China, Asean move closer to free trade

CEBU — The Association of Southeast Asian Nations (ASEAN) and China stepped closer to a free trade agreement with the signing yesterday of a much-awaited economic deal.

The accord, to take effect later this year, will liberalize the services sectors including tourism, telecommunications, energy and computers. ASEAN leaders pledged to abide by the provisions of the World Trade Organization.

The signing of the "Agreement on Trade and Services of China-ASEAN Free Trade Area" came as China girds for stronger economic clout in the region.

"This is a major result for our economic and trade cooperation," Chinese Premier Wen Jiabao said in a speech at the ASEAN’s annual summit here.

"We are friendly neighbors and also important strategic partners," he said.

ASEAN was to meet with the leaders of Japan and South Korea, who were to hold their own summit with China for the first time in two years, as well as emerging regional power India.

Wen said yesterday’s signing "has laid the foundation for the timely completion" of a free-trade pact scheduled for 2015.

"I hope this will bring the China-ASEAN win-win cooperation and common development to a higher level," he said.

Wen said tariffs for more than 7,000 items had been lowered and the bilateral China-ASEAN trade volume reached $160 billion in 2006 — an increase of 23.4 percent from the previous year.

"In the past year, cooperation in all fields has been carried out in a down-to-earth manner with obvious achievements," he said.

"China is very satisfied," he added.

"China consistently supports ASEAN in playing a leading role in East Asia cooperation. China is pleased with the substantive and fruitful progress in its cooperation with ASEAN across the board in the past year," Wen said.

Wen suggested that China and ASEAN strengthen their political and mutual trust by pushing their trade relations to a new level this year, particularly by encouraging ASEAN business people to seek more trade opportunity in China.

Countries have begun slashing tariffs on some products, though tough negotiations continue on loosening trade restrictions for finance and other service industries.

Faced with the growing influence of China as well as India, ASEAN on Saturday reaffirmed a pledge to create its own economic community with free movement of goods, services, investment and people by 2015.

Beijing said an effective China-ASEAN free trade area will also depend on stronger cooperation between the two parties’ inspection and quarantine authorities. Beijing offered to host the 1st China-ASEAN Ministerial Consultation on Quality Supervision, Inspection and Quarantine this year.

"China consistently supports ASEAN in playing a leading role in East Asia cooperation. China is pleased with the substantive and fruitful progress in its cooperation with ASEAN across the board in the past year," Wen said.

Far from reality?

Analysts are wondering how a region that runs from super-rich Brunei to impoverished Myanmar can create one of the world’s largest free-trade blocs by 2015.

The move would liberalize the movement of goods, services, investment and capital across a region of almost 570 million people, around one-tenth of the world’s population.

"ASEAN is committed to expanding its trade area to create one of the world’s greatest trading blocs by 2015," Mrs. Arroyo proclaimed when she opened the summit.

But the grouping’s members range from the modern, advanced island state of Singapore with a per capita GDP of some $28,600 to poor communist Laos, where per capita GDP is around $2,000.

Singapore’s elder statesman and one of ASEAN’s founders, Lee Kuan Yew, said in an interview last year: "To have one currency, a borderless community, I don’t see that, not yet."

Michael Clancy, an economist and CEO of the Philippine Business Leaders Forum, said ASEAN was moving very slowly towards economic integration.

"It has adopted the European model but unlike Europe, it does not see the same urgency at the rising economic might of China and globalization.

"ASEAN may boast a market of more than 550 million people but it is a market fragmented with huge disparities between member states," he told AFP.

China currently dwarfs ASEAN in terms of attracting foreign direct investment – $60 billion in 2005 compared to $30 billion for ASEAN, of which more than 60 percent went to Singapore.

Southeast Asia also has much work to do on harmonizing regulations.

"When it comes to rules and regulations, individual member countries still impose their own separate laws," Matthew Daley, president of the Manila-based US-ASEAN Business Council, said.

"China has a market of 1.2 billion and the same rules apply throughout."

Although ASEAN has been cutting tariffs, it is a slow process, one senior regional diplomat said.

The Economist Intelligence Unit, in a report for the ASEAN Business and Investment summit last December, stressed the need for further tariff cuts and unified customs rules within the bloc.

"If goods could move freely and tariff-free within the trade bloc as well as into markets further afield, then ASEAN would certainly become a more attractive place for firms to locate their factories," it said.

Haruhiko Kuroda, president of the Asian Development Bank, expressed optimism about the process.

He said ASEAN has already achieved "substantial economic integration" but a single currency was a long way off.

"It’s a natural development for ASEAN but it will not be easy. Such a move will be a major political challenge for ASEAN," Kuroda said.

Talk of monetary union has gone on for years and gained momentum following the 1997 Asian financial crisis, but it is no longer seen as a high priority within the bloc.

Michael Wootton, chairman of the Manila-based British Business Council, called in a recent interview with the Business Mirror for Southeast Asian leaders to show more dedication and commitment in their single market vision.

"It seems ASEAN is struggling to get its act together. There is not enough horsepower to get it running," Wootton said. - with Pia Lee-Brago AFP, AP