Petrochemical producers in Southeast Asia have limited legal options to defer or block the implementation of a zero-tariff regime that will take effect next year, as per ICIS.
It was earlier reported that Singapore, Indonesia, Malaysia, the Philippines, Thailand and Brunei are the six members of the Association of South East Nations (ASEAN) that agreed, under a free trade pact to remove import duty for a range of products, including polyolefins, starting 2010. However, petrochem makers from Indonesia and Philippines are hoping that its' implementation will be deferred. Apprehensions that each one could lose market share its member country makes the plastics players cautious of the removal of trade barriers. Polyolefin makers in Indonesia were actively urging for a postponement of the new trade policy, fearing competitive imports from Thailand and Singapore. Since the agreement has already been ratified, Indonesia will find it difficult to renegotiate the policy.
FTA terms allow suspension of tariff concessions by a country only “if it can be determined that increased imports have caused injury or economic damage to local companies. However, this has very rarely been implemented in the past. Even if it implemented now, it would be a temporary measure for a period of 3-5 years.
Seeking antidumping actions from their respective governments is a second option available to petrochemical players wary of the new trade regime. If the industry is worried about a flood of imports they can go in for this option by proving that pricing was unfair and that the local industry suffered material injury. This type of action is possible and can be extended for an indefinite period. This route, however, entails high legal fees and would take a while to enforce. Companies also have to wait for a few months before they can initiate action.
There is a provision in the ASEAN-China FTA for a temporary delay in tariff reduction by reclassifying goods as ‘sensitive’ and ‘highly sensitive’ products. The duty elimination could then be delayed to 1 January 2015. But the problem for Indonesia is that there are limits on the number of ‘sensitive’ and ‘highly sensitive’ products and the deadline for classifying goods was back in 2004. It was also uncertain whether China and other ASEAN countries would allow Indonesia to deviate from the FTA.
According to ICIS, for Indonesia to delay tariff elimination will require some agreement by the other ASEAN members and China [in the case of the China-Asean FTA] otherwise Indonesia will be in breach of its legal obligations.