Trade deal boosts Taiwan ties with China
By Robin Kwong in Taipei
Published: June 13 2010 20:14 | Last updated: June 13 2010 20:14
China and Taiwan have reached agreement on a wide-ranging trade deal that would be an important milestone for the warming of relations between the two cold war rivals.
The deal, called the Economic Co-operation Framework Agreement, or Ecfa, would also pave the way for Taiwan to join in the flurry of free trade deals being made by other Asian countries. China had previously blocked such efforts by Taiwan as it claims sovereignty over the democratically ruled island, but that opposition is expected to fade with the signing of the new agreement.
Without the opportunity to participate in trade deals, Ma Ying-jeou, Taiwan president, said last week that his country would be “sure to lag behind, to be forced out of the global economic sphere and to be marginalised”.
Negotiators from both sides said they had made key breakthroughs after a third round of talks held in Beijing on Sunday, particularly in the “early harvest list” of what sectors would be included in the initial round of opening. The contents of that list had been the main sticking point in previous negotiations.
The breakthroughs allow the deal to be formally signed at the next semi-annual talks between the two sides. It also secures the centrepiece of Mr Ma’s policy of rapprochement with China, which is by far Taiwan’s biggest export market and where more than 1m Taiwanese already live and work.
The agreement, however, is facing strong political opposition within Taiwan, amid fears that economic integration could lead to political reunification and that the economic benefits of the deal will not be as great as Mr Ma has indicated.
Ecfa was “an Eventual Colonisation Framework Agreement that would cause Taiwan to be dominated by China”, Lee Teng-hui, former president, who belongs to the ruling Kuomintang party, said on Saturday. Mr Lee also said he would participate in a protest rally on June 26 organised by the main opposition Democratic Progressive party that is expected to attract more than 100,000 people.
In an effort to pacify the political opposition in Taiwan, Beijing has agreed to do most of the opening during the first stages of Ecfa, which is designed to set up a framework for future economic liberalisation rather than be a comprehensive trade agreement.
China would lower tariffs or otherwise further open its markets to some 500 categories of goods and services from Taiwan, while Taipei would only open about 200 categories, the negotiators said on Sunday.
Mr Ma had earlier wrested a pledge from China to not ask Taiwan to open its markets to Chinese workers or agricultural goods, items that are particularly politically sensitive.
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星期六, 八月 07, 2010
CHINA SEA
South-east Asia: A wider radius
By Tim Johnston
Published: January 27 2010 22:55 | Last updated: January 27 2010 22:55
Chinese soldier at the border of China and Burma
When Laos won its bid to host last month’s South-East Asian Games, China offered to help the tiny nation by building a gleaming new venue on the outskirts of the capital Vientiane. The facility included a “natatorium” for swimming and a stadium for soccer. But for the Laotian government, such generosity would not come cheaply.
EDITOR’S CHOICE
Optimism defies gloom at Asia security meeting - Jun-06
Asean and China close to air travel deals - Feb-01
Biggest regional trade deal unveiled - Jan-01
Asean offers US meeting with Burma leader - Nov-13
Asia urges Obama to refocus on free trade - Nov-13
Asian leaders look to bolster regional ties - Oct-25
China’s Suzhou Industrial Park Overseas Investment Co was promised a 50-year lease on 1,600 hectares of land on the outskirts of the capital in return for building the venue. But an exceptional public backlash, fuelled by news that the Chinese intended to bring in 3,000 labourers to do the job, forced the government to cut the size of the concession to 200 hectares and promise to find extra land elsewhere to compensate for the loss.
The episode illustrates both the gravitational pull exerted by China’s economic and strategic might, drawing the nations of continental south-east Asia into a tighter orbit, and the counterveiling tensions that are becoming apparent as a result. Economic and diplomatic imperatives are starting to clash with nationalist fears of becoming – in many cases not for the first time – satellites of Beijing.
In Vietnam, Chinese plans to mine bauxite have run into heavy public criticism; in Cambodia, farmers and fishermen are worried that their land and water are being bought up; even in Burma, which has few other friends, China’s growing stature and self-confidence are being watched with a degree of trepidation.
