ASEAN CHINA FREE TRADE AREA

The ASEAN China Free Trade Area (ACFTA) is a free trade area among the ten Member States of the Association of Southeast Asian Nations (ASEAN) and the People's Republic of China. The initial Framework Agreement (FA) was signed on 04 November 2002 in Phnom Penh, Cambodia, with the intent of establishing a free trade area among the eleven nations by 2010. The free trade area came into effect on 1 January 2010. The ASEANChina Free Trade Area is the largest free trade area in terms of population and third largest in terms of nominal GDP. Agreement on Trade in Goods Under the ASEAN China Trade in Goods Agreement (ACTIGA), Parties are committed to reduce their tariffs for goods listed under the Normal Track 1 (NT1) from 2005-2010 and Normal Track 2 (NT2) from 2010-2012. China allowed ASEAN Member States, including the Philippines, to have a list of products that were granted flexibility until 2012 (NT2) for 150 tariff lines. For the Philippines and Indonesia however, 400 tariff lines were accorded flexibility. The Sensitive Track under the ACFTA consists of the Sensitive List (SL) and the Highly Sensitive List (HSL). The timeframe for SL requires tariffs to be reduced to 20% in 2012 and shall be subsequently reduced to 0-5% in 2018. For HSL, tariffs will be reduced to 50% in 2015. With these tariff cuts, the average tariff levels under the FTA have declined to 4.5%, compared with the MFN rate of 8.1%. In Chinas case, the overall simple ad valorem average for 2009 under the ACFTA is 2.5%, compared with the 9.7% MFN rate. The implementation of ACTIGA is expected to benefit Parties to the Agreement in terms of fair and equitable/reciprocal market access treatments with each others export commodities.

The Philippines implemented its commitments through the following legal enactments which has allowed traders to enjoy low tariffs when exporting to China (i) Executive Order (E.O.) 487 for the implementation of Normal Track concessions covering the first package (i.e. 2005-2008) to comply with the 01 July 2005 milestone, (ii) E.O. 613 for the second package of Normal Track concessions following the schedule of reduction beginning 01 January 2007 to 31 December 2008 and (iii) E.O. 814 which was signed on 30 June 2009 for the last tranche of tariff reduction concessions. The third package consists of all Normal Track products whose tariff rates will follow the schedule of reduction beginning 01 January 2009 to 31 December 2010/2012 under the ACFTA modality. Agreement on Trade in Services The ASEAN China Trade in Services Agreement (ACTISA) provides for the expansion of trade in services in the region. Under this Agreement, services and services suppliers/providers in the region will enjoy improved market access and national treatment in sectors/subsectors where commitments have been made. The market access commitments of the Parties to the ACTISA are contained in the first package of specific schedule of commitments that are attached to the Agreement. The Agreement provides for liberalization on substantial coverage of sectors/subsectors especially in more than 60 additional subsectors committed by ASEAN Member Countries which are parties to the GATS/WTO. With the Agreement, it is expected that trade in services in the region would expand and grow in scale through the four modes of service delivery, namely: cross-border supply, consumption abroad, commercial presence, and movement of natural persons.

Aside from increased trade, the TIS Agreement is also expected to bring about higher levels of investments in the region, particularly in sectors where commitments have been made, namely: business services such as computer related services, real estate services, market research, management consulting; construction and engineering related services; tourism and travel related services; transport services; educational services; telecommunication services; health-related and

social services; recreational, cultural and sporting services; environmental services; and energy services. The ASEAN-China TIS Agreement was signed in January 2007 in Cebu, Philippines and entered into force on 01 July 2007. ASEAN and China are in the final phase of negotiations on the second package of commitments. Investment Agreement The ASEAN China Investment Agreement is the third of three main agreements concluded under the 2002 ASEAN China Framework Agreement on Comprehensive Economic Co-operation. The conclusion of an Investment Agreement is timely as this provides an enabling environment that will lead to enhanced investment flows between both sides at a time when ASEAN and China are both key emerging economies with strong economic prospects. Chinas investment in ASEAN was a cumulative US$6.1 billion up to the end of 2008, while ASEANs investments into China alone totaled US$5.6 billion in 2008. The ASEAN-China Investment Agreement was signed on 15 August 2009.

Copies of the Agreements and relevant Philippine Executive Orders are available online through the following url links: Framework Agreement on Comprehensive Economic Co-Operation 1. Text of the Agreement http://www.aseansec.org/13196.htm 2. 1st Protocol http://www.aseansec.org/15157.htm Trade in Goods Agreement 3. Text of the Agreement http://www.aseansec.org/16646.htm 4. Schedule of Commitments http://www.aseansec.org/19105.htm (refer to the bottom of the page on the section on Tariff Reduction Schedules) 5. Philippine Executive Orders EO 485 (Early Harvest) www.tariffcommission.gov.ph/eo_485.htm EO 487 (1st Package NT 05-08) www.tariffcommission.gov.ph/eo_487.htm EO 613 (2nd Package NT 07-08) www.tariffcommission.gov.ph/eo_613.htm EO 618 (Implementation of www.tariffcommission.gov.ph/eo_618.htm reciprocal treatment) EO 814 (Last Tranche NT 09-12) www.tariffcommission.gov.ph/eo_814.htm Trade in Services Agreement 6. Text of the Agreement http://www.aseansec.org/documents/acfta/TIS/ASEANCHINA-TIS.pdf 7. Schedule of Commitments http://www.aseansec.org/19105.htm [refer to the section on Schedule of Specific Commitments (First Package)] Investment Agreement http://www.aseansec.org/22974.pdf ASEAN China FTA Business Portal http://www.asean-cn.org/ Provides information on the Agreement (provisions and schedules), as well as updates on activities connected to the FTA.