NEAT Working Group on East Asian Trade andInvestment Facilitation

Report(Draft)

Beijing, China
25 June 2010

Introduction
NEAT Working Group Meeting on East Asian Trade and Investment Facilitation (TIF)
was held in Beijing, China on 25 June 2010. NEAT members and experts from theASEAN + 3 countries and the ASEAN Secretariat took part in this meeting. There
were an opening session, three panel discussions and a wrap-up session.
Amb. Zhao Jinjun, President of China Foreign Affairs University, and Prof. Huang
Weiping from Renmin University of China, delivered keynote speeches at theOpening Session. The participants had candid discussions on three panel topics: 1)
East Asian Trade and Investment Facilitation in World Economic Recovery:
Opportunities; 2) East Asian Trade and Investment Facilitation in World Economic
Recovery: Challenges and Obstacles; and 3) Policy Recommendations to Promote
East Asian Trade and Investment Facilitation in Post-Crisis Era. Professor Qin Yaqing,Country Coordinator for NEAT China and Executive Vice President of China Foreign
Affairs University, wrapped up the meeting.
I. TIF Cooperation in East Asia: Latest Developments and Achievements
The global financial crisis has been reshaping the international economic order; EastAsia has thus become a region on the rise in the world economic structure and theglobal economic governance. Trade and investment facilitation (TIF) is a significant
aspect of economic cooperation. For East Asia, TIF cooperation can help reduce
regional trade inefficiency, remove market access barriers, expand intra-regional
demands, and solidify the foundation for East Asian economic development. It is also
an effective way for East Asian countries to get better adapted to the new externaleconomic and trade environment in the post-crisis era.
TIF cooperation in East Asia has great potential. At present, all economies in theregion have participated positively in various TIF cooperative mechanisms.
1. TIF cooperation under APEC
Since the issuance of APEC Economic Leaders' Declaration of Common Resolve (theBogor Declaration), APEC members have made remarkable achievements in TIF
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cooperation, especially in customs procedures, standardization and conformance,business mobility and e-commerce through the implementation of the two APEC's
Trade Facilitation Action Plans (TFAP I & II), which led to a reduction in tradetransaction costs by 5% between 2002 and 2006 and additional 5% between 2007 and2010. In addition, APEC has implemented an ambitious APEC's Investment
Facilitation Action Plan（IFAP）, contributing to a more transparent, stable andefficient trade and investment environment with comparatively lower transaction costin the Asia Pacific region.
2. TIF cooperation under AFTA
In an effort to achieve its goal of building the ASEAN Community by 2015, ASEAN
members have conducted TIF cooperation in an orderly manner through sucharrangements as ASEAN Customs Valuation Guide and Single Window Agreement.
In trade facilitation, after seven years of extraordinary efforts, ASEAN Customs has
been able to reduce time required for Customs clearance from several days to about
two hours, on average. The Green Lane system provides speedy customs clearance for
CEPT goods. Similar initiatives have also been adopted by several ASEAN MemberCountries such as the Gold Card Program in Indonesia, Super Green Lane in thePhilippines and Single Window in Singapore.1
In investment facilitation, since the signing of ASEAN Investment Area Framework
Agreement in October 1998, ASEAN members have been making constant efforts tointegrate their regional market so as to build a unified, transparent and free “singleinvestment area”. For instance, ASEAN Investment Area Framework Agreement has
been activated, which aims at removing intra-regional investment impediments
through the implementation of an investment liberalization plan so that ASEAN
investors are able to invest freely in all fields by 2010 and non-ASEAN investors will
be able to do so by 2020.

