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BIZCHINA> Center
China-ASEAN free trade ahead
(China Daily)
Updated: 2008-06-23 14:56

It is not only the first in China, but also the world's largest by population.

It is China-ASEAN (Association of Southeast Asian Nations) FTA (free trade area), which debuted in 2002 and planned for completion in 2010.

It possesses a population of 1.8 billion, and is also the third largest global trade group behind the European Union and North American Free Trade Area (NAFTA). The China-ASEAN FTA's annual trade volume is expected to reach $1.2 trillion by 2010.

From a new concept originally conceived before 2002 to the national economic strategy recognized by the Chinese government in 2007, the FTA's rapid evolution in merely six years has amazed many.

FTA (also termed free trade zone) is an organization of nations or regions which jointly reach a series of economic agreements, including eliminating or reducing tariff rates, improving intellectual property regulations, easing investment rules, and more.

The concept was originally created by the United States in 1980, which, in August 1992, together with Canada and Mexico, agreed to build NAFTA, the world's first FTA between developed nations and developing nations.

In the last decade more nations have jumped on the FTA wave. By November 2007, 197 regional trade projects have gone through under the World Trade Organization (WTO). The majority were FTAs, 80 percent of which were formed over the past 10 years.

However the FTA concept had been given short shrift, especially in East Asia, including China, South Korea and Japan, where no FTA agreement was signed before 2000.

But China witnessed a turning point at exactly that time.

During the 1990s, as part of its efforts to participate in the global economy, China began to contemplate developing a regional economic group at the same time as it was applying for entry in the WTO. In November 2000, the then Premier Zhu Rongji proposed establishing the China-ASEAN FTA at the Fourth China-ASEAN Leadership Forum held in Singapore.

Zhu's proposal received a warm welcome and came on the heels of the commitment of "a closer economic partnership" made by the trade ministers of the ASEAN, Australia and New Zealand in October the same year.

In the aftermath of the 1997 Asian financial crisis, the ASEAN expected that a "closer partnership" could pave a way for a FTA with the two economies in a bid to strengthen its economic power to fend off possible threats from China.

The ASEAN had reasons to worry. China was at a critical juncture with the WTO, and it had been rumored that such a move would cause an investment exit from the ASEAN to China as well as a huge influx of exports from China into the ASEAN.

"China is expected to clear up the concerns through its proposal, and we also expected the ASEAN to co-share the benefits that the reform and opening up policy and the WTO membership could bring in," Long Yongtu, general secretary of the Boao Forum, was quoted by Caijing magazine as saying.

The Chinese government appointed the-then Ministry of Foreign Trade and Economic Cooperation to conduct feasibility study that began in late 2000. The conclusion released in October 2001 was that a China-ASEAN FTA was beneficial to all parties concerned and that the ASEAN and China would both see a rise in annual exports. Following rounds of talks, the two sides wrapped up the China-ASEAN commodity trade agreement in November 2004 in Laos.

The agreement is a milestone in the history of economic cooperation between China and the ASEAN, as it is the first FTA agreement for both.


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