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When the Association of Southeast Asian Nations (ASEAN) was launched in 1967, it was hard for its founders to predict the establishment of a China-ASEAN free trade area (FTA).
That was not because of the ideological chasm, dormant economic links, nor even the territorial disputes of the time. The time was just not ripe for such an economic and trade agreement.
Thirty-eight years on, the world has changed a lot. Globalization and free trade have become irreversible trends. As close neighbors, China and ASEAN cannot afford to ignore the opportunities to cooperate and benefit from regional integration.
Freer trade relations will benefit both. It will allow all concerned to realize economies of scale and improve efficiency.
In the coming days, the two entities will share the first basket of fruit from the free trade area arrangement; they are scheduled to reduce tariffs on industrial goods from July 20, which is part of a bilateral agreement on commodity trade reached in November last year.
The agreement has led to gradually reduced tariffs for more than 7,000 industrial commodities excluding agricultural products, which are already free of tariffs between the two sides.
Thanks to a series of substantial moves to push bilateral trade relations in recent years, China and ASEAN have reached not only tangible trade agreements, but a consensus that political will and pragmatism count despite historical distrust.
In 2002, leaders of the two sides inked the China-ASEAN Framework Agreement on Comprehensive Economic Cooperation in Cambodia, an important step in materializing the call of former Premier Zhu Rongji to establish a FTA in 2000.
In 2003, they expanded the scope of cooperation into the political area, with their leaders signing the declaration to develop a relationship of "strategic partnership."
China and ASEAN countries also reached an understanding on security issues, promising in November 2002 to solve the South China Sea issue in a peaceful manner.
And to display its real desire to encourage free trade between the two entities, China has allowed free-tariff agricultural imports from Thailand, Malaysia and the Philippines, the first batch of ASEAN countries to join the Early Harvest program started early last year. The deal is not mutual, but a one-way goodwill gesture from China.
Given the economic, social and cultural differences between China and ASEAN countries, the free trade area may not proceed without difficulties.
Regarding global trade, the two entities are competitive in some areas.
China is ASEAN's fifth largest trade partner, while the latter is the fourth largest of China. This displays the importance of bilateral trade, but the fact that they are not each other's top export markets suggests a competitive implication. Both are wooing consumers, capital and technology from developed countries.
The rivalry, however, will have to give way to substantial gains in a Sino-ASEAN free trade area.
By 2010, when the free trade area should be completed, it will have a population of 1.7 billion and a gross domestic product totaling US$2.5 trillion. Overall trade volume will amount to US$1.2 trillion.
Both cannot afford to miss out on this fantastic opportunity, and ignore it at our peril.
(China Daily June 29, 2005)
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