Free Trade Area (FTA) between ASEAN and China
On January 1, 2010, the world welcomed the new year and the dawning of this century’s second decade. The ASEAN (Association of Southeast Asian Nations) countries and China, however, have more on their plates as the free-trade agreement between them, eight years in the making, came into effect. The Free Trade Area (FTA) between China and the ASEAN nations will be implemented in two stages.
Under the China-ASEAN Free Trade Area agreement, China is cutting tariffs on imports from ASEAN nations from an average of 9.8 percent to about 0.1 percent; the ASEAN countries will reduce tariffs on goods from China from an average of 12.8 percent to 0.6 percent. The current agreement affects China and the following ASEAN members – Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. These six countries were the original ASEAN members at the time of signing the ASEAN Free Trade Area agreement (AFTA) on 28 January 1992 in Singapore.
The new ASEAN members Cambodia, Laos, Myanmar and Vietnam will join the FTA by 2015 and allow 90 percent of Chinese imports in without tariffs.
This is a major economical development, yet it received little or no attention from the Western media. The FTA may have long-term impact on the world and cannot be underestimated.
ASEAN has been a free trade area, since 1999 stretching from the banks of the Irrawaddy to the forests of New Guinea. The ten countries have over half a billion people with a collective economic output of over $1.5 trillion dollars. More important is the area’s rapid growth. The collective GDP’s average growth was 16 percent for the years 2007 and 2008.
We are more than familiar with China’s impressive economic achievements over the past two decades. Its GDP is nearly $8 trillion and China is poised to become the second largest economy some time in the year. Although China’s growth for 2007 and 2008 at 11.4 percent and 9.6 percent was slower than the ASEAN, China still surpassed that of many other countries.
Eventually the FTA will embrace a population of more than two billion people and a GDP of $10 trillion. It is the third largest trading group after the European Union and the North America Free Trade Agreement (NAFTA).
Trade between China and the ASEAN nations more than tripled in the five years ending in 2008 at just under $200 billion. The expectation is for it to skyrocket under FTA which is not only the belief of government officials and analysts but also of the traders as well:
“The establishment of the free trade area is really good news for me,” said Liu Yuzhen, a trader at the Tianyuan Fruit Trade Market near China’s border with Vietnam.
Liu said she now exports about 10 tons of fruit to Vietnam every day and hopes to expand under the free-trade agreement.
The FTA may easily be the harbinger of the creation of a trade and economic zone with the participation of China, the ASEAN countries, Japan, South Korea and, maybe, the United States.
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