ASEAN, China agree to set up world’s largest free trade zone
BANDAR SERI BEGAWAN, Nov 6: Chinese Premier Zhu Rongji and Southeast Asian leaders agreed on Tuesday to set up the world’s largest free trade zone in a significant decision that capped the annual ASEAN summit here.
The proposal for a free trade area (FTA) covering rapidly-growing China and resource-rich Southeast Asia was proposed by Zhu last year.
My suggestions were all accepted by them. They agreed that China will become a part of the ASEAN Free Trade Area, Zhu told reporters after a meeting with the leaders of the 10-member Association of Southeast Asian Nations (ASEAN).
ASEAN leaders set a 10-year target date to achieve the ambitious goal but Zhu said it could be achieved within five years.
It will be the world’s largest free trade zone in terms of population and third largest in terms of gross domestic product (GDP) after the North American and European FTAs.
For the countries of Southeast Asia, this agreement is of enormous historic significance, Brunei Sultan Hassanal Bolkiah told reporters.
By the time the free trade market is established it will cover two billion consumers, have a combined GDP of two trillion dollars, and two-way trade of $1.23 trillion, the sultan said.
China’s Premier Zhu emphasized the FTA would be mutually beneficial to both sides, calming fears that cheap Chinese goods would swamp Southeast Asia.
China is not trying to increase its exports through this measure. We will help each other and cooperate with each other, Zhu told reporters.
The FTA is expected to increase Chinese and ASEAN exports by 50 per cent and add one per cent growth to ASEAN’s GDP and 0.3 per cent growth to China’s GDP, China’s deputy foreign minister Wang Yi told a news conference, citing findings by an ASEAN expert group.
He said the decision Tuesday showed China and ASEAN were ready to join hands to face up to the risk and challenges of globalization.
This will be a new milestone in the relationship between China and ASEAN. Of course there will be challenges because of the need to open markets between both sides... (but) what’s more important is the meeting has shown the political will of China and ASEAN leaders, Wang said.
He said it was too soon to say whether the zone will have no tariffs or just low tariffs.
Wang also rejected suggestions China and ASEAN were competitors because they produced similar products and exported to the same countries, saying they were actually complementary.
We rarely collide. For example, ASEAN is rich in natural resources. China need natural resources and we also need energy, Wang said.
After Zhu made the proposal last year at the ASEAN summit, an expert group was set up to study the idea. The thumbs up was given to the leaders for the setting up of the FTA, covering a market of about 1.8 billion people — comprising China, the world’s most populous nation with 1.3 billion consumers, and the 510 million people in ASEAN.
Most of ASEAN comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam will already be part of a free market by 2003 under the grouping’s own liberalization plan.
ASEAN is the fifth-largest trade partner of China after Japan, the United States, the European Union and the Special Administrative Region of Hong Kong.
China was ASEAN’s sixth biggest trading partner in 2000.
ASEAN was also considering extending the proposed FTA to cover Japan and South Korea.
Japanese Prime Minister Junichiro Koizumi said he was not worried about Japan lagging behind under an ASEAN-China FTA.
Japan welcomes deepening ties between China and ASEAN, Koizumi said.
As for an East Asia FTA, Koizumi said: Each country has its own difficulties, but I think it is important to move ahead by overcoming difficulties while recognising the importance of free trade.—AFP
