free trade zone asean obstacles and prospects for vietnam and dispute resolution mechanism between...


Introduction

Regionalism and the multilateral trading system ● RTA’S /FTA’S Are vastly in number, scope and coverage and their

number is still growing. ● It is estimated that more than half of world trade is now conducted

under preferential trade agreements. ● Among the best known are the European Union, the European Free

Trade Association (EFTA), the North American Free Trade Agreement (NAFTA), the Southern Common Market (MERCOSUR), the Association of Southeast Asian Nations (ASEAN), and the Common Market of Eastern and Southern Africa (COMESA).

● From its inception, the GATT — and now the WTO — has allowed member countries to conclude customs unions and free-trade areas, as an exception to the fundamental principle of non-discrimination set in the most-favored-nation clause of Article I.


Background

● ASEAN-China FTA / ASEAN-India FTA World’s largest FTA Market potential - 2.7 billion people Substantial manufacturing activities Customs duties still significant

Presenter

Presentation Notes

By implementing the Common Effective Preferential Tariff, Vietnam can request special privileges from ASEAN/AFTA


Background

● Progress of negotiations Framework Agreement – 4 Nov 2002 Early Harvest Programme – agriculture products Agreement on Trade in Goods – 29 Nov 2004 Dispute Settlement Mechanism Agreement – 29

Nov 2004 Tariff Concessions – effective from 1 July 2005 Tariff free access by 2010 to 2015 Services and investments also to be included in

negotiations (later phases)


Major Principle (Goods) ● Purpose of a RTA should:

To facilitate trade between the constituent countries

Not to raise barriers to the trade of other WTO members not parties to the RTA (GATT Article XXIV).

● Note: Preferential trade arrangements on goods between developing-country members are regulated by an “Enabling clause” dating from 1979 (Uruguay Round).


For Services

• Non-reciprocal preferential agreements involving selected developing and developed countries require WTO members to seek a waiver from WTO rules. (GATS Article V.)

• Best known examples: The US-Caribbean Basin Economic Recovery Act; The Cotonou Agreement signed by the EC; And the ACP countries to replace the Lomé Convention


Qualifying for Tariffs Preferences

● To determine Customs Duty Rate Tariff Classification (what is the tariff code?) Country of Origin determined by Rules of Origin

Different ROOs for different purposes Types of rates:

Normal rate MFN rate FTA rate


Trade in Goods

● Two categories of goods Normal Track (“NT”) Goods

“Appendix 1”-List Sensitive Track (“ST”) Goods

Sensitive List High Sensitive List (no commitments)


Normal Track Goods

● All goods except ST Goods ● Tariff reductions commencing 1 July 2004 ● Tariffs rates to be reduced to 0%

For ASEAN 6 and China – by 2010 For Cambodia, Lao PDR, Myanmar, Vietnam (“CLMV”) – by

2015 ● NB: Tariff rates for “Appendix 1-Goods”: tariffs to be

eliminated by: 2012 for ASEAN 6 / China 2018 for CLMV


NT Tariff Overview Vietnam

X = Applied MFN Tariff

Rate

ACFTA Preferential Tariff Rate (Not later than 1 January)

2005 - 2006 2007 2008 2009 2011 2013 2015

X > 60%

60

50

40

30

25

15

10

0

45% < X < 60%

40

35

35

30

25

15

10

0

35% < X < 45%

35

30

30

25

20

15

5

0

30% < X < 35%

30

25

25

20

17

10

5

0

25% < X < 30%

25

20

20

15

15

10

5

0

20% < X < 25%

20

20

15

15

15

10

0-5

0

15% < X < 20%

15

15

10

10

10

5

0-5

0

10% < X < 15%

10

10

10

10

8

5

0-5

0

7% < X < 10%

7

7

7

7

5

5

0-5

0

5% < X < 7%

5

5

5

5

5

5

0-5

0

X < 5%

Standstill 0


Sensitive Track Goods

● Sub-classified in Sensitive List & High Sensitive List

● Exempted from tariff concessions ● MFN rate applies ● Sensitive List was to be review by 2008 ● No agreement on tariff reduction of High

Sensitive List Goods


Sensitive Track Goods (cont’d)

● ASEAN 6, China up to 400 tariff lines at HS 6-digit level not exceeding 10% of total import value based on 2001 statistic

● CLMV up to 500 tariff lines ● ASEAN: automobiles, electronic devices,

textiles, agriculture products rice ● China: tobacco, cars spare parts, paper

products


Rules of Origin (ROO)

