Fri, Nov 15, 2002 - Page 8 News List

Trade key wapon in Asia's future

By Wu Fu-Cheng 吳福成

China and ASEAN signed the Framework Agreement on Com-prehensive Economic Coopera-tion on Nov. 4 in preparation for the establishment, within 10 years, of a free-trade area. This not only reflects China's regional integration strategy in the new century, but will also have a drastic impact on the political and economic development of the Asia-Pacific region.

This massive economic entity is expected to have a market of 1.7 billion consumers, a GDP of nearly US$2 trillion and US$1.2 trillion in total trade value. Japan and the US, to avoid losing their stakes in the ASEAN market and their political and economic influence in the region, have also proposed to forge closer econo-mic partnerships with the regional group.

One consequence of all this could turn out to be rivalry between the China-led Asian free-trade area and a future US-led pan-American free trade zone across the Pacific. Those two groupings, plus the EU, will divide the world into three blocs.

ASEAN members have long had sensitive and conflicting feelings about China's economic rise, accession into the WTO and promotion of a China-ASEAN free trade zone. They worry that China will attract all the foreign capital from ASEAN like a magnet, but on the other hand, they are eager to exploit China's 1.3-billion-population market.

Now, China has agreed to provide the three least-developed ASEAN nations -- ?Laos, Cambodia and Myanmar -- ?with preferential treatment starting in 2004 by removing tariffs on more than 600 agricultural, livestock and fisheries products and expanding its participation in the Mekong River development project.

China also sealed the Decla-ration on the Conduct of Parties in the South China Sea with ASEAN in order to address the sovereignty dispute over islands. All this demonstrates China's intention of taking concrete action to ease ASEAN anxieties about the "China threat theory."

Undeniably, the signing of the agreement on economic cooperation is advantageous to deepening economic ties between China and ASEAN, while the signing of the declaration on the conduct of parties is conducive to political trust between the two. Following the ASEAN summit in Cambodia, the outside world will find it impossible to view the new ties between China and ASEAN in the traditional light.

In addition, in the China-ASEAN free-trade area, the 10-member bloc will not have to obey Beijing's orders. The area will be constructed along the lines of the already established Asean Free Trade Association (AFTA) and will follow many of the latter's systems and arrangements, hence the name, ASEAN-China (10 plus one) free-trade area. This enhances the possibility that a 10-plus-three area will eventually take shape.

At one time the proposal for an ASEAN-Japan-China-South Korea free-trade area was a hot issue. But this plan was superseded by the China-ASEAN deal because Japan was reluctant to open its agricultural market to ASEAN nations.

Japan was taken aback by the China-ASEAN agreement. To ease the competitive pressure caused by the possibility that Beijing might become the leader in regional integration, Japan has accelerated discussions on a free-trade area. The idea is that the Japan-ASEAN pact will materialize within 10 years but at least one year after the entity between China and ASEAN.

In addition, Japan also played the "Taiwan card," calling for the formation of an Asian free-trade area covering Japan, South Korea, China, Taiwan, Hong Kong and ASEAN. Such a grouping could rival the EU and the North American Free Trade Agreement countries. Japan hopes that the Asian free-trade area will be operative by 2010, which is also the deadline for the APEC forum to conduct trade and investment liberalization.

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