – are assumed to be shared equally (to maintain the shares from the base data) among private consumption, government, and investment demands. Household and government saving rates adjust residually to establish the macroeconomic saving-investment balance in each region.

Benchmark Data and Calibration

The model is calibrated to the GTAP 7.1 database (the most recent update of Narayanan and Walmsley (eds.), 2008) that combines detailed bilateral trade, and protection data reflecting economic linkages among regions with individual country input-output data, which account for intersectoral linkages within regions, for the benchmark year 2004. The advantage of using a 2004 baseline is that it allows comparing the effects of the FTAs under consideration with the status quo ante before any of these initiatives has been implemented. Production, trade and income elasticities are drawn from the GTAP behavioural data base (Dimaranan, McDougall and Hertel, 2006).

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Table 6.1 Sectoral and Regional Aggregation

Sector Code

Commodity Groups / Production Sectors

Region Code

Region

AGFOFI Agricultural Commodities EU European Union

MINFLS Minerals including Fossile Fuels ASEAN Association of South East Asian Nations

FOODPR Processed Food Products China Peoples‟ Republic of China

BEVTOB Beverages and tobacco products India India

TEXTIL Textiles Japan Japan

APPARL Wearing apparel and leather products Korea South Korea

WOODPR Wood products AustralNZ Australia, New Zealand

PAPERP Paper and publishing products OAsia Other Asia

PETCOL Refined petroleum and coal products NAFTA North American Free Trade Area

CHEMRP Chemical, rubber and plastic products LACTA Latin American and Caribbean FTAs

MINPRD Mineral products nec EFTA European Free Trade Area

FEMETL Ferrous metals Balkan Balkans, Turkey

NFMETL Metals nec FSU Former Soviet Union

METLPD Metal products AfricaMed Mediterranean Africa

MOTVEH Motor vehicles and parts SSALDCs Sub-Saharan African

TRNSEQ Transport equipment nec RoW Rest of the world

ELECEQ Electronic equipment

MACHEQ Machinery and equipment nec

OMANUF Manufactures nec

TRADSV Trade Services

TRANSV Transport Services

OSERV Other Services

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6.3 Patterns of Trade and Production in the Benchmark Equilibrium

This section presents information on selected key characteristics of the 2004 benchmark equilibrium data. The top panel of Table 6.2 shows the matrix of global total trade flows of goods and services for the EU, the ASEAN Plus Six regions, and the rest of the world in the benchmark year. The second and third panel shows the corresponding regional destination shares for each region‟s global exports and the regional origin shares for each region‟s global imports.

EU member exports to the ASEAN Plus Six group account for 8.3 percent of total EU exports including intra-EU exports, or 21.5 percent of total extra-EU exports in 2004. Imports from ASEAN Plus Six account for 11.8 percent of total EU imports including intra-EU imports or 30.3 percent of its extra-EU imports. The EU share in total imports of the various ASEAN Plus Six group members ranges from 11.8 percent for South Korea to 24.5 percent for Australia. With respect to trade within the ASEAN Plus Six group, exports to this group account for 47 percent of ASEAN exports, 35 percent of Japan‟s exports and 28 percent of China‟s exports, but for only 19 percent of India‟s total exports in the status quo ante.

Table 6.3 provides background information for the proper interpretation of the sectoral simulation results reported in section 6.4 below. It shows the benchmark commodity composition of total EU-27 gross output, as well as the commodity composition of total EU exports and EU exports to ASEAN Plus Six destinations. Furthermore, it shows the shares of export production for these markets in total EU production. Four sectors – machinery and equipment, chemicals, electronic equipment, and motor vehicles and parts – account for 43 percent of total export earnings from the ASEAN Plus Six region, that is 64 percent of merchandise (i.e. non-service) exports.

The sectors in which EU production for ASEAN Plus Six markets is highest in proportion to total EU production are electronic equipment, machinery and equipment, minerals, non-ferrous metals and chemicals. Table 6.4 decomposes the EU export destination shares in the second panel of Table 6.3 by commodity group.

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Table 6.2 EU-ASEAN+6 Total Trade Flow Matrix 2004 in a Global Perspective

Trade Flows by Origin and Destination ($ bill.)

Destination

EU ASEAN China India Japan Korea AustralNZ All Other Total

Ori

gin

EU 2570.4 90.5 90.2 29.5 80.6 30.2 36.7 1258.3 4186.5

ASEAN 123.7 110.1 70.6 9.9 65.9 21.6 17.1 206.8 625.7

China 167.8 50.6

6.9 89.2 28.9 14.1 326.2 683.6

India 30.6 7.3 5.7

3.6 1.6 1.2 53.6 103.7

Japan 115.4 71.0 93.4 3.9

48.4 15.3 308.4 655.7

Korea 43.9 24.7 66.4 3.8 24.5

4.3 141.2 308.8

AustralNZ 21.6 12.0 10.4 5.2 22.1 8.4 11.6 44.6 135.9

All Other 1138.4 174.4 260.8 67.9 252.6 116.5 49.4 2035.0 4094.9

Total 4211.8 540.6 597.5 127.2 538.5 255.7 149.5 4374.0 10794.7

Regional Export Shares by Destination (%)

Destination


Ori

gin

EU 61.4 2.2 2.2 0.7 1.9 0.7 0.9 30.1 100.0

ASEAN 19.8 17.6 11.3 1.6 10.5 3.5 2.7 33.1 100.0

China 24.5 7.4

1.0 13.1 4.2 2.1 47.7 100.0

India 29.5 7.1 5.5

3.5 1.5 1.2 51.7 100.0

Japan 17.6 10.8 14.2 0.6

7.4 2.3 47.0 100.0

Korea 14.2 8.0 21.5 1.2 7.9

1.4 45.7 100.0

AustralNZ 15.9 8.9 7.6 3.9 16.2 6.2 8.5 32.8 100.0

All Other 27.8 4.3 6.4 1.7 6.2 2.8 1.2 49.7 100.0

Total 39.0 5.0 5.5 1.2 5.0 2.4 1.4 40.5 100.0

Regional Import Shares by Origin (%)

Destination


Ori

gin

EU 61.0 16.7 15.1 23.2 15.0 11.8 24.5 28.8 38.8

ASEAN 2.9 20.4 11.8 7.8 12.2 8.5 11.4 4.7 5.8

China 4.0 9.4

5.4 16.6 11.3 9.4 7.5 6.3

India 0.7 1.4 0.9

0.7 0.6 0.8 1.2 1.0

Japan 2.7 13.1 15.6 3.1

18.9 10.2 7.0 6.1

Korea 1.0 4.6 11.1 3.0 4.5

2.9 3.2 2.9

AustralNZ 0.5 2.2 1.7 4.1 4.1 3.3 7.7 1.0 1.3

All Other 27.0 32.3 43.7 53.4 46.9 45.6 33.0 46.5 37.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

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Table 6.3 Commodity Composition of EU Production, Exports and Export-Output Ratios (in %)

All EU Exports EU Exports to ASEAN+6

Xi/X Exi/Ex Exi/Xi ExASEAN+6,i/ExASEAN+6 ExASEAN+6,,i/Xi

Agriculture 1.76 1.65 16.11 0.51 0.43

Minerals 0.52 1.08 35.52 1.95 5.48

Processed food 3.57 4.08 19.64 2.22 0.91

Beverages & tobacco 1.17 1.20 17.65 0.96 1.20

Textiles 0.83 2.05 42.28 1.29 2.27

Apparel 1.03 2.16 35.99 1.73 2.45

Wood products 0.84 1.73 35.53 0.95 1.66

Paper products 2.22 2.55 19.78 1.79 1.19

Refined petrol & coal 1.38 1.41 17.55 0.41 0.44

Chemicals 4.49 14.28 54.67 11.50 3.77

Mineral products 1.15 1.31 19.64 0.88 1.13

Ferrous metals 0.99 2.56 44.56 1.73 2.57

Nonferrous metals 0.52 1.53 50.69 1.49 4.22

Metal products 2.11 2.29 18.70 1.37 0.96

Motor vehicles 3.46 11.21 55.63 6.31 2.68

Other transport equipment 1.06 2.49 40.36 2.74 3.80

Electric equipment 1.59 5.83 63.28 7.31 6.78

Machinery 5.45 14.72 46.45 21.18 5.71

Other manufactures 0.99 1.34 23.19 1.11 1.65

Trade services 7.96 1.98 4.27 4.38 0.81

Transport services 7.76 9.05 20.05 8.65 1.64

Other services 49.15 13.49 4.72 19.53 0.58

100.00 100.00 17.19 100.00 1.47

Notes: Xi: EU gross output value of commodity i; X=∑i Xi; Exi: Total EU exports of commodity i (including intra-EU exports); Ex=∑i Exi; ExASEAN+6,i: EU exports to ASEAN+6 group of commodity i; ExASEAN+6=∑i ExASEAN+6,i.

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Table 6.4 Shares of ASEAN+6 Countries in Total EU Exports by Commodity Group 2004 (in %)

Share of Exports to

ASEAN China India Japan Korea AustralNZ All ASEAN+6

Agriculture 0.41 0.96 0.14 0.82 0.17 0.15 2.65

Minerals 1.03 2.08 11.88 0.27 0.09 0.06 15.42

Processed food 1.07 0.42 0.06 2.02 0.49 0.60 4.66

Beverages & tobacco 1.86 0.54 0.10 2.94 0.59 0.79 6.82

Textiles 1.09 1.55 0.26 1.32 0.59 0.55 5.37

Apparel 0.85 1.23 0.16 3.38 0.77 0.43 6.82

Wood products 0.57 0.66 0.10 2.39 0.33 0.64 4.68

Paper products 1.65 1.43 0.54 0.87 0.34 1.17 6.00

Refined petrol & coal 0.88 0.73 0.08 0.39 0.21 0.19 2.48

Chemicals 1.44 1.48 0.41 1.92 0.62 1.02 6.89

Mineral products 1.17 1.01 0.39 1.43 0.80 0.95 5.75

Ferrous metals 1.73 1.90 0.86 0.25 0.70 0.32 5.76

Nonferrous metals 1.27 2.97 0.92 1.75 1.06 0.36 8.32

Metal products 1.21 1.47 0.30 0.94 0.48 0.71 5.12

Motor vehicles 0.46 1.28 0.09 1.81 0.38 0.80 4.82

Other transport equipment 2.76 2.42 0.98 0.84 0.67 1.76 9.42

Electric equipment 4.67 3.15 0.42 1.04 0.92 0.52 10.71

Machinery 2.09 4.77 0.89 1.92 1.27 1.36 12.30

Other manufactures 1.63 0.72 0.53 2.78 0.46 1.00 7.11

Trade services 5.80 7.38 0.33 3.65 1.03 0.73 18.93

Transport services 2.41 1.03 0.62 2.13 1.06 0.92 8.17

Other services 4.49 2.13 1.33 3.01 0.58 0.83 12.37

2.16 2.16 0.70 1.93 0.72 0.88 8.55

6.4 Simulation Analysis

6.4.1 The Simulation Scenarios

The simulation analysis considers each of the five agreed ASEAN+1 FTAs with China, India, Korea, Japan and Australia / New Zealand in isolation as well as a combined „All FTAs‟ scenario, in which the five ASEAN+1 agreements are jointly implemented. In addition, we simulate a prospective ASEAN Plus Six FTA among these partners, in which China, India, Korea, Japan and Australia / New Zealand extend the tariff concessions on imports from the ASEAN group also to each other. In other words, in the „All FTAs‟ scenario, tariff barriers among the non-ASEAN members of the ASEAN Plus Six group remain frozen at baseline level, while in the ASEAN Plus Six scenario, the non-ASEAN members also extend additional tariff preferences to each other.

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The seven scenarios are simulated for two alternative baselines reflecting alternative assumptions about further progress in global multilateral trade negotiations – a realistic „no-Doha‟ baseline and an optimistic „post-Doha‟ baseline. Results in comparison to the former baseline are presented and discussed in the following section, while section 6.4.2 is devoted to the latter case.

Table 6.5a shows the initial and post-FTA tariff rates on ASEAN imports from each of its FTA partners under the „no-Doha‟ baseline for each commodity group of the CGE model. Table 6.5b presents the tariff cuts on ASEAN exports granted by its FTA partners under the various ASEAN+1 FTAs. Under the ASEAN Plus Six FTA scenario it is assumed that the non-ASEAN FTA partner countries apply these tariff cuts also to imports from each other. The FTA tariffs have been determined as import-weighted averages of the scheduled rates at HS6 level.

Table 6.5a ASEAN Tariff Rates on Imports from FTA Partners (in percent)

China India Japan Korea AustralNZ

Initial FTA Initial FTA Initial FTA Initial FTA Initial FTA

Agriculture 11.85 0.33 3.46 0.48 8.37 0.19 8.22 0.16 3.34 0.12

Minerals 2.29 0.00 1.65 0.00 2.36 0.00 4.45 0.00 0.42 0.00

Processed food 11.54 1.70 5.07 1.84 23.50 11.88 25.10 3.80 5.10 5.10

Beverages & tobacco 69.45 0.27 92.26 1.13 41.53 7.67 44.03 10.35 24.04 11.78

Textiles 15.62 0.01 9.99 0.27 17.13 0.00 18.81 0.01 4.87 0.02

Apparel 10.93 0.00 7.48 0.41 25.47 0.00 13.17 0.00 5.34 0.54

Wood products 12.21 0.00 5.52 0.01 14.96 0.00 16.31 0.01 6.44 0.01

Paper products 9.76 0.00 4.82 0.06 10.61 0.00 9.90 0.16 5.31 0.05

Refined petrol & coal 7.78 0.10 2.52 0.00 3.59 0.33 7.29 0.12 4.35 0.63

Chemicals 5.26 0.02 3.48 0.31 7.74 0.11 7.24 0.05 4.84 0.14

Mineral products 11.77 0.51 8.42 0.93 6.77 0.15 10.07 0.04 7.20 0.08

Ferrous metals 4.84 0.79 4.21 1.38 9.00 1.02 7.64 1.59 3.74 0.68

Nonferrous metals 3.51 0.00 2.60 0.40 4.68 0.01 5.26 0.00 1.63 0.00

Metal products 9.96 0.00 7.00 0.27 11.41 0.53 9.38 0.62 7.42 0.21

Motor vehicles 17.13 3.58 22.68 2.43 26.04 3.57 43.92 3.18 24.88 2.60

Other transport equipment 12.84 1.03 2.12 0.28 8.62 0.04 2.70 1.08 0.85 0.16

Electric equipment 2.07 0.01 2.37 0.01 1.11 0.00 2.24 0.23 2.05 0.02

Machinery 5.92 0.05 3.16 0.05 4.43 0.06 5.61 0.11 3.82 0.11

Other manufactures 9.06 0.05 0.57 0.02 8.33 0.25 11.32 0.03 7.93 0.11

Note: Initial tariffs are reported for the „No-Doha‟ baseline. Initial tariffs will be lower for the „post-Doha‟ baseline according to the stylized Doha tariff reduction schedule reported in section 6.4.2.

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Table 6.5b FTA Partner Tariff Cuts on ASEAN Imports (in percent)

AustralNZ Korea India Japan China

Agriculture 100.0 83.4 62.8 81.3 78.2

Minerals 100.0 100.0 100.0 100.0 100.0

Processed food 100.0 55.2 55.1 49.8 73.0

Beverages & tobacco 100.0 92.6 22.6 67.7 80.6

Textiles 100.0 100.0 94.0 99.8 96.7

Apparel 99.7 100.0 78.2 100.0 100.0

Wood products 99.0 99.3 100.0 100.0 79.9

Paper products 100.0 100.0 98.6 100.0 28.2

Refined petrol & coal 100.0 100.0 27.8 100.0 95.7

Chemicals 100.0 99.9 95.7 99.8 97.3

Mineral products 100.0 100.0 99.4 100.0 100.0

Ferrous metals 100.0 100.0 98.6 100.0 100.0

Nonferrous metals 100.0 100.0 97.1 100.0 100.0

Metal products 100.0 100.0 98.6 100.0 99.5

Motor vehicles 100.0 100.0 49.1 100.0 66.5

Other transport equipment 100.0 100.0 96.3 100.0 97.2

Electric equipment 99.8 100.0 100.0 100.0 98.9

Machinery 99.9 100.0 97.4 100.0 99.4

Other manufactures 100.0 100.0 98.7 100.0 100.0

Note: Figures are the percentage reduction in applied tariff rate levels relative to the baseline tariffs (100 = complete removal of the tariff).

6.4.2 Results in the Absence of a Completion of the Doha Round

Tables 6.6 to 6.8 report the impacts of the East Asian free trade agreements for aggregate welfare as measured by real absorption (the sum of real domestic final demand at baseline prices), the real exchange rate and aggregate total real exports of goods and services for all scenarios and all regions.

Among the FTA partners, the developed regions Japan, South Korea and Australia / New Zealand are projected to benefit from moderate welfare gains arising from their respective ASEAN+1 agreements and more so under an ASEAN Plus Six FTA. The simulation results suggest that ASEAN benefits most from the FTAs with India and China and also to a small extent from the FTA with Australia and New Zealand. However, for the agreement with Japan, the model projects a noticeable aggregate welfare loss for ASEAN as a result of a pronounced deterioration in its overall terms of trade, which is reflected in a depreciation of the real exchange rate on the order of 0.3 percent as reported in Table 6.7. The economic explanation for this adverse real exchange rate effect is a deterioration of ASEANs bilateral trade balance with Japan in response to the bilateral tariff cuts, which requires additional ASEAN exports to other regions in order to finance the additional net imports from Japan. Therefore ASEAN‟s real exchange rate needs to deteriorate to restore external balance. The same economic mechanism explains the small net welfare loss for ASEAN arising from the FTA with Korea.

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The other negative signs in Table 6.6 can likewise be explained by adverse induced terms of trade effects which translate into a real exchange rate depreciation, as can be inferred from a joint look at Tables 6.6 and 6.7. Since the welfare effects of the isolated implementation of the various ASEAN+1 FTAs largely add up to the welfare effects of a joint implementation of all agreements, it appears that ASEAN as a bloc would be better off under a selective implementation of the FTAs with China, India, and Australia / New Zealand compared to the „AllFTAs‟ scenario, because in aggregate welfare terms the losses from the Japan agreement effectively eradicate most of the gains from the India and China agreement. Moreover, further trade liberalization among the non-ASEAN members of the ASEAN Plus Six group turns the remaining small gain for ASEAN under the „AllFTAs‟ scenario into a small loss under the ASEAN Plus Six FTA scenario. Similarly, for China and India a move from „AllFTAs‟ to ASEAN Plus Six turns a small net welfare loss into a larger welfare loss.

The indirect aggregate welfare effects on non-participating other world regions remain very small to negligible. The simulated aggregate welfare loss for the EU arising from the ASEAN Plus Six is 0.01 percent of baseline absorption and virtually nil for the various ASEAN+1 FTAs.

This finding of tiny welfare impacts of further trade liberalization in East Asia for the EU confirms the results of earlier CGE studies which report third-country effects. Thus, Urata and Kiyota (2003) simulate an FTA among ASEAN, China, Japan Korea, Hong Kong and Taiwan and report a Hicksian equivalent variation of -0.02 percent of baseline GDP for the EU. Kawai and Wignaraja (2007) consider an ASEAN Plus Six FTA and report an income gain for the EU of 0.02 percent. Ando (2009) likewise analyses an ASEAN Plus Six FTA and finds an absolute per-capita welfare loss of 11 US$ for the EU, which is evidently a very small fraction of average annual EU per-capita income.

Table 6.8 reports impacts on total aggregate exports of goods and services to all global destinations by region of origin. The results show that the global EU export volume remains virtually unaffected by any of the East Asian trade agreements.

Table 6.9 exhibits the effects on aggregate EU exports to the various ASEAN Plus Six partners as well as to the ASEAN Plus Six group as a whole. Under the most comprehensive East Asian integration scenario (ASEAN Plus Six FTA), the EU export volume to the ASEAN Plus Six region as a bloc is projected to decline by 0.3 percent. However, this aggregate net figure masks stronger underlying impacts on EU exports to individual members of the group. For instance, EU exports to India decline by nearly 2.3 percent while EU exports to Japan rise by 0.9 percent in this scenario. The explanation for these differential trade impacts is again to be found in the real exchange rate movements as reported in Table 6.7. While India‟s real exchange rate depreciates entailing a drop in India‟s demand for imports from all sources including the EU, Japan enjoys a strong real exchange rate appreciation which boosts its demand for imports including imports of EU origin. Thus, in the case of India, the general equilibrium real exchange rate effect reinforces the ordinary trade diversion effects, while in the case of Japan the real exchange rate works in the opposite direction to – and indeed dominates - the trade diversion effect. This example neatly illustrates the need for a general equilibrium approach to the analysis of integration schemes with non-negligible macro-repercussions.

We are now turning to sectoral impacts on EU trade and production. For brevity‟s sake, we are focusing here primarily on the „AllFTAs‟ and the ASEAN Plus Six FTA scenarios. Table 6.11 shows the consequences of the joint establishment of all five ASEAN+1 FTAs for EU exports to the ASEAN Plus Six regions by commodity group. EU textile exports to the ASEAN Plus Six bloc are projected to be most affected with a drop by 1.53 percent, followed by ferrous metals (-0.89 percent), wearing apparel (-0.88 percent), motor vehicles and parts

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(-0.69 percent) and chemicals (-0.56 percent). To set these and other figures in Table 6.11 into proper perspective, they need to be read in conjunction with the baseline share figures in Table 6.3 and 6.4. For instance, EU exports of motor vehicles and parts to ASEAN drop by a massive 8.1 percent. However, the baseline share of ASEAN in EU total motor vehicle exports is only 0.46 percent and the EU export/output ratio is 55.6 percent – therefore the impact of this drop on EU total output would be small even in the absence of the projected increase in demand for EU motor vehicles by Japan and Korea.

Table 6.12 shows the corresponding simulation results for the ASEAN Plus Six FTA scenario. Again EU textile exports to the region take the strongest blow (-4.5 percent), followed by apparel (-4.1 percent), mineral fuels (-1.3 percent) and motor vehicles (-1.2 percent).

Table 6.10 shows the resulting impacts on EU gross output by sector for these two scenarios as well as for the five individual ASEAN+1 FTA scenarios. The sectoral EU real output effects at the CGE sector aggregation level remain generally well below 0.1 percent of baseline production in all scenarios. The only exceptions are the EU textile and apparel sectors, which contract by up to 0.3 percent under the AllFTA scenario and by up to 0.8 percent under the ASEAN Plus Six FTA scenario. However, it is noteworthy that the projected reductions in EU output in these two sectors are not primarily due to the drop in EU exports to the ASEAN Plus Six countries96, but the result of a significant increase in EU apparel imports from India, China and ASEAN at the expense of EU demand for EU apparel. India, China, and ASEAN together account for more than 50 percent of EU baseline apparel imports and their apparel sectors expand strongly in the scenarios under consideration. This entails that their capacity to export to all world regions expands. In the case of India‟s apparel exports, this indirect general equilibrium effect is further reinforced by the aforementioned strong real exchange depreciation. The contraction of the EU textile sector is in turn a backward linkage effect, since apparel is very intense in the use of textile inputs.

96 As shown in Table 6.3 the share of EU exports to the ASEAN Plus Six region in EU output is only

2.3 percent for Textiles and 2.5 for Apparel. Thus, for instance the 1.5 percent decline in EU Textile production for ASEAN Plus Six markets under the ASEAN Plus Six scenario viewed in isolation would reduce EU output by less than 0.04 percent.