Asean trade deficit with China
It is not just within the region that there are worries. For years, south-east Asia has provided a cheap and dependable reservoir of labour for international manufacturers. While western investors struggle to make a profit in China, the fat margins on Vietnamese T-shirts or Malaysian hard drives have boosted many a multinational’s balance sheet.
Free trade and rising tension
When the free-trade agreement between China and the 10 Association of South East Asian Nations came into force this year, pulling together 1.9bn people and eliminating tariffs on 90 per cent of products, it was greeted publicly as the dawn of a new era but privately with concern. Producers in Indonesia, Thailand and the Philippines fear markets will be swamped by competition from their larger partner, with which Asean no longer runs a trade surplus. However, a recent Standard Chartered Bank report shows that commodities exporters such as Indonesia and Vietnam are likely to benefit from China’s rise, unlike nations such as Thailand and Malaysia whose export profiles overlap substantially with China’s.
The threat to the delicate regional balance is being taken increasingly seriously both within Asia and outside, particularly given a flurry of recent arms purchases by Vietnam, Thailand and Burma: all countries where the military sit close to the centre of political power.
The fears on the streets of Asian capitals and in the boardrooms of the west have forced the governments of the region into a delicate balancing act. Given China’s sensitivity to criticism, they are having to tread a fine line between placating the concerns of their citizenry and keeping Beijing on side, while also reassuring investors. “There is a difference between what the politicians say in public and what the population feels,” says Malcolm Cook at the Lowy Institute for International Policy in Sydney.
In many ways, China’s proximity is a blessing for its neighbours. In the longer term, the rise of China as a power has given south-east Asia a renewed geostrategic relevance in keeping with its economic heft. The 10 members of the Association of South East Asian Nations comprise nearly 600m people and have a combined gross domestic product of some $1,500bn (€1,065bn, £925bn).
When Hillary Clinton stood on a podium at an Asean summit in Thailand last year and told her audience, “We’re back,” her immediate reference was to the wilderness years of US foreign policy under the administration of George W. Bush. But for many, America’s south-east Asia policy has been in a torpor for almost two decades. Jim Webb, Democratic chairman of the Senate subcommittee on east Asian and Pacific affairs, this week described the region as “a long-overlooked area of our foreign policy, rooted in the often contradictory standards we have used in the past and still use today in defining the underlying parameters of our relationships with different countries and different governmental systems”.
China’s willingness to spread its largesse without the troublesome conditions regarding human rights that Washington commonly appends to its assistance has also been welcomed in a region that has a rocky relationship with democracy. The result is a renewed competition for influence among the four regional powers: China, India, Japan and the US.
“Asean is going through one of its sweetest moments in its history because it has four suitors interested in it,” says Kishore Mahbubani, a professor at the National University of Singapore. “It could be a battlefield if the competition is military, but if it is economic it will be wonderful for south-east Asia.”
Today, the US is more willing than before to engage with the region regardless of democratic credentials – and countering the influence of China is high on the agenda, particularly in the case of Burma. Much of the enthusiasm of the Burmese junta in welcoming US overtures is driven, say analysts, by the generals’ desire to counterbalance the Chinese influence.
In the short term, proximity to Chinese economic success has taken some of the edge off the impact of the global financial crisis; the largesse of China’s domestic stimulus programme is also spilling over its southern border to help buoy the economies of the region.
The most obvious manifestation is the gaudy tide mark of casinos and golf courses that clings to the border through Burma, Laos and Vietnam: 24-hour neon-lit extravaganzas where tipsy Chinese apparatchiks rub shoulders with gangsters and entrepreneurs to risk tens of thousands of renminbi on the turn of a card.
In many towns along the China-Burma border, there is little to tell travellers they are not in China; shopkeepers prefer renminbi to the local currency, the mobile telephone service comes from China Telecom and, in at least one hotel, all the room numbers start with eight – a lucky number for Chinese gamblers.
