Sat, Dec 18, 2004 - Page 8 News List

ASEAN and China sign 'dirty' FTA

By Honigmann Hong洪財隆

ASEAN, fond of holding grand meetings and declaring "new action programs," on Dec. 2 signed a free trade agreement (FTA) with China, a move that has grabbed the world's attention. The agreement won't take force until 2010. But since it involves a realignment in the region's integration, it has caused a domino effect, with Japan, South Korea, New Zealand and even India moving faster to sign similar agreements with ASEAN. It can also be predicted that the US will reconsider its trade diplomacy in East Asia.

It seems the evolving situation might give Taiwan and the US another shared interest -- or rather, a shared worry over whether they will be marginalized by the economic integration process in Asia.

Politely speaking, the FTA between ASEAN and China is a matter of putting the cart before the horse. It completely violates the normal procedure whereby the agreement would first be negotiated and signed and only then take effect and be implemented.

In November 2002, the two sides first signed a preparatory Framework Agreement on Comprehensive Economic Cooperation expressing their willingness to set up an FTA, implementing measures while negotiations were still ongoing.

The first set of measures including agricultural, fishery and livestock (and some industrial products), and a unilateral reduction of customs duties by China on imports from ASEAN nations was implemented in January this year and is generally referred to as the "Early Harvest Program." In other words, since both sides are members of the WTO, China can clearly be suspected of trying to make an early start before the official implementation of the FTA.

China can of course defend itself by saying that it is a generalized system of preferences which was promoted by the UN a long time ago: unilateral benefits on certain specified products offered by developed countries to still developing countries.

The problem is that China, whose full market status is not yet universally recognized, and whose national income per capita is lower than that of ASEAN countries, should not be the one to dispense such benefits, regardless of whether we look at the issue from the perspective of law or logic.

Further, following the gradual expansion of the scope of the FTA negotiations, from last year's agricultural, fishery and livestock issues to the present manufacturing industry (completed only recently) and next year's service industry and investment issues, the number of countries and industries affected also increases steadily. Maybe someone will report or complain about China's "beneficial actions" to Geneva.

Next, judging from the two parties' geographic size and and the number of countries involved, and the fact that such a complex FTA could be completed in less than two years clearly shows that there has been some shady dealings going on. Mainly, almost all "sensitive products" have been excluded during the negotiation process, allowing each country to rely on high customs duties to protect special products decided by each country itself. This means that the FTA does not apply to these products.

For example, total imports of the items on the list put together by Indonesia make up 15 percent of its total imports, while Malaysia's car industry and Thailand's petrochemical industry have been the main obstacles to trade liberalization within ASEAN.

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