China and the Association of Southeast Asian Nations (ASEAN) are
taking a tangible step towards creating the world's most populous
free trade area (FTA).
They are scheduled to lower tariffs on more than 7,000
industrial goods tomorrow, spearheading the full implementation of
the Agreement on Trade in Goods inked in November last year.
This unequivocally testifies to their resolve to boost common
development and prosperity through enhanced economic and trade
exchanges.
Zhang Yunling, director of the Institute of Asia-Pacific Studies
at the Chinese Academy of Social Sciences, told China
Daily: "The Sino-ASEAN drive to achieve trade liberalization
marks the historic inception of the China-ASEAN FTA, a big free
market encompassing 1.7 billion people, an aggregate gross domestic
product of almost US$2 trillion and overall trade volume worth
US$1.2 trillion per year."
Demonstrating cooperation between China and ASEAN, which has
been developed from a mere framework to include more substantial
content, the move is expected to create an ideal environment for
both parties to benefit from economic integration.
Progress in exploratory negotiations over details of the
China-ASEAN FTA has been relatively swift.
In November 2002, leaders from both sides signed the landmark
China-ASEAN Framework Agreement on Comprehensive Economic
Cooperation in Cambodia, agreeing to set up the China-ASEAN FTA
within 10 years, a vital step in making concrete the proposal
former Chinese Premier Zhu Rongji made in 2000.
A breakthrough in East Asia's regional economic cooperation as
well as a milestone in Sino-ASEAN relations, the FTA plan will
allow all members to enjoy more favourable trade and investment
conditions than the WTO can offer. Liberalized trade means more
opportunities to realize economies of scale and improve
efficiency.
Zhang explained that to show its intention to boost free trade
between the two sides, China has eliminated tariffs on selected
agricultural products from Thailand, Malaysia and the Philippines
the first batch of ASEAN countries to join the four-year Early
Harvest programme started in 2003.
The one-way goodwill deal from China, unprecedented in forging
an FTA among developing countries, had given ASEAN a head start
before China began cutting tariffs to the rest of the world under
its WTO commitment this year.
As the first step towards allowing China and ASEAN to enjoy the
early benefits of the trade agreement, the programme has encouraged
fast growth in bilateral agricultural trade and laid solid
foundations for the umbrella FTA.
Instead of an over-ambitious deal to free up all trade, the
approach of tackling easy-to-implement plans first, as adopted
under the Early Harvest programme, is more realistic and thus
efficient in demonstrating the benefits of free trade.
The Sino-ASEAN tariff cuts on more than 7,000 industrial
commodities, the core of the FTA, will be carried out using the
same principles.
Xu Ningning, director of the China-ASEAN Business Council, told
China Daily: "The liberalization is taking place step by
step."
"Tariffs are to be axed by 2010 for the six advanced ASEAN
members Brunei, Indonesia, Malaysia, the Philippines, Singapore and
Thailand. The four underdeveloped members Laos, Viet Nam, Cambodia
and Myanmar will have until 2015 to comply.
"For the richer ASEAN countries, products in the standard track
will be cut to 0 and 5 percent by 2010. Duties on products
identified as sensitive will not reach this level until 2018; those
on highly sensitive products will go no lower than 50 percent."
Lower tariffs will reduce companies' production costs and
sharpen their competitiveness.
Xu explained business deals are essential for China and ASEAN
members' aspirations to make their relations mutually beneficial.
Their shared commitment to economic progress is creating demand for
economic cooperation.
Trade between China and ASEAN continued to surge in 2004,
jumping 35.3 percent to a high of US$106 billion, and hit US$60
billion in the first half of this year.
Such dynamics have fuelled belief in trade prospects between
China and ASEAN, respectively each other's sixth and fourth largest
trade partners.
China's robust economic growth and its entry into the WTO make
it a huge potential market for ASEAN products.
Li Guanghui, an expert in regional economic cooperation at the
Institute of Economics under the Ministry of Commerce, said, "As
the tariff cuts come into force, trade between China and ASEAN
countries are likely to increase."
Given the economic, social and cultural differences between the
two sides, difficulties in transforming the plan from ideas to
reality must not be overlooked.
Trade liberalization means much more than tariff cuts and the
removal of non-tariff barriers.
Chai Yu, an expert in economics at the Chinese Academy of Social
Sciences said: "A full FTA, an essential stage in regional economic
integration, covers trade in goods and services as well as
investment.
"The two sides might encounter real obstacles when it comes to
negotiations covering services and investment."
To meet the challenges of embarking on the road to a full
China-ASEAN FTA, concrete and continuous steps must be taken to
increase the rate at which existing trade liberalization
commitments are implemented.
Looming tariff cuts on industrial goods are a much-needed shot
in the arm for the drive to achieve shared regional goals.
Regional integration is expected to enhance mutual trust and
help member states play a greater role in world affairs.
The strategic cooperation geared towards peace and prosperity in
China and ASEAN nations is in the interests of both sides and is
expected to sharpen the competitive edge of the whole region.
(China Daily July 19, 2005)