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Table 6.6 Aggregate Welfare Effects by Region (Percentage Changes)

ChinaFTA IndiaFTA JapanFTA KoreaFTA AusNZFTA AllFTAs ASEAN+6FTA

EU 0.00 0.00 0.00 0.00 0.00 0.00 -0.01

ASEAN 0.08 0.16 -0.23 -0.02 0.02 0.04 -0.04

China 0.03 -0.01 -0.01 -0.02 0.00 -0.01 -0.15

India -0.01 -0.01 0.00 -0.01 0.00 -0.02 -0.13

Japan -0.01 0.00 0.05 0.00 0.00 0.04 0.14

Korea -0.03 -0.01 -0.02 0.21 0.00 0.13 0.37

AustralNZ 0.00 0.00 0.00 0.00 0.01 0.00 0.10

OAsia -0.02 -0.01 -0.02 -0.02 0.00 -0.06 -0.13

NAFTA 0.00 0.00 0.00 0.00 0.00 0.00 0.00

LACTA 0.00 0.00 0.00 0.00 0.00 0.00 -0.01

EFTA 0.00 0.00 0.00 0.00 0.00 0.01 0.01

Balkan 0.00 0.00 0.00 0.00 0.00 -0.01 -0.02

FSU 0.00 0.00 0.00 0.00 0.00 -0.01 0.00

AfricaMed 0.00 0.00 0.00 0.00 0.00 -0.01 -0.02

SSALDCs 0.00 0.00 0.00 -0.02 0.00 -0.02 -0.05

Note: Percentage change in real absorption (i.e. the sum of private consumption, government consumption and investment demand).

Table 6.7 Real Exchange Rate Effects by Region (Percentage Changes)


EU -0.01 0.01 0.01 0.00 0.00 0.00 0.02

ASEAN -0.34 -0.23 0.30 0.00 -0.04 -0.35 -0.21

China -0.24 0.01 0.00 0.04 0.01 -0.17 -0.24

India 0.00 0.79 0.03 0.02 0.00 0.85 1.64

Japan 0.05 -0.01 -0.51 0.01 0.00 -0.45 -1.41

Korea 0.07 0.00 0.02 -0.34 0.00 -0.23 -0.88

AustralNZ -0.01 0.01 0.02 0.03 -0.06 -0.01 -1.03

OAsia 0.07 0.01 0.01 0.04 0.00 0.13 0.40

NAFTA -0.01 0.01 0.00 0.00 0.00 0.00 0.05

LACTA -0.01 0.01 0.00 0.00 0.00 0.00 0.05

EFTA -0.01 0.01 0.01 0.00 0.00 0.01 0.06

Balkan -0.02 0.02 0.02 0.01 0.00 0.02 0.09

FSU -0.02 0.02 0.00 0.00 0.00 -0.01 0.02

AfricaMed -0.04 0.02 0.01 0.02 0.00 0.02 0.12

SSALDCs -0.03 0.03 0.00 0.01 0.00 0.01 0.11

Note: Negative signs indicate a real exchange rate appreciation.

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Table 6.8 Effects on Aggregate Export Volume by Region (Percentage Changes)


EU -0.01 0.00 0.00 0.00 0.00 -0.01 -0.02

ASEAN 0.54 -0.11 0.73 0.28 0.03 1.40 1.44

China 0.53 0.00 0.02 0.01 0.00 0.56 2.38

India -0.01 1.40 -0.01 -0.02 0.00 1.36 3.24

Japan 0.00 -0.01 0.23 -0.01 0.00 0.21 0.97

Korea 0.01 0.01 -0.02 0.21 0.00 0.21 1.75

AustralNZ -0.01 -0.01 -0.01 -0.02 0.21 0.17 1.96

OAsia -0.04 0.00 0.01 0.02 0.00 0.00 -0.06

NAFTA -0.01 0.00 0.00 0.00 0.00 -0.01 -0.01

LACTA -0.01 0.00 -0.01 0.00 0.00 -0.01 -0.02

EFTA -0.02 0.00 0.00 -0.01 0.00 -0.04 -0.11

Balkan -0.01 0.00 -0.01 0.00 0.00 -0.02 -0.03

FSU -0.01 0.00 -0.01 0.00 0.00 -0.02 -0.03

AfricaMed -0.01 0.00 0.00 0.00 0.00 -0.01 -0.02

SSALDCs -0.01 -0.01 -0.01 0.01 0.00 -0.02 0.01

RoW -0.01 0.00 0.00 0.00 0.00 -0.02 -0.05

Note: Note: Table 6.8 shows changes in each region‟s total exports of goods and services to all global destinations, while Table 6.9 shows changes in EU exports of goods and services to the various ASEAN+6 regions.

Table 6.9 Effects on EU Export Volume to ASEAN+6 Regions (Percentage Changes)

ChinaFTA IndiaFTA JapanFTA KoreaFTA AusNZFTA AllFTAs ASEAN6FTA

ASEAN 0.03 0.14 -0.63 -0.13 0.02 -0.54 -0.57

China -0.04 0.01 0.03 0.00 0.00 -0.02 -0.73

India -0.03 -0.74 -0.02 -0.01 0.00 -0.80 -2.26

Japan -0.07 0.02 0.42 -0.02 -0.01 0.34 0.90

Korea -0.09 0.02 0.03 0.23 0.00 0.18 -0.20

AusNZ -0.02 0.00 -0.01 -0.02 -0.10 -0.15 0.24

ASEAN+6 -0.03 -0.01 -0.06 -0.02 -0.01 -0.13 -0.30

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Table 6.10 Effects on EU Output by Sector (Percentage Changes)


Agriculture 0.01 0.00 0.00 0.00 0.00 0.01 -0.01

Minerals 0.01 -0.02 0.00 0.00 0.00 0.00 -0.02

Processed food 0.01 0.00 0.00 0.00 0.00 0.00 -0.02

Beverages & tobacco -0.01 0.00 0.00 0.00 0.00 -0.01 -0.02

Textiles -0.05 -0.03 -0.04 -0.08 -0.01 -0.20 -0.61

Apparel -0.07 -0.03 -0.07 -0.08 -0.01 -0.26 -0.79

Wood products 0.06 0.03 -0.03 0.00 -0.01 0.05 0.03

Paper products 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Chemicals -0.06 -0.01 0.01 -0.01 0.00 -0.07 -0.08


Ferrous metals -0.01 -0.02 -0.01 0.00 0.00 -0.04 -0.05

Nonferrous metals -0.01 0.00 -0.01 -0.01 0.00 -0.02 0.15

Metal products -0.01 0.00 0.00 0.00 0.00 -0.02 -0.01

Motor vehicles -0.01 0.00 -0.03 -0.02 0.00 -0.06 -0.04

Other transport equipment -0.01 0.00 0.01 0.05 0.00 0.04 0.15

Electric equipment -0.04 0.07 -0.06 0.07 0.01 0.04 -0.07

Machinery -0.03 -0.01 0.01 0.00 0.00 -0.03 -0.04

Other manufactures 0.01 -0.01 0.00 -0.01 0.00 -0.01 -0.02

Trade services 0.00 0.00 0.00 0.00 0.00 0.01 0.01


Other services 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Table 6.11 Effect of All ASEAN+1 FTAs on EU Exports by Commodity (Percentage Changes)

EU Exports to

ASEAN China India Japan Korea AusNZ All ASEAN+6

Agriculture 1.58 0.12 -1.50 0.14 -2.35 0.04 0.10

Minerals 0.49 0.16 -0.45 0.29 0.03 0.32 -0.29

Processed food 0.22 0.00 -6.93 -0.10 -1.31 -0.01 -0.22

Beverages & tobacco -1.45 -0.25 -0.64 0.11 -0.07 -0.07 -0.39

Textiles -5.06 -0.64 -1.53 -0.56 -0.40 -0.61 -1.53

Apparel -4.01 -0.42 -1.95 -0.29 -0.69 -0.73 -0.88

Wood products -0.58 -0.01 -1.65 0.24 -0.85 -0.39 -0.10

Paper products -0.22 0.13 -1.09 0.49 0.40 -0.09 -0.05

Refined petrol & coal -0.35 -0.34 -0.50 0.18 0.05 0.19 -0.20

Chemicals -1.84 -0.65 -1.48 0.29 0.19 -0.32 -0.56

Mineral products -0.91 -0.11 -1.09 0.49 0.24 -0.13 -0.14

Ferrous metals -2.85 0.15 -0.90 0.39 0.26 -0.03 -0.89

Nonferrous metals -1.27 0.14 -0.30 0.38 -0.24 0.07 -0.12

Metal products -2.15 0.05 -1.03 0.40 0.33 -0.13 -0.47

Motor vehicles -8.07 -0.02 -1.01 0.38 0.05 -0.23 -0.69

Other transport equipment -0.79 -0.11 -0.90 0.35 0.59 0.01 -0.28

Electric equipment -0.05 0.04 -0.91 0.61 0.04 -0.10 0.01

Machinery -2.07 0.01 -1.01 0.41 0.23 -0.23 -0.36

Other manufactures -0.73 -0.08 -1.23 0.44 0.06 -0.16 -0.11

Trade services 1.06 0.22 -0.55 0.45 0.44 0.03 0.51

Transport services 0.70 0.24 -0.48 0.48 0.51 0.09 0.40

Other services 0.86 0.20 -0.56 0.45 0.51 0.04 0.42

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Table 6.12 Effects of ASEAN+6 FTA on EU Exports by Commodity (Percentage Changes)

EU Exports to


Agriculture 1.34 0.58 -2.53 -0.60 -7.41 2.50 -0.23

Minerals 0.49 -0.26 -1.72 0.81 0.84 3.09 -1.30

Processed food 0.02 0.08 -7.72 -0.82 -4.08 0.28 -0.83

Beverages & tobacco -1.56 -0.56 -1.24 0.21 -7.47 0.42 -0.99

Textiles -6.35 -1.98 -5.16 -5.67 -4.37 -4.99 -4.50

Apparel -5.01 -2.69 -4.77 -3.79 -5.09 -6.09 -4.06

Wood products -0.90 -0.15 -2.98 0.93 -1.77 0.39 0.21

Paper products -0.34 0.18 -2.25 1.64 1.74 1.15 0.31


Chemicals -1.93 -1.61 -3.39 0.97 -0.72 0.25 -0.71

Mineral products -0.94 -1.24 -3.24 1.41 -0.29 0.88 -0.17

Ferrous metals -2.52 -0.59 -2.97 1.47 0.65 0.16 -1.24

Nonferrous metals -1.24 -0.53 -4.05 1.32 -1.33 -0.78 -0.75

Metal products -2.08 -0.77 -3.45 1.58 0.30 0.41 -0.54

Motor vehicles -7.85 -2.11 -3.25 1.39 -0.13 -1.85 -1.17


Electric equipment 0.06 -0.56 -2.52 1.69 -0.23 0.37 -0.08

Machinery -1.91 -1.07 -3.44 1.07 -0.85 0.20 -0.89

Other manufactures -0.97 -1.30 -3.86 1.40 -0.46 0.54 -0.05

Trade services 0.95 0.40 -1.05 1.47 1.69 1.18 0.85


Other services 0.75 0.34 -1.14 1.48 1.92 1.26 0.74

6.4.3 Results under a Successful Completion of the Doha Round

This section reports results for the alternative assumption of a successful Doha Round

completion. The stylized Doha Round baseline scenario is based on the revised December

2008 draft modalities for agriculture and non-agricultural market access (WTO, 2008a,b) and

is specified as follows: In line with WTO (2008a), the bound tariff cuts for agricultural goods

shown in Table 6.13 are implemented. Furthermore, the developed countries eliminate their

agricultural export subsidies and domestic support for agricultural production in developed

countries is cut by 50%.

In line with WTO (2008b), for non-agricultural bound tariffs, the Swiss formula

127

with coefficient a=8 for developed and a=25 for non-LDC developing countries is applied to

determine the cut in applied tariffs, where To and T1 denote the pre- and post-Doha rates

respectively. Thus, we follow the common practice in CGE analyses of the Doha Round to

assume that cuts in bound rates feed through into corresponding cuts in applied rates. Given

the presence of considerable binding overhang in many developing countries, this is

undoubtedly a simplifying assumption.97 All LDC import tariffs remain unchanged. In cases

where the assumed Doha Round tariff cuts are deeper than the cuts agreed under the

various free trade agreements, the Doha cuts apply.

Table 6.13 Doha-Round Bound Tariff Cut Schedule for Agricultural Goods

Developed Regions Developing Countries except LDCs

Pre-Doha Bound Rate Cut by Pre-Doha Bound Rate Cut by

≤ 20 54% ≤ 30 33.3%

>20 -50 57% >30 – 80 38.0%

>50 -75 64% >80 -130 42.7%

>75 70% >130 46.7%

Table 6.14 reports aggregate welfare impacts of the various East Asian FTAs compared to

the post-Doha benchmark. The distribution of welfare gains among the members of the

ASEAN Plus Six group follows the same pattern as in the absence of a Doha deal, i.e. the

developed participants – Japan, Australia / New Zealand and Korea – benefit while ASEAN,

India and China suffer small net welfare losses under a joint implementation of the five

ASEAN+1 FTAs or a full ASEAN Plus Six FTAs. However, since the initial tariff distortions

are lower under the Doha baseline, it is not surprising that the real absorption gains as well

as the underlying real exchange rate impacts (Table 6.15) are generally noticeably lower

than without a successful Doha round. India in particular is projected to suffer a far less

pronounced deterioration of its terms of trade and depreciation of its real exchange rate, and

as a result the projected aggregate net welfare loss under these scenarios is considerably

lower. This result suggests that much of the required adjustment of India‟s real exchange

rate under an ASEAN Plus Six FTA would also be necessary under a completion of the

Doha Round.

Turning to the indirect impacts of the East Asian FTAs on the European Union, the effects on

aggregate welfare are now completely unnoticeable at two-post-decimal digit precision level,

while the effects on aggregate global EU exports of goods and services reported in Table

6.16 have the same order of magnitude as those in Table 6.8 for the no-Doha baseline.

The impacts on EU exports and real output at the sectoral level shown in Tables 6.17 to 6.19

exhibit likewise a similar pattern to the results reported in the previous section. The sectors

with the strongest percentage declines in EU exports to the region under an ASEAN Plus Six

FTA are again textiles and apparel. The volume of EU textile exports to the ASEAN Plus Six

97 For recent CGE studies of the Doha Round that take account of binding overhang see Bouet and

Laborde (2010) and Willenbockel (2009).

128

bloc is projected to decline by 2.6 percent (compared to 4.5 percent in the no-Doha case)

and EU apparel exports to the region decline by 2 percent (compared to 4.1 percent in the

no-Doha case). These results indicate that the tariff preferences the ASEAN Plus Six

members would grant to each other under the assumed FTA exceed the tariff cuts that

would happen under an implementation of the December 2008 Doha Round proposals by a

considerable margin in these sectors.

These two sectors also remain the EU industries with the strongest projected decline in real

gross output in response to the implementation of an ASEAN+6 FTA. The EU textile sector

shrinks by 0.36 percent (compared to 0.61 percent under the no-Doha baseline) and the EU

apparel industry production declines by 0.46 percent (compared to 0.79 percent under the

no-Doha baseline). Given the comparative-static nature of the CGE analysis, it should be

borne in mind that these figures should not be interpreted as absolute contractions, but

rather as deviations from the baseline growth paths of these sectors in a hypothetical post-

Doha world98.

98 For instance, if – say – the EU apparel industry would grow at an average annual growth rate of 1

percent in the absence of the ASEAN+6 FTA, the statement that “EU apparel output declines by 0.46 percent” means that each year the output of the sector is 0.46 percent lower than the output level along this no-FTA growth path, but this does not mean that the sector shrinks over time in absolute terms.

129

Table 6.14 Aggregate Real Absorption Effects by Region (Doha Baseline) (Percentage Changes)


EU 0.00 0.00 0.00 0.00 0.00 0.00 0.00

ASEAN 0.05 -0.01 -0.24 -0.06 0.01 -0.23 -0.28

China 0.02 0.00 -0.01 -0.01 0.00 0.00 -0.20

India 0.00 0.00 0.00 0.00 0.00 -0.01 -0.08

Japan -0.01 0.00 0.04 0.00 0.00 0.04 0.12

Korea -0.02 0.00 -0.01 0.14 0.00 0.10 0.33

AustralNZ 0.00 0.00 0.00 0.00 0.00 0.00 0.02

OAsia -0.01 0.00 -0.01 -0.01 0.00 -0.03 -0.09

NAFTA 0.00 0.00 0.00 0.00 0.00 0.00 0.00

LACTA 0.00 0.00 0.00 0.00 0.00 0.00 -0.01

EFTA 0.00 0.00 0.00 0.00 0.00 0.00 0.01

Balkan 0.00 0.00 0.00 0.00 0.00 -0.01 -0.02

FSU 0.00 0.00 0.00 0.00 0.00 0.00 -0.01

AfricaMed 0.00 0.00 0.00 0.00 0.00 -0.01 -0.02

SSALDCs 0.00 0.00 0.00 -0.01 0.00 -0.02 -0.05

RoW 0.00 0.00 0.00 0.00 0.00 0.00 -0.01

Table 6.15 Real Exchange Rate Effects by Region (Doha Baseline) (Percentage Changes)


EU -0.01 0.00 0.01 0.00 0.00 -0.01 0.01

ASEAN -0.30 -0.02 0.24 0.04 -0.03 -0.10 -0.01

China -0.18 0.00 0.00 0.03 0.00 -0.14 -0.01

India -0.01 -0.27 0.03 0.01 0.00 -0.23 0.21

Japan 0.03 0.00 -0.39 0.01 0.00 -0.34 -1.10

Korea 0.06 0.00 0.02 -0.40 0.00 -0.31 -1.20

AustralNZ -0.02 0.01 0.00 0.01 -0.05 -0.05 -0.47

OAsia 0.05 0.00 0.01 0.03 0.00 0.09 0.32

LACTA -0.01 0.00 0.00 0.00 0.00 -0.01 0.02

EFTA -0.01 0.00 0.01 0.00 0.00 0.00 0.04

Balkan -0.01 0.00 0.01 0.00 0.00 0.00 0.03

FSU -0.02 0.00 0.01 0.00 0.00 0.00 0.05

AfricaMed -0.02 0.00 0.00 0.00 0.00 -0.02 0.01

SSALDCs -0.03 -0.01 0.01 0.01 0.00 -0.02 0.07

RoW -0.02 0.00 0.00 0.01 0.00 -0.02 0.05

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Table 6.16 Effects on Aggregate Real Exports by Region (Doha Baseline) (Percentage Changes)


EU -0.01 0.00 0.00 0.00 0.00 -0.01 -0.02

ASEAN 0.42 0.05 0.54 0.22 0.02 1.22 1.22

China 0.41 0.00 0.01 0.00 0.00 0.43 1.80

India -0.01 -0.12 -0.01 -0.01 0.00 -0.14 0.93

Japan 0.00 0.00 0.04 0.00 0.00 0.04 0.29

Korea 0.00 0.00 -0.02 0.04 0.00 0.03 0.71

AustralNZ -0.01 0.00 0.00 -0.01 0.13 0.12 1.00

OAsia -0.03 0.00 0.00 0.01 0.00 -0.03 -0.07

NAFTA -0.01 0.00 0.00 0.00 0.00 -0.01 0.00

LACTA 0.00 0.00 0.00 0.00 0.00 -0.01 -0.02

EFTA -0.02 0.00 0.00 0.00 0.00 -0.03 -0.08

Balkan 0.00 0.00 0.00 0.00 0.00 -0.01 -0.02

FSU -0.01 0.00 -0.01 0.00 0.00 -0.02 -0.02

AfricaMed 0.00 0.00 0.00 0.00 0.00 -0.01 -0.01

SSALDCs -0.01 0.00 0.00 0.01 0.00 -0.01 0.02

RoW -0.01 0.00 0.00 0.00 0.00 -0.01 -0.03

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Table 6.17 Effects on Real EU Output by Sector (Doha Baseline) (Percentage Changes)


Agriculture 0.01 0.00 0.00 0.00 0.00 0.01 0.01

Minerals 0.01 -0.01 0.00 0.00 0.00 0.01 -0.01

Processed food 0.01 0.00 0.01 0.00 0.00 0.02 0.02

Beverages & tobacco 0.00 0.00 0.00 0.00 0.00 0.00 0.01

Textiles -0.02 0.00 -0.04 -0.06 0.00 -0.11 -0.36

Apparel -0.03 0.01 -0.05 -0.06 0.00 -0.14 -0.46

Wood products 0.04 -0.01 -0.05 -0.01 -0.01 -0.03 -0.05

Paper products 0.00 0.00 0.00 0.00 0.00 0.00 -0.01


Chemicals -0.04 -0.01 0.00 -0.01 0.00 -0.06 -0.07


Ferrous metals -0.01 0.00 0.00 0.00 0.00 -0.01 -0.02

Nonferrous metals -0.01 0.01 0.00 0.00 0.00 0.00 0.11

Metal products 0.00 0.00 0.00 0.00 0.00 -0.01 -0.01

Motor vehicles -0.01 0.00 0.01 0.00 0.00 0.00 0.09

Other transport equipment 0.00 0.00 0.01 0.03 0.00 0.03 0.11

Electric equipment -0.07 0.00 -0.07 0.02 0.01 -0.11 -0.30

Machinery -0.02 0.00 0.00 0.00 0.00 -0.03 -0.05

Other manufactures 0.01 0.00 0.00 -0.01 0.00 0.00 -0.02

Trade services 0.00 0.00 0.00 0.00 0.00 0.01 0.01


Other services 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Table 6.18 Effects of AllFTAs on EU Exports by Commodity (Doha Baseline) (Percentage Changes)

EU Exports to


Agriculture -1.20 0.09 -0.01 0.27 0.13 0.08 -0.06

Minerals 0.30 0.13 -0.19 0.21 0.02 0.25 -0.10

Processed food 0.48 0.08 4.17 0.61 0.78 0.04 0.52

Beverages & tobacco -0.36 -0.02 0.46 0.24 0.23 0.02 0.03

Textiles -3.26 -0.38 -0.22 -0.34 -0.10 -0.32 -0.91

Apparel -2.91 -0.21 0.04 -0.10 -0.22 -0.30 -0.49

Wood products -1.60 -0.24 -0.43 -0.08 -0.44 -0.40 -0.36

Paper products -0.45 0.09 -0.15 0.33 0.25 -0.05 -0.06


Chemicals -1.54 -0.48 -0.47 0.15 0.07 -0.23 -0.44

Mineral products -0.79 -0.05 -0.19 0.33 0.20 -0.06 -0.08

Ferrous metals -1.83 0.14 -0.13 0.26 0.13 -0.04 -0.50

Nonferrous metals -0.85 0.11 -0.17 0.18 -0.18 -0.02 -0.10

Metal products -1.60 0.05 -0.10 0.27 0.21 -0.06 -0.31

Motor vehicles -3.59 0.10 0.14 0.32 0.22 -0.03 -0.19

Other transport equipment -0.82 -0.05 0.05 0.22 0.41 0.02 -0.19

Electric equipment -0.03 -0.30 -0.33 0.23 -0.21 -0.32 -0.12

Machinery -1.77 -0.01 -0.10 0.23 0.12 -0.17 -0.29

Other manufactures -0.74 -0.02 0.11 0.31 0.08 -0.07 -0.05

Trade services 0.58 0.17 0.17 0.32 0.38 0.06 0.33


Other services 0.40 0.16 0.16 0.31 0.36 0.06 0.29

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Table 6.19 Effects of ASEAN+6 FTA on EU Exports by Commodity (Doha Baseline) (Percentage Changes)

EU Exports to


Agriculture -1.26 0.02 -0.56 0.49 -0.59 0.49 -0.07

Minerals 0.24 -0.26 -0.88 0.51 0.57 2.07 -0.68

Processed food 0.39 0.01 3.73 1.31 1.31 0.48 0.91

Beverages & tobacco -0.43 -0.20 0.15 0.81 0.90 0.36 0.34

Textiles -4.00 -1.52 -2.35 -3.11 -1.77 -2.28 -2.56

Apparel -3.53 -1.72 -1.60 -1.69 -1.95 -2.50 -2.01

Wood products -1.78 -0.62 -1.24 0.46 -0.43 -0.40 -0.18

Paper products -0.52 -0.03 -0.84 1.20 1.40 0.35 0.10


Chemicals -1.57 -1.34 -1.62 0.67 -0.31 -0.17 -0.58

Mineral products -0.82 -1.02 -1.52 1.00 0.28 0.25 -0.12

Ferrous metals -1.60 -0.58 -1.31 0.97 0.35 -0.15 -0.79

Nonferrous metals -0.97 -0.56 -2.63 0.78 -0.98 -0.95 -0.64

Metal products -1.56 -0.73 -1.59 1.11 0.48 -0.09 -0.44

Motor vehicles -3.18 -0.55 -0.30 1.17 0.71 -0.68 -0.07


Electric equipment -0.14 -0.79 -1.56 0.85 -0.57 -0.50 -0.35

Machinery -1.67 -1.03 -1.62 0.72 -0.37 -0.23 -0.75

Other manufactures -0.92 -1.03 -1.54 1.03 0.18 0.00 -0.01

Trade services 0.50 0.15 -0.11 1.08 1.55 0.49 0.52


Other services 0.33 0.07 -0.15 1.08 1.53 0.54 0.49

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6.5 Conclusions

The main results of the CGE analysis can be briefly summarized as follows:

In line with previous computable general equilibrium assessments of further East

Asian economic integration, the aggregate welfare impacts of the various ASEAN+1

FTAs for the EU are of a negligible order of magnitude.

