ASEAN agrees to lower barriers to boost regional trade
Bloc to sign key new agreement in October amid global economic tension
KUALA LUMPUR -- Southeast Asian leaders are pushing to deepen economic integration at a regional summit that began Monday, approving an upgraded trade agreement and endorsing a new long-term vision in their first meeting since Washington announced sweeping tariffs in April.
In an effort to mitigate geopolitical risks, the bloc has just concluded negotiations on an upgraded ASEAN Trade in Goods Agreement (ATIGA), set to be formally signed at the annual October summit. The revised deal aims to lower remaining tariffs and remove non-tariff barriers to improve trade flows among member states.
Malaysian Trade Minister Zafrul Aziz has called ATIGA the "cornerstone" of the bloc's economic integration, with the aim of achieving a free flow of goods. Since the agreement came into force in 2010, average intra-ASEAN tariffs have fallen to below 1% for all members.
"The upgraded version features forward-looking and commercially meaningful provisions to boost regional trade, enhance supply chain resilience, and deepen intra-ASEAN integration," Zafrul said.
But under the current rules of origin framework, products have to meet certain value added levels within the region to qualify for ATIGA preferences. The plans underway aim to lower parts of this threshold, according to officials, though details may change before the agreement is formally signed.
The upgrade also includes standardized electronic exchange of trade documents to streamline cross-border customs clearance. While over 90% of regional goods are already tariff-free, analysts flagged challenges such as outdated customs procedures, inconsistent documentation and complex rules of origin that still hinder regional trade.
Kyohei Yabu of the Japan External Trade Organization's Bangkok office said the revisions are expected to improve rules and advance customs digitalization, long seen as a "practical barrier" to business. "Further digitalization of rules of origin is expected to reduce trade costs within the ASEAN region," he said.
The efforts come as Southeast Asia scrambles to buttress regional trade as U.S. "reciprocal" tariffs -- ranging from 10% on Singapore to 49% on Cambodia -- rattle markets and put pressure on export-driven regional economies like Malaysia, Singapore and Thailand, which now face weaker growth prospects.
Despite renewed calls for deeper regional integration, intra-ASEAN trade has remained largely flat at around 21% of the bloc's total trade for decades, lagging far behind the EU at 60%. In comparison, China accounted for 20% of ASEAN's $3.8 trillion in trade in 2024, while the U.S. made up 12%, according to ASEANstats data.
Amir Fareed Rahim, director of strategy at KRA Group, a Southeast Asian public affairs and political risk consultancy, said that the upgrades to ATIGA are very timely for "strengthening supply chain resilience" amid disruptions and heightened geoeconomic risks.
Separately, leaders on Monday adopted the ASEAN Community Vision 2045, a 20-year plan to transform the bloc into the world's fourth-largest economy. The roadmap prioritizes deeper intra-regional trade and investment, enhanced manufacturing capacity, and greater use of local currencies to boost financial resilience and autonomy.
Speaking at the signing ceremony, Malaysian Prime Minister Anwar Ibrahim said: "Geopolitical tensions, economic fragmentation, climate and technological disruption are testing the bonds between nations."
The vision also aims to position the region as an "integral part of the global supply chain" by streamlining upstream and downstream production, strengthening distribution and logistics networks, and securing access to raw materials. These efforts are intended to boost efficiency and expand the production of value-added goods, it said.
Nazir Razak, chairman of the ASEAN Business Advisory Council, a regional lobby group, and former CEO of Malaysia's CIMB Group, said the bloc must act decisively and implement necessary legislative and regulatory reforms in the face of an uncertain global environment.
"We really need to do more together as a region -- apart from also looking for other regions and all that to collaborate with -- given that the U.S. will not be the business partner it was in the past," he told Nikkei Asia.
According to diplomatic sources, ASEAN leaders also agreed on Monday to formally admit East Timor into the bloc in October. The group granted in-principle approval for its membership in 2022, and East Timor has participated in ASEAN summits as an observer since then while advancing through the accession process. It will become ASEAN's 11th member and the first new addition since Cambodia joined in 1999.
Additional reporting by Ng Chun Kiat in Kuala Lumpur and Kenya Akama in Bangkok.