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China-ASEAN Free Trade Area

The Association of Southeast Asian Nations (ASEAN), ever since its inception in 1967, has gradually become "not only a well-functioning, indispensable reality in the region.…also a trusted partner of the United Nations in the field of development". (Comment by Kofi Annan Secretary-General of the United Nations) It is a co-operation, primarily economic, but also integrated with the political and security aspects. From the five original signatories, Malaysia, the Philippines, Singapore and Thailand who concluded the "ASEAN Declaration" (also called Bangkok Declaration), to the later joined member countries, Myanmar, Vietnam, Brunei, Laos and Cambodia, now ASEAN has ten members, occupying an total area of 4.5 million square kilometers, of a population of 0.5 billion.

The ASEAN official organization structure is mainly composed of ASEAN Summit, ASEAN Ministerial Meeting (AMM), ASEAN Economic Ministers Meeting (AEM), ASEAN Finance Ministers Meeting (AFMM) and others. Under the ASEAN Ministerial Meeting, there is also ASEAN Standing Committee and the secretariat. The ASEAN Standing Committee, under the Chairmanship of the Foreign Minister of the country-in-chair, is mandated to coordinate the work of the Association in between the annual ASEAN Ministerial Meeting (AMM). The ASEAN Chair and Vice Chair are elected based on alphabetical rotation of all ASEAN Member Countries. The ASEAN Secretariat, on the other hand, headed by the Secretary-General of ASEAN, is mandated to initiate, advise, coordinate, and implement ASEAN activities. It is located in Jakarta, capital of Indonesia.

For these 30 years since its establishment, especially for recent years, ASEAN is proactive in its external affairs. Not only it has 11 dialogue partners, it also set up ASEAN Regional Forum (ARF) in July 1994. The ARF is the principal forum for security dialogue in Asia. It draws together 23 countries which have a bearing on the security of the Asia Pacific region. Also, The Forum for East Asia Latin America Cooperation (FEALAC) was set up in September 1999 with now 30 member nations, aiming to promote better understanding and cooperation between East Asia and Latin America.

In the same spirit, the co-operation mechanism of "10+1" and "10+3" also came into being. "10+1" is the meeting between ten ASEAN countries and China. The first "10+1" was held in Kuala Lumpur, Malaysia in 1997. "10+3" is the meeting between ten ASEAN countries plus China, Japan and South Korea.

ASEAN and China's trade relation has been ever closer. Ever since 1995, the bilateral trade value has been increasing with a rate over 15%. Especially China's persistent effort in preventing the RMB from devaluation during the 1997 South East Asia financial crisis reinforced the mutual trust between ASEAN countries and China. Subsequently, between ASEAN and China, a series of economic co-operation pacts were signed. At the time being, ASEAN is China the 5th biggest trade partner and China is ASEAN's 6th biggest trade partner. China exports a variety of goods to ASEAN, including agricultural goods, metal products, mineral products and manufactured goods, while importing mainly industrial raw materials and oils from ASEAN. Since ASEAN becomes less and less dependent on the importation of garments, textile products and other light industry and labour intensive products, capital intensive products like machines, electrical equipment, become more important during the 1990s. The focus of their bilateral trade has shifted from originally daily commodities to manufactured goods.

Therefore, among all ASEAN's external policies, the one probably having the most impact will be the "China-ASEAN Free Trade Area". ASEAN countries are mostly China's neighbours. Some of them being the important export market for China's south west provinces, have close trade ties. The establishment of "China-ASEAN Free Trade Area" will greatly facilitate these provinces' exportation, good for China's West development.

"China- ASEAN Free Trade Area" is a FTA having 1.7 billion consumers, with 2 trillion USD in total GDP value, 1.2 trillion USD in total trade value. It will be the FTA with largest population in the world, also the largest FTA among developing countries. It aims not only to reduce tariff and abolish trade barriers, but also economic co-operation in many areas, agriculture, information and telecommunication, human resource development, transportation, infrastructure and Meikong river's development.

The concept of "China-ASEAN Free Trade Area" was first raised by the last Premier Zhu Rongji in Singapore during the 4th China-ASEAN "10+1"meeting, and received wide appreciation. Later a taskforce of experts was formed to conduct related research. ASEAN leaders subsequently agree to build up "China-ASEAN Free Trade Area" in ten years.

During the 6th China-ASEAN "10+1" meeting in Phnom Penh, Cambodia, Chinese and ASEAN leaders signed the "Framework Agreement on Comprehensive Economic Co-Operation Between ASEAN and the People's Republic of China" on 5 November 2002, signifying the progress of "China-ASEAN Free Trade Area" officially commenced, with a goal of its full establishment by 2010. The Agreement came into effect from January 1, 2003 with the launching of related free trade negotiations. Both sides agreed to, for instance, to lower tariff for agricultural products before the beginning of 2004, abolishing it completely in three years.

According to Agreement, China will, in the first phase, achieve mutual zero tariff treatment with six of the ASEAN countries, namely Indonesia, Singapore, Thailand, the Philippines and Myanmar by 2010. By the year 2015, the goal of zero tariff treatment will be reached for the remaining four countries, Vietnam, Brunei, Laos and Cambodia. On October 1, 2003, China and Thailand first of all successfully grant to each other zero tariff for vegetables and fruits.

To promote the construction of "China-ASEAN Free Trade Area" CAFTA and share the opportunities of cooperation and development, Premier Wen Jiabao proposed at the 7th China- ASEAN "10+1" meeting in October 2003 that the China-ASEAN Expo ( CAEXPO) would be held annually from 2004 in Nanning, Guangxi of the People's Republic of China. His proposal was well received by leaders of ASEAN member. At the same meeting, Premier Wen Jiabao also proposed to hold the China-ASEAN Business & Investment Summit in China. The 1st Summit will be held in Nanning along with China-ASEAN Expo.

Guangxi is a unique province which connects China and ASEAN countries by both land and sea accesses. Nanning, the capital of Guangxi, known as "Green City of China". is blessed with convenient transportation network, complete service system, state-of-the-art convention and exhibition facilities.

The first CAEXPO will be sponsored by Ministry of Commerce of the People's Republic of China and Trade and Economy Departments of ASEAN Countries and organized by the People's Government of Guangxi Zhuang Autonomous Region. It will be held from Nov 3 to 6, 2004 at Nanning International Convention & Exhibition Center. It will include national image demonstration, investment negotiation, tourism co-operation, exhibition of advantageous products, business project networking facilitation, top-level forum and cultural exchanges. Those who are interested in the Expo, please contact our Promotional Activities Department for details, Tel: 87989267, Fax: 590309.


This article was prepared by IPIM’s Research and Information Division.