The Evolving ASEAN Free Trade Area: Widening and Deepening

A recent development in regional trading arrangements has been their tendency to both widen and deepen. This paper examines the impacts of widening, and assesses the progress of deepening in the ASEAN Free Trade Area (AFTA). The widening of AFTA has seen its membership grow from six countries at its inception in 1992 to 10 currently. The new entrants will gain from membership in AFTA, with the main benefits likely to come from improved access to markets in the region, and increased foreign investment flows. This widening has increased AFTA’s diversity and made it more heterogeneous. But it also threatens to fragment AFTA, with the emergence of a two-tier system consisting of a developed and underdeveloped segment. The AFTA-Plus program is designed to deepen regional integration. Apart from harmonizing customs procedures and tariff nomenclature, and fast-tracking a common customs valuation method, progress has been limited. In services and intellectual property rights for instance, the multilateral rather than regional approach would appear to be both more effective and less likely to be subject to distortions. With foreign investment, the preferential access arrangement proposed in the ASEAN Investment Area could distort the investment climate and result in unequal gains to old and new members.