1 ASEAN Secretariat.Trade Facilitation in ASEAN http://www.aseansec.org/pdf/BrosurTradeFacility.pdf

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3. TIF cooperation under GMS
Since the Eighth Ministerial Conference on Sub-regional Cooperation of ASEAN inOctober 1998, GMS has made notable progress in FTA cooperation, as exemplified
by the Ten-Year Strategic Framework for the GMS Program formulated in 2001,
GMS Cross—Border Transport Agreement in 2003, and the Strategic Framework forAction on Trade Facilitation and Investment in GMS in 2005. The last was formulatedby the governments of China, Cambodia, Laos, Myanmar, Thailand and Vietnam
together with Asian Development Bank for a five-year period of time and defined
four priority fields for cooperation including customs regime, quarantine measures,
trade logistics, and business mobility. These agreements and strategic frameworks
serve as guidelines for trade and investment facilitation cooperation in GMS,
coordinated and concerted actions among its members and capacity-building for its
comparatively less developed members.
4. TIF cooperation among China, Japan and ROK
In recent years, remarkable progress has been made in TIF cooperation among China,
Japan and ROK. With the approval of the Action Plan to Improve Business
Environment in December 2008, the CJK trilateral investment agreement is to beconcluded after several rounds of negotiations. In early May of 2010, the first roundof the joint study on the trilateral FTA by government officials, business andacademic participants from China, Japan and ROK was formally launched. "Outlookfor 2020" issued in the third meeting of leaders of China, Japan and ROK sets down
guiding principles for trilateral cooperation for the following decade, and specificallystipulates their cooperation in harmonizing standards and removing technical barriers
for trade. In addition, a permanent secretariat will soon be established to
institutionalize the trilateral cooperation.
5. TIF cooperation under East Asian bilateral FTAs
Most bilateral FTAs( including ASEAN+1 FTAs) in East Asia contain provisions
related to TIF cooperation. Take China-ASEAN FTA for instance, the Framework
Agreement on Comprehensive Economic Cooperation between ASEAN and China3

signed in November 2002 requires establishing effective trade and investment
facilitation measures, including, but not limited to, simplification of customs
procedures and development of mutual recognition arrangements, and facilitating
trade in goods and services, and investment through standards and conformity
assessment, technical and other non-tariff trade barriers removal, customs
co-operation, and capacity building.
The above-mentioned TIF cooperative mechanisms are mutually enhancing andcomplementary. They upgraded TIF cooperation level in the region, and laid a solid
foundation for further TIF cooperation in East Asia in the post-crisis era.
II. Future TIF Cooperation in East Asia: Obstacles and Challenges
In a nutshell, TIF cooperation in East Asia faces both hardware challenges asrepresented by its weak infrastructure, and software challenges in its institutionalconstruction.
1. Poor infrastructure and hardware insufficiency for furthering TIF cooperationin East Asia
Infrastructure is a key factor for TIF cooperation. However, some countries in East
Asia have poor infrastructure facilities and inadequate investment in transportation,communication, quarantine and customs clearance, which make it hard for thesecountries to meet the needs of soaring trade and FDI in this region, seriously hinder
free flow of goods and capital, and pose obstacles to continued TIF cooperation.
2. Disparity in development levels and different perceptions and capability in
TIF cooperation
East Asian countries are at different stages of economic and institutional development,
and consequently, they have different perceptions towards TIF. Such differences
hobble further and deeper TIF cooperation in the region.
A country’s perception towards TIF is directly related to its economic development
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level; the more developed economies with higher per capita GDP and greater ability
to conduct foreign trade and overseas investment, usually, have more positive
perceptions toward TIF cooperation. Due to large disparities in development levels,
East Asian countries have different perceptions and capability in TIF cooperation.
Singapore, Malaysia and Japan have better TIF performance, and are more proactive
and capable in promoting and implementing TIF cooperation. The less developed
countries in East Asia with lower TIF levels have less dynamism and capability topromote and to implement TIF cooperation. Such circumstances not only constrain
their foreign trade and FDI inflows, but also impede further development ofintra-regional trade and investment in East Asia, exerting negative impact on thesustainable development of the region as a whole.
3. High cost and affordability of less developed countries
Reform of customs authorities is vital to the success of TIF cooperation. But to mostdeveloping countries in East Asia, especially the comparatively less developed ones,relevant reforms like modernization of customs clearance, setup, maintenance andupgrading of EDI, and connection of networks of government departments, customs
and enterprises, all involve high costs that are not affordable for them.
In addition, TIF cooperation is different from trade and investment liberalization inthat TIF requires constantly improving the administrative capabilities of thegovernment and quality of its human resources. TIF calls for a more transparent,
convenient and efficient trade and investment management system. It even involves
revision of domestic laws and reform of economic systems, and need greater
coordination and collaboration among countries. To East Asian countries that havevery different political and social systems, especially to the comparatively lessdeveloped ones with their TIF at their initial stage, these are all arduous tasks which
can not be accomplished in a short time span.
4. Complex investment agreements and domestic institutions
The network of international investment agreements (IIAs) has expanded toencompass more than 5,700 different agreements, with almost every country in the5world being part to at least one of the bilateral investment treaties, double taxation
treaties and other international agreements with investment provisions, such as free
trade agreements and economic cooperation agreements that make up this system.1
The universe of IIAs has not only grown in numbers, but also in complexity；
agreements increasingly overlap and multifaceted. Besides, countries in East Asia
have unaligned national laws，procedures，rules and regulations for investment. Sucha complex system of agreements and domestic institutions lacks coordination andunification. Therefore, it is an urgent task for East Asia to coordinate and harmonize
international investment policies and to make them more consistent with one another.
5. Difficult quantitative assessment of TIF cost-benefit
TIF is difficult to be assessed in a quantitative manner in terms of its cost-benefit.
Without persuading cost-benefit analysis, policy-makers in some countries might be
reluctant to invest too much to improve their TIF performance and to step up TIF
cooperation. Difficulties and problems loom ahead as disparities in their developmentlevels, lagging infrastructure levels, poor management, and inconsistent policies andlegislations all need to be addressed.
III. A Framework for East Asian Trade and Investment Facilitation Cooperation
1. Objectives
East Asian cooperation in trade and investment facilitation should aim at narrowing
the development gap, sustaining economic development and promoting commonprosperity of the people in the region. Specific goals should be as follows:
to ameliorate trade and investment environment in East Asia;
to present and implement a practical action plan with specific trade andinvestment facilitation measures so as to accelerate East Asia economic
integration and East Asia FTA building; andto reduce transaction costs of intra-regional trade.
1