● Wholly obtained rule Includes products harvested, fished, planted etc. from a

particular country ● Minimum content rule

40 % minimum content rule (see next slide) Cumulative rule of origin Not including minimal operations:

Transportation facilitation Packaging Ensuring preservation

● Product specific rules of origin


Rules of Origin (cont’d)

● Direct consignment requirement in order to qualify for tariff reductions: Transit through ACFTA member states allowed Transit through non-member states possible, if:

Geographical reasons / transport requirements Products must not enter non-member state’s trade

or consumption no operation other than unloading or reloading in

non-member state


Rules of Origin (cont’d)

● Certificate of Origin required Form E Exporting country’s authorities responsible for

issuing the Form E PRC: local Entry-Exit Inspection and Quarantine

Bureau


Vietnam in ASEAN

● July 1995: Vietnam entered into the Association of Southeast Asian Nations (ASEAN)

● Conduced to its policy of openness, economic reform and structural adjustment

● By implementing the Common Effective Preferential Tariff, Vietnam can request special privileges from ASEAN/AFTA


Vietnam in ASEAN

● “Vietnam shall have tariffs on 45 % of its Normal Track tariff lines eliminated not later than 1 January 2013”

● “Vietnam shall be not more than 40% of the total number of tariff lines in its Sensitive track or 140 tariff lines at the HS 6-digit level whichever is lower”

● “Vietnam, [ …] shall reduce the applied MFN tariff rates of tariff lines placed in their respective Sensitive Lists to 20 % not later than 1 January 2015. These tariff rates shall be subsequently reduced to 0-5 % not later than 1 January 2020”


After Vietnam’s WTO accession

Other bilateral agreements in effect covering service sector commitments:

● Vietnam’s Most-Favored-Nation treatment/ National Treatment with respect to the sectors telecom, banking, Insurance. ( Commitments differs depending on the single agreement)

● EU’s Market Access Agreement (MAA) ● MAA not in effect anymore since Vietnam’s WTO

accession


Dispute Settlement Agreement

● Only ACFTA parties (i.e. ASEAN member states and China) can be parties

● Not private entities ● Applicable to all ACFTA-related disputes ● Parties to designate liaison offices


Dispute Resolution Agreement

● Consultation Required prior to Arbitral Tribunal Request to be send by complaining party to party

complained against’ liaison office To enter consultation within 30 days (if urgent 20

days) after request 60 days (if urgent 20 days) to settle dispute



● Arbitral Tribunal

30, max. 60 days to appoint three arbitrators Each party to appoint one, jointly appoint Chief

Arbitrator If unable to reach consent, Chief Arbitrator to be

determined by WTO Director-General or President of ICJ

Held in English language



● Final report Objective assessment of the case including an

examination of the facts and the applicability of and conformity with the Framework Agreement

To be released within 120 day, max. 180 days (if urgent 60 days) after composition



● Implementation 30 days (max. 45 days) for arbitral tribunal to

determine time frame for implementation of final report’s recommendations and rulings

Original arbitral tribunal to review implementation consistency



● “Enforcement” Compensation: voluntary, to be consistent with

Framework Agreement Suspension of concessions or benefits Temporary in nature Neither is preferred to full implementation 30 days (max. 45 days) for arbitral tribunal to

determine the appropriate level of suspension of concessions / benefits

Suspension to be in affected sector, other sectors only if such suspension not practicable


Overview Dispute Resolution

120, max. 180 days (if urgent: 60 days) after composition to issue final report

Implementation

Proceeding of Arbitral Tribunal

30, max. 60 days to appoint three arbitrators

60 days to settle dispute (if urgent: 20 days)

Request for Appointment of Arbitral Tribunal

Consultation

max. 30 days (if urgent: 20 days) after request to enter consultation

Request for Consultation from Complaining Party


Overview Dispute Resolution (cont’d)

Enforcement

30, max. 45 days for arbitral tribunal report to determine the appropriate level of suspension of concessions/benefits

20 days to reach mutual agreement on adjustment

Determination by Arbitral Tribunal

Negotiations on compensatory adjustment

30, max 45 days for arbitral tribunal to determine time frame for implementation


THANK YOU FOR YOUR

ATTENTION!

Q & A


DUANE MORRIS VIETNAM LLC

[email protected]

HO CHI MINH CITY OFFICE HANOI OFFICE Saigon Tower Pacific Place 29 Le Duan Street 83B Ly Thuong Ho Chi Minh City Kiet Vietnam Hanoi Vietnam

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