The potential formation of an ASEAN Plus Six FTA is projected to entail an

aggregate EU welfare loss of the order of 0.01 percent in the absence of a successful

completion of the Doha Development Round.

The additional aggregate EU welfare impact of an ASEAN Plus Six FTA on top of a

Doha agreement is virtually nil.

Under the most comprehensive East Asian integration scenario (ASEAN Plus Six

FTA), the EU export volume to the ASEAN Plus Six region as a bloc is projected to

decline by 0.3 percent.

Under the joint establishment of ASEAN+1 FTAs with China, India, Korea, Japan and

Australia / New Zealand EU textile exports to the ASEAN Plus Six bloc are projected

to be most affected with a drop by 1.53 percent, followed by ferrous metals (-0.89

percent), wearing apparel (-0.88 percent), motor vehicles and parts (-0.69 percent)

and chemicals (-0.56 percent).

Under an ASEAN Plus Six FTA, again EU textile exports to the region take the

strongest blow (-4.5 percent), followed by apparel (-4.1 percent), mineral fuels (-1.3

percent) and motor vehicles (-1.2 percent).

The sectoral EU real output effects at the CGE sector aggregation level remain

generally well below 0.1 percent of baseline production in all scenarios. The only

exceptions are the EU textile and apparel sectors, which contract by up to 0.3

percent under the AllFTA scenario and by up to 0.8 percent under the ASEAN Plus

Six FTA scenario.

When the impacts of the East Asian FTAs on the EU are compared to a post-Doha

antimonde as opposed to a no-Doha baseline, aggregate and sectoral results follow

a similar pattern but the magnitudes are muted.

135

7 Conclusions

The South East Asian region has seen a wave of bilateral and regional free trade agreements over the last few years. The near future is likely to see a continuation of this trend. ASEAN is becoming a regional FTA hub, having concluded agreements with all the key regional players: China, South Korea, Japan, India and Australia and New Zealand. Some ASEAN members actively pursue a policy of engaging in bilateral FTAs with several partners in Asia-Oceania and beyond. Despite some attempts, notably the talks on the EU-ASEAN FTA that are currently on hold, so far the EU has remained little engaged in the Asian integration process.

Given the fast rise of the role of East Asia in global economy and in international trade in particular, the effects of deepening regional integration in South East Asia on excluded partners can be potentially substantial especially at the sectoral level. The objective of this report is to shed light on the likely consequences on the EU resulting from on-going and some prospective FTAs in the region, especially with regard to tariff liberalisation.

One challenge in this analysis is the presence of a complex web of agreements involving South East Asian economies – the well known noodle-bowl structure. As discussed in chapters 2 and 3 there is hardly a common pattern even for the plurilateral agreements of ASEAN with its key partners. Given the lack of a common external tariff of ASEAN each such agreement is equivalent to ten bilateral agreements as all ASEAN members negotiate their tariff schedules separately.

Almost all the FTAs involving the regional economies entered into force very recently, and hence their implementation is little advanced in most cases. While tariff reductions are generally introduced as planned, progress in implementation of deep integration provisions face substantially more obstacles.

Apart from, the FTAs in the ASEAN+1 format, Singapore, Thailand, Malaysia and to a lesser extent also some other ASEAN member countries tend to also establish bilateral trade agreements, even with the same partners that have already concluded an FTA with ASEAN. For example, at the end of 2010 the ASEAN-Japan plurilateral FTA that entered into force in relation to eight ASEAN members coexisted with seven bilateral FTAs between ASEAN countries and Japan.

The forces behind this dual bilateral and multilateral approach differ between cases. Bilateral agreements may be easier to negotiate and hence can be implemented faster, which is not an unimportant issue given the speed at which other regional FTAs are being formed. Also, from the perspective of individual ASEAN member countries, bilateral agreements may allow for the negotiation of certain provisions that partners may not be willing to extend to the ASEAN countries as a whole. Bilateral FTAs may also allow countries to extend the coverage and depth of existing plurilateral agreements, a potentially attractive option especially for more developed ASEAN countries such as Singapore. On the other hand, the formation of plurilateral agreements can be a means of introducing more coherence and transparency to the pre-existing network of bilateral deals, although the example of the ASEAN-Japan FTA shows that it is not always easy to achieve this objective in practice.

The FTAs involving ASEAN and its member countries are very heterogeneous as regards tariff reduction schedules and the degree of ambition with regard to non-tariff provisions. In many cases these provisions are limited to best endeavour or cooperation clauses or confirmation of already existing commitments. Plurilateral FTAs signed by ASEAN in general are more limited in scope, compared to a number of the bilateral FTAs.

136

From the perspective of partners currently outside the ASEAN‟s FTA networks the key questions include ones on:

The scope and depth of the FTAs currently in place and those likely to enter into force in the future

The degree of progress in the effective implementation of the agreements and especially their key provisions

The degree of utilisation of preferences in foreign trade transactions between FTA partners, itself depending on the effective preference margins and costs of utilisation

Progress in multilateral trade liberalisation and / or in forging new bilateral or plurilateral deals with ASEAN

Focusing on the tariff provisions themselves the report identifies the ASEAN-Japan agreement as the one with the potentially strongest effects on the EU. These effects are small at the aggregate level, but non-negligible impacts may materialise in several sectors and products that together account for a significant part of EU exports to ASEAN. The findings from partial and general equilibrium models as well as the analysis of Sussex Framework indicators consistently point to products in HS chapter 87 (vehicles and parts and accessories thereof) as the ones where current EU exports are sizeable and where particularly significant export market losses may materialise.

The importance of the successful completion of the Doha Round negotiations for the EU as a means of minimising the possible negative effects from the processes of South East Asian is also evident. Assuming a successful completion of the Doha Round significantly limits or in some cases completely removes the potential detrimental effects of being excluded from South East Asian integration initiatives.

It is difficult to predict to what extent current FTA provisions on regulatory issues and non-tariff barriers will be effectively implemented. Limited capacity especially on the side of less developed ASEAN countries and conflicting interest of various stakeholders are likely to hinder progress. At the same time, the declared general political ambitions of countries sometimes go further than is provided by the current format of FTAs and the agreements may further evolve incorporating new provisions. It is possible that over time the capacity to act and real commitment to deep economic integration could increase.

Utilisation of preferences has been relatively low until recently. However, at least for some products preferences are more meaningful and are widely utilised. Further progress in the FTA implementation process could lead to rising utilisation of preferences (in the form of lower tariff and especially non-tariff barriers) and larger scope for potential adverse impact on non-members, including the EU.

We are sceptical as to the medium-term prospects of very ambitious initiatives to create unified regional FTAs covering a large part of East / East and South Asia or even the entire Asia-Pacific region – ASEAN Plus Three, ASEAN Plus Six or the Trans-Pacific Partnership. Apart from some economic interests, there are substantial political economic obstacles hindering their progress. Nevertheless, continued attempts to bring more order and transparency to the current FTA network and to engage new partners, notably the US may lead to successful implementation of other initiatives that are currently not considered. It is instructive to bear in mind that barely a decade ago most of the FTAs currently in force were hardly conceivable.

137

There are important caveats that should be considered in drawing policy conclusions from this study. As indicated above our empirical attempts to identify sectors and products likely to see the most significant effects in terms of EU exports and production and the estimates of the magnitude of these likely effects are based only on abolishing or reduction of tariff barriers due to FTAs. However, the agreements involving ASEAN countries are clearly targeting much more than shallow integration of tariff cuts. This is self-evident in case of bilateral FTAs involving Singapore, a country with virtually no import tariffs, but this also applies to other agreements, to a varying degree.

Limited progress to date in deep integration can be taken as justifying the focus of this study on tariff barriers. It should also be noted that good estimates of non-tariff barriers and comparable assessments of practical consequences of given FTA provisions on doing business across the borders are very difficult to find. This hinders the possibility of studies like this one to provide precise analytical conclusions. This should be taken into account in considerations on the optimal EU‟s trade policy towards the region. A different type of studies based on business surveys and in-depth interviews with key informants may provide particularly useful insights enriching the analysis of this report.

Finally, this study does not take into account some potentially important mechanisms helping the EU gain from economic integration processes involving South East Asia. It is plausible to expect that deepening integration in the region could provide lift ASEAN‟s growth and its import demand. From the EU perspective this additional demand could offset some of the supply shifting effects due to FTAs. Also, the EU companies have been among the leading foreign investors in ASEAN and for them regional integration processes open new prospects. Clearly, the South East Asian integration processes offers also some opportunities for the EU.

138

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141

Appendix 1. Overview of characteristics of South East Asian FTAs

Table A1.1a Scope and Coverage of FTAs in which ASEAN countries are involved -Intra Asia Bilateral FTAs

Tariff reduction

Services

Rules of Origin

Contingency measures (anti-dumping, countervailing duties, safeguard)

Technical regulations (TBT, SPS)

Intellectual Property

Trade Facilitation

Competition Investment Government Procurement

Singapore-China

Yes Yes Yes Yes (AD, SG, CVD not allowed)

Yes No Yes No No No

Vietnam-Japan Yes Yes Yes Yes (only SG) Yes Yes Yes Yes No99

Yes

Indonesia-Japan

Yes Yes Yes Yes (only SG) No Yes Yes Yes Yes Yes

Philippines-Japan

Yes Yes Yes Yes (only SG) Sectoral mutual recognition

Yes Yes Yes Yes Yes

Thailand-Japan

Yes Yes Yes Yes (only SG) Sectoral mutural recognition

Yes Yes Yes Yes Yes

Malaysia- Japan

Yes

Yes Yes Yes (only SG) Yes Yes Yes Yes Yes No

Singapore- Japan

Yes Yes Yes Yes (CVD, SG)

Yes Yes Yes Yes Yes Yes

Singapore-Australia

Yes

Negative list

Yes Yes Yes (AD, CVD) Yes Yes Yes Yes Yes Yes

Thailand-Australia

Yes Yes Yes Yes Yes Yes Yes Yes Yes No

99 Japan-Vietnam Investment Agreement enforced in 2004 separately exists.

142

Tariff reduction

Services

Rules of Origin

Contingency measures (anti-dumping, countervailing duties, safeguard)


Intellectual Property

Trade Facilitation


Thailand-New Zealand

Yes Yes Yes Yes Yes Yes Yes Yes Yes No

Singapore-New Zealand

Yes Yes Yes Yes (AD, CVD and SG not allowed)


Singapore- India

Yes Yes Yes Yes (SG) Yes Yes Yes No Yes No

143

Table A1.1b Scope and Coverage of FTAs in which ASEAN countries are involved -Intra Asia Bilateral FTAs (Cont’d)

Dispute Settlement

Labour Standards

Environment Standards

Labour Mobility Technology Transfer

Singapore-China Yes No No No No

Vietnam-Japan Yes No No Yes No

Indonesia-Japan Yes No No Yes No

Philippine-Japan Yes No No Yes No

Thailand-Japan Yes No No Yes No

Malaysia Japan Yes Yes Yes No No

Singapore- Japan Yes Yes Yes Yes No

Singapore-Australia Yes No No Yes No

Thailand-Australia Yes No No Yes No

Singapore-New Zealand Yes No No No No

Thailand-New Zealand Yes Yes Yes No No

Singapore-India Yes No No Yes No

Notes: Yes: covered, No: no coverage

AD: Anti-dumping, CVD: Countervailing duties, SG: Safeguard

144

Table A1.2a Scope and Coverage of FTAs in which ASEAN countries are involved -Intra Asia Plurilateral FTAs

Tariff reduction

Services

Rules of Origin

Contingency Measure (Anti-dumping, countervailing duties, safeguard)


Intellectual Property Rights

Trade Facilitation


ASEAN Free Trade Agreement

Yes

Positive/ negative list

Yes

Yes Only SG Yes Yes Yes No Yes No

ASEAN-India Yes Yes Yes WTO applied Yes No Yes No No No

ASEAN-Australia, NZ

Yes Yes Yes Only SG Yes Yes Yes Yes Yes No

ASEAN-Japan Yes Under negotiation

Yes Only SG Yes No Yes No Under negotiation

No

ASEAN-Korea Yes Yes Yes Only SG Yes No Yes No Yes No

ASEAN- China Yes Yes Yes Yes No No No No Yes No

145

Table A1.2b Scope and Coverage of FTAs in which ASEAN countries are involved - Intra Asia Plurilateral FTAs (cont’d)

Dispute Settlement Labour Standards Environment Standards


ASEAN Free Trade Agreement

Yes No No No No

ASEAN-India Yes No No Yes No

ASEAN-Australia, NZ

Yes No No Yes No

ASEAN-Japan Yes No No No No

ASEAN-Korea Yes No No No No

ASEAN-China No No No No No

146

Table A1.3a Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional bilateral FTA

Tariff reduction

Services

Rules of Origin




Trade Facilitation


Singapore-US Yes Yes Yes Yes (application of domestic law)


Singapore-Jordan

Yes Yes Yes No No No No No Yes No

Singapore-Panama

n.a Yes Yes n.a. n.a. No No No No No

Table A1.3b Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional bilateral FTA

Dispute Settlement Labour Standards Environment Standards Labour Mobility Technology Transfer

Singapore-US Yes Yes Yes Yes No

Singapore-Jordan

Yes No No No No

Singapore-Panama

Yes No No No No

147

Table A1.4a Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional plurilateral FTAs

Tariff reduction

(year: year of tariff elimination)

Services

Rules of Origin




Trade Facilitation


TRANS-PACIFIC Strategic Economic Partnership Agreement

Yes

Negative list

Yes

(negative list)

Yes Yes Yes Yes Yes Yes No Yes

Singapore-EFTA

Yes

Yes Yes Yes (AD not allowed)

Yes Yes No Yes Yes Yes

Table A1.4b Scope and Coverage of FTAs in which ASEAN countries are involved - Inter-regional plurilateral FTAs

Dispute Settlement Labour Standards Environment Standards


TRANS-PACIFIC Strategic Economic Partnership Agreement

Yes Yes Yes No No

Singapore-EFTA Yes No No No No

148

Appendix 2. Regulatory provisions in selected ASEAN’s FTAs

Table A2.1 Overview of services commitments in selected FTAs

FTA Summary Comments Sectoral carve outs List approach Level of openness

100

ASEAN India

No provisions

ASEAN ANZ

Services commitments expand on GATS (a) government procurement;

(b) subsidies or grants101

(c) services supplied in the exercise of governmental authority or

(d) air transport services, measures affecting traffic rights however granted

102

e) Measures affecting natural persons seeking access to the employment market of another Party, measures regarding citizenship, residence or employment on a permanent basis.

Positive 103

Hybrid104

100 Commitments in each listed sector are made with respect to four different modes of supply: cross-border trade (mode 1), consumption abroad (mode 2), commercial presence (mode 3), and movement of natural persons (mode 4). 101

Including government supported loans, guarantees, and insurance, provided by a Party or to any conditions attached to the receipt of such subsidies or grants, whether or not such subsidies or grants are offered exclusively to domestic services, service consumers or service suppliers. 102

Other than measures affecting: (i) aircraft repair and maintenance services; (ii) the selling and marketing of air transport services; and (iii) computer reservation system services.

103 Fink: only the sectors that parties have expressly identified are subject to market opening undertakings. Countries are free to maintain or impose trade-restrictive measures in non-scheduled sectors, although those measures may still be subject to an agreement‟s general disciplines (such as on transparency).

104 Taken from Fink (2008): “Under a GATS-style hybrid list, parties may define the level of openness in listed sectors either on a positive or negative list basis. In particular, agreements following this approach typically adopt the market access and national treatment provisions of the GATS. Schedules of commitments then specify the market access „terms, limitations and conditions‟ and national treatment „conditions and qualifications‟. In other words, countries are free to describe either how trade is restricted or what type of services transactions are allowed in a listed sector. As a rule of thumb, an entry in

149


100

ASEAN Korea

Services commitments expand on GATS (a) government procurement;

(b) air transport services, measures affecting traffic rights however granted

105

(c) Measures affecting natural persons seeking access to the employment market of another Party, measures regarding citizenship, residence or employment on a permanent basis

Positive

ASEAN Japan

Best endeavour + subcommittee

ASEAN China

China‟s undertakings offer only limited value added over China‟s WTO accession commitment.

Most undertakings replicate existing GATS commitments.

For selected business and transport services, China has offered full foreign ownership and has eliminated economic needs tests.

Core air transport services Positive list Hybrid

Singapore China

Only major restrictions are in Singapore‟s nationality and residency requirements

Government procurement

Traffic rights

Positive List Hybrid

Singapore Japan

Singapore‟s major restriction is a nationality requirement for managers and directors of foreign invested enterprises.

Only improvement relative to Singapore‟s GATS schedule consists of extended periods of stay for business visitors and intra-corporate transferees.

Core air transport services106

cabotage in maritime transport

Positive list Hybrid

a GATS schedule that takes the form „None, except ....‟ signifies a negative list of trade-restrictive measures, whereas an entry that takes the form „Unbound, except . . .‟ signifies a positive list of market-opening concessions. 105

Other than measures affecting: (i) aircraft repair and maintenance services; (ii) the selling and marketing of air transport services; and (iii) computer reservation system services.

150


100

Singapore US

a) inscribes a phase-out commitment under which Singapore would open its market to US banks within 18 months from the entry into force of the agreement.

b) offers deeper market opening in the area of telecommunications.

Core air transport services

Government procurement

Negative,107

except cross border trade in financial services adopts a positive list

Negative

Japan Malaysia

Malaysia offers modest value added over its GATS commitment in business, communications, construction, and tourism services.

Some Malaysian commitments raise foreign equity limitations (e.g., from 30 to 35%), but do not allow for majority foreign ownership.

In some mode 4 sub-sectors, Malaysia offers minor improvements: small increases in the number of certain types of foreign natural persons allowed.

Japan offers value added relative to the GATS in several sub-sectors and modes, albeit with modest depth in some undertakings.

New commitments cover, in particular, certain professional service categories.

Telecommunications: Japan offers greater foreign equity ownership Japan‟s FTA schedules also provide for full liberalization in a number of sub-sectors and modes categorized as “unbound due to lack of technical feasibility” under the GATS.

(a) air transport services, measures affecting traffic rights108

(b) cabotage in maritime transport services;

(c) subsidies or grants provided by a Party or a state enterprise

(d) measures pursuant to immigration laws and regulations;

(e) measures affecting natural persons seeking access to the employment market of a Party, or measures regarding citizenship, residence or employment on a permanent basis;

(f) government procurement


106 Other than measures affecting: (i) aircraft repair and maintenance services; (ii) the selling and marketing of air transport services; and (iii) computer reservation system services.

107 Negative list approach entails identifying what is not covered or not allowed under the agreement.

108 other than measures affecting: (i) aircraft repair and maintenance services; (ii) the selling and marketing of air transport services; and (iii) computer reservation system services

151


100

Japan Philippines

The schedules of the Japan-

Malaysia EPA and the Japan-Philippines EPA are almost identical.

Improvements on the GATS in certain sub-sectors, but most part mode 3 commitments do not offer majority foreign ownership or control, with exceptions of certain energy and distribution services for which full foreign ownership is allowed.

Philippines‟ commitments value added in professional services, computer services, educational services, and value-added telecom services.

Most Mode 3 commitments relax foreign ownership and control requirements, but fall short of allowing full foreign ownership.






(f) government procurement.


Japan Thailand

Thailand‟s commitments offer modest value-added relative to its‟ GATS commitment.

Mode 3, Thailand inscribed a horizontal foreign equity limitation of 49%.






(f) government procurement.

Positive Hybrid



152


100

Japan Vietnam

As with the Thailand and Philippines schedules Japan‟s commitments offer modest improvements in the GATS schedules.

For Vietnam, the nationality requirement provides that at least 20% of managers, directors, and experts hired by a foreign company must be Vietnamese.

Foreign equity participation restriction in maintenance and repair of equipment (excluding maritime vessels, aircraft or other transport equipment) reduced: allows 51% foreign equity from Jan 2010, and 100% from Jan 2012.

Retailing services: Vietnam retains the discretionary leeway to impose quantitative restriction on the opening of two or more shops

Telecommunications services, internet connection services may be provided by a non facilities-based supplier only through a form of joint venture with a telecommunications carrier legitimately licensed in Vietnam with a maximum foreign equity participation 65% (50% in case of internet connection services provided by a facilities-based supplier).

Financial services, the establishment of a branch office of a foreign company permitted in the insurance and insurance-related service sectors other than life insurance (i.e. damage insurance only) after January 11, 2012



(c) measures pursuant to immigration laws and regulations;

(d) measures affecting natural persons seeking access to the employment market of a Party, or measures regarding citizenship, residence or employment on a permanent basis;

(e) government procurement.

Positive Hybrid

111 other than measures affecting: (i) aircraft repair and maintenance services; (ii) the selling and marketing of air transport services; and (iii) computer reservation system services.

153

Table A2.2 Selected intellectual property rights provisions in Asian FTAs

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ASEAN India ⦻

ASEAN China ⦻

ASEAN - ANZ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻

ASEAN Japan ⦻

ASEAN Korea ⦻

Singapore US ⦻ ⦻ ⦻ ⦻ ⦻ 113

⦻ ⦻ ⦻114

⦻ ⦻ ⦻ ⦻ ⦻ ⦻115

Singapore China ⦻

Singapore Japan ⦻ ⦻ ⦻ ⦻116

112 Pharmaceuticals / agricultural chemical products

113 Singapore is not obligated to give effect to Articles 6 and 7 of the Trademark Law Treaty.

114 The parties shall enforce the International Convention for the Protection of New Varieties of Plants (1991) within six months of signing the FTA.

