ASEAN-China
Open Free Trade Area
By Stephen
Coates (AFP)
30 December 2009
JAKARTA: China and Southeast
Asia will establish the world's
biggest free trade area (FTA)
on Friday, liberalising billions
of dollars in goods and investments
covering a market of 1.7 billion
consumers.
Eight years in the making,
the ASEAN-China FTA will rival
the European Union and the
North American Free Trade
Area in terms of value and
surpass those markets in terms
of population.
Officials hope it will expand
Asia's trade reach while boosting
intra-regional trade that
has already been expanding
at 20 per cent a year.
"In 2010 we are sending
a strong signal that ASEAN
is open," H.E Sundram
Pushpanathan, of the Association
of Southeast Asian Nations
(ASEAN), told AFP.
China has just overtaken
the United States to become
ASEAN's third largest trading
partner, and will leap Japan
and the EU to become "number
one" within the first
few years of the FTA, said
Pushpanathan, Deputy Secretary-General
for the ASEAN Economic Community.
Under the agreement, China
and the six founding ASEAN
countries - Brunei, Indonesia,
Malaysia, Philippines, Singapore
and Thailand - are to eliminate
barriers to investment and
tariffs on 90 per cent of
products.
Later ASEAN members, including
Vietnam and Cambodia, have
until 2015 to follow suit.
Zhang Kening, the director-general
of the department of international
trade and economic affairs
in Beijing, said the average
tariff rate China charged
on ASEAN goods would be cut
to 0.1 per cent from 9.8 per
cent.
Average tariffs imposed on
Chinese goods by ASEAN states
will fall to 0.6 per cent
from 12.8 per cent.
ASEAN-China trade has exploded
in the past decade, from US$39.5
billion in 2000 to US$192.5
billion last year, Pushpanathan
said.
At the same time, ASEAN-China
trade with the rest of the
world has reached US$4.3 trillion,
or about 13.3 per cent of
global trade.
Teng Theng Dar, chief executive
of the Singapore Business
Federation, said sectors likely
to reap the most benefits
from the FTA included services,
construction and infrastructure,
and manufacturing.
"Other than product
and service innovations, this
is one great new business
opportunity for the establishment
of a regionally-based innovative
supply chain for market reach
and growth," he said.
Officials said there was
more to the deal than sating
China's thirst for Asian raw
materials like palm oil, timber
and rubber, and opening up
regional markets for its manufactured
products, steel and textiles.
"China and ASEAN countries
are all export-oriented economies.
A large proportion of our
products target the US and
EU markets... Generally neither
side took the other's market
as its most important target
market," Zhang said.
"But with the establishment
of the China-ASEAN free trade
zone, we think there is potential
to improve or adjust this
situation... Both sides have
many goods that complement
each other's needs."
Not everyone is happily singing
the free-trade anthem, however.
At the 11th hour, industry
groups in Indonesia, Southeast
Asia's biggest economy, and
the Philippines are frantically
pressing their governments
to keep tariffs on vulnerable
sectors until 2012.
"These sectors aren't
ready to compete with imported
Chinese products. If the government
implements free trade now,
these industries are surely
going to die," Indonesian
lawmaker Airlangga Hartarto
said.
He cited 12 sectors including
textiles, petrochemicals,
footwear, electronics, steel,
auto parts, food and drinks,
engineering services and furniture.
"For example, a local
sack for sugar, rice and fertilizer
costs about 1,600 rupiah (US$1.70)
each. A Chinese sack costs
about 800 rupiah each,"
he said.
Indonesian Footwear Association
chairman Eddy Widjanarko said
Chinese firms would take their
share of the Indonesian market
to 60 per cent from 40 per
cent, costing some 40,000
local jobs.
Indonesian Furniture Producers
Association executive director
Tanangga Karim blamed the
government for failing to
level the playing field, and
called for non-tariff protection
in the form of strict safety
and quality controls.
"We have to admit that
we aren't ready to compete
now with imported Chinese
products," he said.
Pushpanathan conceded that
some local businesses would
struggle.
"In the short term there
will be some adjustments that
some countries have to make.
Some local companies will
lose their domestic market
share but ultimately consumers
will benefit," he said.
Source: AFP
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