ASEAN: Regional Trends in Economic Integration, Export ... - USITC

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BOX 7.2 Automotive: Profile of ASEAN Integration The existing production integration in the ASEAN region has largely been driven by the use of the AICO system by foreign, particularly Japanese, automakers and parts producers. The AICO system, which was implemented on November 1, 1996, was included as an element of the automotive Roadmap to promote resource sharing among ASEAN members in order to increase industrial growth and investment, improve manufacturing scale economies, and widen the scope of ASEAN-based industries, and thus achieve greater ASEAN integration. a AICO appears to have been somewhat successful in achieving its goals, at least in the automotive sector. According to the Philippine Institute for Development Studies, “The AICO Scheme has illustrated a successful integration initiative of the ASEAN as it encouraged multinational enterprises particularly those in the electronics and automotive industry to adopt efficient production networks regionwide.” b Within this program, Japanese automakers have been able to consolidate and rationalize production throughout the region. The automotive industry has accounted for the majority of the AICO arrangements, and Thailand, Malaysia, Indonesia, and the Philippines have been the leading beneficiaries of this system, with Toyota being one of the primary movers and beneficiaries of this effort. As an example of how the AICO system functions, Toyota was able to establish a production system whereby components from Thailand, Malaysia, and Indonesia were exported to the Philippines for assembly of certain motor vehicles (e.g., the Toyota Camry and Corolla). In return, Thailand, Malaysia, and Indonesia were obliged to import certain motor vehicle components from the Philippines for the assembly of designated motor vehicles (e.g., the Kijang and Soluna) in their respective countries. c In this way, Toyota was able to concentrate the production of components in individual countries and achieve the economies of scale necessary to produce cost-effectively. Mitsubishi, Honda, and Nissan used a similar approach in the ASEAN region to concentrate production of certain components in specified countries, which were then shipped to an ASEAN region vehicle assembly site. Denso (Japan), one of the world’s leading motor vehicle parts manufacturers, was also able to use this system for production of a wide range of components, with shipments of parts largely traded among the same four countries. The program came with certain limitations, however. Governments were concerned with balancing trade within the industry, which contributed to the obligations to purchase parts. Moreover, any revisions to the production and trading arrangements required approval by the parties to the agreement. d Additionally, each ASEAN member country applied its own methodology to the approval process, with no standardization across the region. e Industry representatives generally indicated that the AICO system is no longer as important, since duties among the ASEAN-6 were eliminated as of January 1, 2010. As a result, the industry is freed from the paperwork and government approval process that were required under AICO to benefit from the duty preferences. One U.S. automaker indicated that under AICO the firm benefited from a 5 percent preferential duty rate for its automotive products traded within ASEAN, but it no longer participates in the program since duties have been eliminated. f Similarly, a trade group stated that the AICO is now meaningless because it only provided duty exemptions, and duties are now very low. g New applications for AICO arrangements are reportedly on hold, although the program is still in effect for the ASEAN- 4 countries that have yet to fully eliminate their duties. h Some automakers still use the program, however, as it can be especially helpful in Vietnam. i a Thailand in the 2000’s, “Industry on the Move,” n.d., 287. b Aldaba and Yap, Investment and Capital Flows, January 2009, 31. c Republic of the Philippines, Tariff Commission, Executive Order No. 215, February 15, 2000. d Industry official, interview by USITC staff, Bangkok, March 16, 2010. e Lau, “Distinguishing Fiction from Reality,” 2006, 471. f Industry official, interview by USITC staff, Bangkok, March 15, 2010. g Association official, interview by USITC staff, Singapore, March 4, 2010. h Association official, interview by USITC staff, Kuala Lumpur, March 12, 2010. i Government official, interview by USITC staff, Jakarta, March 1, 2010. 7-8
Several other challenges to full integration also remain. Two difficult issues are the harmonization of automotive standards and regulations and the elimination of government policies that protect local industry, both of which are goals of the Roadmap. Moreover, although the ASEAN integration movement is creating conditions to foster greater cooperation among members, robust intraregional competition continues. As a result, the automotive industry is a particularly difficult sector in which to build consensus because individual countries (e.g., Malaysia, Indonesia, and Thailand) want to be the regional hub for the industry. 39 One association representative indicated that the region is trying “its level best” to integrate the industry, but that this process will take time. 40 Standards/conformance The lack of common automotive standards in the region weakens the industry’s ability to integrate and compete effectively and is one of the Roadmap goals still under discussion. Because parts and vehicles must be manufactured to specific country standards rather than for a larger regional market, parts suppliers lose the benefits of economies of scale to lower costs. The harmonization of automotive environmental and safety standards throughout the region is reportedly moving slowly. Each ASEAN member country currently has its own standards, but the 10 countries are working on adopting a common set of standards for the automotive industry, using the UNECE 52 (1958) as a baseline 41 and Euro 4 standards for emissions by 2012. The ASEAN Coordinating Committee on Standards and Quality (ACCSQ), which is instrumental to the regional effort to harmonize automotive standards, reportedly talks regularly with the private sector about automotive standards. Within ACCSQ, the Automotive Product Working Group (APWG) meets three times a year to discuss harmonization efforts, the last time in January 2010. 