By Xu Lingui
MANILA, Dec. 28 (Xinhua) -- A free trade agreement (FTA) between China and the bloc of ten Southeast Asian countries, the first of its kind, will serve as a stepping stone for the diverse Asian community to further integrate and might give birth to a broader multilateralized trading pact across the region, said a senior economist of the Philippines-based Asian Development Bank.
"There is a lot of expectation of this FTA," Jayant Menon, principal economist of ADB's Office of Regional Economic Integration, told Xinhua in an interview on the eve of the establishment of the China-ASEAN (the Association of Southeast Asian Nations) free trade area on Jan. 1, 2010.
"Big bang" effects can't be expected because China and the ASEAN have come a long way in the past eight years and they are quite open economies already, Menon said.
"But this FTA can be seen as a stepping-stone towards a broader agreement, and eventually, hopefully, a multilateralized trading arrangement whereby the achievements are offered to non-members in a non-discriminate manner," he added.
Menon said other regional economic powers such as Japan, South Korea and the United States are expected to join once this FTA expands.
The China-ASEAN free trade area covered a population of 1.9 billion and a combined gross domestic product close to 6 trillion U.S. dollars. It is the world's largest trading bloc in terms of population covered and the third largest in terms of trading volume.
Trade between China and ASEAN countries have picked up rapidly in the past decade. Official statistics indicated that trade between China and the ASEAN bloc expanded to a total worth of 231.1 billion U.S. dollars in 2008, from 19.5 billion U.S. dollars in 1995. Trade has especially doubled in the past four years.
Agreements on the trade of goods and services and a pact to encourage inter-regional investment have been separately signed. The slash of duties has begun since 2005 and more than 7,000 trading items covered by the agreements will be tariff-free products by Jan. 1, 2010.
But Menon said more substantial changes would come from investment liberalization.
"The real benefits would come from investment more so than trade," he said. "If negotiators can complete the investment agreement rather quickly and make it clean, open agreements, there could be quite significant benefits. We could improve the investment inflow from outside as well as within the region."
Menon said China now is already a big investor in the region and there is a lot of room for allocation of investments in the region to facilitate the type of product fragmentation network trade that has already taken place.
PAINS, GAINS
Menon said people can't expect profits coming from this FTA too soon and actually in the short run, there might a little bit of pain of adjustment costs for some countries joining the FTA and there will also be some resistance.
The economist cited the recent example of Indonesian industries proposing the government to delay the implementation of the FTA, a move to protect the country's fragile textile, farming, steel sectors.
The Jakarta Post reported that Indonesian Textile Association has proposed a postponement for 94 textile and garment products being included in the zero-tariff products covered by the China-ASEAN FTA.
But Menon said gains will come in the long run and for instance a lot of farming communities could benefit by specializing in different commodities and doing two-way trade of commodities within agriculture. He said such gains have shown in the mutually beneficial farm trade between China and Thailand covered by the free trade agreement.
EU-STYLE BLOC STILL A LONG SHOT
Menon said it might take at least three generations before an integrated Asia moving close to a European Union style economic union.
"With the EU, we must always remind ourselves that it takes a long time for them to reach the point that they have arrived at today," Menon said. "In some senses, there are tendencies for them to eventually integrate because they have so much in common and there are so many economic forces pushing them together."
"But the situation in Asia is quite different and as there is too much diversity to easily form a sort of deep integration agreement like an economic union," he added.
Countries like Indonesia and Singapore and China are totally different economies in terms of population basis, economic structures, Menon said, adding that for example, labor mobility an important ingredient to any sort of economic union -- is a complicated issue in Asia and it is very hard to see it been addressed in any time soon.
He said moving towards the EU-style arrangement also has to do with the competitiveness of member countries. And unlike the EU where complementarities exist, Asian countries have similar capital and labor prices and it would take a long time for this to be changed.
Menon said that explains why the trade of intermediate goods, rather than final goods, dominates China-ASEAN trade despite the sharp increase in figures over the past few years.
An ADB study shows that 60 percent of the manufactured goods in the region eventually entered the Western market and China's role as an assembling hub for the region's goods has not changed.
Menon said as ASEAN countries developed and as China gets richer, there is still enough room for the increase of regional demand to sustain some of the growth, but substantive changes won't take place too soon. He said China can not move up the product value chain overnight to manufacturing hi-tech final goods that will meet the region's demands.
"We can't be too impatient about this type of integration process. It takes a very long time," Menon said.