See UNCTAD website at

http://www.unctad.org/Templates/Webflyer.asp?docID=11010&intItemID=2068&lang=1 dated 10 thFebruary 20096

2. Guiding principles
Given different development levels among the Member States, a few guiding
principles should be adhered to in East Asia cooperation in trade and investment
facilitation, which include comprehensiveness, flexibility, transparency, comparability
and inclusiveness.
Comprehensiveness means that the cooperation should include all Member States,
cover all aspects of trade and investment facilitation, and benefit all Member States.
Flexibility means that each Member State decides the width and depth of thecooperation in which it would like to participate according to its own conditions; theMember States are allowed to follow individualized timetable. It is a way both tomeet the high expectations of the Members at advanced stage and to bring along theMembers at initial or medium stages through example-setting and experience-sharing.
Being flexible also means both the facilitation performances of individual Member
States and that of the 10+3 as a whole should be assessed.
Transparency means that the Member States should make prompt publications ofdomestic laws, regulations, trade polities, technical standards and management rules,
so that other Members can have a full and convenient access to relevant information
for monitoring and gaining maximum benefits from the facilitation measures.
Comparability means that the cooperation timetable and facilitation measures should
be practical and quantifiable, so that the outcomes can be assessed quantitatively
through horizontal and vertical comparisons. Quantitative assessments are an
important reference for designing next step action plans.
Inclusiveness means that policy-making for regional trade and investment facilitationcooperation should be participated by the public sector, the private sector and theacademia all together through close cooperation, dialogues and consultations.
3. Approaches
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Multiple approached should be taken in East Asian cooperation in trade andinvestment facilitation, for instance, consensus-based collective action, path-finder
approach, narrowing down the development gap through capacity building,government-business-academia cooperation, and so on.
Two approaches are highlighted in the following, namely, quantitative assessment
mechanism and a steering committee for EATIF.
A quantitative assessment mechanism ensures tangible outcomes of the cooperation,
which includes the following elements:
Key Performance Indicators (KPIs). KPIs should be defined for each priority
area in consultation with successful practice of WB, APEC and GMS, which
will be used in measuring the progress of the action plan.
Regular reporting mechanism. Consultative Working Groups and KPIreporting formats should be set up for the priority areas. The consultative
groups are responsible for updating the Ministers’ Meetings with the latest
progress made in the priority areas by the Member States individually and by
the 10+3 collectively.
Independent experts’ team. An independent experts’ team should be formed
and tasked to make a mid-term assessment of the implementation of theaction plan in late 2013 and early 2014, and ensure the final objective ofreducing transaction cost by 5% to be achieved by 2016 .
It is necessary to establish an EATIF Steering Committee responsible for translating
the agreements of 10+3 Summit and Ministers’ Meeting into a specific action plan,
facilitating communications and resources-sharing among the Member States and theworking groups of the priority areas, monitoring and reviewing the cooperation
process, updating the Economic Ministers’ Meeting and Foreign Ministers’ Meetingwith the latest development, harmonizing individual efforts on TIF and making policy
recommendations.
4. Priority cooperation areas

