On Monday, an agreement was sealed between China and the 10-member ASEAN in Phnom Penh, setting the timetable for the establishment of the world's largest free-trade zone. The signing of the pact again illustrates that China's regional economic and political clout is increasing at an alarming rate. The implications for Taiwan, the US, Japan and South Korea are many.
The weight China carries in the region was fully demonstrated during this week's ASEAN summit in Cambodia. Beijing stole the show, relegating the ASEAN members to mere supporting roles. The streets of Phnom Penh were reportedly packed with signs welcoming Chinese Premier Zhu Rongji (
China's pre-eminence was also evident by its ability to move forward from Tuesday to Monday the day an ASEAN agricultural cooperative memorandum was signed. Some ASEAN members had initially envisioned establishing a free-trade zone linking the alliance with China, Japan and South Korea. But Zhu pre-empted Beijing's economic rivals Tokyo and Seoul two years ago by proposing a China-ASEAN free-trade zone -- leaving Japanese Prime Minister Junichiro Koizumi to play catch-up at this week's meeting.
However, China did not come through with many of the concessions that it had been expected to make to get the ASEAN pact. For example, during the initial negotiations, Beijing refused to include both rice and palm oil among the goods for which tariff reductions were to be negotiated. Those products are two of the most important ASEAN exports to China.
The growing might of China is apparently making rivals feel anxious -- and rightly so. When Zhu proposed a trilateral free-trade zone between China, Japan and South Korea, the response he got was lukewarm -- as demonstrated when Koizuimi said such a free-trade zone was a mid-term or even long-term goal of Japan. However, Japan immediately suggested to South Korea that it was ready to begin bilateral negotiations for a free-trade agreement. Having already signed an agreement with Singapore, Japan is targeting Malaysia and Indonesia for such agreements as well.
Japan evidently realizes the need to work with South Korea in countering and balancing China's economic clout. While the Chinese market may be enormous and its economy developing rapidly, China still trails far behind the two countries in terms of state-of-the-art technologies.
An ASEAN-China free-trade market will take 10 to 15 years to materialize -- years that will be taken up with round after round of difficult negotiations. Such discussions will provide opportunities to challenge the economic status of China.
Where does Taiwan fit into the picture? Taiwan can be an important element to any efforts to counter-balance Chinese power.
To begin with, Taiwanese capital has played an all-important role in the economic development of China in the past decade. If the US and Japan sign free trade deals with Taiwan, diverting some of the Taiwanese capital that is now flowing into China, this could thwart an important component of China's equation for success. This helps explain why China is so adamantly opposed to Taiwan signing an agreement with any country.
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