42 For autos and electronics, the general strategy is to first conclude a mutual recognition agreement (MRA), 43 and then to work on regulatory harmonization. With respect to motor vehicles and parts, ASEAN leaders have agreed to adopt an MRA based on the 1958 UNECE agreement, which could be signed by 2011. There is reportedly some international pressure (especially from the United States) to adopt the 1998 UNECE agreement which includes the option of self-declaration, 44 instead of the 1958 standard. This difference in approach has contributed to delays in progress toward harmonization in the automotive sector. 39 Association official, interview by USITC staff, Singapore, March 4, 2010; Borhan, “Indonesia to Boost Automotive Industry,” International Enterprise Singapore, April 16, 2010. 40 Industry official, interview by USITC staff, Kuala Lumpur, March 12, 2010. 41 The UNECE 52 standards come out of the World Forum for Harmonization of Vehicle Regulations (Working Party 29). WP.29 is a permanent working party of the United Nations that functions as a global forum allowing open discussions on motor vehicle regulations among UN member countries and any regional economic integration organizations set up by country members of the United Nations. Malaysia and Thailand have already acceded to the 1958 agreement. World Forum for Harmonization of Vehicle Regulations (WP.29) Web site, http://www.unece.org/trans/main/welcwp29.htm?expandable=99. 42 U.S. Chamber of Commerce, written submission to the USITC, March 12, 2010, 12. 43 Mutual recognition agreements would allow companies to test their products once at a designated testing center, after which the products would be certified as meeting or exceeding the mutually agreed upon standards and would not require in-country testing. Malaysia is reportedly drafting the MRA as the first step in technical harmonization. Government official, interview by USITC staff, Jakarta, March 1, 2010. 44 One automaker feels that the ASEAN market is weak and not yet ready for self-certification, a process that allows a firm to self-certify that its products meet all necessary standards and requirements stipulated by the foreign market. Industry official, interview by USITC staff, Bangkok, March 15, 2010. 7-9
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United States International Trade C
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U.S. International Trade Commission
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Abstract This report describes tren
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CONTENTS―Continued Chapter 5 Wood
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CONTENTS―Continued Tables—Conti
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Acronyms 3PL ACCSQ ACDD ACE ACIA AD
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LPI MDF MFN MOU MRA MTCC NAFTA NAP
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Executive Summary The Association o
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Infrastructure and the legal framew
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Despite tariff reductions, the regi
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CHAPTER 1 Introduction Purpose, Sco
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Participating countries also gain a
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TABLE 1.2 Export Competitiveness Fa
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transactions, reinvested earnings,
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Bibliography Acoca, Brigitte. Empow
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CHAPTER 2 ASEAN and Selected Region
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BOX 2.1 Timeline of important miles
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BOX 2.2 AEC Blueprint: Goals and me
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BOX 2.3 ASEAN-wide free trade agree
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progress has been only achieved in
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BOX 2.4 What is ATIGA? ATIGA builds
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TABLE 2.2 Intra-ASEAN imports and e
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TABLE 2.4 Total imports, exports, a
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China is often viewed as a major co
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cases of dispute, but does not prov
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TABLE 2.6 Minimum permitted equity
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TABLE 2.8 Ease of trading across bo
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it maximally useful, such as the ab
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TABLE 2.9 ASEAN in the World Bank
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foreign ownership of express delive
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population that regularly uses the
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Bibliography Acoca, Brigitte. Empow
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ASEAN Economic Ministers. “Joint
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Malaysian Institute of Economic Res
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CHAPTER 3 Electronics: Computer Com
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competition between ASEAN countries
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Regional Integration, Export Compet
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Supporting industries Another impor
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The AEF is unique within the region
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TABLE 3.3 Computer components: ASEA
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joint R&D. 71 These advantages of l
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order to compete for investment (bo
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efficient service to tenants. Despi
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Bibliography Asian Productivity Org
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World Trade Organization (WTO). Inf
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Project to stimulate intra-ASEAN pr
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TABLE 4.2 Certain cotton woven fabr
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includes the production of cotton y
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BOX 4.1 Cotton woven apparel: Profi
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national government source stated t
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strengthen supplier relationships.
