ASEAN-China Economic Relations

6. ASEAN-China Free Trade Agreement: Negotiation, Implementation and Prospect

86 Lu Bo 6 6 ASEAN-China Free Trade Agreement: Negotiation, Implementation and Prospect Lu Bo FTA is the abbreviation for Free Trade Agreement or Free Trade Area when it is referred to regional cooperation, and it is more popularly used than PTA (preferential trade agreement) or RTA (regional trading agreement). FTA can be seen as a part of the WTO system for free trade and comprehensive economic cooperation; it is rule-based and member-driven. All decisions should be made by consensus and the agreements are the outcome of negotiations between or among members.1 The one-vote-down principle of WTO decisions is also applied to FTAs. This makes the negotiation slow but it allows for different ideas and protects the interests of the small or weak economies. As an FTA is much smaller with fewer members, it is much easier to make a decision than at the WTO. ASEAN-CHINA FTA: FROM PROPOSAL TO FRAMEWORK Relatively speaking, Asia paid attention to FTA later than other areas in the world, especially Europe and America. In 1990, the Prime Minister of Malaysia, Mahathir Mohamad proposed to establish a regional cooperation group named “East Asia Economic Group” (EAEG) consisting of ASEAN, ０６ ＡＳＥＡＮ－Ｃｈｉｎａ ＥＲ Ｃｈ ６ 11/7/06, 4:40 PM 86 FTA: Negotiation, Implementation and Prospect 87 China, Japan and Korea (South Korea, or Republic of Korea), but the proposal was not accepted mainly because it was opposed by the United States of America, one of the initiators of APEC.2 However, the situation changed a year later after the United States initiated in 1991 to establish the North America Free Trade Area (NAFTA) with Canada and Mexico. ASEAN quickly responded by establishing the ASEAN Free Trade Area (AFTA) in 1992 as a qualitative leap in the history of ASEAN economic cooperation. In 1992, Singapore, the most active free trade promoter, successfully encouraged Thailand to initiate the AFTA3 at the ASEAN summit held in Singapore. This is the first FTA in Asia. Through careful negotiations, ASEAN completed most negotiations on trade and investment in the 1990s, especially on tariff and non-tariff arrangements. Four years later, ASEAN successfully initiated the Asia-Europe Meeting (ASEM) inauguration in March 1996 with the establishment of the Asia-Europe Foundation (ASEF) and the Asia-Europe Business Forum. Soon after, ASEAN carried out the ASEAN-Mekong Basin Development Cooperation in June 1996 with the support of ADB and other donors. A rail link from Singapore to Kunming, passing through Malaysia, Thailand, Cambodia, Laos, Myanmar and Vietnam, was among the proposed projects. Professor Donald E. Weatherbee of the University of South Carolina had the following comments on AFTA: No matter the demonstrable lack of sustainable real regionalized policy achievements or how inner-conflicted the region might be, a Southeast Asian region exists because leaders have a minimum, lower-denominator consensus on what regional interests are, and some degree of collective expectations of how they should act in pursuit of these interests.4 Proposal of ASEAN-China FTA At the meeting of ASEAN’s economic ministers in Chiang Mai in October 2000, Thailand’s Deputy Prime Minister and Commerce Minister, Supachai Panitchpakdi5 called for the creation of a regional mechanism through which China and ASEAN could negotiate mutual tariff concessions to help less developed economies. Supachai said a formalized system of tariff concession would be needed to safeguard Southeast Asia’s weaker economies from a flood of cheap exports once China joins the WTO.6 As Australia and New Zealand had initiated a similar FTA proposal with ASEAN early in 1999, China’s Premier Zhu Rongji proposed a feasibility study on establishing an ASEAN-China FTA (ACFTA) as its reply to Supachai’s call at the ASEAN-China Summit in December 2000. In his speech, he said, “It might be advisable in the long run for China and ASEAN countries to explore the establishment of a free trade relationship between ０６ ＡＳＥＡＮ－Ｃｈｉｎａ ＥＲ Ｃｈ ６ 11/7/06, 4:40 PM 87 88 Lu Bo them.”7 The expert group joined by researchers from both sides completed the feasibility study report and found that ACFTA would benefit both ASEAN and China. According to the report and the statistics of China’s customs, trade in goods between China and ASEAN increased about 20 per cent per year from the late 1980s to early 2000s. During the 1990s, China and ASEAN member states had many economic cooperations and significantly reduced their tariff rates on many...