[A-List] China: flexing trade muscles

["Michael Keaney" <michael.keaney@xxxxxx>]

Asean and China sign deal for free trade area
By Amy Kazmin in Phnom Penh
Financial Times; Nov 05, 2002

South-east Asian nations and China yesterday signed a framework agreement to
establish a comprehensive free trade area by 2010 - a move that most
south-east Asian leaders hope will help the region profit from China's
rising economic power.

The deal, signed by leaders of China and the 10-member Association of
Southeast Asian Nations (Asean) in Phnom Penh, sets out a roadmap for
eliminating tariffs and non-tariff barriers on both goods and services to
create the world's largest free trade area of more than 1.7bn people.

The agreement provides for special reatment for the weakest Asean members -
Vietnam, Cambodia, Laos and Burma - which will have until 2015 to comply
with the deal.

As a a sign of goodwill, the deal provides for an "early harvest" of goods
that will have reduced tariffs within three years, mostly agricultural goods
such as fruits and vegetables, which Asean is eager to sell to China.

Negotiating the details, starting early next year, is likely to be tough and
painful. Some analysts are sceptical of the undertaking reaching its
ultimate aim, particularly given the deep reservations among some Asean
members. But Rodolfo Severino, Asean's secretary- general, said the region
had little choice but to strengthen economic ties with its huge neighbour.

"You can either close yourself off from China and crouch in fear or engage
more closely," he said. "Although some industries will get hurt, the overall
impact (of free trade) on both China and Asean would be beneficial."

China's accelerating growth, its seemingly unlimited manufacturing capacity,
and its ability to lure strong flows of foreign investment - apparently at
Asean's expense - has worried Asean countries since the economic crisis.

With the global textile quota regime ending in 2005, several Asean countries
face the imminent wipeout of their important textile industries as
manufacturers shift capacity to lower-cost China, while other goods face the
prospect of displacement by cheaper Chinese products in third country
markets.

Asean has tried to boost its appeal to investors by forging itself into a
single large market, but the half-hearted effort has focused largely on
tariff reductions, leaving many non-tariff barriers to the regional movement
of goods and services.

Analysts say Asean will be forced to accelerate its own efforts to remove
trade barriers and unify its markets.

Though Asean's trade with China has expanded significantly in the last
decade - rising to about $41bn in 2000, up from about $8bn in 1991, China
still absorbs just 3 per cent of the exports of the six the biggest Asean
economies and provides just 5 per cent of those economies' imports.

Call for halt to indiscriminate travel warnings

The Association of Southeast Asian Nations yesterday called on the
international community to stop "indiscriminately" advising people to avoid
travelling to south-east Asia, saying its members were working to ensure the
safety of visitors to the region, writes Amy Kazmin.

The Asean leaders said such warnings played into the hands of terrorists,
and should not be issued without evidence of possible terrorist attacks.

Since the Bali bombing, countries like Australia, Britain, Denmark and the
US have urged their citizens to exercise caution while travelling in
south-east Asia, where poorly trained, inefficient and often corrupt
security agencies are seen as leaving their countries vulnerable to attack.