logo logo

China and ASEAN launch world’s 3rd biggest trade zone

Reuters | 1 Jan 2010

FACTBOX - China and ASEAN to launch world’s 3rd biggest trade zone

JAKARTA (Reuters) — China and the 10-member Association of South East Asian Nations (ASEAN) are poised to launch a free trade agreement on Friday, forming an economic bloc of 1.9 billion people with trade worth around $200 billion.

China sees the agreement as a way of securing supplies of raw materials, while countries in ASEAN — an eclectic grouping ranging from highly advanced Singapore to Laos, a poor landlocked communist state — see opportunities in China’s huge market.

Here is some background on the trade agreement:

HISTORY: China and ASEAN signed an initial FTA in November 2002. Some tariffs have been reduced since 2005 and agreements on goods and services, the first two stages, were concluded in 2007, while a deal on investment was completed in August this year.

TARIFFS: Tariffs on 90 percent of goods traded with China to be eliminated by 2010 for Indonesia, Brunei, Malaysia, the Philippines, Singapore and Thailand, and by 2015 for Laos, Vietnam, Cambodia and Myanmar.

The remaining 10 percent, including on textiles and some electronics, are deemed sensitive and will be lowered more slowly.

A Chinese official said when the FTA is fully implemented it will impose zero tariffs on about 7,000 categories of goods.

SERVICES: Preferential access will be given for companies from ASEAN into China’s services market, and vice versa, in areas such as business services and tourism.

TRADE: China-ASEAN trade is targeted to hit $200 billion by 2010, up from $192.6 billion in 2008 and $113 billion in 2005. This will make it the third-largest free trade zone in trade volume after the European Economic Area and the North American Free Trade Area.

NUMBER OF PEOPLE: 560 million people in ASEAN and 1.3 billion in China.

 ASEAN is expected to benefit from increased exports of raw materials to China, but Southeast Asian consumer goods and car parts makers could lose out to cheaper China imports.
 Food and beverages, and products such as jewellery and cosmetics in countries such as Thailand are expected to benefit from higher Chinese demand.
 Southeast Asian companies may also benefit from cheaper raw and intermediate goods from China — for example, clothing firms will now have access to cheaper material.
 Manufacturers of goods such as textiles, footwear and steel in countries such as Thailand, Vietnam, Cambodia and Indonesia appear vulnerable to cheap Chinese imports.
 Indonesia previously said it might seek to delay the deal, but media reports indicate Southeast Asia’s biggest economy will instead instigate a review after proposals to postpone 228 tariff lines in sectors such as steel, electronics and petrochemicals.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Sources: Reuters, ASEAN, China News Service, The Jakarta Post

(Reporting by Ed Davies and Sunanda Creagh in Jakarta, Orathai Sriring in Bangkok, and Chris Buckley and Lucy Hornby in Beijing; Writing by Ed Davies, Editing by Dean Yates)

 source: Reuters