A free-trade agreement between China and Southeast Asia has come into force on the first day of the new year, consolidating a sixfold surge in economic activity over the past decade between countries representing a quarter of the world’s population.
The agreement expands a limited 2005 trade area between China and the 10-member Association of Southeast Asian Nations, scrapping tariffs on about 90 percent of goods.
“This FTA is going to make a difference at the margin to some Asean countries but not others,” said Razeen Sally, a director of the Brussels-based European Centre for International Political Economy, a trade-policy research group. “Basically it takes down the tariffs but does little on all the non-tariff barriers where you would have much bigger gains to trade.”
The trade agreement would hit high-tariff industries in Indonesia and
the Philippines more than other Asean countries, Sally said. Trade in
parts and components, the “central artery” of China-Asean economic
ties, won’t be affected much because most of those tariffs are already
near zero, he said.
Opposition to the trade agreement has been loudest in Indonesia, where
the government has sought to placate concerns that industries including
textiles, food and electronics will suffer. Indonesia should
renegotiate the deal because the textile industry may see its domestic
market share decline by 50 percent as cheaper Chinese goods enter the
market, said Ade Sudradjat, vice chairman of the Indonesian Textile
The government is setting up a team to monitor trade practices, Hatta
Rajasa, coordinating minister for the economy, told reporters in
“When a nation has cheap products, we must see whether there’s unfair
trade in it, such as unfair subsidies,” he said. “We must be proactive.”
China’s trade with Asean has jumped sixfold since 2000 to $193 billion last year, surpassing that of the US. China’s share of Southeast Asia’s total commerce has increased to 11.3 percent from 4 percent in that time, whereas the US’s portion of trade with the bloc fell to 10.6 percent from 15 percent, Asean statistics show.
During that time, Asean’s trade deficit with China widened by five times to $21.6 billion. The bloc reported a $21.2 billion trade surplus with the US last year, down 12 percent from 2000.