ASEAN agrees to lower barriers to boost regional trade: WEF calls it a 'game changer'

Southeast Asian leaders approved trade and economic reforms to boost regional integration in response to geopolitical tensions and new American tariff hikes threatening the region's export-driven economies.

Decisions were made during the opening of a regional summit in Malaysia on Monday, the first high-level meeting since Washington imposed new high tariffs on ASEAN exports on April 2.

The bloc of 10 members approved an updated version of the ASEAN Trade in Goods Agreement (ATIGA) and adopted an ambitious 20-year economic roadmap known as the ASEAN Community Vision 2045.

New trade agreement to reduce barriers and modernize customs

According to Nikkei Asia, negotiations on the updated ATIGA have been concluded, and the official signing is expected at the ASEAN summit in October. The revised agreement could reduce residual duties and dismantle non-tariff barriers that stifle the 'free movement' of goods across borders.

Malaysian Trade Minister Zafrul Aziz called the agreement a 'cornerstone' of ASEAN's economic integration, stating that the bloc has ambitions for a seamless intra-regional trade environment.

‘The updated version presents forward-looking and commercially significant provisions to boost regional trade, enhance supply chain resilience, and deepen intra-ASEAN integration,’ Zafrul estimated.

90% of goods already cross borders duty-free, but economists say the agreement eliminates outdated customs procedures, inconsistent documentation, and a framework that currently requires products to meet strict local content thresholds to qualify for tariff relief.

Officials wish to relax some of these value-added thresholds, although final details are still under discussion. The agreement also introduces standardized electronic exchange of trade documents, intended to simplify customs clearance and reduce transaction costs.

‘Further digitization should reduce trade costs within the ASEAN region,’ noted Kyohei Yabu of the Japan External Trade Organization from the JETRO office in Bangkok.

The World Economic Forum welcomes the agreement

The World Economic Forum (WEF) described the digital element of the ASEAN agreement as a 'game changer' for the region's economic growth. The Forum specifically referred to DEFA, a framework agreement on the digital economy within the ASEAN economic strategy.

‘DEFA is a strategic roadmap for how our nearly 680 million people can access a digital future that is open, secure, and inclusive,’ said the WEF. DEFA includes initiatives for skills development, digital literacy, and talent mobility.

According to WEF figures, 71% of all venture capital deals in the region in 2023 were related to the digital economy, outperforming the global average of 11%. Annual investments in communication and data services surged from $777 million in 2015 to $4.4 billion in 2024.

The Forum stated that the implementation of DEFA will accelerate this momentum and open doors for women entrepreneurs, rural innovators, and youth-led startups.

Washington's tariffs are affecting Asian markets

The 'reciprocal tariffs' of President Donald Trump's administration in April targeted ASEAN exports. The new duties range from 10% on Singaporean goods to 49% on Cambodian and Laotian products.

Protectionist trade policies have shaken markets across Southeast Asia, especially export-dependent economies like Malaysia, Singapore, and Thailand. Regional leaders are now striving to protect their economies and consumer spending from the fallout while easing internal trade structures.

‘A transition in the geopolitical order is underway, and the global trading system is under additional pressure with the recent imposition of unilateral American tariffs,’ warned Malaysian Prime Minister Anwar Ibrahim in his opening speech at the meeting. ‘Protectionism is on the rise as we witness the erosion of multilateralism.’

Anwar revealed that he had written to Trump, proposing a meeting between the American president and ASEAN leaders to calm tensions. The proposed summit could take place as early as October, although no date or location has been finalized.

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