115 Enforce chapter within six months of the FTA‟s entry into force.

116 Best endeavour enforcement

154

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Japan Indonesia ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻117

⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻118

Japan Malaysia ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻119

Japan Philippines ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻120

Japan Thailand ⦻121

⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻122

Japan Vietnam ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻ ⦻123

117 Best endeavour enforcement

118 Border measures; criminal and civil remedies


120 Fines & imprisonment

121 Assistance for acquisition of intellectual property rights for small and medium enterprises



155

Table A2.3 Overview of competition provisions in selected Asian FTAs

FTA No provisions

Cooperation: transparency; exchange of public info and expertise

Effective domestic competition law obligation

Designated monopolies & government enterprises permitted

Obligation to reduce public enterprises

Institutional requirements

DSM

ASEAN India

ASEAN China

ASEAN - ANZ Contact point

ASEAN Japan

ASEAN Korea

Singapore US authority with indep tribunal

Singapore China

Singapore Japan

Japan Indonesia Non discrimination & procedural fairness

Japan Malaysia Shall promote

Japan Philippines Shall promote

Japan Thailand Non discrimination & procedural fairness

Japan Vietnam Shall promote non discrimination & procedural fairness in domestic competition laws

156

Table A2.4 Overview of government procurement provisions in selected Asian FTAs

FTA No Gov Proc provisions

WTO GPA Information Exchange

Institutional requirements

Domestic measures Future. negotiations

AIFTA

ACFTA

AAFTA

AJFTA

AKFTA

Singapore US

GPA Schedules & Annexes Incorporated

WTO GPA

Singapore China

Singapore Japan

GPA Schedules & Annexes Incorporated

WTO GPA

Japan Indonesia

Subcommittee

Japan Malaysia

Japan Philippines

Subcommittee Recognize the principles of non discrimination & transparency. Ensure fair & effective implementation of domestic measures

Within 5 years, Topics: inter alia Non-Discrimation Transparency; bid challenge mechanisms & WTO GPA conformity

Japan Thailand

Contact point Subcommittee

Japan Vietnam

Subcommittee on Business environment

Best endeavour: – transparency Fair and effective

157

Table A2.5 Overview of investment provisions in selected Asian FTAs

FTA Provisions Definition of investment

Exceptions Performance requirements

Labour / environmental standards

DSM

ASEAN -India

none

ASEAN –Japan

Cooperation only

none

ASEAN - ANZ

narrow124

(a) government procurement; (b) subsidies or grants provided by a Party; and (c) services supplied in the exercise of governmental authority

TRIMs + No Reference National courts ICSID UNCITRAL

ASEAN Korea

narrow (a) government procurement; (b) subsidies or grants provided by a Party; c) any taxation measure (excluding transfers and compensation) d) any disputed measure existing prior to agreement e) government services f) existing non-conforming measures g) IPs

TRIMs No National Treatment ICSID UNCITRAL Other

ASEAN -China

broad125

(a) any taxation measure. (b) government procurement (c) subsidies or grants; (d) services supplied in the exercise of governmental (e) measures adopted or maintained by a Party affecting trade in services

TRIMs No Reference National courts ICSID UNCITRAL Other

124 “Investment” means an investment in its territory of an investor of another Party, in existence as of the date of entry into force of this Agreement or established, acquired or expanded thereafter, and which, where applicable, has been admitted by the host Party, subject to its relevant laws, regulations and policies;

125 “Investment” means every kind of asset invested by the investors of a Party in accordance with the relevant laws, regulations and policies 1 of another Party in the territory of the latter including, but not limited to, the following: (i) movable and immovable property and any other property rights such as mortgages, liens or pledges; (ii) shares, stocks and debentures of juridical persons or interests in the property of such juridical persons; (iii) intellectual property rights, including rights with respect to copyrights, patents and utility models, industrial designs, trademarks and service marks, geographical indications, layout designs of integrated circuits, trade names, trade secrets, technical processes, know-how and goodwill; (iv) business concessions

158




DSM

Singapore -China

Incorporates ASEAN-China provisions

broad As ASEAN-China As ASEAN-China

As ASEAN-China

As ASEAN-China

Singapore US

broad126

Financial services covered under separate chapter government procurement; or (b) subsidies or grants provided by a Party, including government-supported loans, guarantees, and insurance d) existing non-conforming measures

TRIMs+ Environment Reference ICSID UNCITRAL Other

Singapore Japan

Broad a) measures affecting the movement of natural persons of a Party b) government procurement c) subsidies / incentives for all sectors d) company registration formalities for all sectors e) ownership of residential land f) regulation on Singapore $ transactions g) privatisation h) services i) printing and publishing j) arms and explosives

TRIMs+ No National Treatment ICSID

Japan Indonesia

Broad a) any existing non-conforming measure set out in Annex 4 b) measures affecting the movement of natural persons of a Party b) government procurement

TRIMs+ Environment Reference ICSID UNCITRAL Other

Japan Malaysia

Broad (a) any existing non-conforming measure set out in Annex 4 (b) portfolio investments (c) government procurement

TRIMs Environment National Regional ICSID UNCITRAL

conferred by law, or under contract, including concessions to search for, cultivate, extract, or exploit natural resources; and (v) claims to money or to any performance having financial value.

126 Covered investment means, with respect to a Party, an investment in its territory of an investor of the other Party. Covered investments shall include those existing at the date of entry into force of this Agreement as well as those established, acquired, or expanded thereafter.

159




DSM

Japan Philippines

Broad (a) immigration (b) measures affecting the movement of natural persons of a Party b) any existing non-conforming measure as set out in its Schedule to Part l of Annex 7

127

TRIMs+128

Labour Environment

National Treatment To be further defined

Japan Thailand

Broad a) Immigration and naturalization b) government procurement c) IPs

TRIMs Environment National Treatment National courts ICSID UNCITRAL

Japan Vietnam

Broad a) existing exceptional measures specified in Annex II c) IPs d) Annex I exceptional matters

129

TRIMs Environment National Treatment ICSID UNCITRAL

127 Similar to Japan-Malaysia provisions

128 Article 93 Prohibition of Performance Requirements 1. Neither Party shall impose or enforce, as a condition for investment activities in its Area of an investor of the other Party, any of the following requirements:

(a) to export a given level or percentage of goods or services; (b) to achieve a given level or percentage of domestic content; (c) to purchase, use or accord a preference to goods produced or services provided in its Area, or to purchase goods or services from persons in its Area; (d) to relate the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with investments related to such investment activities; (e) to restrict sales of goods or services in its Area that investments related to such investment activities produce or provide by relating such sales to the volume or value of its exports or foreign exchange earnings; (f) to appoint, as executives, managers or members of boards of directors, individuals of any particular nationality; (g) to hire a given level of its nationals; (h) to transfer technology, a production process or other proprietary knowledge to a person in its Area, except when the requirement: (i) is imposed or enforced by a court, administrative tribunal or competition authority to remedy an alleged violation of competition laws; or (ii) concerns the transfer of intellectual property rights which is undertaken in a manner not inconsistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement (hereinafter referred to in this Chapter as “the TRIPS Agreement”); (i) to locate the headquarters of that investor for a specific region or the world market in its Area; (j) to achieve a given level or value of research and development in its Area; or k) to supply one or more of the goods that the investor produces or the services that the investor provides to a specific region or world market, exclusively from its Area. 2. The provision of paragraph 1 above does not preclude either Party from conditioning the receipt or continued receipt of an advantage, in connection with investment activities in its Area of an investor of the other Party, on compliance with any of the requirements set forth in subparagraphs (g) through (k) of paragraph 1 above.

129 Japan: 1. Fisheries within the territorial sea, internal waters, exclusive economic zone and continental shelf 2. Explosives manufacturing industry 3. Aircraft industry 4. Arms industry 5. Nuclear energy industry 6. Space industry 7. Electricity utility industry 8. Gas utility industry 9. Broadcasting industry 10. Freight

160

Table A2.6 Overview of safeguards provisions in selected Asian FTAs

FTA Global Safeguards130

Provisional safeguards131

Safeguard transition period

132

Duration Safeguard threshold %

133

Compensation or equivalent effects

134

BoP safeguards135

ASEAN India

5 yrs 3 yrs (+1) 3%

ASEAN China

Excluding quantitative restriction measures

136

5 yrs 3 yrs (+1) 3%

forwarding business industry 11. Financial services (deposit insurance) 12. The maintenance, designation or elimination (including privatization) of a public monopoly 13. The maintenance, establishment or disposal (including privatization) of a state enterprise 14. Subsidies 15. Land transaction

Vietnam: 1. Broadcasting, television 2. Production, publication of cultural products 3. Oil and gas exploitation, and precious mineral mining 4. Fisheries within the territorial sea, internal waters, exclusive economic zone and continental shelf 5. Timber exploitation of natural forest 6. Production of arm, ammunition and explosives 7. Gambling 8. Ownership, utilization of land and house 9. Operation of river ports, seaports and airports 10. Share purchasing of the state-owned enterprise 11. Subsidies Electricity and domestic air transport Treatment referred to in paragraph 2 of Article 2 (most-favored nation treatment) shall be accorded in the sectors or matters specified in 1 to 20.

130 Explicit incorporation of the GATT Art XIX, the WTO Agreement on Safeguards and Art V the Agreement on Agriculture. This includes the investigation processes set out in Article 42 of the Agreement on Safeguards.

131 These provisional safeguards tariff increases are refunded if the investigation does not result in a finding that the safeguards requirements are met or the duration of any provisional measure is counted as part of the safeguard period.

132 A Party to the agreement shall have the right to initiate such a measure on a good within the transition period for that good. The transition period for a good shall begin from the date of entry into force of the FTA in question.

133 The safeguard measure must not be applied against an originating good of a FTA Party if its share of imports of the good concerned in the importing Party is less than a stated percentage.

134 Excluding simultaneous recourse to both the global and the bilateral FTA safeguard provisions

135 In accordance with the conditions established under Article XII of GATT 1994 and the Understanding on the Balance-of- Payments Provisions of the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement.

161




132


133


134

BoP safeguards135

ASEAN - ANZ

200 days137

3 yrs 2 yrs (+1) 3%138

After 30 days of consultations

ASEAN Japan

200 days139

10 yr review 3 yrs (+1) 3%140


ASEAN Korea


141

7 yrs 3 yrs (+1) 3% Good offices within 90 days of application of safeguard

Singapore US

200 days 10 yrs 2 yrs (+2) After 30 days of consultations

Singapore China

5 years 3 yrs (+1) 3% After 45 days of consultations

Singapore Japan

Reference global safeguards

Reference global safeguards

3 yrs Reference global safeguards


136 The FTA safeguards provision explicitly excludes Articles 5, 9, 13 & 14 of the Agreement on Safeguards.

137 The provision notes that the investigation cannot take longer than 12 months.

138 This safeguard measure shall not be applied against an originating good of a Party which is an ASEAN Member State, as long as its share of imports of the good concerned in the importing Party does not exceed three (3) per cent of the total imports from the other Parties, those Parties with less than three per cent import share collectively account for not more than nine per cent of total imports of the good concerned from the other Parties.

139 The investigation cannot take longer than 12 months.

140 This safeguard measure shall not be applied against an originating good of a Party which is an ASEAN Member State, as long as its share of imports of the good concerned in the importing Party does not exceed three (3) per cent of the total imports from the other Parties, those Parties with less than three per cent import share collectively account for not more than nine per cent of total imports of the good concerned from the other Parties.

141 Agreement on Safeguards Articles 5, 9, 13 & 14.

162




132


133


134

BoP safeguards135

Japan Indonesia

200 days 5 year review 5 yrs After 30 days of consultations

+ exchange controls 142

Japan Malaysia

200 days 10 yr review 4 yrs (+1) After 30 days of consultations

+ exchange controls

Japan Philippines


143

200 days 10 yr optional review

3 yrs (+1) After 30 days of consultations

+ exchange controls

Japan Thailand

15 yr optional review

3 yrs (+2) After 30 days of consultations

+ exchange controls

Japan Vietnam


144

10 yr review 3 yrs (+1) After 30 days of consultations

142 Exchange controls or exchange restrictions in accordance with the Articles of Agreement of the International Monetary Fund.

143 Each Party shall not apply emergency measures on an originating good imported up to the limit of quota quantities granted under tariff rate quotas applied in accordance with Schedule in Annex 1.

144 A Party shall not apply a bilateral safeguard measure to an originating good imported up to the limit of quota quantities granted under tariff rate quotas applied in accordance with its Schedule in Annex 1.

163

Table A2.7 Overview of rules of origin in selected Asian FTAs

FTA Basic Rules of Origin Cumulation De minimus

ASEAN – India (AIFTA)

RVC145

(35)

Plus CTSH146

Cumulation permitted across all RTA Parties provided inputs each satisfy RVC(35)+CTSH rule

Not applicable.

ASEAN – China (ACFTA)

RVC (40) Cumulation permitted across all RTA Parties provided inputs each satisfy RVC(40) rule

Not applicable.

ASEAN-Australia & New Zealand (AANZFTA)

RVC (40)

CTC147

(4-digit)

Cumulation permitted across AANZFTA provided inputs each satisfy RVC(40) or CTC rule

2 Rules:

(1) For goods other than textiles and apparel in HS 50-63, non-CTC qualified inputs up to 10% of FOB value of final product allowed

(2) For textiles and apparel in HS 50-63, non-CTC qualified up to

(a) 10% of value or

(b) 10% of total weight allowed.

145 RVC is the Regional Value Content in percentage which specifies that the FTA content is not less than a stated per cent of the Free on Board Value (FOB) of the product.

146 CTSH is the Change is Sub Tariff Heading.

147 CTC is the Change in Tariff Classification

164


ASEAN-Japan (AJFTA)

RVC (40)

CTC (4-digit)

Cumulation permitted across AJFTA provided inputs each satisfy RVC(40) or CTC rule

3 Rules:

(1) For goods in HS 16,19,20,22,23, 28 through 49 and 64 through 97, non-CTC qualified inputs up to 10% of FOB value of final product allowed

(2) For goods in HS 18 and 21, non-CTC qualified inputs allowed up to 10 % or 7% of FOB value as per annex 2

(3) For textiles and apparel in HS 50-63, non-CTC qualified up to 10% of total weight allowed.

ASEAN-Korea (AKFTA)

RVC (40)

CTC (4-digit)

Cumulation permitted across AANZFTA provided inputs each satisfy RVC(40) or CTC rule

2 Rules:

(1) For goods other than textiles and apparel in HS 50-63, non-CTC qualified up to 10% of value allowed

(2) For textiles and apparel in HS 50-63, non-CTC qualified up to 10% of total weight allowed.

Singapore US

(1) the good is wholly obtained or produced entirely in the territory of Singapore, the United States, or both;

(2) each nonoriginating material used in the production of the good

(A) undergoes an applicable change in tariff classification set out in Annex 3A of the Agreement as a result of production occurring entirely in the territory of Singapore, the United States, or both; or

(B) if no change in tariff classification is required, the good otherwise satisfies the applicable requirements of such Annex; or

(3) the good itself, as imported, is listed in Annex 3B of the Agreement and is imported into the territory of the United States from the territory of Singapore.

2 Rules:

(1) the value does not exceed 10% of the FOB value of the product; and

(2) the product meets all other applicable requirements for qualifying as an originating product.

165


Singapore China

RVC (40) except for product specific rules

Cumulation permitted provided inputs each satisfy the RVC(40) rule

2 Rules:

(1) the value does not exceed 10% of the FOB value of the product; and

(2) the product meets all other applicable requirements for qualifying as an originating product.

Singapore Japan

Change in tariff classification criteria (at 4-digit HS level). For 264 categories, the choice of a change in tariff classification or 60% or more of cumulative added value applies (to be reduced to 40%).

Cumulation permitted provided the inputs each satisfy the RVC or CTC rule

Not applicable

Japan Indonesia

Either the 40% or more of cumulative added value criteria or the change in tariff classification (at 4-digit or 6-digit HS level) criteria.

Cumulation permitted provided the inputs each satisfy the product specific rules

Not applicable

Japan Malaysia



Not applicable

Japan Philippines



Not applicable

Japan Thailand

Either the 40% or more of cumulative added value criteria or the change in tariff classification (at 4-digit or 6-digit HS level) criteria..


Not applicable

166


Japan Vietnam

(a) the good has a local value content (“LVC”), of not less than 40%, and the final process of production has been performed in the Party; or

(b) all non-originating materials used in the production of the good have undergone in the Party a change in tariff classification ( “CTC”) at the 4-digit level (i.e. a change in tariff heading) of Harmonized System.


Rules:

For a good classified under Chapters 16, 19, 20, 22, 23, 28 through 49, and 64 through 97 of the Harmonized System, the total value of non-originating materials used in the production of the good that have not undergone the required CTC does not exceed 10% of the FOB;

(b) in the case of a particular good classified under Chapters 9, 18, and 21 of the Harmonized System, the total value of non-originating materials used in the

production of the good that have not undergone the required CTC does not exceed 10% or 7% of the FOB, as specified in Annex 2; or

c) in the case of a good classified under Chapters 50 through 63 of the Harmonized System, the weight of all non-originating materials used in the production of the good that have not undergone the required CTC does not exceed 10% of the total weight of the good.

167

Appendix 3. Details on tariff reduction schedules

This appendix contains additional data supporting the analysis of tariff reduction schedules in ASEAN+1 FTAs included in Section 2.2.2 of the main report. The information on actual distribution of tariff lines into different categories of products is based on the texts of annexes to respective FTAs. These annexes are available only as files in the pdf format and some country schedules could not be read into a spread sheet thus making the analysis infeasible.

Table A3.1 ASEAN-China Normal track schedule for ASEAN 6 and China

X= Applied MFN 2005 2007 2009 2010

X>20% 20 12 5 0

15% <X<20 15 8 5 0

10<X<15 10 8 5 0

5<X<10 5 5 0 0

X<5 Standstill Standstill 0 0

Table A3.2 ASEAN-China FTA: number of tariff lines in the Sensitive Track

Sensitive Highly sensitive

Brunei 70 46

Cambodia 350 150

China 178 101

Indonesia 304 47

Lao PDR 88 30

Malaysia 281 96

Myanmar 271 0

The Philippines 270 76

Singapore 1 1

Thailand 251 100

Vietnam N/A N/A

Table A3.3 ASEAN-Korea FTA: Normal Track schedule for ASEAN6

X= Applied MFN 2006 2007 2008 2009 2010

X>20% 20 13 10 5 0

15% <X<20 15 10 8 5 0

10<X<15 10 8 5 3 0

5<X<10 5 5 3 0 0

X<5 Standstill Standstill Standstill 0 0

Note: Given the later entry into force of the agreement the actual schedules are somewhat delayed, e.g. for Philippines the end date for tariff elimination is January 2012.

168

Table A3.4 ASEAN-Korea FTA: number of tariff lines in the Sensitive Track

Sensitive List Group A Group B Group C Group D Group E

Brunei 27 13

Cambodia 265 5 159 40

Indonesia 321 5 111 40

Korea 310 6 139 24 7 40

Lao PDR 326 5 155

Malaysia 339 14 45 15 39

Myanmar 193 160 40

The Philippines

259 5 49 40

Vietnam 343 33 118 9 40

Table A3.5 ASEAN-India FTA: Distribution of tariff lines into different reduction schedules

Brunei Cambodia Malaysia Philippines Thailand

Normal Track -1 7296 6644 7461 5073 4582

Normal Track-2 1191 336 1536 1442

Sensitive Track 794 1134 1551 577 753

Exclusion list 1377 166 1030 1174 757

Highly Sensitive List

19 127 393 19

TOTAL 10658 8299 11705 8659 6111

Table A3.6 ASEAN-Japan FTA: Distribution of tariff lines into different reduction schedules (% of all tariff lines)

Brunei Cambodia Indonesia Myanmar Philippines Thailand Vietnam

A 69.11 2.67 42.83 2.43 54.73 48.68 19.10

B 27.00 78.94 42.51 79.16 42.64 48.09 71.09

C 1.83 6.07 3.34 12.98 0.83 0.93 2.17

R 0.99 10.70 1.95 4.28 0.71 0.40 0.00

X 1.07 1.62 9.36 1.15 1.09 1.90 7.64

169

Table A3.7 ASEAN-Australia/New Zealand FTA: Percentage of tariff lines fully liberalised by year

Base Rate (2005 MFN) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Unbounded

Constant

Reducing to a positive

Australia 46.0

80.6

96.1

96.1

96.2

96.2

96.2

96.6

96.6

96.6

96.6

96.6

99.7

99.7

99.7

99.7

99.7

99.7

0.3

- 0.0

Brunei 71.9

74.8

82.5

82.5

82.5

94.0

94.0

95.6

95.6

95.6

95.6

95.6

98.7

98.7

98.7

98.7

98.7

98.7

1.3

- 0.0

Cambodia 4.7

4.7

4.7

4.7

4.7

4.7

4.7

4.7

4.7

4.7

4.7

4.7

4.7

83.0

83.0

83.0

88.1

88.1

1.5

3.5 7.0

Indonesia 21.2

21.0

58.0

58.1

72.8

84.9

86.1

91.1

91.1

91.1

91.1

91.6

92.9

92.9

92.9

93.1

93.1

93.2

1.0

- 5.8

Lao PDR -

-

-

-

-

-

-

-

-

-

-

-

-

87.0

87.0

87.0

90.5

90.5

0.2

2.5 6.8

Malaysia 48.9

51.1

60.3

67.2

78.8

87.2

87.2

87.4

88.5

88.5

88.5

88.5

93.4

93.4

93.4

93.4

93.4

93.4

1.1

- 5.3

Myanmar 3.6

3.6

3.6

3.6

3.6

3.6

3.6

3.6

3.6

3.6

3.6

3.6

70.1

80.2

80.2

80.2

85.1

85.1

0.8

6.3 7.8

New Zealand

57.7

79.5

84.6

84.6

90.2

90.5

90.5

90.6

90.6

96.5

96.7

96.8

100

100

100

100

100

100

-

- 0.0

Philippines 3.6

9.1

60.4

68.4

79.9

89.8

89.8

93.2

93.2

93.3

93.6

93.7

94.7

94.7

94.7

94.7

94.7

94.7

1.0

- 4.3

Singapore 100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

-

- 0.0

Thailand 5.0

42.1

72.3

72.3

78.5

87.2

87.2

89.8

90.6

91.4

91.4

91.4

98.8

98.8

98.8

98.8

98.8

98.8

1.1

- 0.1

Vietnam 27.9

27.6

27.6

27.6

27.6

27.6

27.6

27.6

53.8

61.1

85.0

85.6

90.6

90.6

90.6

90.6

90.6

90.6

1.9

1.7 5.8

170

Appendix 4. Partial equilibrium analysis – additional results and sensitivity analysis

This appendix contains additional tables for partial equilibrium modelling discussed in Chapter 5. We first report the results for the trade volume and prices in the baseline model specification (Tables A4.1 and A4.2). Subsequent tables report the results of sentivity analysis taking different values of the elasticity of substitution of origin of imports. Tables A4.3 and A4.6 are equivalents of the Table 5.6 in the main text with the changes in the value of EU exports to ASEAN for, respectively, low and high elasticties. Tables A4.4 – A4.5 and A4.7-A4.8 disaggregate the results into volume and price changes. Finally, in Table A4.9 we present the results on the change on the value of EU exports to ASEAN when a translog function is used with elasticities as reported in Table 5.2. Tables A4.10-11 complete the picture showing the volume and price changes. Table A4.12 extends the sensitivity analysis by analysis of the case of the large elasticity of supply of exports.

