Negotiations on the establishment of a China-ASEAN (Association of Southeast Asian Nations) Free Trade Area (FTA) are expected to wrap up before the scheduled date of June 30, said a source close to the talks.

The China-ASEAN FTA Negotiation Committee has held dozens of meetings and negotiations are proceeding smoothly, sources said.

The committee has reached a basic consensus on the trade arrangement, he added.

The committee set up three working groups governing rules of origin, trade of goods and trade of services and investment.

Agriculture, information and communication technologies, human resources development, mutual investment and the development of the Mekong River have been identified as priorities for immediate co-operation.

The source said that drawing up rules on the place of origin have taken the most effort as many issues and products should be taken into account, he said.

These issues include the definition of the place of origin, the computation of added value in the place of origin and the definition of the place of origin for sensitive products, he said.

The official believed the China-ASEAN FTA will be launched as scheduled and will help to tap the region's huge potential.

The world's largest FTA, which covers 1.7 billion consumers with a combined gross domestic product of US$2 trillion, is set to start in 2010.

Some ASEAN members had earlier actually been calling for separate free trade agreements with China and China had agreed to begin these negotiations after the China-ASEAN FTA talks are completed in June, the official said.

Singapore Deputy Prime Minister Lee Hsien Loong, who paid a visit to China last week, said Singapore and China will begin free trade agreement talks in November, with few obstacles expected.

Analysts said climate for a FTA was good, helping the talks reach a successful conclusion.

"The technical negotiations are not the biggest block to the FTA, compared to worries about a 'China threat' in some ASEAN member countries," said Zhao Jinping, a researcher with the Development Research Center of the State Council.

There had already been talk of China as a "threat" when the negotiations started, he said.

But facts prove that China's development will bring tremendous immediate and long-term benefits to Asian countries, Zhao said.

China is a huge market for ASEAN countries and the nation has trade deficits with them, he said.

China's imports from ASEAN countries surged by 50 per cent to US$47 billion last year, compared to exports of US$31 billion, increasing by 30 per cent.

Imports continued to increase by 42.5 per cent to US$13.8 billion and exports totaled US$8.1 billion, up 31.9 per cent in the first quarter of this year.

The early harvest program, which is on a fast track, contributed to the increase, Zhao said.

The program was launched January 1 this year and offered preferential tariffs on more than 500 mostly agricultural products.

Thailand became the largest beneficiary, moving early to enjoy the tax reduction since last October under the China-Thailand trade arrangement on vegetables and fruit.

Thailand exported 556 million yuan (US$67.2 million) worth of vegetables and 240 million yuan (US$29 million) worth of fruit to China in the first quarter, increasing by 38 and 80 per cent.

The two categories benefited by 31.48 million yuan (US$3.8 million) and 38.88 million yuan (US$4.7 million) in terms of tax reductions.

Meanwhile, China exported vegetables worth 44.5 million yuan (US$5.38 million) and fruit worth 64.7 million (US$7.8 million).

Malaysia, Indonesia and Singapore had 12 items benefiting from preferential export regulations with increased tax reductions.

The reduced tax reached 156,000 yuan (US$18,800) in January, 1.31 million yuan (US$15,800) in February and 27.98 million yuan (US$3.38 million) in March.

"The preferential amount of it is not that big, but represents the goodwill," Zhao said.

China is also adding that the nation would encourage its companies to invest in ASEAN member states.

The Chinese Government has been successful in establishing development zones to attract investment and training officials from the members of ASEAN last year on related issues, Zhao said.

But Zhao said the establishment of the FTA will be more complex than the setting up of the world's two major free trade zones - the European Union (EU) and the North American Free Trade Agreement (NAFTA).

EU members have similar political systems, levels of economic development and cultural backgrounds, while NAFTA is basically led by the United States.

But Asian countries differ significantly in terms of their social conditions, Zhao explained.

(China Daily May 21, 2004)