Asean-countries-map
But the economic effect of the boom is less than it might seem. Although China is growing in importance as a trading partner, it still accounts for less than one-quarter of the consumption of emerging east Asia’s exports and for many countries it is a direct competitor. (Even the casinos are mostly Chinese-owned and most of the croupiers, bar staff and prostitutes are recruited from across the border.)
For much of south-east Asia, the benefits of China as a neighbour are tempered with foreboding that as its gravitational pull increases, it might ultimately suck in their economies and societies. “One of the fears is that China will take over the regional production chain: that it will swallow south-east Asia’s lunch,” says Mr Cook of the Lowy Institute.
It is a fear that is informed by the nations’ history. “They have a lot of baggage with China,” says Thitinan Pongsudhirak, director of the Institute of International and Security Studies in Bangkok. “The Communist party of China has been supportive of local communist insurgencies in almost all countries in the region.”
Anti-Chinese feeling has boiled over in a number of places in Asia-Pacific in the past 50 years: there were anti-Chinese riots in Burma in 1967; hundreds of thousands of ethnic Chinese fled Vietnam in the wake of the Sino-Vietnamese war in 1979; dozens of Chinese were killed in riots in Indonesia in 1969 and again in 1998; most recently, Chinese businesses were burnt to the ground in Papua New Guinea last year.
Indonesia has moved to delay the implementation of the China-Asean Free Trade Agreement in important areas, particularly steel and textiles, and in October accused China of dumping nails and imposed a punitive tariff of 145 per cent on its shipments.
For its part, Beijing is sensitive to the effect it is having on its neighbours and has tried to step lightly in the region. When the Chinese and Asean leaderships meet, careful choreography ensures they are portrayed as equals. China, on a charm offensive, last year offered a total of $25bn to Asean nations: $15bn in loans, including $6.7bn in preferential credit, as well as a $10bn investment fund.
Last month Xi Jinping, China’s vice-president and heir apparent to Hu Jintao, took a swing through Asia, stopping in Burma to reaffirm support for the regime and sign a slew of co-operation pacts, including a deal to build an oil and gas pipeline to the heart of China’s Yunnan province. In Cambodia, where China is the biggest foreign investor, Mr Xi signed $1.2bn worth of deals, just two days after the Cambodian authorities defied international pressure to deport 20 Uighur asylum-seekers whom China suspected of involvement in July’s unrest in the province of Xinjiang.
In spite of all this, the potential still exists for violent confrontation in south-east Asia, particularly over the Paracel and Spratly Islands, which are claimed in all or in part by Brunei, China, Taiwan, Malaysia, the Philippines and Vietnam.
Beijing has recently become more assertive in the South China Sea, which is believed to hold large oil and gas reserves. On new year’s eve it announced plans to make the Paracels a “top-class” tourist destination, provoking a sharp response from Vietnam. Last March it dispatched China Yuzheng 311, the largest ship in its fisheries protection fleet, to the South China Sea to fly the flag in response to incursions including a number of landings among the atolls of the Spratlys by officials from Malaysia.
There are also signs that south-east Asia is rearming. Vietnam recently announced that it would buy six Kilo-class submarines and 12 fighter jets from Russia, Burma has been shopping for Russian combat aircraft and Thailand has allocated money to re-equip its air force with new fighters.
Internally, south-east Asia is a potentially toxic mix of raw nationalism, resource competition and a kaleidoscope of political systems that, democracy aside, ranges from absolute monarchy in Brunei via military dictatorship in Burma to the communist regimes of Laos and Vietnam.
Both the rise of China and renewed US interest are altering the balance of an entente asiatique that has broadly held since the end of the Vietnam war. If the competition is economic it could, as Prof Mahbubani says, be good for the region, but there are no guarantees that rivalries can be contained within the economic sphere.
As Mr Thitinan in Bangkok puts it: “Some Chinese think their role in the past was as an imperial power in this region. This is their back yard and they see a pattern of the past coming true again.”
HANOI PERMITS PUBLIC DEFIANCE OF ITS NORTHERN NEIGHBOUR – UP TO A POINT
Vietnam has a long and confrontational history with its giant northern neighbour. So in 2008, when Aluminum Corporation of China put forward a plan to mine bauxite there, it struck a raw nerve.
