EHP reaps fruit of its success
China and the Association of Southeast Asian Nations (ASEAN) are making encouraging progress with the early harvest programme (EHP), which the two economies launched in January 2004.
"The programme is moving on successfully and bilateral trade volumes are expected to increase still further," said Fan Ying, a trade expert at the Foreign Affairs College.
Since EHP was implemented between China and ASEAN members, bilateral agricultural trade has made considerable progress, statistics from China’s customs reveal .
The agricultural products China exported to ASEAN totalled US$2.12 billion in 2004, down 9.8 per cent from the year before, while the country’s imports rose nearly 41 per cent to US$ 3.72 billion.
China exported fruits valued at US$76 million to ASEAN countries in the first two months of this year, reflecting an increase of nearly 34 per cent from last year.
The country imported fruits worth around US$51 million from ASEAN, up 15.9 per cent from last year.
Although the growth rate of China’s fruit exports far surpassed that of the country’s imports this year, Fan is not worried about a possible trade imbalance between the two economies.
"The apparent imbalance resulted from seasonal fluctuations as most of ASEAN’s fruit is harvested in the summer," she explained, adding that the gap would likely be made up by July or August this year.
Despite the increase in imports, many agricultural products from ASEAN, such as mangoes from Thailand, bananas from the Philippines and papaws from Malaysia, are still rarely found in Chinese cities, particularly in the north.
The Chinese market is so large that ASEAN fruit producers have had to increase production to meet demand said Fan.
Experts believed that ASEAN countries would export more to China following improvements in production capability and the further reduction of import duties.
In fact, it is easier to find vegetables and fruits that are from China in the markets of ASEAN countries, because the emerging market for Chinese traders is not as large as their own domestic market and is easier to deal with.
Under EHP, China first agreed to allow ASEAN members to taste "early harvest" by reducing tariffs on some 560 agricultural imports from ASEAN from the beginning of last year.
In June 2004, Singapore joined China and Thailand in agreeing to reduce tariffs on vegetable and fruit imports to zero.
Tariffs on fruit trade have also dropped to zero between China and Malaysia, Indonesia, Philippines and Brunei since the beginning of this year.
According to An Min, China’s vice-minister of commerce, tariff rates on all these agricultural products would be totally removed by 2006.
"The early harvest programme, which differs from the format of North American Free Trade Agreement and the European Union, has emerged as a feasible model for economic co-operation between developing countries," Fan said.
It has paved the way for future negotiations, the expert said.
Both China and ASEAN benefit greatly from the free trade of agricultural products, as their production in this sector complements each other.
However, the smooth implementation of EHP is just the first phase of efforts toward a free trade agreement (FTA) between China and ASEAN members.
Following EHP, China has started talks with ASEAN on the free trade of industrial goods.
"It is tough for them to make progress as competition in that field is much more severe than in agriculture," Fan said.
For example, some manufacturing industries from ASEAN countries may be afraid that low-priced Chinese products will cut into their business.
The two sides are most at odds when it comes to the service and investment sectors.
Governments on both sides are determined to protect their domestic industries as few of these 11 countries are strong enough in these sectors.
"However, EHP has laid a solid foundation for the overall FTA between them," Fan said.
The whole package of FTA between the two sides is expected to be established by 2010.
FTA between China and ASEAN continues to follow a basic principle— to implement when the time is right, while conducting negotiations for the sectors left.
Fan said this format provided a model for other countries.
"We do not need to start with agriculture for every FTA but talks are supposed to carried out from the easy to the difficult," she said.
Such an approach is expected to bring about realistic benefits to both sides in advance of the implementation of the whole agreement.
Jin Ming, an expert from the Chinese Academy of International Trade and Economic Co-operation, echoed Fan by saying that China’s FTA with ASEAN members will provide an example to other countries which were engaging in, or expected to start, negotiations with China.
An agreement similar to EHP was signed between China and Pakistan when China’s Premier Wen Jiabao visited the South Asia country earlier this month.
"An official from New Zealand’s Embassy in China has expressed to me their interests in this form of implementation," Fan added.
China is currently pursuing the establishment of FTAs with a number of surrounding countries and trading partners. In total, it has launched talks with over 20 countries around the world.
Besides the implementation of EHP with ASEAN, China’s talks with Chile, Australia and the Gulf Co-operation Council (GCC) have also entered a substantive stage.
According to a survey conducted by the Asia News Network (ANN), a news alliance of 14 major English-language publications from Asian countries, most Asian countries have sought to create bilateral and regional free trade agreements in the past several years in a bid to promote the free flow of goods, services and investment across borders.
Experts said these countries worked hard to establish free trade investment facilitation agreements as a result of their impatience with the slow-moving progress of the World Trade Organization’s (WTO) negotiations.
They prefer to implement FTAs as they have noticed the success of the North American Free Trade Agreement and the European Union.As a result, the number of FTA’s has increased from 79 in 1995 to over 200 in 2004.
"Bilateral and regional trade agreements are easier for governments to make, compared to the difficulty of reaching a consensus among all WTO members," Bin Jiancheng, a scholar of Jiangxi University of Finance and Economics said in an essay.
In any case, he said, they hope to improve their own economies through acquiring access to the material resources and target markets.
The ANN survey showed that some countries also see an FTA as a means to improve structural reform and deregulation in domestic markets, especially after the financial crisis of 1997.
Besides, governments expect to achieve more with FTAs than just tariff reductions. They are looking forward to reaching agreements on a number of issues such as intellectual property rights protection, the movement of labour and human rights and environmental protection.