1. Review of the China-ASEAN Free Trade Area Construction (CAFTA)
In November 2002, leaders of China and the 10 ASEAN countries formally signed the Framework Agreement on Comprehensive Economic Co-operation between the People’s Republic of China and the Association of South East Asian of Nations( hereinafter referred to as Framework Agreement), marking the beginning of the construction process of a China-ASEAN Free Trade Area. As enshrined in the agreement, CAFTA will be completed in 2010.
In January 2004, both parties initiated the creative “Early Harvest Program” under the Framework Agreement, introducing preliminarily tariff reduction of 600 types of agricultural products.
In November 2004, during the 8th China-ASEAN Summit held in Laos, China and ASEAN formally signed the Agreement on Trade in Goods (TIG) of the Framework Agreement. The TIG, which took effect in July 2005, includes 23 articles and 3 annexes, among which, Article 3 “Tariff Reduction and Elimination” addresses the core of trade in goods. Implementation of the TIG marked the inauguration of comprehensive tariff-reduction, with the tariff of the first package of 7445 types of goods being reduced to about 20%.
In January 2007, China and ASEAN formally signed the Agreement on Trade in Services, which is a crucial step towards the establishment of CAFTA.
In August 2009, during the 8th China-ASEAN Economic and Trade Ministers’ Meeting held in Thailand, China and ASEAN formally signed the Agreement on Investment, concluding successfully negations in major fields concerning CAFTA.
Starting from January 1, 2010, tariff of about 90% of the commodities traded in CAFTA (China plus the original six countries of the ASEAN) will be reduced to zero, marking the initial establishment of the FTA.
2. Development Prospects for CAFTA
Establishment of the CAFTA will immensely facilitate trade and investment among member countries, promote employment, spur economic development and enhance the economic strength of the region and raise its international status.
The rule of zero-tariff and reduction of non-tariff barriers brought about by the establishment of the CAFTA will increase trade volume among member countries. Moreover, since a considerable part of the trading between China and ASEAN is the business done by multinational corporations within specific industries, when the industrial chains are at work, increase of export to China of one ASEAN country would give rise to the growth of the import from other ASEAN countries. In this way, the trade scale of CAFTA would be expanded.
Despite fierce competitions between some products from China and ASEAN countries, there are still many products from these two places that are highly complementary. China has a lot of products which have apparent competitive advantages, for example, textiles, clothing, shoes, groceries, grain and building materials; and has such products which enjoy great potential advantages as mechanical and electronic equipment, precision instruments，clocks and watches, vehicles, metallic products and chemical products. Therefore, on the one hand, with the growth of the bilateral trade, export volume of Chinese products with competitive advantages is likely to increase; machinery and electric products, especially high-tech products may see a marked rise. On the other hand, ASEAN products with competitive advantages such as petroleum, palm oil, tropical agricultural products and cash crops will also see greater prospects for export.