A public argument erupted, startling observers of a country where most important policy decisions are brewed behind closed doors then rubber-stamped by the national congress.
Although the debate was couched in terms of potential environmental and social damage, for many it was rooted in Sinophobia forged by a millennium of Chinese rule – though it ended 1,000 years ago – and in a simmering territorial dispute over the Spratly and Paracel islands in the South China Sea. Vo Nguyen Giap, the 98-year-old architect of victories against the French and Americans between the 1950s and 1970s, who once accused the Chinese of tearing up infants during the abortive 1979 invasion, lent moral authority to opposition, calling for an environmental survey to be completed first. A final decision on the full project is pending, although a pilot is going ahead.
Why the Vietnamese government, which runs one of the world’s most restricted media environments, allowed such a potentially incendiary debate to take place in public is unclear. Some analysts say it allowed the authorities to hold up the deal without offending China, even if it was only to drive a harder bargain.
Whatever the reason, the authorities ensured the arguments focused on the environmental and social cost. Once it became clear dissenters were turning their criticism on China, they clamped down. Nguyen Hoang Hai, a prominent blogger and human rights activist, was sentenced to 30 months in prison in September for tax fraud. Another blogger, Nguyen Ngoc Nhu Quynh, was arrested in August and accused of “abusing democratic freedoms to infringe on the interests of the state”. Both had been vocal critics not only of the bauxite mine but also of government policy on the disputed groups of islands.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
By Tim Johnston
Published: January 27 2010 22:55 | Last updated: January 27 2010 22:55
Chinese soldier at the border of China and Burma
When Laos won its bid to host last month’s South-East Asian Games, China offered to help the tiny nation by building a gleaming new venue on the outskirts of the capital Vientiane. The facility included a “natatorium” for swimming and a stadium for soccer. But for the Laotian government, such generosity would not come cheaply.
EDITOR’S CHOICE
Optimism defies gloom at Asia security meeting - Jun-06
Asean and China close to air travel deals - Feb-01
Biggest regional trade deal unveiled - Jan-01
Asean offers US meeting with Burma leader - Nov-13
Asia urges Obama to refocus on free trade - Nov-13
Asian leaders look to bolster regional ties - Oct-25
China’s Suzhou Industrial Park Overseas Investment Co was promised a 50-year lease on 1,600 hectares of land on the outskirts of the capital in return for building the venue. But an exceptional public backlash, fuelled by news that the Chinese intended to bring in 3,000 labourers to do the job, forced the government to cut the size of the concession to 200 hectares and promise to find extra land elsewhere to compensate for the loss.
The episode illustrates both the gravitational pull exerted by China’s economic and strategic might, drawing the nations of continental south-east Asia into a tighter orbit, and the counterveiling tensions that are becoming apparent as a result. Economic and diplomatic imperatives are starting to clash with nationalist fears of becoming – in many cases not for the first time – satellites of Beijing.
In Vietnam, Chinese plans to mine bauxite have run into heavy public criticism; in Cambodia, farmers and fishermen are worried that their land and water are being bought up; even in Burma, which has few other friends, China’s growing stature and self-confidence are being watched with a degree of trepidation.
Asean trade deficit with China
It is not just within the region that there are worries. For years, south-east Asia has provided a cheap and dependable reservoir of labour for international manufacturers. While western investors struggle to make a profit in China, the fat margins on Vietnamese T-shirts or Malaysian hard drives have boosted many a multinational’s balance sheet.
Free trade and rising tension
When the free-trade agreement between China and the 10 Association of South East Asian Nations came into force this year, pulling together 1.9bn people and eliminating tariffs on 90 per cent of products, it was greeted publicly as the dawn of a new era but privately with concern. Producers in Indonesia, Thailand and the Philippines fear markets will be swamped by competition from their larger partner, with which Asean no longer runs a trade surplus. However, a recent Standard Chartered Bank report shows that commodities exporters such as Indonesia and Vietnam are likely to benefit from China’s rise, unlike nations such as Thailand and Malaysia whose export profiles overlap substantially with China’s.
