ASEAN CONCLUDES FTA'S WITH INDIA, AUSTRALIA/NZ

UNCLAS SECTION 01 OF 02 SINGAPORE 000931

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON ASEAN

SUBJECT: ASEAN CONCLUDES FTA'S WITH INDIA, AUSTRALIA/NZ


1. (SBU) Summary: ASEAN member nations concluded this week a
limited Free Trade Agreement (FTA) covering trade in goods with
India and a separate, more comprehensive agreement with Australia
and New Zealand. Both are scheduled to be signed at the Bangkok
ASEAN Summit in December. The agreements add to previously signed
ASEAN trade agreements with China, Korea, and Japan. End Summary.


2. (U) On the margins of the 40th annual meeting of ASEAN Economic
Ministers (AEM) held August 25-29 in Singapore, ASEAN member nations
concluded a joint FTA with Australia and New Zealand, and a limited
trade agreement with India. ASEAN announced on August 28 that
negotiations on both agreements had been concluded, but scheduled
signings for later this year to allow for legal reviews and other
domestic approval processes. ASEAN plans to sign both agreements at
the ASEAN Summit in Bangkok in December and hopes to have investment
pacts with China and Korea ready by that date as well.

Australia/NZ - ASEAN's first comprehensive FTA
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3. (U) After more than three years and 16 rounds of negotiations,
ASEAN concluded a comprehensive FTA with Australia and New Zealand,
the first FTA that ASEAN has pursued that included negotiations on
goods, services and investment simultaneously. The agreement covers
trade in goods, services, investment, financial services,
telecommunications, electronic commerce, movement of natural
persons, intellectual property, competition policy and economic
cooperation. Implementation time frames are staggered, with
Australia and New Zealand typically having the shortest
implementation times and Burma, Cambodia and Laos the longest.


4. (SBU) Agreement was reached after last-minute wrangling over a
number of issues that threatened to delay approval until later in
the year. Martin Harvey, New Zealand's High Commissioner in
Singapore, told Econoff that last minute negotiations focused on
market access for key agricultural exports in Indonesia and the
Philippines. New Zealand is also continuing negotiations on
separate bilateral side agreements on labor and the environment with
Indonesia and the Philippines.


5. (U) ASEAN's trade with Australia and New Zealand hit USD 47.8
billion in 2007, with ASEAN netting a trade surplus of 14.2 billion.
Flows of Australian and New Zealand investment in ASEAN were USD
1.1 billion in 2007.

India FTA limited, services and investment to follow
-------------- --------------


6. (SBU) ASEAN also announced conclusion of a limited trade
agreement with India after six years of negotiations. The agreement
covers only trade in goods, with 489 items excluded from tariff
reduction. Negotiations had focused on reducing India's proposed
list of excluded items down from an initial 1414 products. Ms. Tan
Mey Ling, senior assistant director at Singapore's Ministry of Trade
and Industry, told Econoff the two sides agreed on the 489 figure
nearly two years ago, but negotiations had hung up over tariff
treatment for crude and refined palm oil, coffee, pepper and tea.
ASEAN and India also agreed to launch negotiations on services and
investment as a single undertaking. Negotiations are set to begin
soon with a goal of completion by the end of 2009.


7. (U) India is the 7th largest trading partner for ASEAN countries
collectively and accounts for only two percent of ASEAN's external
trade. However, it is also one of ASEAN's fastest growing markets
with exports growing at an average of 31 percent annually since

2005. ASEAN and India have targeted trade to hit USD 50 billion by
2010, up from the current USD 38 billion.

ASEAN's other regional FTAs
--------------


8. (U) The FTAs concluded with India and Australia/New Zealand join
a network of other FTAs that ASEAN economies have completed with
regional countries, including Korea, Japan and China. At the ASEAN
Economic Ministers (AEM) meetings this week, ASEAN and China
announced progress toward a bilateral investment pact that they
expected would be signed in December. The pact would build on
agreements in trade in goods and services completed in 2004 and 2006
respectively. Korea is also pursuing an investment agreement with
ASEAN that AEM Ministers hoped would be concluded by December as
well. In a joint statement, Japan and AEM Ministers noted the
signing of the ASEAN-Japan Comprehensive Economic Partnership
Agreement in April and said they looked forward to implementation of

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the agreement during 2008. In an August 29 statement, ASEAN
Secretary General Surin Pitsuwan said ASEAN had agreed on a schedule
of discussions for an FTA with the European Union, but called it
"one of the most challenging" FTAs ASEAN had pursued. Press reports
cited Burma's membership in ASEAN as a complicating factor.
HERBOLD