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Talks on ASEAN+6 trade bloc to kick off in May

Jakarta Post, Indonesia

Talks on ASEAN+6 trade bloc to kick off in May

By Linda Yulisman, The Jakarta Post

31 January 2013

Members of the Association of Southeast Asian Nations (ASEAN) together with the group’s six major trading partners are slated to begin in May the first round of negotiations to form the world’s largest economic bloc by 2015.

“In the first round of talks, ASEAN and free trade agreement [FTA] partners will negotiate modalities and commitments for liberalization, covering the trade in goods, services and investment,” Trade Ministry director general for international trade cooperation Iman Pambagyo said on Wednesday in Jakarta.

As a prelude to the talks, the parties would meet in Bali at the end of February to seek common ground for a platform for negotiations, Iman said.

Three working groups — trade in goods, services and investment — were finalizing the scoping papers and terms of reference, he added.

The new partnership, dubbed the Regional Comprehensive Economic Partnership (RCEP), or “ASEAN+6” trade deal, will establish an integrated market of 16 countries in the Asia-Pacific region, with a population of more than 3 billion and a combined gross domestic product (GDP) of US$17.23 trillion.

It will cover six countries outside ASEAN — Australia, China, India, Japan, South Korea and New Zealand — that have all separately sealed free trade pacts with the 10-member group.

To pave the way for the RCEP talks, ASEAN and India earlier concluded a hard bargained FTA on services and investment before a commemorative summit between the two parties in New Delhi, India, last December.

Iman said that the planned negotiations might place a greater emphasis on the liberalization of the service sector as each party might already place very low import tariffs on merchandise trade by 2018.

To anticipate this, the Trade Ministry would aim this year to include the expansion of the service sector in the government’s middle-term development goals (RPJM), he added.

In past years, Indonesia has witnessed the rising contribution of the service sector to its economy.

Service-related sectors represented 53.13 percent of GDP in 2011, up from 48.20 percent in 2006.

Indonesia is scheduled to ratify the eight packages of the ASEAN Framework Agreement on Services (AFAS) this year, which will further open up the domestic service sectors to regional players.

It will also further liberalize the service sectors until 2015 when the ASEAN economic community is settled, allowing up to 70 percent of foreign equity participation in the country.

Sherry Stephenson, a senior fellow at the Geneva-based International Center for Trade and Sustainable Development, said that the content of service in Indonesia’s exports, which measured service inputs in manufacturing industries, was still low compared to other neighboring nations, at around 20 percent to its gross exports.

As foreign direct investment (FDI) received in Asia shifts from the manufacturing sector to services, Indonesia should be able to cope with this development to compete with other countries. “Indonesia needs to mainstream a trade in services policy into its national agenda,” she said.