The threat to the delicate regional balance is being taken increasingly seriously both within Asia and outside, particularly given a flurry of recent arms purchases by Vietnam, Thailand and Burma: all countries where the military sit close to the centre of political power.
The fears on the streets of Asian capitals and in the boardrooms of the west have forced the governments of the region into a delicate balancing act. Given China’s sensitivity to criticism, they are having to tread a fine line between placating the concerns of their citizenry and keeping Beijing on side, while also reassuring investors. “There is a difference between what the politicians say in public and what the population feels,” says Malcolm Cook at the Lowy Institute for International Policy in Sydney.
In many ways, China’s proximity is a blessing for its neighbours. In the longer term, the rise of China as a power has given south-east Asia a renewed geostrategic relevance in keeping with its economic heft. The 10 members of the Association of South East Asian Nations comprise nearly 600m people and have a combined gross domestic product of some $1,500bn (€1,065bn, £925bn).
When Hillary Clinton stood on a podium at an Asean summit in Thailand last year and told her audience, “We’re back,” her immediate reference was to the wilderness years of US foreign policy under the administration of George W. Bush. But for many, America’s south-east Asia policy has been in a torpor for almost two decades. Jim Webb, Democratic chairman of the Senate subcommittee on east Asian and Pacific affairs, this week described the region as “a long-overlooked area of our foreign policy, rooted in the often contradictory standards we have used in the past and still use today in defining the underlying parameters of our relationships with different countries and different governmental systems”.
China’s willingness to spread its largesse without the troublesome conditions regarding human rights that Washington commonly appends to its assistance has also been welcomed in a region that has a rocky relationship with democracy. The result is a renewed competition for influence among the four regional powers: China, India, Japan and the US.
“Asean is going through one of its sweetest moments in its history because it has four suitors interested in it,” says Kishore Mahbubani, a professor at the National University of Singapore. “It could be a battlefield if the competition is military, but if it is economic it will be wonderful for south-east Asia.”
Today, the US is more willing than before to engage with the region regardless of democratic credentials – and countering the influence of China is high on the agenda, particularly in the case of Burma. Much of the enthusiasm of the Burmese junta in welcoming US overtures is driven, say analysts, by the generals’ desire to counterbalance the Chinese influence.
In the short term, proximity to Chinese economic success has taken some of the edge off the impact of the global financial crisis; the largesse of China’s domestic stimulus programme is also spilling over its southern border to help buoy the economies of the region.
The most obvious manifestation is the gaudy tide mark of casinos and golf courses that clings to the border through Burma, Laos and Vietnam: 24-hour neon-lit extravaganzas where tipsy Chinese apparatchiks rub shoulders with gangsters and entrepreneurs to risk tens of thousands of renminbi on the turn of a card.
In many towns along the China-Burma border, there is little to tell travellers they are not in China; shopkeepers prefer renminbi to the local currency, the mobile telephone service comes from China Telecom and, in at least one hotel, all the room numbers start with eight – a lucky number for Chinese gamblers.
Asean-countries-map
But the economic effect of the boom is less than it might seem. Although China is growing in importance as a trading partner, it still accounts for less than one-quarter of the consumption of emerging east Asia’s exports and for many countries it is a direct competitor. (Even the casinos are mostly Chinese-owned and most of the croupiers, bar staff and prostitutes are recruited from across the border.)
For much of south-east Asia, the benefits of China as a neighbour are tempered with foreboding that as its gravitational pull increases, it might ultimately suck in their economies and societies. “One of the fears is that China will take over the regional production chain: that it will swallow south-east Asia’s lunch,” says Mr Cook of the Lowy Institute.
It is a fear that is informed by the nations’ history. “They have a lot of baggage with China,” says Thitinan Pongsudhirak, director of the Institute of International and Security Studies in Bangkok. “The Communist party of China has been supportive of local communist insurgencies in almost all countries in the region.”
