The Association of Southeast Asian Nations (ASEAN) celebrated its 50th anniversary in a ceremony last year in Manila, Philippines.
At 50, this regional Free Trade Agreement (FTA) includes 10 member states (Singapore, Malaysia, Thailand, Philippines, Indonesia, Vietnam, Cambodia, Myanmar, Laos, and Brunei) and a market of about 600 million people, with vibrant and growing economies and strong legal institutions that provide tremendous business opportunities for Wisconsin businesses.1
Ngosong Fonkem, West Virginia University College of Law 2011 (JD, MBA) and Tulane Law School 2012 (LLM), is a senior advisor at Addison-Clifton LLC, Milwaukee, where he assists U.S. and foreign companies with day-to-day compliance with U.S. trade laws and related audits, investigations, intervention, and civil enforcement proceedings, and with conducting business in Asia.
Wisconsin firms are already active in the ASEAN market and trade with this regional trading bloc is positive.2 Although trade relations between Wisconsin and ASEAN are strong, trade margins could grow significantly if Wisconsin firms continue to deepen their ties to the region, thus unlocking and capturing untapped economic opportunities there.
Wisconsin and the ASEAN Markets
Many Wisconsin multinational corporations’ Asia Pacific headquarters are domiciled in ASEAN member countries.3 Many Wisconsin large and Small Medium Enterprises (SME) also have an ASEAN presence, either through business relationships or through exports.
Specifically, in 2012, Wisconsin firms exported approximately $1.14 billion in goods and services to ASEAN countries, a 4 percent market share of all exports to the region.4
In 2012, Wisconsin’s top exports to the region were:
- computers and electronic products,
- food and kindred products,
- agricultural products, and
- transportation equipment.5
Not only do Wisconsin firms benefit from exports to ASEAN, Wisconsin firms’ imports from ASEAN region are an invaluable addition to manufacturing supply chains for Wisconsin-made products.6 In 2016, for example, approximately 6.7 percent of all imports into Wisconsin were sourced from only four of the 10 ASEAN member countries.7
Business Ties Encouraged and Facilitated
Strengthening business ties with ASEAN is not only beneficial to Wisconsin firms, such relationship is also encouraged and facilitated by the U.S. government.
The U.S. has a Free Trade Agreement with Singapore, which in addition to tariffs reduction provisions for trade in goods and services, also contain tax treatment of American nationals employed in Singapore.8
Similarly, the U.S. has concluded Double Tax Treaties with other ASEAN countries like Indonesia, Malaysia, Philippines, Singapore, and Thailand, and has conveyed Most Favored Nation status to Vietnam,9granting it access to U.S. domestic market without any tariffs or quotas restrictions.10
A Base for Further Markets
Due to its strong business ties with ASEAN, Wisconsin firms could also use ASEAN as a base to penetrate further into other Asian markets like Korea, China, and India. The U.S. already has a free trade agreement with South Korea, the United States-South Korea Free Trade Agreement (KORUS).
In situations where no free trade agreement exists between the U.S. and the identified countries, deepening business ties has added benefits, because ASEAN currently has a free trade agreements with a number of their neighboring countries like China and India.
Such agreements for example, contain tariff rates reduction provisions on all traded products between ASEAN and China (97 percent)11 and India (100 percent).12
Wisconsin companies, through their subsidiary in any of the ASEAN countries, can have that subsidiary qualify as an ASEAN company. Accordingly, these companies will benefit from rules of origin duty, saving benefits that allow some percentages of U.S. originating components to be included in product classification calculations prior to duty-free exports either across ASEAN or to China and India.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Addison-Clifton.
1 Wisconsin Economic Development Corporation.
2 State Imports for Wisconsin, U.S. Census Bureau.
4 Kimberly Clark, Bemis Corporation, Plexus, Kohler, Oshkosh Corporation, and Pierce Manufacturing’s Asia Pacific operations are based in an ASEAN country. This data is obtained from each of the listed company’s website.
5 State by State – Asean and Wisconsin Trade, ASEAN Briefing.
6 State Imports for Wisconsin, U.S. Census Bureau.
8 Quick Facts: U.S.-Singapore Free Trade Agreement, Office of the United States Trade Representative; United States-Singapore Free Trade Agreement, naftaclaims.com
9 U.S. Trade Representative Schwab Applauds Trade Bill Signing, Office of the United States Trade Representative.
10 United States Income Tax Treaties - A to Z, IRS.gov. The U.S. has tax treaties with a number of foreign countries. Under these treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries.
11 ASEAN - China Free Trade Agreements, ASEAN.org.
12 ASEAN - India Free Trade Area, ASEAN.org