China-ASEAN FTA pact set to boost trade volume

(China Daily)
Updated: 2009-12-30 07:31
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A comprehensive trade pact between China and major Southeast Asian economies that comes into effect on Friday is expected to accelerate bilateral commerce and cut reliance on developed economies hit by weak import demand, key officials from both sides said yesterday in Beijing.

Trade volume in the China-ASEAN Free Trade Area (FTA) "will jump," and the yearly rate of growth will be "40 to 50 percent or more for a certain period of time," a Thai embassy official said during a press conference held by the Ministry of Commerce (MOFCOM).

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Warawudh Chuwiruch's assessment was largely shared by Chinese officials at the conference.

"After 2010, bilateral trade will see rapid growth despite the financial crisis," said Zhang Kening, commercial counselor at the department of international trade & economic affairs under MOFCOM. But, "in the short-term, it is impossible to achieve that (kind of) robust growth," Zhang cautioned.

The China-ASEAN FTA, which is operational from Jan 1, 2010, will be the largest of its kind, covering a population of 1.9 billion. It will encompass a region with the "largest GDP worth $2 trillion" annually, Chuwiruch said.

China-ASEAN trade has outperformed commercial exchanges with other trade partners despite the global downturn.

From January to November, China-ASEAN trade dropped by 13.2 percent from a year earlier, 4.3 percent less than the 17.5-percent decline seen in China's overall trade volume during the same period.

Ever since 2002, when China and the ASEAN signed the Economic Co-operation Framework agreement that signaled a start to the China-ASEAN FTA, bilateral trade has grown by 24.2 percent annually until 2008 when the global financial crisis hit.

More competition

Under the FTA framework, China and six ASEAN nations - Brunei, the Philippines, Indonesia, Malaysia, Thailand and Singapore - will cut to zero the tariff on 90 percent of imported goods, or 7,000 product categories.

The other four ASEAN members will follow suit from 2015. "Industries in China and ASEAN complement each other. China imports resource-related products such as copper and rubber, and exports ships, steel, garments and ceramics," Zhang said.

There is significant concern, however, on both sides.

Even though more products will be imported at lower rates, the agreement will spark "fiercer competition in select industries", such as garments, furniture, footwear and automobiles, the Thai embassy's Chuwiruch said.

"Chinese manufacturers are good at cost control. The market share they (enterprises from ASEAN) now have will probably be eroded by powerful Chinese competitors. They will be phased out if they fail to become competitive quickly," he said.

In fact, some Indonesian enterprises have urged the government to delay the FTA's implementation, said Xu Ningning, deputy secretary-general, Chinese secretariat, at the China-ASEAN Business Council.

"Industry associations from Indonesia are strongly against the FTA, claiming it will push up the unemployment rate. They are suggesting that the government postpone implementation for another three to five years," said Xu.