WHILE MANY ARE focusing on China's and Taiwan's last steps toward joining the WTO, the decision to create an ASEAN-China Free Trade Area should be generating more interest.
It might be an exaggeration to say that such a trade zone could reshape the economic structure of this region. However, the room for Taiwan's economy to expand could be restricted if such a decision is carried out.
The proposed free trade area is estimated to have a combined market of 1.8 billion people and a GDP of US$2 trillion. Though it is scheduled to begin in 10 years, the decision is already being touted as a win-win result for both China and ASEAN countries.
Actually, it could be highly risky for ASEAN to combine markets with China, though it seems to have no choice. China attracts an average of US$40 billion in foreign direct investment a year, about 80 percent of the total for Asia, while the 10 countries of ASEAN took only 17 to 18 percent.
China's accession to the WTO is creating a more compelling reason for ASEAN to engage with Beijing. The combination could reinvigorate ASEAN's stagnated economy.
Nevertheless, local industries in ASEAN countries could also be harmed by the proposed free trade area. In the current economic situation in Asia, China and ASEAN countries are in asymmetrical competition, as the former absorbs a lot of resources and foreign investment at the expense of the latter.
To open markets in such a situation might not lead to the weak reaching parity with the strong, but to the weak being swallowed up.
Moreover, the framework of the ASEAN-China free trade zone might result in domestic pressures forcing governments to protect local industries. In fact, ASEAN's plans for its own separate free trade area, in which barriers on a wide range of products would be dropped by 2003, are still unresolved because of disagreements over Malaysia's car market and Thailand's petrochemicals.
As many ASEAN countries have frequently faced political unrest domestically, the free trade area might increase political and economic inequality and result in more instability.
As economic considerations cause ASEAN to cooperate with China, the association's attitude toward Taiwan will also change. Initially, ASEAN was formed to check the influence of powerful countries in the region after the Cold War, including China.
Former president Lee Teng-hui (
However, under current circumstances, if ASEAN countries keep courting China's market, Taiwan's room to trade in ASEAN will become limited, compounding China's routine suppression of Taiwan. In addition, once it creates unrest in ASEAN countries, Taiwan would also be influenced.
Therefore, as ASEAN makes such an important policy shift, Taiwan should cautiously monitor developments and the aftermath of the ASEAN-China free trade area.
Chen Chien-Hsun is a freelance journalist in Taipei.
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