Table A4.1 Percentage changes in quantities of EU exports to ASEAN (standard elasticity specification)

Product

Current exports (in thousands of USD)

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.22 0.41 0.00 -8.41 0.00 0.41 -7.56 0.41 -8.41 -7.56

210690 260,401 2.07 0.51 -0.44 -0.95 -0.07 0.14 -0.33 0.44 -1.45 -0.39

220820 75,963 10.12 10.09 -0.10 -0.02 -0.01 10.02 10.08 10.08 -0.13 10.07

220830 156,719 8.50 8.31 -0.07 -0.17 -0.03 8.25 8.17 8.28 -0.27 8.14

271019 125,411 0.00 -1.34 -0.06 -0.01 -0.04 -1.39 -1.34 -1.38 -0.11 -1.38

293399 7,014 0.00 -0.19 -0.17 0.00 -0.07 -0.36 -0.19 -0.27 -0.25 -0.27

300210 29,868 0.00 -0.03 0.00 -0.07 0.00 -0.03 -0.10 -0.03 -0.07 -0.10

300490 1,085,252 0.00 -0.39 -0.21 -0.62 -0.22 -0.59 -1.01 -0.60 -1.04 -1.22

330499 94,131 19.57 18.92 -2.20 -0.46 -0.15 17.47 18.62 18.82 -2.81 18.52

382490 238,952 1.96 1.14 -2.43 -0.16 -0.04 -0.99 1.00 1.10 -2.63 0.96

390210 18,836 0.00 -1.37 -0.74 -0.07 -0.25 -2.10 -1.44 -1.62 -1.07 -1.70

390950 73,690 0.00 -1.77 -1.75 -0.20 -0.06 -3.49 -1.97 -1.83 -2.00 -2.02

392190 48,451 0.30 -4.90 -6.58 -0.50 -0.18 -11.00 -5.36 -5.07 -7.20 -5.53

392690 156,801 7.34 0.94 -15.23 -0.21 -0.05 -11.65 0.76 0.90 -15.44 0.72

401199 3,467 0.03 -1.04 -1.16 -0.08 -0.55 -2.19 -1.12 -1.59 -1.78 -1.66

480511 23,311 0.00 -2.48 -0.98 -1.40 0.00 -3.44 -3.86 -2.48 -2.37 -3.86

481092 29,014 0.00 -2.30 -0.40 -0.42 -0.09 -2.69 -2.71 -2.39 -0.91 -2.80

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 0.00 -0.02 -0.11 0.00 -0.02 -0.11 0.00 -0.13 -0.11

730410 62,887 0.00 -7.04 -19.91 -0.03 -0.21 -25.08 -7.07 -7.23 -20.09 -7.26

730799 53,398 3.34 0.50 -4.35 -0.41 -0.09 -3.21 0.15 0.42 -4.83 0.07

732690 268,545 0.00 -2.66 -5.83 -0.17 -0.07 -8.28 -2.83 -2.73 -6.05 -2.89

760611 32,847 20.99 16.04 -10.65 -10.94 -0.25 9.63 9.45 15.98 -20.33 9.39

760612 65,201 7.27 1.83 -3.48 -4.97 -0.13 -0.48 -1.46 1.74 -8.34 -1.54

840999 91,534 0.12 -0.22 -0.85 -0.08 -0.01 -1.01 -0.29 -0.23 -0.94 -0.31

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00

841199 172,076 0.00 -0.01 -0.25 -0.01 0.00 -0.26 -0.02 -0.01 -0.26 -0.02

841480 151,708 0.00 -1.88 -3.79 -0.17 -0.27 -5.57 -2.05 -2.15 -4.21 -2.32

841790 30,729 0.00 -0.12 -0.18 -0.01 -0.01 -0.29 -0.13 -0.13 -0.20 -0.14

841950 85,043 0.06 -2.44 -1.56 -0.11 -0.10 -3.93 -2.54 -2.54 -1.77 -2.64

843149 84,440 0.54 0.27 -0.74 -0.09 0.00 -0.35 0.20 0.27 -0.84 0.19

844390 46,849 0.00 -0.06 -0.12 0.00 0.00 -0.18 -0.06 -0.06 -0.12 -0.06

847180 24,632 0.00 -0.15 -0.01 0.00 0.00 -0.17 -0.16 -0.16 -0.02 -0.16

171

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

847330 428,442 0.00 -0.06 -0.04 0.00 0.00 -0.10 -0.06 -0.06 -0.04 -0.06

847989 368,597 0.00 -0.24 -0.97 -0.01 -0.01 -1.21 -0.25 -0.25 -0.98 -0.26

847990 191,492 0.09 0.05 -0.20 0.00 0.00 -0.12 0.05 0.05 -0.20 0.05

848180 226,916 0.03 -1.91 -2.03 -0.12 -0.12 -3.88 -2.03 -2.03 -2.26 -2.14

848210 33,606 0.00 -0.58 -1.48 -0.01 0.00 -2.05 -0.59 -0.59 -1.49 -0.59

850239 260,042 0.03 -3.16 -2.82 0.00 -0.02 -5.85 -3.16 -3.18 -2.85 -3.18

851722 110 0.00 0.00 -4.67 0.00 0.00 -4.67 0.00 0.00 -4.67 0.00

851730 109,677 2.55 1.88 -0.05 -0.21 0.00 1.85 1.74 1.88 -0.26 1.74

851750 240,869 0.00 -0.57 -0.06 0.00 0.00 -0.63 -0.57 -0.57 -0.07 -0.57

851780 155,072 6.47 4.51 -0.29 -0.04 -0.01 4.36 4.49 4.50 -0.34 4.50

851790 694,925 -0.07 -0.02 0.00 0.00 -0.10 -0.08 -0.07 -0.03 -0.07

852510 36,009 0.14 0.01 -0.07 -0.02 0.00 -0.06 -0.01 0.00 -0.10 0.00

852520 418,949 0.25 -0.05 -0.02 0.00 -0.05 -0.07 -0.05 -0.09 -0.06 -0.09

853690 127,203 6.26 5.05 -5.38 -0.05 -0.07 1.21 5.01 5.00 -5.50 1.16

853710 167,225 0.57 -1.81 -5.11 -0.20 -0.04 -6.66 -2.00 -1.85 -5.34 -6.70

853890 92,600 0.09 -1.22 -6.33 -0.11 -0.04 -7.41 -1.33 -1.26 -6.47 -7.45

854129 290,506 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 -0.01

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.04 -1.72 -2.00 -0.01 0.00 -3.66 -1.72 -1.72 -2.00 -3.66

870322 7,170 1.56 -1.40 -37.24 -0.01 0.00 -36.38 -1.41 -1.40 -37.25 -36.39

870323 284,341 4.36 0.57 -21.12 -0.04 0.00 -18.19 0.54 0.56 -21.15 -18.19

870324 90,012 7.86 7.10 -10.43 -0.66 0.00 -0.78 6.57 7.10 -11.01 -0.78

870332 5,663 3.06 -21.44 -6.18 -0.60 -0.04 -25.35 -21.81 -21.46 -6.77 -25.35

870829 33,641 2.80 -5.19 -19.29 -0.13 -0.02 -21.82 -5.30 -5.21 -19.40 -21.82

870899 485,931 1.37 -0.68 -20.38 -0.61 -0.10 -20.19 -1.26 -0.77 -20.90 -20.19

880230 12,568 0.00 -1.29 -0.01 0.00 -1.30 -1.29 -1.29 -0.01 -1.30

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.04 -0.03 -0.02 -0.01 -0.07 -0.06 -0.05 -0.06 -0.07

890190 103,346 0.37 -1.41 -2.95 -0.06 0.00 -4.22 -1.47 -1.41 -3.00 -4.22

901890 143,422 0.00 -0.23 -0.48 -0.03 -0.02 -0.71 -0.26 -0.25 -0.53 -0.71

Source: Model calculations.

Table A4.2 Percentage change in the EU export price to ASEAN (standard elasticity specification)

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 0.24 0.08 0.00 -1.74 0.00 0.08 -1.56 0.08 -1.74 -1.56

210690 0.41 0.10 -0.09 -0.19 -0.01 0.03 -0.07 0.09 -0.29 -0.08

220820 1.95 1.94 -0.02 0.00 0.00 1.93 1.94 1.94 -0.03 1.94

220830 1.64 1.61 -0.01 -0.03 -0.01 1.60 1.58 1.60 -0.05 1.58

271019 0.00 -0.27 -0.01 0.00 -0.01 -0.28 -0.27 -0.28 -0.02 -0.28

172

293399 0.00 -0.04 -0.03 0.00 -0.01 -0.07 -0.04 -0.05 -0.05 -0.05

300210 0.00 -0.01 0.00 -0.01 0.00 -0.01 -0.02 -0.01 -0.01 -0.02

300490 0.00 -0.08 -0.04 -0.12 -0.04 -0.12 -0.20 -0.12 -0.21 -0.25

330499 3.64 3.53 -0.44 -0.09 -0.03 3.27 3.47 3.51 -0.57 3.46

382490 0.39 0.23 -0.49 -0.03 -0.01 -0.20 0.20 0.22 -0.53 0.19

390210 0.00 -0.28 -0.15 -0.01 -0.05 -0.42 -0.29 -0.33 -0.21 -0.34

390950 0.00 -0.36 -0.35 -0.04 -0.01 -0.71 -0.40 -0.37 -0.40 -0.41

392190 0.06 -1.00 -1.35 -0.10 -0.04 -2.30 -1.10 -1.03 -1.48 -1.13

392690 1.43 0.19 -3.25 -0.04 -0.01 -2.45 0.15 0.18 -3.30 0.14

401199 0.01 -0.21 -0.23 -0.02 -0.11 -0.44 -0.23 -0.32 -0.36 -0.33

480511 0.00 -0.50 -0.20 -0.28 0.00 -0.70 -0.78 -0.50 -0.48 -0.78

481092 0.00 -0.46 -0.08 -0.08 -0.02 -0.54 -0.55 -0.48 -0.18 -0.57

710231 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 0.00 0.00 0.00 -0.02 0.00 0.00 -0.02 0.00 -0.03 -0.02

730410 0.00 -1.45 -4.34 -0.01 -0.04 -5.61 -1.46 -1.49 -4.39 -1.50

730799 0.66 0.10 -0.89 -0.08 -0.02 -0.65 0.03 0.08 -0.98 0.01

732690 0.00 -0.54 -1.19 -0.03 -0.01 -1.71 -0.57 -0.55 -1.24 -0.59

760611 3.88 3.02 -2.23 -2.29 -0.05 1.86 1.82 3.01 -4.44 1.81

760612 1.41 0.36 -0.71 -1.01 -0.03 -0.10 -0.29 0.35 -1.73 -0.31

840999 0.02 -0.04 -0.17 -0.02 0.00 -0.20 -0.06 -0.05 -0.19 -0.06

841112 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841199 0.00 0.00 -0.05 0.00 0.00 -0.05 0.00 0.00 -0.05 0.00

841480 0.00 -0.38 -0.77 -0.03 -0.05 -1.14 -0.41 -0.43 -0.86 -0.47

841790 0.00 -0.02 -0.04 0.00 0.00 -0.06 -0.03 -0.03 -0.04 -0.03

841950 0.01 -0.49 -0.31 -0.02 -0.02 -0.80 -0.51 -0.51 -0.36 -0.53

843149 0.11 0.05 -0.15 -0.02 0.00 -0.07 0.04 0.05 -0.17 0.04

844390 0.00 -0.01 -0.02 0.00 0.00 -0.04 -0.01 -0.01 -0.02 -0.01

847180 0.00 -0.03 0.00 0.00 0.00 -0.03 -0.03 -0.03 0.00 -0.03

847330 0.00 -0.01 -0.01 0.00 0.00 -0.02 -0.01 -0.01 -0.01 -0.01

847989 0.00 -0.05 -0.19 0.00 0.00 -0.24 -0.05 -0.05 -0.20 -0.05

847990 0.02 0.01 -0.04 0.00 0.00 -0.02 0.01 0.01 -0.04 0.01

848180 0.01 -0.38 -0.41 -0.02 -0.02 -0.79 -0.41 -0.41 -0.46 -0.43

848210 0.00 -0.12 -0.30 0.00 0.00 -0.41 -0.12 -0.12 -0.30 -0.12

850239 0.01 -0.64 -0.57 0.00 0.00 -1.20 -0.64 -0.64 -0.58 -0.65

851722 0.00 0.00 -0.95 0.00 0.00 -0.95 0.00 0.00 -0.95 0.00

851730 0.50 0.37 -0.01 -0.04 0.00 0.37 0.35 0.37 -0.05 0.35

851750 0.00 -0.11 -0.01 0.00 0.00 -0.13 -0.11 -0.11 -0.01 -0.11

851780 1.26 0.89 -0.06 -0.01 0.00 0.86 0.88 0.88 -0.07 0.88

851790 0.00 -0.01 0.00 0.00 0.00 -0.02 -0.02 -0.01 -0.01 -0.01

852510 0.03 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.02 0.00

173

852520 0.05 -0.01 0.00 0.00 -0.01 -0.01 -0.01 -0.02 -0.01 -0.02

853690 1.22 0.99 -1.10 -0.01 -0.01 0.24 0.98 0.98 -1.12 0.23

853710 0.11 -0.36 -1.04 -0.04 -0.01 -1.37 -0.40 -0.37 -1.09 -1.38

853890 0.02 -0.25 -1.30 -0.02 -0.01 -1.53 -0.27 -0.25 -1.33 -1.54

854129 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854140 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 0.01 -0.35 -0.40 0.00 0.00 -0.74 -0.35 -0.35 -0.40 -0.74

870322 0.31 -0.28 -8.90 0.00 0.00 -8.65 -0.28 -0.28 -8.90 -8.65

870323 0.86 0.11 -4.63 -0.01 0.00 -3.94 0.11 0.11 -4.64 -3.94

870324 1.52 1.38 -2.18 -0.13 0.00 -0.16 1.28 1.38 -2.31 -0.16

870332 0.61 -4.71 -1.27 -0.12 -0.01 -5.68 -4.80 -4.72 -1.39 -5.68

870829 0.55 -1.06 -4.20 -0.03 0.00 -4.80 -1.08 -1.06 -4.22 -4.80

870899 0.27 -0.14 -4.45 -0.12 -0.02 -4.41 -0.25 -0.15 -4.58 -4.41

880230 0.00 -0.26 0.00 0.00 0.00 -0.26 -0.26 -0.26 0.00 -0.26

880240 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 0.00 -0.01 -0.01 0.00 0.00 -0.01 -0.01 -0.01 -0.01 -0.01

890190 0.07 -0.28 -0.60 -0.01 0.00 -0.86 -0.30 -0.28 -0.61 -0.86

901890 0.00 -0.05 -0.10 -0.01 0.00 -0.14 -0.05 -0.05 -0.11 -0.14

Source: Model calculations.

Table A4.3 Percentage change in the value of the EU’s exports to ASEAN by scenario (Low substitution)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.46 0.89 0.00 -5.74 0.00 0.89 -4.66 0.89 -5.74 -4.66

210690 260,401 2.35 0.97 -0.36 -0.77 -0.06 0.66 0.29 0.92 -1.19 0.23

220820 75,963 11.82 11.80 -0.07 -0.02 -0.01 11.74 11.79 11.79 -0.10 11.78

220830 156,719 9.83 9.68 -0.05 -0.12 -0.03 9.63 9.57 9.65 -0.20 9.54

271019 125,411 0.00 -0.83 -0.04 -0.01 -0.03 -0.86 -0.83 -0.85 -0.07 -0.86

293399 7,014 0.00 -0.13 -0.11 0.00 -0.05 -0.24 -0.13 -0.18 -0.16 -0.18

300210 29,868 0.00 -0.02 0.00 -0.04 0.00 -0.02 -0.07 -0.02 -0.05 -0.07

300490 1,085,252 0.00 -0.25 -0.13 -0.39 -0.15 -0.38 -0.65 -0.40 -0.67 -0.80

330499 94,131 22.55 22.14 -1.22 -0.25 -0.10 21.30 21.97 22.08 -1.59 21.90

174

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

382490 238,952 2.26 1.71 -1.55 -0.10 -0.03 0.31 1.62 1.68 -1.69 1.59

390210 18,836 0.00 -0.86 -0.46 -0.04 -0.17 -1.33 -0.90 -1.03 -0.68 -1.08

390950 73,690 0.00 -1.13 -1.09 -0.12 -0.04 -2.27 -1.26 -1.18 -1.26 -1.30

392190 48,451 0.34 -3.72 -4.83 -0.36 -0.14 -8.52 -4.08 -3.86 -5.33 -4.22

392690 156,801 8.38 3.36 -11.52 -0.15 -0.04 -6.90 3.23 3.33 -11.71 3.20

401199 3,467 0.03 -0.88 -0.89 -0.06 -0.47 -1.76 -0.94 -1.35 -1.41 -1.41

480511 23,311 0.00 -1.59 -0.59 -0.85 0.00 -2.21 -2.48 -1.59 -1.46 -2.48

481092 29,014 0.00 -1.46 -0.23 -0.25 -0.06 -1.71 -1.73 -1.53 -0.55 -1.79

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 0.00 -0.02 -0.08 0.00 -0.02 -0.09 0.00 -0.10 -0.09

730410 62,887 0.00 -5.60 -15.68 -0.02 -0.16 -20.94 -5.63 -5.76 -15.85 -5.79

730799 53,398 3.84 1.60 -3.25 -0.30 -0.08 -1.29 1.34 1.54 -3.63 1.27

732690 268,545 0.00 -2.14 -4.46 -0.13 -0.06 -6.59 -2.27 -2.20 -4.65 -2.33

760611 32,847 25.00 20.81 -7.75 -7.99 -0.20 15.65 15.50 20.75 -15.98 15.44

760612 65,201 8.66 4.28 -2.62 -3.78 -0.11 2.37 1.54 4.20 -6.51 1.46

840999 91,534 0.14 -0.13 -0.67 -0.06 -0.01 -0.76 -0.19 -0.15 -0.74 -0.20

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 0.00 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00

841199 172,076 0.00 -0.01 -0.20 -0.01 0.00 -0.20 -0.02 -0.01 -0.21 -0.02

841480 151,708 0.00 -1.52 -2.88 -0.13 -0.23 -4.40 -1.65 -1.74 -3.24 -1.87

841790 30,729 0.00 -0.09 -0.14 -0.01 -0.01 -0.24 -0.10 -0.11 -0.16 -0.11

841950 85,043 0.07 -1.91 -1.21 -0.08 -0.09 -3.11 -1.99 -2.00 -1.38 -2.08

843149 84,440 0.62 0.40 -0.58 -0.07 0.00 -0.08 0.34 0.40 -0.65 0.34

844390 46,849 0.00 -0.05 -0.09 0.00 0.00 -0.14 -0.05 -0.05 -0.09 -0.05

847180 24,632 0.00 -0.13 -0.01 0.00 0.00 -0.14 -0.13 -0.13 -0.02 -0.13

847330 428,442 0.00 -0.05 -0.03 0.00 0.00 -0.08 -0.05 -0.05 -0.03 -0.05

847989 368,597 0.00 -0.19 -0.77 -0.01 -0.01 -0.96 -0.20 -0.20 -0.78 -0.21

847990 191,492 0.11 0.07 -0.16 0.00 0.00 -0.06 0.07 0.07 -0.16 0.07

848180 226,916 0.03 -1.56 -1.55 -0.09 -0.10 -3.10 -1.65 -1.65 -1.74 -1.74

848210 33,606 0.00 -0.48 -1.14 -0.01 0.00 -1.62 -0.49 -0.49 -1.15 -0.49

850239 260,042 0.03 -2.60 -2.17 0.00 -0.02 -4.75 -2.61 -2.62 -2.19 -2.62

851722 110 0.00 0.00 -3.70 0.00 0.00 -3.70 0.00 0.00 -3.70 0.00

851730 109,677 3.01 2.46 -0.04 -0.16 0.00 2.43 2.34 2.46 -0.20 2.34

851750 240,869 0.00 -0.47 -0.05 0.00 0.00 -0.52 -0.47 -0.47 -0.05 -0.47

851780 155,072 7.41 5.79 -0.22 -0.03 -0.01 5.68 5.77 5.78 -0.25 5.78

851790 694,925 0.00 -0.06 -0.02 0.00 0.00 -0.08 -0.06 -0.06 -0.02 -0.06

852510 36,009 0.16 0.05 -0.06 -0.01 0.00 0.00 0.04 0.04 -0.07 0.04

175

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

852520 418,949 0.29 0.04 -0.01 0.00 -0.04 0.03 0.04 0.01 -0.05 0.01

853690 127,203 7.11 6.12 -4.09 -0.04 -0.06 3.15 6.09 6.08 -4.19 3.11

853710 167,225 0.65 -1.25 -3.85 -0.15 -0.04 -5.03 -1.40 -1.29 -4.04 -5.06

853890 92,600 0.11 -0.96 -4.95 -0.08 -0.03 -5.87 -1.04 -0.99 -5.06 -5.90

854129 290,506 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 -0.01

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.05 -1.36 -1.47 -0.01 0.00 -2.82 -1.36 -1.36 -1.48 -2.82

870322 7,170 1.82 -0.55 -33.23 -0.01 0.00 -32.40 -0.55 -0.55 -33.23 -32.40

870323 284,341 4.95 1.91 -17.57 -0.03 0.00 -14.21 1.88 1.90 -17.60 -14.22

870324 90,012 9.40 8.74 -8.55 -0.51 0.00 2.05 8.31 8.74 -9.03 2.05

870332 5,663 3.45 -16.98 -4.77 -0.47 -0.03 -20.82 -17.35 -17.00 -5.25 -20.82

870829 33,641 3.22 -2.73 -15.08 -0.08 -0.02 -17.05 -2.81 -2.74 -15.18 -17.05

870899 485,931 1.58 0.10 -15.98 -0.41 -0.08 -15.59 -0.31 0.02 -16.47 -15.59

880230 12,568 0.00 -1.05 -0.01 0.00 0.00 -1.06 -1.05 -1.05 -0.01 -1.06

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.03 -0.02 -0.02 -0.01 -0.05 -0.05 -0.04 -0.05 -0.05

890190 103,346 0.42 -1.02 -2.25 -0.05 0.00 -3.21 -1.07 -1.02 -2.29 -3.21

901890 143,422 0.00 -0.21 -0.41 -0.03 -0.02 -0.62 -0.23 -0.23 -0.46 -0.62

Total 13,596,376 1.29 0.47 -1.96 -0.19 -0.03 -1.36 0.31 0.44 -2.19 -0.92

Table A4.4 Parentage changes in quantities of EU exports to ASEAN (low substitution)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.21 0.74 0.00 -4.80 0.00 0.74 -3.90 0.74 -4.80 -3.90

210690 260,401 1.95 0.81 -0.30 -0.64 -0.05 0.55 0.24 0.76 -1.00 0.19

220820 75,963 9.76 9.74 -0.06 -0.01 -0.01 9.69 9.73 9.73 -0.08 9.72

220830 156,719 8.13 8.00 -0.04 -0.10 -0.02 7.97 7.91 7.98 -0.17 7.89

271019 125,411 0.00 -0.69 -0.03 0.00 -0.02 -0.72 -0.69 -0.71 -0.06 -0.72

293399 7,014 0.00 -0.11 -0.09 0.00 -0.04 -0.20 -0.11 -0.15 -0.14 -0.15

300210 29,868 0.00 -0.02 0.00 -0.04 0.00 -0.02 -0.06 -0.02 -0.04 -0.06

300490 1,085,252 0.00 -0.21 -0.11 -0.33 -0.12 -0.32 -0.54 -0.33 -0.56 -0.66

330499 94,131 18.47 18.14 -1.02 -0.21 -0.08 17.46 18.00 18.08 -1.33 17.94

382490 238,952 1.88 1.42 -1.29 -0.08 -0.02 0.26 1.34 1.40 -1.41 1.32

390210 18,836 0.00 -0.71 -0.38 -0.04 -0.14 -1.11 -0.75 -0.86 -0.57 -0.90

176

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

390950 73,690 0.00 -0.95 -0.91 -0.10 -0.03 -1.90 -1.05 -0.98 -1.05 -1.09

392190 48,451 0.29 -3.11 -4.04 -0.30 -0.12 -7.15 -3.41 -3.23 -4.47 -3.53

392690 156,801 6.94 2.80 -9.70 -0.12 -0.03 -5.79 2.69 2.77 -9.86 2.66

401199 3,467 0.02 -0.73 -0.74 -0.05 -0.39 -1.47 -0.78 -1.12 -1.18 -1.17

480511 23,311 0.00 -1.32 -0.49 -0.71 0.00 -1.84 -2.07 -1.32 -1.21 -2.07

481092 29,014 0.00 -1.22 -0.20 -0.21 -0.05 -1.43 -1.44 -1.27 -0.45 -1.49

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 0.00 -0.01 -0.07 0.00 -0.01 -0.07 0.00 -0.08 -0.07

