The strategic importance of the ASEAN Free Trade Agreement

A core objective of New Zealand trade policy is to broaden and deepen the opportunities available to exporters by removing and reducing barriers to trade and investment, as well as to establish frameworks through which trade and investment linkages can evolve and expand. The ASEAN FTA, by removing trade and investment barriers, therefore advances New Zealand's trade policy objectives with a group of key trading partners.

The ASEAN economies represent a market of more than 566 million people, accounting for more than US$1,400 billion in global trade. They are an increasingly important destination for New Zealand goods, service suppliers and outward investment.

This importance is reflected in the high rate of growth in trade between New Zealand and the ASEAN economies. New Zealand exports to the ASEAN countries have increased 121 percent since the year to June 2000 to around $4.6 billion in the year to June 2008. Over the same period, imports from the ASEAN countries have increased 233 percent to almost $7.0 billion in the year to June 2008.

The elimination of tariffs and other barriers to trade under the ASEAN FTA will open up further opportunities for New Zealand exporters throughout the ASEAN markets. Indeed, as a result of the ASEAN member countries' commitments under the FTA, tariffs will be eliminated on all key products of trade interest in major markets within twelve years. Significant commercial benefits will be provided to exporters through the elimination of tariffs on about 99 percent of New Zealand's exports to priority markets (namely, Indonesia, Malaysia, the Philippines and Viet Nam).

Indonesia, Malaysia, the Philippines and Viet Nam markets were deemed priority markets in negotiations with ASEAN as New Zealand already has high quality and comprehensive FTAs with Singapore, (Singapore-New Zealand Closer Economic Partnership), Brunei and Singapore, (Trans-Pacific-Strategic-Economic-Partnership-Agreement) Thailand, (Thailand-New Zealand Closer Economic Partnership). The Least Developed Country members of ASEAN (Cambodia, Laos and Myanmar), were not accorded the same priority as New Zealand has little to no current trade to these markets and these countries have, since 2001, had duty free and quota free access to the New Zealand market.

Beyond market access for goods, the ASEAN FTA will provide more opportunities, and greater certainty and transparency, for New Zealand service suppliers and investors wishing to operate in the ASEAN markets.

New Zealand's services trade into ASEAN has expanded in recent years, particularly in the sectors of tourism and education. In 2007, almost 87,000 ASEAN tourists visited New Zealand, making it one of New Zealand's larger tourism markets. In the area of education, ASEAN student numbers studying in New Zealand have grown to over 7,800 in 2007. The ASEAN FTA therefore provides a strong base from which to further build services trade, particularly in those services sectors where New Zealand has a rapidly growing commercial interest and relative comparative advantage, as ASEAN economies continue to develop and open further to foreign service providers.

In 2007, New Zealand investment in the ASEAN region totaled a little over $3.76 billion. New Zealand's total investment in the ASEAN region has grown 61% since 2003. Singapore, Malaysia, Thailand and Indonesia are all among New Zealand's top 25 total investment destinations.

Investment from ASEAN member countries in the same period into New Zealand totaled almost $8.22 billion (constituting 3.2% of total foreign investment in New Zealand), with almost $1.64 billion being inward foreign direct investment. Singapore is New Zealand's fourth largest source of total investment, and has a direct investment stock of almost $1.64 billion.

Reflecting this growing investment relationship between New Zealand and the ASEAN economies, the ASEAN FTA will provide greater security for New Zealand investors and investments in these markets, including through the potential for recourse to binding investor‑state arbitration procedures.

The economic cooperation components of the ASEAN FTA constitute an important subset of wider economic cooperation between New Zealand and ASEAN, contributing directly to New Zealand's strategic engagement with the ASEAN region and broader regional integration processes central to New Zealand's future economic prosperity and security.

With the increasing number of preferential trade agreements being concluded internationally, avoiding disadvantage in key export markets relative to competitors from third countries under such agreements is another important reason for New Zealand's pursuit of FTAs. The ASEAN FTA assists in addressing our defensive commercial interests of preserving and enhancing existing levels of competitiveness.

More generally, ASEAN is active in negotiating FTAs with other countries. It has agreements with China, Japan, Republic of Korea, and has recently concluded a goods-only agreement with India. ASEAN is also negotiating with a range of countries, including the EU. Protecting New Zealand exporters' competitive position in ASEAN vis-à-vis these competitors was therefore a key objective for the negotiations.

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