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New era of China-ASEAN tie-up

By Wen Jia (China Daily)
Updated: 2009-10-22 08:47

The much-expected birth of the China-ASEAN Free Trade Area (CAFTA) would be a celebration of the pursuit for common prosperity over adversity, friendly cooperation over animosity, and trade liberalization over protectionism.

As leaders from China and Southeast Asia meet this week, final preparations are polished for CAFTA to enter into formal operation on Jan 1, 2010, when 90 percent of goods will cross borders at zero tariff, and services and investments at nation-treatment status. It forms the world's largest free trade area, at least in the population measure. The area integrates a market with 1.9 billion people and trade volume of $4,500 billion, grouping China with Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The birth of CAFTA is the fruit of true international friendship. Faltering out of the 1997 Asian financial crisis, ASEAN economies were relieved to find a firm and helping hand in China, which sacrificed its own interests in stabilizing renminbi and helping to bail them out. The proposal of a free trade area by then Chinese premier Zhu Rongji rose naturally from economic cooperation and coincided with ASEAN's dream first inked in the 1976 Bali Concord.

The Framework Agreement on Comprehensive Economic Cooperation between China and ASEAN signed on Nov 14, 2002 was followed by a trade-in-goods agreement in 2004, a services agreement in 2007 and an investment agreement in August 2009.

The fact that the operation comes as these nations battle the chills of another financial crisis simply makes the bonds between them closer, and CAFTA, more valuable.

Just as a free trade area talk was new to China, the talk with China was also the first ever by ASEAN. As analysts observed, China followed a principle of equality and mutual benefits, offering more than taking back in the pilot zone. It adopted unilateral tariff favors and carried out "early-harvest" programs for Southeast Asian farm produce to make their way to Chinese dinner tables.

The cooperation on CAFTA is characterized by differential treatment and flexibility in specific arrangements to cope with gaps among nations. Cambodia, Laos, Myanmar and Vietnam will not reduce tariffs on Chinese products to zero until 2015, leaving time for these economies to develop. Trade in services and investments will further open up by then with all sides.

Such arrangements are not rare in stage-by-stage tariff cuts and reflect China's respect for smaller partners and for diversity. China also considers providing a total of 270 million yuan ($39.7 million) this year in special aid to less developed Cambodia, Laos and Myanmar, and helping them to tide over the most difficult time.

The measures have more than tripled ASEAN's trade volume with China to $231.1 billion in 2008 by China's statistics and $192.5 billion by ASEAN statistics, with ASEAN in a favorable balance.

The cooperation won immediate international recognition. Since 2003, the free trade area path China blazes has drawn over Japan, South Korea, Australia and New Zealand and India to ASEAN. Today, even Europe and the Untied States are eyeing their copies.

Still, CAFTA's birth will mark a new era of economic integration between China and ASEAN. The potential will be more than faster expansion of trade.

As ASEAN Secretary-General Surin Pitsuwan said in Nanning on Tuesday, the focus is turning to further promote liberalization of trade. As costs are lowered and procedures simplified, producers and service providers of these nations could deepen division of labor and upgrade their product quality and variety. More cooperation and technological advances will help them to gain better foothold in the global supply chain. The facilitation of service trade and mutual investment, largely thanks to strong administrative guidance, will ensure long-term economic stability and speed up flow of funds and goods within and beyond the area. Free-investment efforts, the promotion of a common foreign reserve pool and even Chiang Mai Initiative for a network of bilateral swap arrangements will elevate their global economic status.

To speed up the process, a $10-billion China-ASEAN Investment Cooperation Fund, initiated by China, is set up this year to finance major projects in infrastructure, energy and technology. A $15-billion credit facility extended by China will advance ASEAN integration in the next three to five years.

The Pan-Beibu Gulf economic zone, a main sub-regional cooperative project between China and ASEAN, has reasons to take off. The Nanning-Singapore economic corridor and bonded port areas round the gulf would become new hot spots and growth points.

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While leading the way for developing economies, CAFTA will usher in a new era for Asia as well. As ASEAN works closely with China, Japan and South Korea, the concept of ASEAN+3 will get more popular, encouraging economic integration and regional cooperation against adverse interference and turbulence.

In the wider world, the new free trade area is a slap to various kinds of modified protectionism. Isn't it ironic that weaker economies once targeted for free trade are striving for trade liberalization while some traditional loudspeakers impose high tariffs on imports?

As ASEAN and China hand in hand lift their economies out of financial crisis onto recovery, both will be aware that friends made and tried out in adversity are true. To others, CAFTA is yet another proof of how the peaceful rise of China will benefit the world.