By Li Guanghui
Upon entering the 21st century, the Chinese Government made
timely diplomatic-strategy re-adjustments and started to push for
better relations with its neighboring countries, seeking mutual
trust politically and co-prosperity economically.
As part of the effort, the process of bringing about a
China-ASEAN (Association of Southeast Asian Nations) Free Trade
Area (FTA) is being driven ahead.
As an arrangement for mutual benefits, the bidding for the FTA
is powering the all-around economic co-operation between China and
ASEAN that, in turn, works as a stabilizing factor for the
region.
Since the 1990s, the integration of regional economies has had
strong momentum a hallmark of accelerated economic globalization.
Regional economic organizations such as the European Union (EU) and
the North American Free Trade Area are acquiring increasingly
important positions in the world economy. On the other hand, free
trade agreements, those signed between developed countries in
particular, are posing a serious challenge to both China and ASEAN
because the preferential tariff rates granted to each other by free
trade agreement members erode the economic and trade advantages
enjoyed by developing nations.
China joined the World Trade Organization (WTO) in December 2001
after more than a decade of painstaking negotiations. As a result,
the focus of the country's foreign trade and economic strategy
began to shift to regional economic co-operation.
China's WTO membership means that the country's economic
development will become increasingly responsive to the world
economy.
At the moment, regional economic integration is picking up speed
and China would risk being marginalized if it did not join this
process.
If China failed to embrace regional integration, it would find
its global competitiveness significantly diminished.
Fortunately, involvement in regional economic co-operation
constitutes a new focus of the nation's overseas economic
strategy.
In the meantime, the economies of the ASEAN members started
recovering in 1999 from the ravages of the 1997 Southeast Asian
financial crisis, which dragged on the once fast growing economies
of the member states. Coincidentally, while ASEAN rose out of
economic stagnation, the Chinese economy entered a phase of
high-speed development.
Doubtless, Chinese demand helped facilitate their economic
growth. In light of that, the nature of ASEAN's economic recovery
recommended a strengthening of relations with China.
It then became obvious that pursuing a China-ASEAN FTA was a
wise strategic option beneficial to both sides.
In November 2002, therefore, the Chinese and ASEAN leaders
signed the Framework Agreement on Comprehensive Economic
Co-operation between China and ASEAN and decided that a China-ASEAN
FTA would be set up in 10 years. The process of establishing the
China-ASEAN FTA was thus set in motion.
Starting on January 1, 2004, the two parties began implementing
an Early Harvest Plan (EHP), cutting tariffs on more than 500
products, as part of the effort to facilitate the birth of the
FTA.
The Chinese and ASEAN economies complement one another as shown
by the results of the EHP. ASEAN's tropical fruits and China's
apples, pears, cabbages and potatoes are competitive respectively.
The China-ASEAN FTA plan has already produced good initial
results.
At the Eighth China-ASEAN Summit convened on November 29, 2004
in Vientiane, capital of Laos, the two parties signed a package of
agreements on trade in goods and dispute settlement, laying down
foundations for standardizing tariff cutting and resolving
disputes.
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Starting from July 20, 2005, China and ASEAN began to cut tariffs
on more than 7,000 products, which marked the coming of the phase
of substantial tariff reduction between China and ASEAN in the
run-up to the establishment of the FTA.
The Framework Agreement on Comprehensive Economic Co-operation
between China and ASEAN has helped advance bilateral trade, with
the China-ASEAN trade volume crossing the threshold of US$100
billion for the first time in 2004 and hitting US$130.37 billion
the next year.
In addition, the two sides have been co-operating closely in
direct investment, services and technology, which has also yielded
significant results.
From the point of view of regional economic integration, the
future Asian economic integration should be based on a more
extensive and more economically powerful regional co-operative
entity, of which the China-ASEAN FTA is a vitally important
component.
Once founded, China-ASEAN FTA will be the largest FTA in Asia,
the most populous FTA in the world and the biggest FTA in the
developing world. The China-ASEAN FTA is expected to accelerate the
trend of regional integration in Asia and, in turn, will have
positive impacts on the world economy.
The author is a researcher with the Economic Research
Institute under the Ministry of Commerce.
(China Daily October 27, 2006)