Anti-Chinese feeling has boiled over in a number of places in Asia-Pacific in the past 50 years: there were anti-Chinese riots in Burma in 1967; hundreds of thousands of ethnic Chinese fled Vietnam in the wake of the Sino-Vietnamese war in 1979; dozens of Chinese were killed in riots in Indonesia in 1969 and again in 1998; most recently, Chinese businesses were burnt to the ground in Papua New Guinea last year.
Indonesia has moved to delay the implementation of the China-Asean Free Trade Agreement in important areas, particularly steel and textiles, and in October accused China of dumping nails and imposed a punitive tariff of 145 per cent on its shipments.
For its part, Beijing is sensitive to the effect it is having on its neighbours and has tried to step lightly in the region. When the Chinese and Asean leaderships meet, careful choreography ensures they are portrayed as equals. China, on a charm offensive, last year offered a total of $25bn to Asean nations: $15bn in loans, including $6.7bn in preferential credit, as well as a $10bn investment fund.
Last month Xi Jinping, China’s vice-president and heir apparent to Hu Jintao, took a swing through Asia, stopping in Burma to reaffirm support for the regime and sign a slew of co-operation pacts, including a deal to build an oil and gas pipeline to the heart of China’s Yunnan province. In Cambodia, where China is the biggest foreign investor, Mr Xi signed $1.2bn worth of deals, just two days after the Cambodian authorities defied international pressure to deport 20 Uighur asylum-seekers whom China suspected of involvement in July’s unrest in the province of Xinjiang.
In spite of all this, the potential still exists for violent confrontation in south-east Asia, particularly over the Paracel and Spratly Islands, which are claimed in all or in part by Brunei, China, Taiwan, Malaysia, the Philippines and Vietnam.
Beijing has recently become more assertive in the South China Sea, which is believed to hold large oil and gas reserves. On new year’s eve it announced plans to make the Paracels a “top-class” tourist destination, provoking a sharp response from Vietnam. Last March it dispatched China Yuzheng 311, the largest ship in its fisheries protection fleet, to the South China Sea to fly the flag in response to incursions including a number of landings among the atolls of the Spratlys by officials from Malaysia.
There are also signs that south-east Asia is rearming. Vietnam recently announced that it would buy six Kilo-class submarines and 12 fighter jets from Russia, Burma has been shopping for Russian combat aircraft and Thailand has allocated money to re-equip its air force with new fighters.
Internally, south-east Asia is a potentially toxic mix of raw nationalism, resource competition and a kaleidoscope of political systems that, democracy aside, ranges from absolute monarchy in Brunei via military dictatorship in Burma to the communist regimes of Laos and Vietnam.
Both the rise of China and renewed US interest are altering the balance of an entente asiatique that has broadly held since the end of the Vietnam war. If the competition is economic it could, as Prof Mahbubani says, be good for the region, but there are no guarantees that rivalries can be contained within the economic sphere.
As Mr Thitinan in Bangkok puts it: “Some Chinese think their role in the past was as an imperial power in this region. This is their back yard and they see a pattern of the past coming true again.”
HANOI PERMITS PUBLIC DEFIANCE OF ITS NORTHERN NEIGHBOUR – UP TO A POINT
Vietnam has a long and confrontational history with its giant northern neighbour. So in 2008, when Aluminum Corporation of China put forward a plan to mine bauxite there, it struck a raw nerve.
A public argument erupted, startling observers of a country where most important policy decisions are brewed behind closed doors then rubber-stamped by the national congress.
Although the debate was couched in terms of potential environmental and social damage, for many it was rooted in Sinophobia forged by a millennium of Chinese rule – though it ended 1,000 years ago – and in a simmering territorial dispute over the Spratly and Paracel islands in the South China Sea. Vo Nguyen Giap, the 98-year-old architect of victories against the French and Americans between the 1950s and 1970s, who once accused the Chinese of tearing up infants during the abortive 1979 invasion, lent moral authority to opposition, calling for an environmental survey to be completed first. A final decision on the full project is pending, although a pilot is going ahead.
