ASEAN–China Free Trade Area

The ASEAN–China Free Trade Area (ACFTA) is a free-trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and the People’s Republic of China, was signed at the 6th ASEAN-China Summit in November 2002 and the full establishment of ASEAN-China FTA in January 2010 has provided a strong foundation for the enhancement of ASEAN-China economic relations.

In August 2019, the amendments to the ASEAN-China FTA came into force, simplifying the rules for trade of goods, services, and investments in the ASEAN-China economic zone that is home to over 1.8 billion people.

ACFTA amendments

The ACFTA Upgrading Protocol makes four key changes to the original ASEAN-China Free Trade Agreement signed in November 2002.

Simplifies rules for the trade of goods

This protocol upgrades and simplifies the rules of origin, which governs the origin of commodities and in turn establishes its eligibility for preferential tariff treatments available under the FTA.

Specifically, it now clarifies the multiple ways in which the origin of good is to be decided.

• Firstly, the origin of goods will be deemed according to the country in which the good was wholly produced or obtained.
• Alternatively, if the good was produced in multiple countries, the regional value content (RVC) must be at least 40 percent of the value of the goods and the final process of production must be performed within a country party to the FTA.
• Lastly, a series of Product Specific Rules have been included to clarify the origin of goods for products that had undergone sufficient transformation in the supply chain or experienced a change in tariff classification.

In addition to this, a new section has been added for customs procedures and trade facilitation, which clarifies the operational certification procedures for applying and obtaining preferential tariffs. ‘Form E‘, introduced by the protocol, verifies the eligibility of export products for preferential treatment.

Simplifies rules for the trade of services

The protocol details specific rules for market access for sectors, such as engineering, construction, sporting, healthcare, securities, and tourism services.

The rules are offered in table form in Annexure 2 of the Protocol – which specifies China’s positions towards each ASEAN member country in terms of the limitations on market access and limitations on national treatment. 

Strengthens investment provisions

The amendment adds provisions that explicitly call for member parties to: simplify procedures for investment applications, improve access to investment laws, rules, regulations, and procedures, and utilize existing investment promotion agencies where necessary.

Improves multilateral economic and technical cooperation

Under the amendments, the respective parties are encouraged to undertake deeper economic and technical cooperation on activities that will bring mutual benefit.

Since ACFTA came into force, China’s share of ASEAN’s total merchandise trade increased from eight percent in 2004 to 21 percent in 2018. With its large cumulative population and high growth potential, ASEAN region continues to offer many opportunities for businesses