730410 62,887 0.00 -4.69 -13.25 -0.02 -0.13 -17.78 -4.71 -4.83 -13.40 -4.85

730799 53,398 3.19 1.33 -2.72 -0.25 -0.06 -1.08 1.11 1.28 -3.03 1.06

732690 268,545 0.00 -1.79 -3.73 -0.11 -0.05 -5.52 -1.90 -1.84 -3.89 -1.94

760611 32,847 20.44 17.06 -6.51 -6.70 -0.17 12.88 12.76 17.02 -13.51 12.71

760612 65,201 7.17 3.55 -2.19 -3.16 -0.09 1.97 1.28 3.49 -5.45 1.22

840999 91,534 0.11 -0.11 -0.56 -0.05 -0.01 -0.64 -0.16 -0.12 -0.62 -0.17

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 0.00 0.00 0.00 -0.01 0.00 0.00 0.00 0.00

841199 172,076 -0.01 -0.16 -0.01 0.00 -0.17 -0.01 -0.01 -0.17 -0.02

841480 151,708 0.00 -1.27 -2.41 -0.11 -0.19 -3.68 -1.38 -1.45 -2.71 -1.56

841790 30,729 0.00 -0.08 -0.12 -0.01 -0.01 -0.20 -0.09 -0.09 -0.13 -0.10

841950 85,043 0.06 -1.60 -1.01 -0.07 -0.07 -2.60 -1.66 -1.67 -1.15 -1.74

843149 84,440 0.51 0.34 -0.48 -0.06 0.00 -0.07 0.29 0.34 -0.54 0.29

844390 46,849 0.00 -0.04 -0.08 0.00 0.00 -0.12 -0.04 -0.04 -0.08 -0.04

847180 24,632 0.00 -0.11 -0.01 0.00 0.00 -0.12 -0.11 -0.11 -0.01 -0.11

847330 428,442 0.00 -0.04 -0.03 0.00 0.00 -0.07 -0.04 -0.04 -0.03 -0.04

847989 368,597 0.00 -0.16 -0.64 -0.01 0.00 -0.80 -0.17 -0.17 -0.65 -0.17

847990 191,492 0.09 0.06 -0.13 0.00 0.00 -0.05 0.06 0.06 -0.13 0.06

848180 226,916 0.03 -1.30 -1.29 -0.08 -0.08 -2.59 -1.37 -1.38 -1.45 -1.45

848210 33,606 -0.40 -0.95 0.00 0.00 -1.35 -0.41 -0.40 -0.96 -0.41

850239 260,042 0.03 -2.17 -1.81 0.00 -0.02 -3.98 -2.18 -2.19 -1.83 -2.19

851722 110 0.00 0.00 -3.10 0.00 0.00 -3.10 0.00 0.00 -3.10 0.00

851730 109,677 2.50 2.04 -0.03 -0.14 0.00 2.02 1.95 2.04 -0.17 1.95

851750 240,869 0.00 -0.39 -0.04 0.00 0.00 -0.43 -0.39 -0.39 -0.04 -0.39

851780 155,072 6.14 4.80 -0.18 -0.02 -0.01 4.71 4.79 4.80 -0.21 4.80

851790 694,925 0.00 -0.05 -0.02 0.00 0.00 -0.07 -0.05 -0.05 -0.02 -0.05

852510 36,009 0.13 0.04 -0.05 -0.01 0.00 0.00 0.03 0.04 -0.06 0.04

852520 418,949 0.24 0.03 -0.01 0.00 -0.03 0.02 0.03 0.01 -0.04 0.01

853690 127,203 5.89 5.07 -3.42 -0.03 -0.05 2.62 5.05 5.04 -3.50 2.58

853710 167,225 0.55 -1.04 -3.22 -0.12 -0.03 -4.21 -1.17 -1.07 -3.38 -4.23

853890 92,600 0.09 -0.80 -4.14 -0.07 -0.03 -4.92 -0.87 -0.83 -4.23 -4.94

854129 290,506 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 -0.01

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.04 -1.13 -1.23 0.00 0.00 -2.36 -1.14 -1.13 -1.23 -2.36

870322 7,170 1.52 -0.46 -28.58 -0.01 0.00 -27.84 -0.46 -0.46 -28.58 -27.84

870323 284,341 4.11 1.59 -14.87 -0.02 0.00 -11.99 1.57 1.58 -14.90 -11.99

870324 90,012 7.78 7.23 -7.18 -0.42 0.00 1.71 6.88 7.23 -7.59 1.71

870332 5,663 2.87 -14.36 -3.99 -0.39 -0.03 -17.68 -14.68 -14.38 -4.40 -17.68

870829 33,641 2.68 -2.28 -12.74 -0.07 -0.01 -14.43 -2.35 -2.29 -12.82 -14.43

870899 485,931 1.31 0.08 -13.51 -0.34 -0.06 -13.17 -0.26 0.02 -13.92 -13.17

880230 12,568 0.00 -0.88 0.00 0.00 0.00 -0.88 -0.88 -0.88 0.00 -0.88

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.03 -0.02 -0.01 -0.01 -0.05 -0.04 -0.03 -0.04 -0.05

177

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

890190 103,346 0.35 -0.85 -1.88 -0.04 0.00 -2.69 -0.89 -0.85 -1.92 -2.69

901890 143,422 0.00 -0.17 -0.34 -0.02 -0.02 -0.51 -0.19 -0.19 -0.38 -0.51

Table A4.5 Percentage change in the EU export price to ASEAN (low substitution)

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 0.24 0.15 0.00 -0.98 0.00 0.15 -0.79 0.15 -0.98 -0.79

210690 0.39 0.16 -0.06 -0.13 -0.01 0.11 0.05 0.15 -0.20 0.04

220820 1.88 1.88 -0.01 0.00 0.00 1.87 1.87 1.87 -0.02 1.87

220830 1.58 1.55 -0.01 -0.02 0.00 1.54 1.54 1.55 -0.03 1.53

271019 0.00 -0.14 -0.01 0.00 0.00 -0.14 -0.14 -0.14 -0.01 -0.14

293399 0.00 -0.02 -0.02 0.00 -0.01 -0.04 -0.02 -0.03 -0.03 -0.03

300210 0.00 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 -0.01 -0.01

300490 0.00 -0.04 -0.02 -0.07 -0.02 -0.06 -0.11 -0.07 -0.11 -0.13

330499 3.45 3.39 -0.20 -0.04 -0.02 3.27 3.37 3.38 -0.27 3.36

382490 0.37 0.28 -0.26 -0.02 0.00 0.05 0.27 0.28 -0.28 0.26

390210 0.00 -0.14 -0.08 -0.01 -0.03 -0.22 -0.15 -0.17 -0.11 -0.18

390950 0.00 -0.19 -0.18 -0.02 -0.01 -0.38 -0.21 -0.20 -0.21 -0.22

392190 0.06 -0.63 -0.82 -0.06 -0.02 -1.47 -0.69 -0.65 -0.91 -0.72

392690 1.35 0.55 -2.02 -0.02 -0.01 -1.18 0.53 0.55 -2.05 0.53

401199 0.00 -0.15 -0.15 -0.01 -0.08 -0.30 -0.16 -0.23 -0.24 -0.24

480511 0.00 -0.27 -0.10 -0.14 0.00 -0.37 -0.42 -0.27 -0.24 -0.42

481092 0.00 -0.25 -0.04 -0.04 -0.01 -0.29 -0.29 -0.26 -0.09 -0.30

710231 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 0.00 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 -0.02 -0.01

730410 0.00 -0.96 -2.80 0.00 -0.03 -3.84 -0.96 -0.98 -2.84 -0.99

730799 0.63 0.27 -0.55 -0.05 -0.01 -0.22 0.22 0.25 -0.61 0.21

732690 0.00 -0.36 -0.76 -0.02 -0.01 -1.13 -0.38 -0.37 -0.79 -0.39

760611 3.79 3.20 -1.34 -1.38 -0.03 2.45 2.43 3.19 -2.86 2.42

760612 1.39 0.70 -0.44 -0.64 -0.02 0.39 0.25 0.69 -1.12 0.24

840999 0.02 -0.02 -0.11 -0.01 0.00 -0.13 -0.03 -0.02 -0.12 -0.03

841112 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841199 0.00 0.00 -0.03 0.00 0.00 -0.03 0.00 0.00 -0.03 0.00

841480 0.00 -0.25 -0.49 -0.02 -0.04 -0.75 -0.28 -0.29 -0.55 -0.31

841790 0.00 -0.02 -0.02 0.00 0.00 -0.04 -0.02 -0.02 -0.03 -0.02

841950 0.01 -0.32 -0.20 -0.01 -0.01 -0.53 -0.34 -0.34 -0.23 -0.35

843149 0.10 0.07 -0.10 -0.01 0.00 -0.01 0.06 0.07 -0.11 0.06

844390 0.00 -0.01 -0.02 0.00 0.00 -0.02 -0.01 -0.01 -0.02 -0.01

847180 0.00 -0.02 0.00 0.00 0.00 -0.02 -0.02 -0.02 0.00 -0.02

847330 0.00 -0.01 -0.01 0.00 0.00 -0.01 -0.01 -0.01 -0.01 -0.01

847989 0.00 -0.03 -0.13 0.00 0.00 -0.16 -0.03 -0.03 -0.13 -0.03

847990 0.02 0.01 -0.03 0.00 0.00 -0.01 0.01 0.01 -0.03 0.01

848180 0.01 -0.26 -0.26 -0.02 -0.02 -0.52 -0.28 -0.28 -0.29 -0.29

848210 0.00 -0.08 -0.19 0.00 0.00 -0.27 -0.08 -0.08 -0.19 -0.08

850239 0.01 -0.44 -0.36 0.00 0.00 -0.81 -0.44 -0.44 -0.37 -0.44

851722 0.00 0.00 -0.63 0.00 0.00 -0.63 0.00 0.00 -0.63 0.00

851730 0.50 0.41 -0.01 -0.03 0.00 0.40 0.39 0.41 -0.03 0.39

178

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

851750 0.00 -0.08 -0.01 0.00 0.00 -0.09 -0.08 -0.08 -0.01 -0.08

851780 1.20 0.94 -0.04 0.00 0.00 0.92 0.94 0.94 -0.04 0.94

851790 0.00 -0.01 0.00 0.00 0.00 -0.01 -0.01 -0.01 0.00 -0.01

852510 0.03 0.01 -0.01 0.00 0.00 0.00 0.01 0.01 -0.01 0.01

852520 0.05 0.01 0.00 0.00 -0.01 0.00 0.01 0.00 -0.01 0.00

853690 1.15 0.99 -0.69 -0.01 -0.01 0.52 0.99 0.99 -0.71 0.51

853710 0.11 -0.21 -0.65 -0.02 -0.01 -0.86 -0.23 -0.22 -0.68 -0.86

853890 0.02 -0.16 -0.84 -0.01 -0.01 -1.00 -0.17 -0.17 -0.86 -1.01

854129 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854140 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 0.01 -0.23 -0.25 0.00 0.00 -0.48 -0.23 -0.23 -0.25 -0.48

870322 0.30 -0.09 -6.51 0.00 0.00 -6.32 -0.09 -0.09 -6.51 -6.32

870323 0.81 0.32 -3.17 0.00 0.00 -2.52 0.31 0.31 -3.17 -2.52

870324 1.51 1.41 -1.48 -0.08 0.00 0.34 1.34 1.41 -1.57 0.34

870332 0.57 -3.05 -0.81 -0.08 -0.01 -3.82 -3.13 -3.06 -0.90 -3.82

870829 0.53 -0.46 -2.69 -0.01 0.00 -3.07 -0.47 -0.46 -2.71 -3.07

870899 0.26 0.02 -2.86 -0.07 -0.01 -2.78 -0.05 0.00 -2.95 -2.78

880230 0.00 -0.18 0.00 0.00 0.00 -0.18 -0.18 -0.18 0.00 -0.18

880240 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 0.00 -0.01 0.00 0.00 0.00 -0.01 -0.01 -0.01 -0.01 -0.01

890190 0.07 -0.17 -0.38 -0.01 0.00 -0.54 -0.18 -0.17 -0.39 -0.54

901890 0.00 -0.03 -0.07 0.00 0.00 -0.10 -0.04 -0.04 -0.08 -0.10

Table A4.6 Percentage change in the value of the EU’s exports to ASEAN by scenario (high substitution)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.48 0.24 0.00 -12.76 0.00 0.24 -11.76 0.24 -12.76 -11.76

210690 260,401 2.58 0.35 -0.66 -1.42 -0.10 -0.19 -0.89 0.26 -2.16 -0.98

220820 75,963 12.53 12.48 -0.15 -0.03 -0.02 12.36 12.47 12.47 -0.20 12.45

220830 156,719 10.55 10.26 -0.12 -0.27 -0.05 10.15 10.02 10.21 -0.44 9.98

271019 125,411 0.00 -2.18 -0.09 -0.01 -0.06 -2.27 -2.19 -2.24 -0.17 -2.25

293399 7,014 0.00 -0.29 -0.27 0.00 -0.11 -0.56 -0.29 -0.40 -0.39 -0.41

300210 29,868 0.00 -0.05 0.00 -0.11 0.00 -0.05 -0.16 -0.05 -0.11 -0.16

300490 1,085,252 0.00 -0.62 -0.33 -1.00 -0.33 -0.95 -1.61 -0.94 -1.65 -1.92

330499 94,131 24.77 23.66 -3.79 -0.81 -0.24 21.11 23.12 23.50 -4.78 22.96

382490 238,952 2.41 1.14 -3.86 -0.27 -0.06 -2.22 0.91 1.08 -4.17 0.85

390210 18,836 0.00 -2.22 -1.21 -0.12 -0.39 -3.37 -2.33 -2.59 -1.71 -2.71

179

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

390950 73,690 0.00 -2.81 -2.82 -0.33 -0.09 -5.49 -3.13 -2.90 -3.22 -3.21

392190 48,451 0.38 -7.35 -10.11 -0.79 -0.26 -16.12 -8.03 -7.57 -10.98 -8.26

392690 156,801 9.17 -0.53 -22.43 -0.36 -0.07 -18.25 -0.80 -0.59 -22.70 -0.86

401199 3,467 0.03 -1.52 -1.82 -0.12 -0.79 -3.29 -1.64 -2.29 -2.71 -2.41

480511 23,311 0.00 -3.95 -1.62 -2.31 0.00 -5.46 -6.10 -3.95 -3.87 -6.10

481092 29,014 0.00 -3.66 -0.67 -0.71 -0.14 -4.29 -4.33 -3.80 -1.51 -4.46

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 0.00 -0.03 -0.16 0.00 -0.03 -0.16 0.00 -0.19 -0.16

730410 62,887 0.00 -10.29 -28.27 -0.06 -0.30 -34.15 -10.34 -10.55 -28.48 -10.60

730799 53,398 4.12 -0.13 -6.64 -0.65 -0.14 -5.64 -0.66 -0.24 -7.34 -0.77

732690 268,545 0.00 -3.88 -8.71 -0.27 -0.10 -12.02 -4.13 -3.97 -9.03 -4.23

760611 32,847 26.10 18.66 -16.33 -16.74 -0.36 8.91 8.65 18.57 -28.92 8.58

760612 65,201 8.86 0.76 -5.32 -7.50 -0.18 -2.54 -3.93 0.64 -12.28 -4.04

840999 91,534 0.15 -0.34 -1.27 -0.12 -0.02 -1.52 -0.46 -0.36 -1.40 -0.48

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 -0.01 -0.01 -0.01

841199 172,076 0.00 -0.01 -0.37 -0.02 0.00 -0.38 -0.03 -0.02 -0.39 -0.03

841480 151,708 0.00 -2.74 -5.71 -0.27 -0.39 -8.19 -3.00 -3.12 -6.31 -3.38

841790 30,729 0.00 -0.17 -0.27 -0.02 -0.02 -0.43 -0.18 -0.19 -0.30 -0.20

841950 85,043 0.07 -3.61 -2.34 -0.16 -0.15 -5.77 -3.76 -3.74 -2.63 -3.89

843149 84,440 0.66 0.27 -1.12 -0.14 0.00 -0.66 0.16 0.27 -1.25 0.16

844390 46,849 0.00 -0.08 -0.19 0.00 0.00 -0.27 -0.08 -0.08 -0.19 -0.08

847180 24,632 0.00 -0.22 -0.02 -0.01 0.00 -0.25 -0.23 -0.22 -0.03 -0.23

847330 428,442 0.00 -0.09 -0.06 0.00 0.00 -0.15 -0.09 -0.09 -0.06 -0.09

847989 368,597 0.00 -0.35 -1.43 -0.01 -0.01 -1.77 -0.37 -0.36 -1.45 -0.38

847990 191,492 0.12 0.06 -0.30 0.00 0.00 -0.21 0.05 0.05 -0.30 0.05

848180 226,916 0.04 -2.77 -3.07 -0.18 -0.17 -5.68 -2.94 -2.93 -3.40 -3.10

848210 33,606 0.00 -0.84 -2.22 -0.01 -0.01 -3.02 -0.85 -0.84 -2.23 -0.86

850239 260,042 0.03 -4.54 -4.24 -0.01 -0.03 -8.44 -4.54 -4.57 -4.28 -4.57

851722 110 0.00 0.00 -6.86 0.00 0.00 -6.86 0.00 0.00 -6.86 0.00

851730 109,677 3.10 2.13 -0.07 -0.32 0.00 2.08 1.92 2.13 -0.39 1.92

851750 240,869 0.00 -0.82 -0.10 0.00 0.00 -0.91 -0.82 -0.82 -0.10 -0.82

851780 155,072 8.06 5.19 -0.45 -0.06 -0.01 4.97 5.16 5.18 -0.52 5.18

851790 694,925 0.00 -0.11 -0.04 0.00 0.00 -0.14 -0.11 -0.11 -0.04 -0.11

852510 36,009 0.18 -0.02 -0.11 -0.03 -0.01 -0.11 -0.04 -0.02 -0.14 -0.02

852520 418,949 0.32 -0.13 -0.02 0.00 -0.07 -0.15 -0.13 -0.19 -0.09 -0.19

853690 127,203 7.84 6.05 -8.08 -0.09 -0.10 0.23 5.99 5.98 -8.24 0.17

180

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

853710 167,225 0.71 -2.79 -7.73 -0.32 -0.06 -9.94 -3.09 -2.85 -8.06 -9.99

853890 92,600 0.11 -1.80 -9.33 -0.17 -0.06 -10.79 -1.96 -1.85 -9.52 -10.84

854129 290,506 0.00 0.00 -0.02 0.00 0.00 -0.02 0.00 0.00 -0.02 -0.02

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.05 -2.53 -3.09 -0.01 0.00 -5.47 -2.54 -2.53 -3.10 -5.47

870322 7,170 1.91 -2.59 -48.16 -0.02 0.00 -47.10 -2.61 -2.60 -48.16 -47.10

870323 284,341 5.45 -0.37 -29.66 -0.06 0.00 -26.17 -0.42 -0.37 -29.69 -26.17

870324 90,012 9.56 8.45 -15.30 -1.05 0.00 -3.13 7.62 8.45 -16.11 -3.13

870332 5,663 3.83 -30.57 -9.57 -0.94 -0.05 -35.07 -30.99 -30.60 -10.41 -35.07

870829 33,641 3.46 -8.84 -27.58 -0.21 -0.03 -30.63 -9.00 -8.86 -27.71 -30.63

870899 485,931 1.70 -1.59 -28.99 -1.02 -0.14 -28.80 -2.54 -1.72 -29.62 -28.80

880230 12,568 0.00 -1.87 -0.01 0.00 0.00 -1.88 -1.87 -1.87 -0.01 -1.88

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.06 -0.05 -0.03 -0.02 -0.11 -0.09 -0.08 -0.10 -0.11

890190 103,346 0.46 -2.14 -4.44 -0.09 0.00 -6.28 -2.23 -2.14 -4.53 -6.28

901890 143,422 0.37 -0.35 -1.51 -0.18 -0.04 -1.70 -0.48 -0.38 -1.69 -1.49

Total 13,596,376 1.17 -0.04 -3.28 -0.36 -0.06 -2.94 -0.34 -0.10 -3.65 -2.26

Table A4.7 Percentage changes in quantities of EU exports to ASEAN (high substitution)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.23 0.20 -10.76 0.00 0.20 -9.90 0.20 -10.76 -9.90

210690 260,401 2.14 0.29 -0.55 -1.19 -0.08 -0.16 -0.74 0.22 -1.80 -0.82

220820 75,963 10.34 10.30 -0.13 -0.03 -0.01 10.20 10.28 10.29 -0.17 10.27

220830 156,719 8.71 8.48 -0.10 -0.23 -0.04 8.39 8.28 8.44 -0.37 8.25

271019 125,411 0.00 -1.82 -0.08 -0.01 -0.05 -1.89 -1.83 -1.87 -0.14 -1.88

293399 7,014 0.00 -0.24 -0.23 0.00 -0.09 -0.47 -0.24 -0.34 -0.32 -0.34

300210 29,868 0.00 -0.04 0.00 -0.09 0.00 -0.04 -0.13 -0.04 -0.09 -0.13

300490 1,085,252 0.00 -0.52 -0.28 -0.83 -0.27 -0.79 -1.34 -0.79 -1.37 -1.61

330499 94,131 20.25 19.36 -3.17 -0.68 -0.20 17.31 18.92 19.23 -4.00 18.80

382490 238,952 2.01 0.95 -3.23 -0.22 -0.05 -1.85 0.76 0.90 -3.49 0.71

390210 18,836 0.00 -1.85 -1.01 -0.10 -0.33 -2.82 -1.95 -2.17 -1.42 -2.26

390950 73,690 0.00 -2.35 -2.36 -0.28 -0.08 -4.60 -2.61 -2.42 -2.69 -2.68

392190 48,451 0.31 -6.16 -8.50 -0.66 -0.22 -13.62 -6.74 -6.35 -9.24 -6.93

181

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

392690 156,801 7.58 -0.44 -19.07 -0.30 -0.06 -15.46 -0.67 -0.49 -19.31 -0.71

401199 3,467 0.03 -1.27 -1.52 -0.10 -0.66 -2.75 -1.37 -1.92 -2.26 -2.01

480511 23,311 0.00 -3.30 -1.35 -1.93 0.00 -4.57 -5.11 -3.30 -3.23 -5.11

481092 29,014 0.00 -3.06 -0.56 -0.59 -0.12 -3.59 -3.62 -3.17 -1.26 -3.73

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 0.00 -0.03 -0.13 0.00 -0.03 -0.13 0.00 -0.16 -0.14