Why the Vietnamese government, which runs one of the world’s most restricted media environments, allowed such a potentially incendiary debate to take place in public is unclear. Some analysts say it allowed the authorities to hold up the deal without offending China, even if it was only to drive a harder bargain.
Whatever the reason, the authorities ensured the arguments focused on the environmental and social cost. Once it became clear dissenters were turning their criticism on China, they clamped down. Nguyen Hoang Hai, a prominent blogger and human rights activist, was sentenced to 30 months in prison in September for tax fraud. Another blogger, Nguyen Ngoc Nhu Quynh, was arrested in August and accused of “abusing democratic freedoms to infringe on the interests of the state”. Both had been vocal critics not only of the bauxite mine but also of government policy on the disputed groups of islands.
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Biggest regional trade deal unveiled
By Kevin Brown in Singapore
Published: January 1 2010 16:35 | Last updated: January 1 2010 16:35
Containers waiting to be moved at Shanghai’s port
Containers wait to be moved at Shanghai’s port. The country stands to benefit from the deal with Asean as it seeks new markets for its goods
China and the 10-country Association of South East Asian Nations on Friday launched the final stage of the world’s biggest regional trade agreement, measured by population, in spite of Indonesia’s last-minute attempts at renegotiation.
The launch of the China-Asean Free Trade Agreement, which covers almost 1.9bn people, coincides with the implementation of a similar deal with Australia and New Zealand and a deepening of Asean’s own internal trading agreements.
Taken together with earlier deals with Japan, South Korea and India, the New Year day accord puts south-east Asia at the centre of a series of regional trade agreements extending from Beijing to Wellington and from New Delhi to Tokyo.
The China-Asean deal takes effect following the completion last summer of an agreement on investment rules, the last leg of an eight-year negotiating marathon that produced earlier agreements on goods and services.
Tariffs have been falling since 2005, with 90 per cent of goods due to be tariff free from Friday for China and the six core Asean members – Indonesia, the Philippines, Thailand, Singapore, Malaysia and Brunei. The target is 2015 for the other four – Laos, Cambodia, Burma and Vietnam.
mapHowever, the deal remains short of genuine free trade. The trade in goods agreement provides for each country to register hundreds of sensitive goods on which tariffs will continue to apply, in many cases until at least 2020.
Sensitive products include various types of electronic equipment, motor vehicles and automotive parts and chemicals, as well as items such as popcorn, snowboarding equipment and toilet paper.
The deal creates the third largest regional trading agreement by value after the European Union and the North American Free Trade Agreement, covering countries with mutual trade flows of $231bn in 2008 and combined gross domestic product of about $6,000bn, according to China’s ministry of commerce.
Jayant Menon, principal economist in the Asian Development Bank’s office of regional economic integration, said it could eventually lead to a wider trade agreement involving Asean, China, Japan, South Korea and the US – an idea floated in November by Yukio Hatoyama, the Japanese prime minister. “There is a lot of expectation of this FTA,” said Mr Menon.
Surin Pitsuwan, Asean’s secretary-general, said the agreement would allow the Asean countries to benefit more from the growth of China, which is already south-east Asia’s third largest trading partner, with about 11 per cent of total two-way trade. “When China grows, Asean has to ensure that we are on the supply line towards that growth,” he said.
Asean, which has a population of 580m and a combined economy bigger than that of India, has substantial reserves of resources such as oil, natural gas, coal and other commodities that China desperately needs to keep its factories operating.
China, which runs a substantial trade surplus with Asean, stands to benefit hugely from easier access to the bloc as it seeks new Asian markets for goods that can no longer be sold to consumers in Europe and North America.
“China and the Asean countries have many products that complement each other,” Zhang Kening, a director at the ministry of commerce, said earlier this week. “We can see great potential to adjust our trade patterns by importing more from Asean countries.”
The deal remains deeply controversial within the region, where suspicion of China’s economic clout and political ambitions vies with the desire to take advantage of the export potential of its fast-growing economy.
