Frequently commentators write
about the “noodle” or “spaghetti” bowl effect of having multiple free trade
agreements (FTAs) operating simultaneously but in inconsistent ways. Usually the difficulties are presented on a
macro level, rather than on a micro level.
Examining particular
products on a cross-FTA basis helps demonstrate the difficulties for exporters
clearly. For example, in the ASEAN Trade in Goods Agreement (ATIGA), most goods
qualify for ASEAN treatment if the good has 40% ASEAN regional value content
(RVC) or the good has been processed to have a change in tariff classification
(CTC) at the 4-digit ASEAN Harmonized Tariff Nomenclature level. In other words, if the good has sufficient
ASEAN origin content or has been processed from a basic form to a more advanced
form, the good will qualify for the zero tariff rate provided by ATIGA. For the
same product in other FTAs, though, different ROOs can apply. For example, the ROOs for paint vary by FTA:
- ATIGA – 40% RVC or CTC at 4 digit level
- ASEAN-China FTA (ACFTA) – 40% RVC
- ASEAN-Korea FTA (AKFTA) – 40% RVC or CTC at 4 digit level
- ASEAN-Australia FTA (AANZFTA)– 40% RVC or CTC at 6 digit level
- ASEAN-India FTA (AIFTA) -- 35% RVC
- ASEAN-Japan Closer Economic Partnership (AJCEP) – 40% RVC
This becomes complicated
when FTAs of individual ASEAN members are considered. Under the US-Singapore
FTA (USSFTA) the paint would have to undergo CTC at the 6 digit level; the RVC
is not considered.
The ROOs for cotton fabric
and apparel are even more convoluted. Textiles
and apparel are politically controversial goods, such that they are subjected
to product-specific ROOs instead of the general ROOs usually applicable (such
as in the case of paint). I examined
this for the Cotton Council International,
the export promotion arm of the National Cotton Council of America.
ATIGA
|
AANZFTA
|
ACFTA
|
AIFTA
|
AJCEP
|
AKFTA
|
||
Fabric
|
RVC 40% or CTC (6) or processing
|
CTC(4) or change from fabric and dyed/printed + 2 more finishing
processes
|
Processing
|
Under negotiation
|
CTC(4) with spun/dyed/printing or no CTC but with dyed/printing
and woven in ASEAN
|
RVC 40% or CTC(2)
|
|
Apparel
|
RVC 40% or CTC(6)/cut+sewn
or processing
|
RVC 40% provided that the good is cut or knit to shape and
assembled
|
Processing
|
Under negotiation
|
CTC(2) and from fabric woven in ASEAN
|
CTC(4) if cut/sewn or RVC
40%
|
Under
ATIGA and ACFTA, processing for fabric means manufactured from yarn or finished
fabrics, and having undergone needle punching / spin bonding / chemical
bonding; weaving or knitting; crocheting or wadding or tufting; or dyeing or
printing and finishing; or impregnation, coating, covering or lamination. Also under ATIGA and ACFTA, processing means cutting
and assembly of parts into a complete article (for apparel and tents) and
incorporating embroidery or embellishment or printing (for madeup articles)
from raw or unbleached fabric or finished fabric.
A survey of other bilateral
and plurilateral FTAs indicates a similar variety of applicable ROOs.
Given all of this,
manufacturers often throw up their hands at the whole thing and don’t use the
FTAs, particularly if the tariff savings are not significant relative to the
work and costs involved.
Although the FTAs of
individual member states are up to those states to work out, ASEAN can help for
its own bilateral FTAs by easing the administration of ROOs (through
self-certification and the ASEAN Single Window) and by allowing for ROO
documentation to be used for multiple ASEAN FTAs (which is currently not the
case). It is important to preserve the
advantages of regional integration, but if using those advantages is too costly
or burdensome for exporters, the efforts are wasted.