730410 62,887 0.00 -8.65 -24.19 -0.05 -0.25 -29.40 -8.69 -8.87 -24.37 -8.91

730799 53,398 3.42 -0.11 -5.57 -0.54 -0.11 -4.72 -0.55 -0.20 -6.15 -0.64

732690 268,545 0.00 -3.24 -7.31 -0.23 -0.08 -10.12 -3.45 -3.32 -7.58 -3.53

760611 32,847 21.32 15.32 -13.81 -14.16 -0.30 7.38 7.16 15.25 -24.76 7.10

760612 65,201 7.33 0.63 -4.45 -6.29 -0.15 -2.13 -3.29 0.54 -10.35 -3.37

840999 91,534 0.12 -0.29 -1.06 -0.10 -0.02 -1.27 -0.38 -0.30 -1.17 -0.40

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00

841199 172,076 0.00 -0.01 -0.30 -0.02 0.00 -0.32 -0.03 -0.01 -0.32 -0.03

841480 151,708 0.00 -2.29 -4.78 -0.22 -0.33 -6.87 -2.51 -2.61 -5.28 -2.82

841790 30,729 0.00 -0.14 -0.22 -0.01 -0.02 -0.36 -0.15 -0.16 -0.25 -0.17

841950 85,043 0.06 -3.01 -1.95 -0.14 -0.12 -4.84 -3.14 -3.13 -2.20 -3.25

843149 84,440 0.55 0.23 -0.93 -0.12 0.00 -0.55 0.13 0.23 -1.05 0.13

844390 46,849 0.00 -0.07 -0.15 0.00 0.00 -0.22 -0.07 -0.07 -0.16 -0.07

847180 24,632 0.00 -0.19 -0.02 0.00 0.00 -0.20 -0.19 -0.19 -0.02 -0.19

847330 428,442 0.00 -0.07 -0.05 0.00 0.00 -0.12 -0.07 -0.07 -0.05 -0.07

847989 368,597 0.00 -0.30 -1.19 -0.01 -0.01 -1.48 -0.31 -0.30 -1.21 -0.31

847990 191,492 0.10 0.05 -0.25 0.00 0.00 -0.17 0.04 0.05 -0.25 0.04

848180 226,916 0.03 -2.31 -2.56 -0.15 -0.14 -4.76 -2.46 -2.45 -2.84 -2.59

848210 33,606 0.00 -0.70 -1.85 -0.01 0.00 -2.53 -0.71 -0.70 -1.86 -0.71

850239 260,042 0.03 -3.80 -3.55 0.00 -0.03 -7.09 -3.80 -3.82 -3.58 -3.83

851722 110 0.00 0.00 -5.75 0.00 0.00 -5.75 0.00 0.00 -5.75 0.00

851730 109,677 2.58 1.78 -0.06 -0.27 0.00 1.73 1.60 1.78 -0.33 1.60

851750 240,869 0.00 -0.68 -0.08 0.00 0.00 -0.76 -0.68 -0.68 -0.08 -0.68

851780 155,072 6.67 4.31 -0.37 -0.05 -0.01 4.13 4.28 4.30 -0.43 4.30

851790 694,925 0.00 -0.09 -0.03 0.00 0.00 -0.12 -0.09 -0.09 -0.03 -0.09

852510 36,009 0.15 -0.02 -0.09 -0.02 -0.01 -0.09 -0.03 -0.02 -0.12 -0.02

852520 418,949 0.27 -0.11 -0.02 0.00 -0.06 -0.13 -0.11 -0.15 -0.08 -0.15

853690 127,203 6.49 5.01 -6.78 -0.07 -0.09 0.19 4.97 4.96 -6.92 0.14

853710 167,225 0.59 -2.33 -6.49 -0.27 -0.05 -8.35 -2.58 -2.38 -6.77 -8.40

853890 92,600 0.09 -1.50 -7.84 -0.14 -0.05 -9.08 -1.64 -1.55 -8.00 -9.12

854129 290,506 0.00 0.00 -0.01 0.00 0.00 -0.02 0.00 0.00 -0.01 -0.02

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.04 -2.12 -2.58 -0.01 0.00 -4.58 -2.12 -2.12 -2.59 -4.58

870322 7,170 1.59 -2.17 -42.16 -0.01 0.00 -41.18 -2.18 -2.17 -42.16 -41.18

870323 284,341 4.52 -0.31 -25.41 -0.05 0.00 -22.34 -0.35 -0.31 -25.44 -22.34

870324 90,012 7.90 6.99 -12.92 -0.88 0.00 -2.62 6.31 6.99 -13.62 -2.62

870332 5,663 3.18 -26.22 -8.04 -0.79 -0.04 -30.23 -26.59 -26.24 -8.75 -30.23

870829 33,641 2.88 -7.42 -23.58 -0.18 -0.02 -26.27 -7.56 -7.44 -23.70 -26.27

870899 485,931 1.41 -1.32 -24.82 -0.85 -0.12 -24.65 -2.12 -1.44 -25.38 -24.65

880230 12,568 0.00 -1.56 -0.01 0.00 0.00 -1.57 -1.56 -1.56 -0.01 -1.57

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.05 -0.04 -0.03 -0.01 -0.09 -0.08 -0.06 -0.08 -0.09

890190 103,346 0.38 -1.79 -3.71 -0.08 0.00 -5.26 -1.86 -1.79 -3.79 -5.26

901890 143,422 0.00 -0.27 -0.58 -0.04 -0.03 -0.84 -0.30 -0.29 -0.64 -0.84

182

Table A4.8 Percentage change in the EU export price to ASEAN (high substitution)

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 0.24 0.04 0.00 -2.25 0.00 0.04 -2.06 0.04 -2.25 -2.06

210690 0.42 0.06 -0.11 -0.24 -0.02 -0.03 -0.15 0.04 -0.36 -0.16

220820 1.99 1.98 -0.03 -0.01 0.00 1.96 1.98 1.98 -0.03 1.98

220830 1.69 1.64 -0.02 -0.05 -0.01 1.62 1.60 1.63 -0.07 1.60

271019 0.00 -0.37 -0.02 0.00 -0.01 -0.38 -0.37 -0.38 -0.03 -0.38

293399 0.00 -0.05 -0.05 0.00 -0.02 -0.09 -0.05 -0.07 -0.06 -0.07

300210 0.00 -0.01 0.00 -0.02 0.00 -0.01 -0.03 -0.01 -0.02 -0.03

300490 0.00 -0.10 -0.06 -0.17 -0.05 -0.16 -0.27 -0.16 -0.28 -0.32

330499 3.76 3.60 -0.64 -0.14 -0.04 3.24 3.53 3.58 -0.81 3.50

382490 0.40 0.19 -0.65 -0.04 -0.01 -0.37 0.15 0.18 -0.71 0.14

390210 0.00 -0.37 -0.20 -0.02 -0.07 -0.57 -0.39 -0.44 -0.29 -0.46

390950 0.00 -0.47 -0.48 -0.06 -0.02 -0.94 -0.53 -0.49 -0.54 -0.54

392190 0.06 -1.26 -1.76 -0.13 -0.04 -2.89 -1.39 -1.30 -1.92 -1.43

392690 1.47 -0.09 -4.14 -0.06 -0.01 -3.30 -0.13 -0.10 -4.20 -0.14

401199 0.01 -0.25 -0.31 -0.02 -0.13 -0.56 -0.28 -0.39 -0.46 -0.41

480511 0.00 -0.67 -0.27 -0.39 0.00 -0.93 -1.04 -0.67 -0.66 -1.04

481092 0.00 -0.62 -0.11 -0.12 -0.02 -0.73 -0.74 -0.64 -0.25 -0.76

710231 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 0.00 0.00 -0.01 -0.03 0.00 -0.01 -0.03 0.00 -0.03 -0.03

730410 0.00 -1.79 -5.39 -0.01 -0.05 -6.73 -1.80 -1.84 -5.43 -1.85

730799 0.68 -0.02 -1.14 -0.11 -0.02 -0.96 -0.11 -0.04 -1.26 -0.13

732690 0.00 -0.66 -1.51 -0.05 -0.02 -2.11 -0.70 -0.67 -1.56 -0.72

760611 3.94 2.89 -2.93 -3.01 -0.06 1.43 1.39 2.88 -5.53 1.38

760612 1.43 0.13 -0.91 -1.29 -0.03 -0.43 -0.67 0.11 -2.16 -0.68

840999 0.02 -0.06 -0.21 -0.02 0.00 -0.25 -0.08 -0.06 -0.23 -0.08

841112 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841199 0.00 0.00 -0.06 0.00 0.00 -0.06 -0.01 0.00 -0.06 -0.01

841480 0.00 -0.46 -0.97 -0.05 -0.07 -1.41 -0.51 -0.53 -1.08 -0.57

841790 0.00 -0.03 -0.04 0.00 0.00 -0.07 -0.03 -0.03 -0.05 -0.03

841950 0.01 -0.61 -0.39 -0.03 -0.02 -0.99 -0.64 -0.63 -0.44 -0.66

843149 0.11 0.05 -0.19 -0.02 0.00 -0.11 0.03 0.05 -0.21 0.03

844390 0.00 -0.01 -0.03 0.00 0.00 -0.04 -0.01 -0.01 -0.03 -0.01

847180 0.00 -0.04 0.00 0.00 0.00 -0.04 -0.04 -0.04 0.00 -0.04

847330 0.00 -0.01 -0.01 0.00 0.00 -0.02 -0.01 -0.01 -0.01 -0.01

847989 0.00 -0.06 -0.24 0.00 0.00 -0.30 -0.06 -0.06 -0.24 -0.06

847990 0.02 0.01 -0.05 0.00 0.00 -0.03 0.01 0.01 -0.05 0.01

848180 0.01 -0.47 -0.52 -0.03 -0.03 -0.97 -0.50 -0.49 -0.58 -0.52

848210 0.00 -0.14 -0.37 0.00 0.00 -0.51 -0.14 -0.14 -0.38 -0.14

850239 0.01 -0.77 -0.72 0.00 -0.01 -1.46 -0.77 -0.78 -0.73 -0.78

851722 0.00 0.00 -1.18 0.00 0.00 -1.18 0.00 0.00 -1.18 0.00

851730 0.51 0.35 -0.01 -0.05 0.00 0.34 0.32 0.35 -0.07 0.32

851750 0.00 -0.14 -0.02 0.00 0.00 -0.15 -0.14 -0.14 -0.02 -0.14

851780 1.30 0.85 -0.07 -0.01 0.00 0.81 0.84 0.85 -0.09 0.85

851790 0.00 -0.02 -0.01 0.00 0.00 -0.02 -0.02 -0.02 -0.01 -0.02

852510 0.03 0.00 -0.02 0.00 0.00 -0.02 -0.01 0.00 -0.02 0.00

852520 0.05 -0.02 0.00 0.00 -0.01 -0.03 -0.02 -0.03 -0.02 -0.03

853690 1.27 0.98 -1.39 -0.01 -0.02 0.04 0.97 0.97 -1.42 0.03

853710 0.12 -0.47 -1.33 -0.05 -0.01 -1.73 -0.52 -0.48 -1.39 -1.74

853890 0.02 -0.30 -1.62 -0.03 -0.01 -1.89 -0.33 -0.31 -1.65 -1.89

854129 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854140 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

183

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

854221 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 0.01 -0.43 -0.52 0.00 0.00 -0.93 -0.43 -0.43 -0.52 -0.93

870322 0.32 -0.44 -10.37 0.00 0.00 -10.07 -0.44 -0.44 -10.37 -10.07

870323 0.89 -0.06 -5.70 -0.01 0.00 -4.93 -0.07 -0.06 -5.70 -4.93

870324 1.53 1.36 -2.73 -0.18 0.00 -0.53 1.23 1.36 -2.88 -0.53

870332 0.63 -5.90 -1.66 -0.16 -0.01 -6.95 -6.00 -5.91 -1.81 -6.95

870829 0.57 -1.53 -5.24 -0.04 0.00 -5.91 -1.56 -1.53 -5.27 -5.91

870899 0.28 -0.27 -5.55 -0.17 -0.02 -5.50 -0.43 -0.29 -5.69 -5.50

880230 0.00 -0.31 0.00 0.00 0.00 -0.32 -0.31 -0.31 0.00 -0.32

880240 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 0.00 -0.01 -0.01 -0.01 0.00 -0.02 -0.02 -0.01 -0.02 -0.02

890190 0.08 -0.36 -0.75 -0.02 0.00 -1.08 -0.38 -0.36 -0.77 -1.08

901890 0.37 -0.08 -0.94 -0.14 -0.01 -0.87 -0.18 -0.09 -1.06 -0.65

Table A4.9 Percentage change in the value of the EU’s exports to ASEAN by scenario (translog specification)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.47 0.49 0.00 -12.76 0.00 0.49 -11.61 0.49 -12.76 -11.61

210690 260,401 2.49 0.47 -0.65 -1.39 -0.09 -0.07 -0.75 0.39 -2.11 -0.83

220820 75,963 12.27 12.22 -0.15 -0.03 -0.01 12.11 12.21 12.21 -0.19 12.19

220830 156,719 10.28 10.02 -0.12 -0.26 -0.04 9.92 9.79 9.98 -0.42 9.75

271019 125,411 0.00 -2.20 -0.10 -0.01 -0.05 -2.29 -2.21 -2.25 -0.16 -2.26

293399 7,014 0.00 -0.24 -0.28 0.00 -0.09 -0.52 -0.24 -0.33 -0.37 -0.33

300210 29,868 0.00 -0.05 0.00 -0.11 0.00 -0.05 -0.15 -0.05 -0.11 -0.15

300490 1,085,252 0.00 -0.59 -0.34 -1.00 -0.26 -0.92 -1.58 -0.85 -1.59 -1.84

330499 94,131 23.92 22.94 -3.73 -0.80 -0.19 20.45 22.41 22.81 -4.67 22.29

382490 238,952 2.35 1.25 -3.88 -0.27 -0.05 -2.14 1.02 1.20 -4.18 0.97

390210 18,836 0.00 -2.22 -1.22 -0.12 -0.31 -3.40 -2.34 -2.52 -1.65 -2.64

390950 73,690 0.00 -2.70 -2.83 -0.33 -0.07 -5.39 -3.01 -2.76 -3.21 -3.08

392190 48,451 0.36 -6.72 -9.91 -0.78 -0.22 -15.52 -7.41 -6.92 -10.75 -7.60

392690 156,801 8.87 0.15 -21.99 -0.34 -0.06 -17.63 -0.12 0.10 -22.26 -0.17

401199 3,467 0.03 -1.31 -1.71 -0.12 -0.68 -2.98 -1.42 -1.97 -2.48 -2.09

480511 23,311 0.00 -3.72 -1.62 -2.31 0.00 -5.24 -5.89 -3.72 -3.87 -5.89

481092 29,014 0.00 -3.37 -0.67 -0.71 -0.11 -4.01 -4.05 -3.47 -1.49 -4.15

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 0.00 -0.03 -0.16 0.00 -0.03 -0.16 0.00 -0.19 -0.16

184

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

730410 62,887 0.00 -8.96 -27.89 -0.06 -0.25 -33.38 -9.01 -9.18 -28.08 -9.23

730799 53,398 4.02 0.08 -6.57 -0.64 -0.11 -5.41 -0.45 -0.01 -7.24 -0.54

732690 268,545 0.00 -3.42 -8.64 -0.27 -0.09 -11.62 -3.68 -3.50 -8.94 -3.76

760611 32,847 25.69 19.12 -16.02 -16.43 -0.30 9.36 9.09 19.05 -28.55 9.03

760612 65,201 8.79 0.89 -5.29 -7.46 -0.15 -2.42 -3.81 0.79 -12.21 -3.90

840999 91,534 0.14 -0.30 -1.27 -0.12 -0.02 -1.48 -0.41 -0.31 -1.40 -0.43

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00

841199 172,076 0.00 -0.01 -0.37 -0.02 0.00 -0.38 -0.03 -0.01 -0.39 -0.03

841480 151,708 0.00 -2.45 -5.67 -0.27 -0.33 -7.90 -2.70 -2.76 -6.21 -3.02

841790 30,729 0.00 -0.16 -0.27 -0.02 -0.02 -0.42 -0.17 -0.17 -0.30 -0.19

841950 85,043 0.07 -3.52 -2.33 -0.16 -0.12 -5.69 -3.67 -3.63 -2.61 -3.78

843149 84,440 0.64 0.28 -1.12 -0.14 0.00 -0.65 0.17 0.28 -1.26 0.16

844390 46,849 0.00 -0.07 -0.19 0.00 0.00 -0.26 -0.07 -0.07 -0.19 -0.07

847180 24,632 0.00 -0.19 -0.02 -0.01 0.00 -0.21 -0.20 -0.19 -0.03 -0.20

847330 428,442 0.00 -0.08 -0.06 0.00 0.00 -0.14 -0.08 -0.08 -0.06 -0.08

847989 368,597 0.00 -0.34 -1.43 -0.01 -0.01 -1.76 -0.35 -0.34 -1.45 -0.36

847990 191,492 0.11 0.05 -0.30 0.00 0.00 -0.21 0.05 0.05 -0.30 0.05

848180 226,916 0.03 -2.44 -3.05 -0.18 -0.14 -5.37 -2.61 -2.58 -3.36 -2.75

848210 33,606 0.00 -0.72 -2.22 -0.01 0.00 -2.91 -0.73 -0.72 -2.23 -0.74

850239 260,042 0.03 -3.99 -4.22 -0.01 -0.03 -7.95 -4.00 -4.02 -4.25 -4.03

851722 110 0.00 0.00 -6.86 0.00 0.00 -6.86 0.00 0.00 -6.86 0.00

851730 109,677 3.07 2.18 -0.07 -0.32 0.00 2.13 1.97 2.18 -0.39 1.97

851750 240,869 0.00 -0.71 -0.10 0.00 0.00 -0.80 -0.71 -0.71 -0.10 -0.71

851780 155,072 7.81 5.32 -0.44 -0.06 -0.01 5.10 5.29 5.32 -0.51 5.32

851790 694,925 0.00 -0.09 -0.04 0.00 0.00 -0.13 -0.10 -0.09 -0.04 -0.09

852510 36,009 0.17 0.00 -0.11 -0.03 -0.01 -0.09 -0.02 0.00 -0.14 0.00

852520 418,949 0.31 -0.09 -0.03 0.00 -0.06 -0.11 -0.09 -0.14 -0.08 -0.14

853690 127,203 7.56 6.00 -8.00 -0.08 -0.09 0.22 5.94 5.94 -8.15 0.17

853710 167,225 0.69 -2.42 -7.65 -0.32 -0.05 -9.58 -2.72 -2.47 -7.97 -9.62

853890 92,600 0.11 -1.59 -9.29 -0.16 -0.05 -10.59 -1.75 -1.63 -9.47 -10.63

854129 290,506 0.00 0.00 -0.02 0.00 0.00 -0.02 0.00 0.00 -0.02 -0.02

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

185

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

854890 10,957 0.05 -2.19 -3.05 -0.01 0.00 -5.13 -2.20 -2.19 -3.06 -5.13

870322 7,170 1.88 -2.52 -47.63 -0.02 0.00 -46.62 -2.54 -2.52 -47.64 -46.62

870323 284,341 5.26 -0.39 -29.09 -0.06 0.00 -25.73 -0.44 -0.39 -29.12 -25.73

870324 90,012 9.50 8.48 -15.23 -1.05 0.00 -3.06 7.66 8.48 -16.03 -3.06

870332 5,663 3.69 -29.77 -9.18 -0.91 -0.04 -34.31 -30.20 -29.79 -10.00 -34.31

870829 33,641 3.37 -8.36 -27.21 -0.21 -0.02 -30.21 -8.52 -8.38 -27.35 -30.21

870899 485,931 1.65 -1.44 -28.60 -0.99 -0.12 -28.40 -2.37 -1.56 -29.22 -28.40

880230 12,568 0.00 -1.72 -0.01 0.00 0.00 -1.73 -1.72 -1.72 -0.01 -1.73

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.06 -0.05 -0.03 -0.01 -0.11 -0.09 -0.07 -0.09 -0.11

890190 103,346 0.44 -1.89 -4.41 -0.09 0.00 -6.04 -1.97 -1.89 -4.50 -6.04

901890 143,422 0.00 -0.30 -0.69 -0.04 -0.02 -0.82 -0.28 -0.27 -0.63 -0.82

Total 13,596,376 1.13 0.03 -3.23 -0.35 -0.05 -2.85 -0.27 -0.01 -3.59 -2.16

186

Table A4.10 Percentage changes in quantities of EU exports to ASEAN (translog specification)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 1.22 0.40 0.00 -10.76 0.00 0.40 -9.77 0.40 -10.76 -9.77

210690 260,401 2.07 0.39 -0.54 -1.16 -0.07 -0.06 -0.63 0.33 -1.76 -0.69

220820 75,963 10.12 10.09 -0.12 -0.03 -0.01 9.99 10.07 10.08 -0.16 10.06

220830 156,719 8.49 8.28 -0.10 -0.22 -0.04 8.20 8.10 8.25 -0.35 8.07

271019 125,411 0.00 -1.84 -0.08 -0.01 -0.04 -1.92 -1.85 -1.88 -0.13 -1.89

293399 7,014 0.00 -0.20 -0.23 0.00 -0.07 -0.43 -0.20 -0.27 -0.31 -0.27

300210 29,868 0.00 -0.04 0.00 -0.09 0.00 -0.04 -0.13 -0.04 -0.09 -0.13

300490 1,085,252 0.00 -0.49 -0.28 -0.84 -0.22 -0.77 -1.32 -0.71 -1.32 -1.53

330499 94,131 19.57 18.78 -3.12 -0.67 -0.16 16.77 18.35 18.68 -3.90 18.25

382490 238,952 1.96 1.04 -3.24 -0.22 -0.04 -1.78 0.85 1.00 -3.49 0.81

390210 18,836 0.00 -1.86 -1.02 -0.10 -0.26 -2.84 -1.95 -2.11 -1.37 -2.21

390950 73,690 0.00 -2.25 -2.36 -0.28 -0.06 -4.52 -2.52 -2.31 -2.68 -2.57

392190 48,451 0.30 -5.63 -8.33 -0.65 -0.18 -13.11 -6.21 -5.80 -9.04 -6.38

392690 156,801 7.34 0.12 -18.69 -0.29 -0.05 -14.92 -0.10 0.08 -18.93 -0.14

401199 3,467 0.03 -1.09 -1.43 -0.10 -0.56 -2.49 -1.19 -1.65 -2.07 -1.74

480511 23,311 0.00 -3.11 -1.35 -1.93 0.00 -4.39 -4.93 -3.11 -3.23 -4.93

481092 29,014 0.00 -2.82 -0.56 -0.59 -0.09 -3.35 -3.38 -2.90 -1.24 -3.47

710231 117,748 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 140,447 0.00 -0.03 -0.13 0.00 -0.03 -0.13 0.00 -0.16 -0.13