RMB-dominated transaction a trend in ASEAN-China FTA construction
BANGKOK, Dec. 28 (Xinhua) -- To realize the Renminbi (RMB)-dominated transaction and trade settlement has become an ever-stronger request in Thailand and the ASEAN area as the ASEAN-China Free Trade Area will fully come into force on January 1, 2010, said Wichai Kiatrengsuk, vice president of the Bangkok Bank and manager of the bank's Chinese Relations Department.
"As the robust development of Sino-Thai trade and investment, there has been an increasing stronger request among our clients that the trade be directly settled between the Chinese currency and Thai baht, without the involvement of U.S. dollars. Many clients from other Southeast Asian countries have made the similar appeal -- the RMB's direct settlement with their local currencies," said Wichai after a ceremony by the Bangkok Bank to mark the launch of Thailand's first credit card that adopts the standard of China Union Pay (CUP), the largest credit card provider in China. Full story
Indonesia forms joint team to deal with ASEAN-China FTA issues
JAKARTA, Dec. 28 (Xinhua) -- Indonesia's Chamber of Commerce and Industry and the association of businessmen have formed a joint team to deal with the issues of the ASEAN-China free trade agreement (ACFTA), the Indonesia Daily quoted an official as saying on Monday.
"The joint team is directly chaired by the Economy Coordinating Minister Hatta Rajasa, Deputy Economy Coordinating Minister Edy Putra, Deputy Minister of Trade Mahendra Siregar and concerned ministerial officials," Deputy Secretary General of the Indonesian Businessmen Association Franky Sibarani was quoted by the report as saying. Full story
Commerce leader: Malaysian businessmen to seek opportunities from China-ASEAN FTA
KUALA LUMPUR, Dec. 28 (Xinhua) -- Malaysia's Associated Chinese Chambers of Commerce and Industry (ACCCIM) will explore opportunities in China following the full implementation of the China-ASEAN Free Trade Agreement (FTA).
Its Executive Adviser Soong Siew Hoong told Xinhua here on Monday that Malaysian businessmen should actively carry out pragmatic actions to find rooms for future development and expansion, while strengthening the business ties with China. Full story
Chinese motorcycle company operating in Vietnam eyes opportunities in China-ASEAN FTA
HANOI, Dec. 25 (Xinhua) -- In a motorcycle shop on the Tay Son Street in Vietnamese capital city of Hanoi, two young attendants were busy introducing motorcycles with the logo of Chinese brand Lifan to customers.
The motorcycles sold in this shop were all produced in an industrial zone in Hung Yen province thirty kilometers away from Hanoi. Eyeing the market opportunities in Vietnam, Chinese motorcycle company Lifan established a production base in Hung Yenseven years ago. It has now grown into an industrial zone comprising of 11 factories making motorcycle parts and assembling motorcycles. Full story
Malaysian Tourism Ministry bears deep hope in China-ASEAN FTA
KUALA LUMPUR, Dec. 25 (Xinhua) -- The Malaysian Tourism Ministry firmly believes that the full implementation of the China-ASEAN Free Trade Agreement (FTA) will benefit friends from China and ASEAN.
Malaysian Tourism Minister Ng Yen Yen told Xinhua here recently that she bore great expectations of the future and prospects of the free trade area. Full story
Interview: China-ASEAN FTA to make regional trade leap
KUALA LUMPUR, Dec. 24 (Xinhua) -- The establishment of China-ASEAN Free Trade Area (FTA) is expected to help the bilateral trade between the two sides grow by leaps and bounds, a leading Malaysian businessman said here recently.
The FTA will also promote the economic integration in the region to go forward rapidly, said Yong Ah Pwi, President of Malaysia-China Chamber of Commerce, in an interview with Xinhua. Full story
ASEAN-China Free Trade Area benefits both sides
HUA HIN, Thailand, Oct. 24 (Xinhua) -- The ASEAN-China Free Trade Area (ACFTA) that takes effect early next year is well on track, with great potentials to produce huge benefits to both sides.
During the on-gong 15th ASEAN Summit and Related Summits, ASEAN leaders said Saturday that the effective implementation of the major milestone in FTA brings ASEAN closer to the ASEAN Economic Community where free flow of goods is one of its major objectives. Full story
ASEAN looks forward to realization of ASEAN-China Free Trade Area
HUA HIN, Thailand, Oct. 24 (Xinhua) -- The 15th Association of Southeast Asian Nations Summit issued a Chairman's Statement Saturday, saying the bloc looked forward to the realization of the ASEAN-China Free Trade Area (ACFTA) on January 1, 2010.
"The leaders were pleased to note the progress in the implementation of the ASEAN-China Trade in Goods Agreement and looked forward to the realization of the ASEAN-China Free Trade Area (ACFTA) on January 1, 2010 when ASEAN 6 and China eliminates tariffs on products in their Normal Track," said the Statement. Full story
