The trade of agricultural produce between China and her ASEAN neighbors has benefited from an early-harvest program that was put in place beginning this year.

The success of the tariff-cutting program, which some dubbed as "a trial move," will be conducive to the eventual realization of a free trade area (FTA) between China and the Association of Southeast Asian Nations (ASEAN), potentially creating the world's largest FTA, analysts say.

According to China General Administration of Customs, China imported a total of US$330 million worth of fruits and vegetables from the ASEAN in the first half of the year, reflecting an increase of 38.7 percent year-on-year.

During the same period, China's exports stood at US$270 million, jumping by 33.9 percent.

The sharp growth should be attributed to the launch of the early-harvest program, which is part of the FTA framework agreement signed by China and the ASEAN in 2002, said Fan Ying, a professor at China Foreign Affairs College.

Under the program, which was implemented on January 1, the two sides have cut tariffs on about 600 agricultural imports between 2 and 15 percent, and agreed to scrap these tariffs in 2006.

Thailand has taken the lead among the ASEAN members in initiating this free trade accord as it has phased out all taxes on 188 fruits and vegetables with China starting last October.

This bold move has resulted in great benefits.

The country's exports of fruits and vegetables to China increased more than 30 percent to stand at US$210 million from January to June, accounting for 64 percent of the ASEAN's total exports.

"Judging from the figures, the program is a win-win deal for the two sides," Fan said.

The robust trade increases also benefit consumers of both sides, as they witnessed a fall in prices on the fruit market.

Prices of some tropical fruits imported from Thailand slumped by 50 percent in Beijing, compared with last year.

Also, Chinese pears and apples are being sold at much lower prices in Thailand, sources said.

"Their prices dropped by 40 to 50 percent," said a Chinese retailer who has business in Thailand.

In addition, the program helps eliminate smuggling of fruits and vegetables across the China-ASEAN borders.

With the zero-tariff program in place, smuggling of fruits and vegetables will be impeded, Fan said.

In a larger picture, Fan said, the early-harvest program boosted the confidence for both China and ASEAN in establishing the FTA as scheduled.

China and AESAN are complementary with each other in terms of the trade of fruits and vegetables, Fan said.

ASEAN exports tropical fruits and vegetables to China and imports temperate ones.

"They don't compete with each other," she said. "This is also the reason why the two sides decided to begin the FTA construction by eliminating tariffs on agricultural imports."

The program is successfully fulfilling its role as a trial move, she said.

"The early-harvest success demonstrates that the FTA will also be a win-win deal for both sides," she said, adding a good beginning increases the likelihood of ultimate success.

"It also soothed some earlier worries that China will be the major beneficiary of the agreement," she said.

Fan also believes the experience and lessons we learned from the early-harvest program will help the two sides better carry out the FTA schedule on industrial cooperation and investment facilitation.

The ASEAN nations also pin high hopes on the FTA proceeding, currently represented by the early-harvest program.

Indonesia expects that its exports to China will soar to US$5.8 billion in 2007 from US$2.9 billion in 2003.

China and the ASEAN have agreed to establish a FTA in 2010, the world's largest with a coverage of 1.7 billion consumers and a combined gross domestic product of US$2 trillion.

However, experts cautioned that setbacks will arise in the future, when the two sides begin eliminating and reducing the duties of industrial imports.

"By contrast, agreements will be easier in the agricultural produce market, as the two parties are complementary in agricultural sector," Fan said. "But in some industrial sectors, they compete with each other and thus problems may occur."

In addition, ASEAN members are not at the same development level, Fan said.

"This diversifies their expectations and brings some difficulties in reaching an agreement."

The establishment of the FTA will be more complex than the process of setting up the European Union, whose members have similar political systems, levels of economic development and cultural backgrounds.

China is now active in talks with a number of countries and regions over the establishment of FTA, as the regional co-operation and integration are gaining pace across the globe.

Other possible FTA partners include New Zealand, Australia, Chile, the Gulf Co-operation Council and South Africa.

The China-ASEAN FTA is the only one that has been officially constructed. The others are still under negotiation.

ASEAN is currently China's fifth largest trading partner with a large amount of trade surplus.

(China Daily August 9, 2004)