730410 62,887 0.00 -7.52 -23.85 -0.05 -0.21 -28.71 -7.56 -7.71 -24.02 -7.75

730799 53,398 3.33 0.07 -5.50 -0.53 -0.10 -4.53 -0.37 -0.01 -6.07 -0.45

732690 268,545 -2.86 -7.25 -0.22 -0.07 -9.78 -3.07 -2.93 -7.51 -3.14

760611 32,847 20.99 15.70 -13.54 -13.89 -0.25 7.74 7.52 15.64 -24.43 7.47

760612 65,201 7.27 0.74 -4.43 -6.26 -0.13 -2.02 -3.18 0.66 -10.28 -3.26

840999 91,534 0.12 -0.25 -1.06 -0.10 -0.01 -1.23 -0.34 -0.26 -1.17 -0.36

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00 0.00 -0.01 0.00

841199 172,076 0.00 -0.01 -0.31 -0.02 0.00 -0.31 -0.02 -0.01 -0.32 -0.03

841480 151,708 0.00 -2.04 -4.75 -0.22 -0.28 -6.63 -2.26 -2.31 -5.20 -2.52

841790 30,729 0.00 -0.13 -0.22 -0.01 -0.01 -0.35 -0.14 -0.14 -0.25 -0.16

841950 85,043 0.06 -2.94 -1.95 -0.14 -0.10 -4.76 -3.06 -3.04 -2.18 -3.16

843149 84,440 0.54 0.24 -0.93 -0.12 0.00 -0.54 0.14 0.23 -1.05 0.14

844390 46,849 0.00 -0.06 -0.16 0.00 0.00 -0.21 -0.06 -0.06 -0.16 -0.06

847180 24,632 0.00 -0.16 -0.02 0.00 0.00 -0.18 -0.16 -0.16 -0.02 -0.16

847330 428,442 0.00 -0.06 -0.05 0.00 0.00 -0.11 -0.06 -0.06 -0.05 -0.06

847989 368,597 0.00 -0.28 -1.19 -0.01 -0.01 -1.47 -0.29 -0.29 -1.21 -0.30

847990 191,492 0.09 0.04 -0.25 0.00 0.00 -0.17 0.04 0.04 -0.25 0.04

848180 226,916 0.03 -2.04 -2.55 -0.15 -0.12 -4.49 -2.18 -2.15 -2.81 -2.30

848210 33,606 0.00 -0.60 -1.85 -0.01 0.00 -2.43 -0.61 -0.60 -1.87 -0.61

850239 260,042 0.03 -3.34 -3.53 0.00 -0.02 -6.67 -3.34 -3.36 -3.56 -3.37

851722 110 0.00 0.00 -5.75 0.00 0.00 -5.75 0.00 0.00 -5.75 0.00

851730 109,677 2.55 1.82 -0.06 -0.26 0.00 1.77 1.64 1.82 -0.33 1.64

851750 240,869 0.00 -0.59 -0.08 0.00 0.00 -0.67 -0.59 -0.59 -0.08 -0.59

851780 155,072 6.47 4.42 -0.37 -0.05 -0.01 4.23 4.39 4.41 -0.43 4.41

851790 694,925 0.00 -0.08 -0.03 0.00 0.00 -0.11 -0.08 -0.08 -0.03 -0.08

852510 36,009 0.14 0.00 -0.09 -0.02 0.00 -0.08 -0.02 0.00 -0.12 0.00

852520 418,949 0.25 -0.08 -0.02 0.00 -0.05 -0.09 -0.08 -0.11 -0.07 -0.11

853690 127,203 6.26 4.97 -6.72 -0.07 -0.07 0.19 4.93 4.92 -6.84 0.14

853710 167,225 0.57 -2.02 -6.42 -0.26 -0.04 -8.05 -2.27 -2.06 -6.69 -8.09

853890 92,600 0.09 -1.32 -7.80 -0.14 -0.04 -8.91 -1.46 -1.36 -7.95 -8.94

854129 290,506 0.00 0.00 -0.01 0.00 0.00 -0.02 0.00 0.00 -0.01 -0.02

854140 108,016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

187

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.04 -1.83 -2.55 -0.01 0.00 -4.30 -1.84 -1.83 -2.56 -4.30

870322 7,170 1.56 -2.11 -41.67 -0.01 0.00 -40.73 -2.12 -2.11 -41.67 -40.73

870323 284,341 4.36 -0.33 -24.91 -0.05 0.00 -21.95 -0.37 -0.33 -24.94 -21.95

870324 90,012 7.86 7.02 -12.86 -0.87 0.00 -2.56 6.34 7.02 -13.55 -2.56

870332 5,663 3.06 -25.51 -7.71 -0.76 -0.04 -29.54 -25.89 -25.53 -8.41 -29.54

870829 33,641 2.80 -7.01 -23.26 -0.17 -0.02 -25.89 -7.15 -7.03 -23.37 -25.89

870899 485,931 1.37 -1.20 -24.48 -0.82 -0.10 -24.30 -1.98 -1.30 -25.03 -24.30

880230 12,568 0.00 -1.44 -0.01 0.00 0.00 -1.45 -1.44 -1.44 -0.01 -1.45

880240 2,299,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 113,076 0.00 -0.05 -0.04 -0.03 -0.01 -0.09 -0.08 -0.06 -0.08 -0.09

890190 103,346 0.37 -1.57 -3.69 -0.08 0.00 -5.06 -1.65 -1.57 -3.77 -5.06

901890 143,422 0.00 -0.25 -0.57 -0.04 -0.02 -0.82 -0.28 -0.27 -0.63 -0.82

Table A4.11 Percentage change in the EU export price to ASEAN (translog specification)

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_D

CK

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 0.24 0.08 0.00 -2.25 0.00 0.08 -2.03 0.08 -2.25 -2.03

210690 0.41 0.08 -0.11 -0.23 -0.01 -0.01 -0.13 0.07 -0.35 -0.14

220820 1.95 1.94 -0.02 -0.01 0.00 1.92 1.94 1.94 -0.03 1.94

220830 1.64 1.60 -0.02 -0.04 -0.01 1.59 1.57 1.60 -0.07 1.56

271019 0.00 -0.37 -0.02 0.00 -0.01 -0.39 -0.37 -0.38 -0.03 -0.38

293399 0.00 -0.04 -0.05 0.00 -0.01 -0.09 -0.04 -0.05 -0.06 -0.05

300210 0.00 -0.01 0.00 -0.02 0.00 -0.01 -0.03 -0.01 -0.02 -0.03

300490 0.00 -0.10 -0.06 -0.17 -0.04 -0.15 -0.27 -0.14 -0.27 -0.31

330499 3.64 3.50 -0.63 -0.13 -0.03 3.15 3.43 3.48 -0.79 3.41

382490 0.39 0.21 -0.66 -0.04 -0.01 -0.36 0.17 0.20 -0.71 0.16

390210 0.00 -0.37 -0.20 -0.02 -0.05 -0.57 -0.39 -0.42 -0.28 -0.44

390950 0.00 -0.45 -0.48 -0.06 -0.01 -0.92 -0.51 -0.47 -0.54 -0.52

392190 0.06 -1.15 -1.72 -0.13 -0.04 -2.77 -1.28 -1.19 -1.88 -1.31

392690 1.43 0.02 -4.05 -0.06 -0.01 -3.18 -0.02 0.02 -4.11 -0.03

401199 0.01 -0.22 -0.29 -0.02 -0.11 -0.50 -0.24 -0.33 -0.42 -0.35

480511 0.00 -0.63 -0.27 -0.39 0.00 -0.89 -1.01 -0.63 -0.66 -1.01

481092 0.00 -0.57 -0.11 -0.12 -0.02 -0.68 -0.69 -0.59 -0.25 -0.70

710231 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

720449 0.00 0.00 -0.01 -0.03 0.00 -0.01 -0.03 0.00 -0.03 -0.03

730410 0.00 -1.55 -5.30 -0.01 -0.04 -6.55 -1.56 -1.59 -5.35 -1.60

730799 0.66 0.01 -1.13 -0.11 -0.02 -0.92 -0.07 0.00 -1.24 -0.09

732690 0.00 -0.58 -1.49 -0.04 -0.01 -2.04 -0.62 -0.59 -1.55 -0.64

760611 3.88 2.96 -2.87 -2.95 -0.05 1.50 1.46 2.95 -5.45 1.45

760612 1.41 0.15 -0.90 -1.28 -0.03 -0.41 -0.65 0.13 -2.15 -0.66

840999 0.02 -0.05 -0.21 -0.02 0.00 -0.25 -0.07 -0.05 -0.23 -0.07

188

Product

DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

841112 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841199 0.00 0.00 -0.06 0.00 0.00 -0.06 0.00 0.00 -0.06 -0.01

841480 0.00 -0.41 -0.97 -0.04 -0.06 -1.36 -0.46 -0.47 -1.06 -0.51

841790 0.00 -0.03 -0.04 0.00 0.00 -0.07 -0.03 -0.03 -0.05 -0.03

841950 0.01 -0.59 -0.39 -0.03 -0.02 -0.97 -0.62 -0.61 -0.44 -0.64

843149 0.11 0.05 -0.19 -0.02 0.00 -0.11 0.03 0.05 -0.21 0.03

844390 0.00 -0.01 -0.03 0.00 0.00 -0.04 -0.01 -0.01 -0.03 -0.01

847180 0.00 -0.03 0.00 0.00 0.00 -0.04 -0.03 -0.03 0.00 -0.03

847330 0.00 -0.01 -0.01 0.00 0.00 -0.02 -0.01 -0.01 -0.01 -0.01

847989 0.00 -0.06 -0.24 0.00 0.00 -0.30 -0.06 -0.06 -0.24 -0.06

847990 0.02 0.01 -0.05 0.00 0.00 -0.03 0.01 0.01 -0.05 0.01

848180 0.01 -0.41 -0.52 -0.03 -0.02 -0.92 -0.44 -0.43 -0.57 -0.46

848210 0.00 -0.12 -0.37 0.00 0.00 -0.49 -0.12 -0.12 -0.38 -0.12

850239 0.01 -0.68 -0.72 0.00 0.00 -1.37 -0.68 -0.68 -0.72 -0.68

851722 0.00 0.00 -1.18 0.00 0.00 -1.18 0.00 0.00 -1.18 0.00

851730 0.50 0.36 -0.01 -0.05 0.00 0.35 0.33 0.36 -0.07 0.33

851750 0.00 -0.12 -0.02 0.00 0.00 -0.13 -0.12 -0.12 -0.02 -0.12

851780 1.26 0.87 -0.07 -0.01 0.00 0.83 0.86 0.87 -0.09 0.87

851790 0.00 -0.02 -0.01 0.00 0.00 -0.02 -0.02 -0.02 -0.01 -0.02

852510 0.03 0.00 -0.02 0.00 0.00 -0.02 0.00 0.00 -0.02 0.00

852520 0.05 -0.02 0.00 0.00 -0.01 -0.02 -0.02 -0.02 -0.01 -0.02

853690 1.22 0.98 -1.38 -0.01 -0.01 0.04 0.97 0.97 -1.41 0.03

853710 0.11 -0.41 -1.32 -0.05 -0.01 -1.66 -0.46 -0.42 -1.37 -1.67

853890 0.02 -0.27 -1.61 -0.03 -0.01 -1.85 -0.29 -0.27 -1.64 -1.86

854129 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854140 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854150 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 0.01 -0.37 -0.52 0.00 0.00 -0.87 -0.37 -0.37 -0.52 -0.87

870322 0.31 -0.42 -10.22 0.00 0.00 -9.93 -0.43 -0.43 -10.22 -9.93

870323 0.86 -0.07 -5.57 -0.01 0.00 -4.84 -0.07 -0.07 -5.58 -4.84

870324 1.52 1.37 -2.72 -0.18 0.00 -0.52 1.24 1.37 -2.87 -0.52

870332 0.61 -5.72 -1.59 -0.15 -0.01 -6.76 -5.82 -5.72 -1.74 -6.76

870829 0.55 -1.44 -5.16 -0.03 0.00 -5.82 -1.47 -1.45 -5.19 -5.82

870899 0.27 -0.24 -5.46 -0.17 -0.02 -5.42 -0.40 -0.26 -5.60 -5.42

880230 0.00 -0.29 0.00 0.00 0.00 -0.29 -0.29 -0.29 0.00 -0.29

880240 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

880330 0.00 -0.01 -0.01 -0.01 0.00 -0.02 -0.02 -0.01 -0.02 -0.02

890190 0.07 -0.32 -0.75 -0.02 0.00 -1.03 -0.33 -0.32 -0.76 -1.03

901890 0.00 -0.05 -0.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00

189

Table A4.12 Percentage change in the EU export value to ASEAN (large elasticity of supply of exports)

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

110710 70,791 2.37 -9.57 0.00 -92.70 0.00 -9.57 -99.89 -9.57 -92.70 -99.89

210690 260,401 5.47 -7.56 -2.39 -4.90 -0.68 -9.70 -12.19 -8.22 -8.01 -12.86

220820 75,963 26.46 26.22 -0.43 -0.11 -0.10 25.85 26.15 26.13 -0.64 26.07

220830 156,719 23.06 21.90 -0.27 -0.69 -0.23 21.65 21.27 21.67 -1.19 21.05

271019 125,411 0.00 -10.69 -0.46 -0.07 -0.53 -11.20 -10.76 -11.30 -1.06 -11.37

293399 7,014 0.00 -2.83 -1.47 0.00 -1.16 -4.33 -2.83 -4.01 -2.64 -4.01

300210 29,868 0.00 -0.39 -0.02 -0.61 -0.01 -0.42 -1.00 -0.40 -0.64 -1.01

300490 1,085,252 0.00 -3.74 -1.64 -5.08 -3.10 -5.46 -9.07 -7.00 -10.21 -12.54

330499 94,131 57.95 50.61 -13.59 -2.46 -1.49 36.07 47.82 48.92 -19.29 46.01

382490 238,952 4.74 -5.87 -20.92 -1.24 -0.58 -26.62 -7.14 -6.46 -23.23 -7.74

390210 18,836 0.00 -11.28 -5.77 -0.55 -3.57 -17.81 -11.90 -15.33 -10.21 -15.98

390950 73,690 0.00 -17.42 -14.16 -1.49 -0.79 -34.59 -19.26 -18.40 -16.92 -20.27

392190 48,451 0.70 -48.07 -41.24 -2.73 -1.81 -98.78 -51.73 -50.51 -47.27 -54.20

392690 156,801 18.52 -48.21 -100.00 -1.01 -0.43 -100.00 -49.92 -48.95 -100.00 -50.67

401199 3,467 0.03 -8.01 -4.79 -0.32 -4.30 -12.93 -8.34 -12.43 -9.50 -12.76

480511 23,311 0.00 -25.71 -7.04 -10.37 0.00 -35.37 -39.80 -25.71 -18.61 -39.80

481092 29,014 0.00 -24.54 -2.68 -2.85 -1.08 -28.21 -28.43 -26.03 -6.86 -29.97

710231 117,748 0.00 0.00 0.00 0.00 0.00 -0.01 0.00 -0.01 0.00 -0.01

720449 140,447 0.00 -0.01 -0.15 -0.79 -0.02 -0.17 -0.81 -0.03 -0.96 -0.83

730410 62,887 0.00 -82.36 -100.00 -0.16 -1.85 -100.00 -82.64 -85.53 -100.00 -85.81

730799 53,398 7.63 -18.30 -28.11 -2.36 -1.01 -47.27 -20.83 -19.38 -32.19 -21.92

732690 268,545 0.00 -28.33 -40.24 -1.02 -0.76 -73.93 -29.55 -29.24 -42.46 -30.46

760611 32,847 34.74 -31.03 -71.34 -73.98 -2.64 -92.29 -93.92 -32.18 -100.00 -94.87

760612 65,201 12.23 -36.84 -23.12 -34.42 -1.43 -58.33 -67.99 -38.25 -64.31 -69.48

840999 91,534 0.20 -3.30 -6.19 -0.48 -0.16 -9.18 -3.79 -3.46 -6.86 -3.95

841112 37,948 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

841191 122,851 0.00 -0.03 -0.04 0.00 -0.02 -0.07 -0.03 -0.05 -0.07 -0.05

841199 172,076 0.00 -0.10 -1.83 -0.09 -0.03 -1.94 -0.19 -0.13 -1.95 -0.22

841480 151,708 0.00 -19.66 -25.53 -1.06 -3.12 -47.82 -20.85 -23.15 -30.37 -24.37

841790 30,729 0.00 -1.16 -1.30 -0.08 -0.18 -2.47 -1.24 -1.34 -1.56 -1.42

841950 85,043 0.11 -20.58 -11.02 -0.75 -1.29 -32.55 -21.40 -21.99 -13.18 -22.81

843149 84,440 0.86 -1.59 -5.10 -0.62 -0.01 -5.93 -2.12 -1.60 -5.75 -2.13

844390 46,849 0.00 -0.66 -0.79 -0.01 0.00 -1.45 -0.66 -0.66 -0.80 -0.66

190

Product


DO

HA

DC

K

JA

PA

N

NZ

AU

S

IND

IA

JA

PA

N_

DC

K

NZ

AU

S_

DC

K

IND

IA_

DC

K

AL

L

AL

L_

DC

K

847180 24,632 0.00 -1.78 -0.10 -0.02 -0.01 -1.88 -1.81 -1.79 -0.14 -1.82

847330 428,442 0.00 -0.65 -0.27 0.00 0.00 -0.91 -0.65 -0.65 -0.27 -0.65

847989 368,597 0.01 -2.28 -7.18 -0.07 -0.09 -9.52 -2.35 -2.37 -7.34 -2.44

847990 191,492 0.22 -0.13 -1.43 -0.02 -0.01 -1.40 -0.15 -0.14 -1.47 -0.16

848180 226,916 0.05 -21.52 -13.51 -0.76 -1.39 -36.40 -22.37 -23.07 -15.83 -23.92

848210 33,606 0.00 -6.77 -10.05 -0.05 -0.05 -17.12 -6.82 -6.82 -10.16 -6.87

850239 260,042 0.04 -37.40 -19.22 -0.02 -0.27 -59.45 -37.43 -37.71 -19.54 -37.74

851722 110 0.00 0.00 -36.40 0.00 0.00 -36.40 0.00 0.00 -36.40 0.00

851730 109,677 4.39 -2.99 -0.34 -1.48 0.00 -3.25 -4.09 -2.99 -1.83 -4.09

851750 240,869 0.00 -6.66 -0.44 -0.01 -0.01 -7.11 -6.67 -6.67 -0.46 -6.68

851780 155,072 10.74 -12.53 -1.77 -0.23 -0.11 -13.59 -12.67 -12.60 -2.12 -12.60

851790 694,925 0.00 -0.86 -0.17 -0.01 -0.01 -1.03 -0.87 -0.87 -0.19 -0.87

852510 36,009 0.31 -1.36 -0.51 -0.12 -0.06 -1.80 -1.46 -1.41 -0.70 -1.41

852520 418,949 0.39 -2.77 -0.10 -0.01 -0.53 -2.86 -2.78 -3.21 -0.65 -3.21

853690 127,203 15.19 2.11 -36.04 -0.32 -0.78 -25.77 1.86 1.49 -37.37 -26.46

853710 167,225 1.34 -23.06 -33.93 -1.19 -0.46 -60.88 -24.43 -23.59 -35.97 -61.50

853890 92,600 0.18 -13.70 -46.38 -0.67 -0.46 -62.70 -14.42 -14.20 -47.77 -63.28

854129 290,506 0.00 -0.03 -0.08 0.00 0.00 -0.12 -0.03 -0.03 -0.08 -0.12

854140 108,016 0.00 -0.01 -0.01 0.00 0.00 -0.02 -0.01 -0.01 -0.01 -0.02

854150 48,108 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854221 395,910 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854229 1,244,054 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854260 281,654 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

854890 10,957 0.07 -17.85 -11.91 -0.04 -0.01 -30.92 -17.89 -17.86 -11.96 -30.93

870322 7,170 2.35 -12.79 -100.00 -0.04 -0.01 -100.00 -12.83 -12.80 -100.00 -100.00

870323 284,341 13.08 -6.07 -100.00 -0.15 -0.02 -100.00 -6.22 -6.09 -100.00 -100.00

870324 90,012 13.42 7.15 -61.45 -3.07 0.00 -44.04 4.35 7.15 -65.26 -44.04

870332 5,663 8.33 -100.00 -28.44 -2.71 -0.29 -100.00 -100.00 -100.00 -31.80 -100.00

870829 33,641 6.66 -55.68 -100.00 -0.57 -0.17 -100.00 -56.61 -55.95 -100.00 -100.00

870899 485,931 3.30 -10.25 -100.00 -2.85 -0.85 -100.00 -13.52 -11.23 -100.00 -100.00

880230 12,568 0.00 -13.32 -0.05 0.00 0.00 -13.37 -13.33 -13.32 -0.05 -13.37

880240 2,299,292 0.00 -0.01 0.00 0.00 0.00 -0.01 -0.01 -0.01 0.00 -0.01

880330 113,076 0.00 -0.28 -0.21 -0.14 -0.13 -0.49 -0.42 -0.41 -0.48 -0.49

890190 103,346 0.94 -17.53 -19.70 -0.38 0.00 -38.43 -17.94 -17.53 -20.12 -38.43

901890 143,422 0.00 -2.03 -2.92 -0.19 -0.24 -4.96 -2.22 -2.27 -3.35 -4.96

191

Appendix 5. Additional tables for Chapter 6

Table A5.1 Regional Aggregation of the Model and Concordance with GTAP 7.1 Regions

GLOBE Region GTAP Code GTAP Name APEC LDC Notes

1 European Union AUT Austria

BEL Belgium

BGR Bulgaria

CYP Cyprus

CZE Czech Republic

DNK Denmark

EST Estonia

FIN Finland

FRA France

DEU Germany

GRC Greece

HUN Hungary

IRL Ireland

ITA Italy

LVA Latvia

LTU Lithuania

LUX Luxembourg

MLT Malta

NLD Netherlands

POL Poland

ROU Romania

PRT Portugal

SVK Slovakia

SVN Slovenia

ESP Spain

SWE Sweden

GBR United Kingdom

2 China CHN China x

3 India IND India

4 Japan JPN Japan x

5 Republic of Korea KOR Korea x

6 Australia and

New Zealand

AUS

NZL

Australia

New Zealand

x

x

7 ASEAN IDN Indonesia x

192


MYS Malaysia x

VNM Vietnam x

XSE Rest of Southeast Asia x

Brunei, Timor Leste

PHL Philippines x

KHM Cambodia x

LAO Lao People's Democratic Republic x

MMR Myanmar x

THA Thailand x

SGP Singapore x

8 NAFTA CAN Canada x

USA United States of America x

MEX Mexico x

9 Russian and other FSU RUS Russian Federation x

UKR Ukraine

BLR Belarus

KAZ Kazakhstan

KGZ Kyrgyzstan

AZE Azerbaijan

ARM Armenia

GEO Georgia

10 Balkans and Turkey ALB Albania

HRV Croatia

XEE Rest of Eastern Europe

Moldova

XER Rest of Europe

Serbia, Montenegro,Bosnia, FYR Mazedonia, small states

TUR Turkey

11 EFTA CHE Switzerland

NOR Norway

XEF Rest of EFTA Iceland, Liechtenstein

12 Rest of Asia PAK Pakistan

XEA Rest of East Asia

LKA Sri Lanka

BGD Bangladesh x

XSA Rest of South Asia x

HKG Hong Kong x

TWN Taiwan x

13 Rest of the World IRN

Iran, Islamic Republic of

193


XWS Rest of Western Asia

Middle East and Arab Countries

XOC Rest of Oceania

NGA Nigeria

ZWE Zimbabwe

BWA Botswana

XSC Rest of South African Customs Union

Lesotho, Namibia, Swaziland

ECU Ecuador

ARG Argentina

BRA Brazil

URY Uruguay

PRY Paraguay

BOL Bolivia

VEN Venezuela

XSM Rest of South America Guyana, Surimam, Falklands

14

Latin American and Caribbean FTAs CRI Costa Rica

GTM Guatemala

NIC Nicaragua

PER Peru x

COL Colombia

PAN Panama

XCA Rest of Central America

Belize, El Salvador, Honduras

XCB Caribbean

15 MED EGY Egypt

MAR Morocco

TUN Tunisia

XNF Rest of North Africa Algeria, Lybia

16 Other EU FTAs ZAF South Africa

CHL Chile x

17 Sub-Saharan Africa LDCs SEN Senegal x

XWF Rest of Western Africa x

(mostly LDCs, exc Ivory Coast and Ghana)

MWI Malawi x

XCF Rest of Central Africa x LDCs, exc Cameroon, Congo

XAC Rest of South Central Africa x Angola, DR Congo

ETH Ethiopia x

TZA Tanzania x

194


MOZ Mozambique x

UGA Uganda x

MUS Mauritius x

MDG Madagascar x

ZMB Zambia x

XEC Rest of Eastern Africa x

(all LDCs, except Kenya and Reunion)

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