The Low Use by Firms of ASEAN Trade Preferences: Will RCEP Follow the Same Destiny? An Agenda for Rescue to Reform Rules of Origin in the Asian and Pacific Region

Abstract

The Association of Southeast Asian Nations (ASEAN) rules of origin (RoO) evolved from the original inception in early ’90 to the later formulation in the ASEAN Trade in Goods Agreement (ATIGA) in 2009. Even after the completion of ATIGA, RoO reform has remained high in the agenda of ASEAN Economic Community resulting in more than thirty years of efforts to improve RoO. In spite of repeated research findings of low utilization rates of ASEAN trade preferences by firms, the ASEAN negotiating machinery has been unable to address the main cause of such low utilization, i.e., the shortcomings of ASEAN RoO and their cumbersome administration by ASEAN Member States The region has recently embarked in the Regional Comprehensive Economic Partnership (RCEP) that has been branded as a solution to the panoply of proliferating sets of RoO existing in Asia and the Pacific. Yet recent research and findings from firms indicated that RCEP has inherited many of the shortcomings of ASEAN rules of origin. An ASEAN Secretariat study of 2021 shows an average utilization rate of ATIGA trade preferences of 50%. This does not bode well for RCEP, unless action is undertaken. This article argues that it is time that Governments of Asia and the Pacific region act on an overdue reform of rules of origin to create a stable and predictable trade facilitating environment. rules of origin, regional trade agreements, trade preferences, utilization rates, ASEAN regional integration