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Trade Area Dispels Worries
A free trade area between China and the Association of Southeast Asian Nations (ASEAN) appears promising despite worries that China is competing with ASEAN for international markets and foreign investment, experts said.

"The China-ASEAN free-trade area is likely the most feasible of all possible regional economic co-operation in Asia," said Gu Yuanyang, a researcher with the World Economics and Politics Institute of the Chinese Academy of Social Sciences.

Asian countries are seeking regional economic co-operation in mainly four forms: the ASEAN free-trade area; ASEAN's cooperation with China, Japan and South Korea (10+3); ASEAN's co-operation with China (10+1) and Northeast Asian cooperation between China, Japan and South Korea.

After the 1997 Southeast Asian financial tumult and the ongoing world economic growth slowdown, ASEAN leaders have recognized the need to refresh the regional economic co-operation body.

But 10+3 and cooperation between China, Japan and South Korea were stalled by the difficulties in reaching consensus on trade liberalization of sensitive farm produce.

A breakthrough in Asia's regional economic co-operation was not made until Premier Zhu Rongji and ASEAN leaders agreed last November to set up the China-ASEAN free-trade area in 10 years, said Gu.

The news is presumed to have deeply upset Japan, which reckons China a major economic and political competitor in Asia.

Asia's biggest economy has been prompted to counter China by proposing its own regional free-trade pacts.

The agreement also surprised the world as a whole, which widely thought the process would have been stalled by China and ASEAN's competition for international markets and foreign investment, said Gu.

China and ASEAN are similar and compete with each other in some aspects of their industrial structure such as labor-intensive industries including light industry, machinery and electronics, household electrical appliances, textiles and garments, said Lu Jinyong, a professor of international trade with the Beijing-based University of International Business and Economics.

He said ASEAN countries must have felt the pressure on their domestic industries from the gigantic, rapidly increasing and competitive Chinese economy.

The China-ASEAN free-trade area will also have to overcome their differences in social systems in order to be successful, he said.

But China needs to import a lot of ASEAN's resources and raw materials and ASEAN is an important export market for China besides the United States and Europe, Lu said.

He said he expected China's huge market potential to be a major attraction to ASEAN countries and outweigh their worries about competition with China.

Gu said ASEAN's worries about competitive Chinese products flooding its markets are not well grounded because China has had a trade deficit with ASEAN since 1999.

"Actually, China is considering lowering tariffs for Laos, Cambodia and Myanmar so as to increase imports from the three countries," he said.

He said China and ASEAN should not be viewed as competitors for transnational direct investment but should collaborate to ensure security, profitability and convertibility for international investors in the region so as to expand overall capital inflow into the region.

Ramon Vicente Kabigting, director of the Philippines' Bureau of International Trade in Beijing for the negotiations, said he hoped the China-ASEAN free-trade area would be a win-win deal.

"China is a formidable competitor," Kabigting said. "We, however, have been dealing with them even without the agreement that we are working on now, and so we reckon that we might as well engage."

(China Daily May 17, 2002)

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