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Indonesia has limited potential as
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investment, 67 with much of the inv
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Bibliography Association of Southea
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CHAPTER 5 Wood-based Products: Hard
Page 115 and 116: some cases, on the export of sawnwo
Page 117 and 118: TABLE 5.1 Hardwood plywood and floo
Page 119 and 120: industry are limited, particularly
Page 121 and 122: important factors continue to hampe
Page 123 and 124: TABLE 5.3 Major intergovernmental p
Page 125 and 126: Export Competitiveness In 2008, ASE
Page 127 and 128: TABLE 5.6 Hardwood plywood and floo
Page 129 and 130: FDI in hardwood plywood and floorin
Page 131 and 132: Trade across land routes has been a
Page 133 and 134: Azarcon, Chulia J. “Comparative T
Page 135 and 136: Malaysia Timber Industry Board (MTI
Page 137 and 138: CHAPTER 6 Healthcare: Healthcare Se
Page 139 and 140: In recent years, the traditional in
Page 141 and 142: services industry by developing the
Page 143 and 144: Only a few countries export large v
Page 145 and 146: growing populations, and increasing
Page 147 and 148: has a healthcare MOU with Cambodia.
Page 149 and 150: BOX 6.1 Healthcare services: Profil
Page 151 and 152: competition for foreign patients in
Page 153 and 154: Singaporean provider provides train
Page 155 and 156: Giusti, Daniele, Bart Criel, and Xa
Page 157: Socio-economic and Environmental Re
Page 160 and 161: Within the broad priority sector, t
Page 162 and 163: Japanese automakers. Their supplier
Page 164 and 165: suppliers must be able to meet QCD
Page 168 and 169: Thailand is considered to be the mo
Page 170 and 171: Despite the continued implementatio
Page 172 and 173: TABLE 7.2 Certain motor vehicle par
Page 174 and 175: Inbound Investment The investment e
Page 176 and 177: Trade Facilitation The timely movem
Page 178 and 179: Bibliography Aldaba, Rafaelita M.
Page 180 and 181: Thailand in the 2000’s. “Indust
Page 182 and 183: (2) the development of ASEAN cooper
Page 184 and 185: productive in climates further from
Page 186 and 187: ASEAN members Thailand and the Phil
Page 188 and 189: Tariff, import tariffs on palm oil
Page 190 and 191: BOX 8.1 Palm oil: Profile of ASEAN
Page 192 and 193: chain, from plantations to retailer
Page 194 and 195: TABLE 8.6 Palm oil: Intra-ASEAN inv
Page 196 and 197: Brunei Burma Cambodia Indonesia Lao
Page 198 and 199: Hickman, Martin. “Online Protest
Page 201: APPENDIX A USTR Request Letter
Page 204 and 205: A-4
Page 207 and 208: E Federal Register /Vol. 74, No. 23
Page 209: APPENDIX C Calendar of Hearing Part
Page 213: APPENDIX D Positions of Interested
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Mr. Aquino noted that the Philippin
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FTA (AANZFTA), Australian and New Z
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cumbersome rules of origin, customs
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APPENDIX E Country Profiles
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BURMA ECONOMIC PROFILE Economic Ind
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INDONESIA ECONOMIC PROFILE Economic
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MALAYSIA ECONOMIC PROFILE Economic
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SINGAPORE ECONOMIC PROFILE Economic
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VIETNAM ECONOMIC PROFILE Economic I
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TABLE F.1 Agro-based products: Prio
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TABLE F.3 Electronics: Priority sec
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TABLE F.4 Healthcare: Priority sect
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TABLE F.5 Textiles and apparel: Pri
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