What is the ASEAN Free Trade Area?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
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  • Last Modified Date: 16 May 2020
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The Association of Southeast Asian Nations (ASEAN) Free Trade Area is an agreement between a group of Southeast Asian countries to limit trade barriers between member nations. This is designed to promote the free exchange of trade between these nations to strengthen their position on the global market while also attracting the attention of companies that may be interested in foreign direct investment. In addition to the original ASEAN Free Trade Area, ASEAN member nations have also negotiated free trade agreements with neighboring nations like China.

The initial proposal for the ASEAN Free Trade Area was developed in 1992, and in 2003, the agreement was implemented. Ten nations ended up joining the ASEAN Free Trade Area: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Vietnam, the Philippines, Singapore, and Thailand. These member nations agree to limit or remove tariffs and other trade barriers that interfere with trade between the member nations.

Within the ASEAN Free Trade Area, countries are essentially allowed to move goods without paying duties. This facilitates the free flow of trade across borders and has advantages for all member nations. Similar agreements have been established in some other regions of the world, such as the North American Free Trade Agreement (NAFTA). Such agreements promote trade between nations, improving all member economies, and also help nations establish a better footing in the international trade community.

The creation of free trade areas like that developed by ASEAN is sometimes criticized, as member nations are accused of having an unfair advantage. It is cheaper to import goods from member nations and to export goods to member nations, putting nonmembers at a disadvantage because in order to compete, they must drop their product prices. Such agreements have also been criticized on the grounds that they tend to disproportionately benefit specific member nations.

China reached a free trade agreement with ASEAN that was implemented in 2010, and nations like Australia and New Zealand have also expressed interest in developing a better trade relationship with ASEAN member nations. Drafting trade policy can take months or years, and decades to implement, as illustrated by the fact that the ASEAN Free Trade Area was agreed to in 1992 and didn't go into effect until 11 years had passed. Patience on the part of negotiators is important, as there are a number of critical stages where agreements can collapse, undoing previous work and forcing people to start all over again.

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