A woman arranges flowers in front of a sign for the 14th Association of Southeast Asian Nations (ASEAN) Summit in Cha-am, Thailand on February 26

Southeast Asian nations signed a free trade pact with Australia and New Zealand, boosting the regional bloc’s efforts to increase commerce amid the global economic recession.

“Such a move is even more essential in these times of economic difficulties, when interdependence, cooperation, and openness are increasingly crucial to our economies and when paving the way for businesses to reap tangible benefits is vital,” Singapore Trade and Industry Minister Lim Hng Kiang said.

Southeast Asian nations in 2007 agreed to open up their markets further in a bid to create an economic zone modeled after the European Union, without a common currency, by 2015. The group has said it needs to improve its competitiveness as China and India, the world’s two fastest-growing major economies, attract an increasing chunk of global investment.

ASEAN’s trade with Australia and New Zealand was about $50 billion last year, and foreign direct investment by the two countries into the regional bloc totaled more than $1 billion, according to Singapore’s trade ministry.

The agreement, known as the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), is aimed at bringing down barriers to trade as part of efforts to develop what it calls an ASEAN Economic Community. It covers an area with a combined population of 600 million and an estimated GDP of $2.7 trillion.

Barriers ‘coming down’

ASEAN’s agreement with Australia and New Zealand covers trade in goods, investment and services which include financial services and telecommunications. It also comprises of electronic commerce, intellectual property, competition policy and economic cooperation.

“Trade barriers are coming down in the region,” Australian Trade Minister Simon Crean said in a statement. “This is the first trade agreement Australia has signed since the onset of the global financial crisis.”

The ASEAN members are Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.

Increasing trade with Vietnam

Crean said the new tariff arrangements between Australia and Vietnam under AANZFTA would open up new opportunities for Australian exporters.

“Almost 90 percent of tariff lines covering 96 percent of our trade with Vietnam will be tariff-free by 2020 under this agreement,” he said in a press release Friday.

“The 10 percent tariff on Australian milk powder will be eliminated in 2016, the 30 percent tariff on yoghurt will be phased out and the 50 percent tariff on Australian ice cream entering Vietnam will be phased out by 2018,” Crean said.

Two-way trade between Australia and Vietnam has grown an average of 22 percent a year over the last five years, reaching $8 billion in 2007-08.

Australia’s total exports to Vietnam rose 17 percent to $2.3 billion in 2007-08. Vietnam was Australia’s 18th largest export market for goods, with major exports of gold, copper, wheat and aluminum.

Source: TN, Bloomberg