On 27-28 January 1992, Heads of State of the Association of Southeast Asian Nations (ASEAN) met in Singapore for the Fourth ASEAN Summit Meeting, at which they agreed to the establishment of an ASEAN Free Trade Area (AFTA) by the year 2008. This deadline has subsequently been moved forward to the year 2005. The main mechanism for the actualization of AFTA is the Common Effective Preferential Tariff (CEPT) Scheme, which aims to reduce tariffs to 0-5 per cent for 15 product groups (fast track) within 5 to 7 years, and the remainder (normal track) within 10 to 15 years. Since the tariff reductions within AFTA is strictly preferential in nature, an unambiguous objective is to promote intra-regional trade. The importance of intra-ASEAN trade has been heightened following the establishment of the North American Free Trade Area (NAFTA) in 1993, and the European Economic Community in 1992. With markets external to the region becoming more trade-restricting, and given East Asia's preoccupation with its accessibility to the North American market, the region will have to increase intra- ASEAN trade if it is to offset some of these losses (Kumar 1992, p. 74). In light of these developments, it is not surprising that the initial response to the creation of AFTA was nothing short of euphoric.

The initial enthusiasm has begun to wane in recent months, however. Fearing a flood of imports, producers in Thailand and, more recently, in Malaysia have called for greater protection at least in the short term (see Kumar 1992, p. 72). The recent dispute over Malaysia's protection of its petrochemicals industry has escalated to the point that Singapore is now seeking redress through the WTO. Concerns have also been raised by the two most protected countries in ASEAN, Indonesia and the Philippines, who fear that their firms will not be able to compete with the more efficient producers in other ASEAN states (see De Rosa 1993).