The Hot Zone
China's newly announced air defense identification zone over the East China Sea aims to shore up national security
Current Issue
· Table of Contents
· Editor's Desk
· Previous Issues
· Subscribe to Mag
Subscribe Now >>
Expert's View
Market Watch
North American Report
Government Documents
Expat's Eye
Photo Gallery
Reader's Service
Learning with
'Beijing Review'
E-mail us
RSS Feeds
PDF Edition
Reader's Letters
Make Beijing Review your homepage
Hot Links

cheap eyeglasses
Market Avenue

Print Edition> World
UPDATED: January 18, 2010 NO. 3 JANUARY 21, 2010
Cashing In on Free Trade



The China-ASEAN Free Trade Area (CAFTA) is, of course, not a zero-sum game. Responding to concerns over escalating competition associated with free trade, ASEAN Secretary General Surin Pitsuwan said in a press release issued at ASEAN's official website on January 7 that CAFTA would help energize the economies of all parties by creating more opportunities for regional trade and investment. Edited excerpts follow:

CAFTA aims to bring the countrieas together in a mutually dependent and beneficial relationship in an increasingly borderless global environment. It signifies the beginning of a deeper dimension in ASEAN-China trade relations. Its establishment also comes at an opportune time to boost regional recovery from the global economic crisis. China's phenomenal growth has had positive effects on ASEAN's own expansion.


ONWARD AND UPWARD: An exhibitor showcases Burmese handicrafts at a China-Myanmar border trade fair in Muse, Myanmar, on December 18, 2008 (LIN YIGUANG) 

China's economic growth and strong investment expansion are energizing the region and providing ASEAN with an expanding, diversified market in an environment of slowing growth in its traditional partners. The completed CAFTA gives ASEAN a strong edge in terms of lower tariffs and more open services opportunities coupled with investment expansion.

ASEAN has the capacity to be the supply chain for China's booming economy, which has been propelled by the gradual trade liberalization under CAFTA. The landscape of trade between ASEAN and China has changed in the last decade due also to fall in tariffs.

Records show trade between ASEAN and China grew by an average of more than 20 percent annually between 2003 and 2008, mainly in electrical and electronic products, fuel and fuel products, plastics, rubber and vegetable oils. Electrical and electronic products accounted for more than one third of ASEAN exports to China, while machinery and equipment were close to one fifth of the total.

In addition, CAFTA positions ASEAN to take advantage of the next phase of China's growth, as its expanding middle-class consumption trends are expected to predicate the next wave of economic expansion. ASEAN also needs to organize and prepare itself in terms of a stable and hospitable investment climate, a well trained work force and improved logistics to take advantage of the new investment prospects arising from this next wave of China's expansion.

Although it is generally acknowledged certain industries will face competitive pressures in the transition of CAFTA, overall, the benefits from the growing trade between ASEAN and China would be translated into more jobs, more spending power and greater synergies between the two regions.

Greater governmental efforts may need to be expended to strengthen the capacity of domestic firms to compete, but this should be short-term, and does not remove the incentive to innovate and cut costs. There are also built-in mechanisms in CAFTA, such as safeguard actions in the face of serious injury to domestic industries. CAFTA has also been implemented gradually, and products located on the sensitive lists are only slated for later liberalization.

The momentum of free trade will provide greater encouragement for greater Chinese investment into ASEAN, particularly in transport and infrastructure. China has recently launched a $10-billion infrastructure investment fund to improve road, railway, airlines and information telecommunications links between China and ASEAN.

It is also providing a $15-billion credit facility to promote regional integration and regional connectivity. With China's global investment strategy just beginning to take off—and judging from the $52.1 billion in FDI (foreign direct investment) outflows from China in 2008—there will certainly be more investments along the value chain in ASEAN.

There are adjustment pains, but weighing in the gains CAFTA is necessary for ASEAN to learn to weather competitive pressures so as to survive in an increasingly difficult, global economic environment.

If history is to judge CAFTA, its capacity to add greater value to all parties' economic development will ultimately weigh in its favor.

Top Story
-Protecting Ocean Rights
-Partners in Defense
-Fighting HIV+'s Stigma
-HIV: Privacy VS. Protection
-Setting the Tone
Most Popular
About BEIJINGREVIEW | About beijingreview.com | Rss Feeds | Contact us | Advertising | Subscribe & Service | Make Beijing Review your homepage
Copyright Beijing Review All right reserved