Indonesia has led opposition to the pact, seeking to delay its implementation because of fears that sectors from steel and petrochemicals to cosmetics and herbal medicines would face overwhelming competition from cheap Chinese imports.
Jakarta has announced a review of the impact of the deal, but drew back from tougher action after the industry minister told parliament his attempts to renegotiate elements of the deal with the other 10 countries had failed.
The co-ordinating minister for the economy warned on Wednesday that there could still be clashes between Jakarta and Beijing. “When a nation has cheap products, we must see whether there’s unfair trade in it, such as unfair subsidies,” he said. “We must be proactive.”
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FOOTNOTE:
ASEAN-6 Achieves Zero Tariffs
ASEAN Secretariat, 31 December 2009
Starting the first day of 2010, Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand can import and export almost all goods across their borders at no tariff.
As of 1 January, for ASEAN-6 an additional 7,881 tariff lines will come down to zero tariffs, bringing the total tariff lines traded under the Common Effective Preferential Tariffs for ASEAN Free Trade Area (CEPT-AFTA) to 54,457 or 99.11%. Additionally, with the reduction, the average tariff rate for these countries is expected to further decrease from 0.79% in 2009 to just 0.05% in 2010. In 2008, intra-ASEAN import value of commodities for these 7,881 tariff lines amounted to US$ 22.66 billion, or 11.84% of ASEAN-6 import value within ASEAN.
The tariff lines include final consumer products such as air conditioners; chilli, fish and soya sauces; as well as intermediate materials such as motorcycle components and motor car cylinders. Other products include iron and steel, plastics, machinery and mechanical appliances, chemicals, prepared foodstuff, paper, cement, ceramic and glass sectors.
The elimination of tariffs by ASEAN-6 underscores ASEAN’s commitment to dismantle tariffs and keep intra-ASEAN trade open. It will also serve as a catalyst for the development of the single market and production base projected by the ASEAN Economic Community (AEC) Blueprint.
The actual impact and how much this final instalment will be translated as savings for consumers will depend on the market dynamics of the respective ASEAN-6 countries. The Secretary-General of ASEAN, Dr Surin Pitsuwan, said that “We sincerely hope that all parties will act to ensure that the man on the street will benefit from these reductions in tariffs.”
As for the business community, especially the downstream producers, Dr Surin said that they also stand to gain. “Lower cost of inputs will allow the business community a wider choice of goods, and in the process, they will move towards becoming more competitive globally, as envisaged in the AEC Blueprint,” he added.
The CEPT-AFTA covers the whole range of products traded by the ASEAN Member States and provides for the gradual reduction in tariffs of these products, which has been ongoing since 1993. Under the CEPT-AFTA schedule for tariff reduction, each ASEAN Member State is allowed to place their products in the normal track, where the commitment is for the tariffs to be reduced to zero by 2010 for ASEAN-6 and 2015 for the remaining four countries, namely Cambodia, Lao PDR, Myanmar and Viet Nam. In 2010, these countries will also see tariff reductions under the CEPT-AFTA commitments to 5%, where the average tariff rate will decrease from 3% in 2009 to 2.61%.
Under the CEPT-AFTA, agricultural products such as tobacco, coffee, live animals and animal products, which come under the Sensitive List (SL), will have their tariffs reduced to 5% on 2010 and to zero tariff by 2015. The Highly Sensitive List (HSL), comprising rice, will have their tariffs capped on a specified date. As for the General Exclusion List (GEL), the tariffs will remain based on factors such as national security and morals/health/aesthetic/archaeological grounds (e.g.: weapons and opium). As of today, 487 tariff lines or 0.89% of tariff lines for ASEAN-6 still remain in the SL, HSL and GEL categories.
Besides tariff liberalisation, ASEAN is also embarking on parallel initiatives in trade facilitation to complement tariff reduction. ASEAN is also actively working on formulating streamlined and simplified customs procedures for clearance of goods, eliminating non-tariff measures, developing the ASEAN Single Window and the ASEAN Trade Repository, improving investment protection, providing for dispute settlement and better Intellectual Property Rights regime and removing the obstacles hindering the movement of professional and skilled workers.
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