China-ASEAN
In November 2001, China and the 10-member Association of South East Asia Nations (ASEAN) began negotiations to set up a free trade area.
One year later, a framework agreement for the planned FTA was signed. The FTA, a zero-tariff market of more than 1.7 billion people, has been targeted to come into force in 2010 for the six original ASEAN members (Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) and in 2015 for the other four (Burma, Cambodia, Laos and Vietnam). Implementation of the framework agreement would occur in stages. For instance:
An early harvest programme covering trade in goods came into force in July 2005. Negotiations on a dispute settlement mechanism were finalised in 2004 for implementation in 2005. Negotiations on trade in services were completed and an agreement signed in January 2007, for implementation in July 2007. The China-ASEAN investment agreement was to be signed at the ASEAN Summit in Thailand in December 2008.
Separately, China signed a bilateral FTA with ASEAN member Singapore in October 2008. Beijing has also been hammering out a lot of separate, smaller and more specific bilateral deals with ASEAN neighbours, such as the infamous Philippine-China investment agreements (the subject of huge corruption scandals in the Philippines in 2007), harmonised food safety standards with Thailand (to facilitate agricultural trade) and numerous arrangements with the Mekong Delta countries.
Politics around the China-ASEAN deal are delicate as ASEAN states want to avoid China’s domination and yet build their economies by interacting with China, especially given the slowdown in demand from the US and European markets. At the same time, China is moving up the manufacturing value-chain losing need for primary products that ASEAN states produce while its search for raw materials such as minerals and oil has rapidly gone global. Finally, the coming into force of full-scale zero-tariff farm trade with China from 2010 onward has raised many fears in the ASEAN world.
(Picture: Workers unions in Indonesia protest against the ASEAN-China FTA)
last update: May 2012
In the latest and most authoritative warning about a new region-wide free-trade agreement with China, an executive with the state social security provider PT Jamsostek predicts that as many to two million Indonesians will be laid off because their firms can’t outperform their Chinese rivals.
Thousands of workers from across West Java staged a rally in Bandung on Wednesday, demanding the implementation of the ASEAN-China Free Trade Agreement be postponed in Indonesia.
Indonesia’s coordinating minister for the economy, Hatta Rajasa, said on Monday that a letter had been sent to ASEAN seeking "further discussion" of its obligation to reduce tariffs.
China sees the agreement as a way of securing supplies of raw materials, while countries in ASEAN see opportunities in China’s huge market.
A free trade agreement between China and its Southeast Asian neighbours, which takes full effect from January 1, will help China fill its urgent need for natural resources, a senior commerce official said on Tuesday.
When the clock strikes midnight on New Year’s Eve, China and 10 Southeast Asian nations will usher in the world’s third-largest free trade area. While many industries are eager for tariffs to fall on everything from textiles and rubber to vegetable oils and steel, a few are nervously waiting to see whether the agreement will mean boom or bust for their businesses.
Indonesian cosmetics and herbal medicine producers are calling for an exemption for their products from the Asean-China free trade agreement. “It is not because we are not ready. The question is our products are even now having to compete with illegal Chinese imports which are usually cheaper but of questionable quality.”
While local industries are seeking a delay in the full implementation of the free trade agreement (FRA) with China, to start in January, China says this stands little chance of succeeding.
Indonesian ministers will meet on Friday to discuss a proposal to renegotiate the Asean-China free trade agreement under a "special status" they will request from ASEAN.
The FTA will allow thousands of products from China to enter Indonesia with no import duties. Millions of workers in the manufacturing sector may be affected.