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Priority should be given to areas that are better-conditioned and easier to achieve
tangible results, for instance, rules of origin, customs procedures, standards andconformance, logistics network, and business mobility. Following actions should betaken:
harmonize the Rules of Origin (ROO) principles of the three 10+1 FTAs; makethem more transparent; bring down transaction and administration costs; avoid“spaghetti effect” as much as possible.

simplify and harmonize customs procedures of countries in the region; makethem more transparent; encourage free flow of goods within the region; improve
efficiency and quality of trade data collection; optimize trade database; provide
the business sector with more accurate, compatible, convenient and timely
information service.

harmonize the Member States’ domestic standards with the internationalstandards; spread the best practice of technical regulation formulation andimplementation; ensure transparency of the Member States’ standards andconformance measures; set up information sharing and consultation mechanisms
to monitor and review the standards and conformance measures.

harmonize the Member States’ rules and regulations on trade logistics; simplify
the formalities for cross-border transport of goods; standardize transportation
technologies; optimize infrastructure facilities and raise speed and efficiency ofregional trade logistics. And regional connectivity in all modes should bepromoted by extending ASEAN Connectivity Master Plan to reach out the Plus
Three countries. So “ASEAN+3 Connectivity Partnership” should be initiated tosupport ASEAN Connectivity Master Plan for this could significantly help
facilitate a greater flow of trade and investment in the region.

strengthenfacilitationcooperation

onvisaapplication

procedure

andstandardization for cross-border business movement; simplify the formalities oftravelling documents inspection and immigration legislature; draw from APEC
Business Travel Card Scheme and simplify cross-border personnel movementwith business purposes such as signing contracts, participating business meetings,negotiating investment; provide visa facilitation; make visa information andapplication documents available on internet.

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5. A Roadmap
A roadmap for East Asian trade and investment facilitation cooperation should be
drafted. Feedbacks and recommendations should be solicited from the public sector,
the private sector and the academia. The roadmap should be examined and finalized
by senior officials’ meeting and submitted to the 10+3 Economic Ministers’ Meeting.
Each Member State then should work out its individual TIF objectives and actionplans accordingly. Consultative Working Groups comprising officials, business
representatives and experts should be established to monitor and assess theimplementation of the action plans in priority areas. The Groups should hold regularmeetings, coordinate with the counterparts of the ASEAN, and submit reports to theMinisters’ Meeting.
Conclusion
East Asia countries have made remarkable achievements in regional trade andinvestment facilitation. In the post-crisis era, it is an apropos choice for East Asia tostrengthen their cooperation in this field as a means to tackle the problems andchallenges of the regional economy. With political will and feasible measures of all
Member States, the cooperation will narrow the development gap across the region,sustain economic growth, and bring practical benefits to peoples in the region.

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