China free trade agreement with asean an overview


Nearly 8 years have passed since Premier Zhu RongJi brought up the idea to establish a China-ASEAN free trade area in 2001. Now that the original idea is being turned into reality with the signing of Framework Agreement on Comprehensive Economic Co-Operation, ATIG 2004,ATIS 2007 and ADSM. And the Parties are making great efforts to the negotiation of investment agreement to ensure the establishment of the China-ASEAN free trade area in 2010.

The CAFTA will be the first free trade area that China establishes with a foreign market. The largest FTA made of developing countries will also be CAFTA with an area measure of 14,000,000 Square kilometers, an estimated population of 2 billion (1. 8 billion now), and a possible total regional GDP of about US 3,000 billion$ to US 4,000 billion$. The total trade will also increase by a dramatic speed. The ACFTA will be another important FTA after EU and NAFTA.

Framework Agreement

Framework Agreement on Comprehensive Economic Co-Operation between ASEAN and the People’s Republic of China, 5 November 2002 (“Framework Agreement”) Framework Agreement is the legal foundation of the ACFTA, and it determines the basic framework of ACFTA. Its main contents are:

the content of ACFTA includes trade in goods, trade in services, investment and economical cooperation in which trade in goods are the core elements. Besides some sensitive products (explained in the ATIG next page), tariffs and trade barriers will be eliminated gradually.

  • Timeframes of the arrangement of negotiations and the establishment steps of ACFTA.

Early Harvest Program

  1. China will give those ASEAN countries which are not members of WTO most-favored nation treatment

Setting up the related mechanisms and regulations. Specially, the Early Harvest Program is an integral part of the ACFTA to accelerate the implementation of the ACFTA by reducing and eliminating tariff rates of more than 500 kinds of products ( major part of them are agricultural products) mutually. Benefits and challenges Benefits: 1. he establishment of ACFTA is to promote East Asian economic integration and world economic development. It will also boost the pace of cooperation among Korea, Japan and ASEAN. At the same time, the positive experience that provided by ACFTA will also help to future East Asia cooperation. From the global view, the economy is in long-term recession. There are lots of obstacles on the way to start a new round of WTO negotiations and world trade growth has slowed down considerably. The new development of East Asia economy is of great benefit to world economic recovery and global trade liberalization. . According to ASEAN-China Expert Group on Economic Cooperation, “the removal of trade barriers between ASEAN and China will lower costs, increase intra-regional trade and increase economic efficiency. The ACFTA will lead to greater specialization in production based on comparative advantage. Trade creation occurs when some domestic production in one ACFTA member is replaced by lower-cost imports from another member. This will boost real income in both regions as resources flow to sectors where they can be more efficiently and productively utilized”.

The establishment of ACFTA should also be of assistance to create more investment, not only will more ASEAN and Chinese companies are willing to invest in an integrated market, the market risks and uncertainties are lower. The United States, Europe and Japan’s attempt to enter the Asian market will also attract investment in the integrated market. Challenges: “China and most of ASEAN countries achieve economic growth mainly through attracting FDI and promoting export, with a common dependence on American and European market which makes these economies exposed to impact of foreign investment and market oscillation.

Regional economic cooperation between China and ASEAN doesn’t lack institutional basis. The major problem is the limited capability of member countries which has impeded the full realization of benefits of Free Trade Area” 6. Conclusion: The ACFTA is now the bridge of China and ASEAN trade and economic cooperation. It has now been working effectively, and with the further market opening, the ACFTA will definitely promote East Asia and world economy.

List of Reference

  1. ASEAN secretariat (2007): Framework Agreement on Comprehensive Economic Co-Operation between ASEAN and the People’s Republic of China, 5 November 2002, online: http://www. seansec. org/16646. htm [retrieved 14. 10. 2008]
  2. ASEAN secretariat (2007): Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Co-operation between the ASEAN and the People’s Republic of China 2004 ANNEX 1, online: http://www. aseansec. org/accfta%20tif/annex%201. zip [retrieved 14. 10. 2008]
  3. ASEAN-China Expert Group on Economic Cooperation (2001): ‘Forging Closer ASEAN- China Economic Relations in the Twenty-First Century’ online: http://www. aseansec. org/newdata/asean_chi. pdf [retrieved 14. 10. 2008]
  4. Bangkok Post (2006): ‘ANALYSIS / ASEAN-CHINA PARTNERSHIP: A blossoming relationship’, online: http://www. aseansec. org/18856. htm [retrieved 14. 10. 2008] Ministry of Commerce of China (MOFCOM) (2008): China – ASEAN free trade area profile, online: http://fta. mofcom. gov. cn/dongmeng/xieyijianjie. shtml [retrieved 14. 10. 2008]
  5. Cheng, Jian (2004): Regional and international organizations, the strategic choice of China, Guizhou Province People Press. Ministry of Commerce of China (MOFCOM) (2008): China – ASEAN framework agreement profile, online: http://fta. ofcom. gov. cn/dongmeng/kuangjiaxieyi. shtml [retrieved 14. 10. 2008]
  6. Ministry of Commerce of China (MOFCOM) (2008): China – ASEAN trade in services profile, online: http://fta. mofcom. gov. cn/dongmeng/fwmy. shtml [retrieved 14. 10. 2008]
  7. Raul, L. Cordenillo (2005): ‘The Economic Benefits to ASEAN of the ASEAN-China Free Trade Area (ACFTA)’, online: http://www. aseansec. org/17310. htm [retrieved 14. 10. 2008] Wu, Yang (2006): ASEAN contemporary economic and politics. World Knowledge Press.
  8. Xinhuanet News (2006): China-ASEAN Free Trade Area Tariff Reduction and Elimination Schedule, online: http://news. xinhuanet. com/photo/2006-10/30/content_5269002. htm [retrieved 14. 10. 2008]
  9. Zhang, Jianping & Li, Xiaoyi (2008), ‘China-ASEAN economic progress, problems and prospects’, in Economic Research Reference (2008), Volume 17, pp. 8-10 Zhang, Haibing (2006): New Development and Problems in China-ASEAN Regional Economic Cooperation, online: http://www. siis. org. cn/Sh_Yj_Cms/Mgz/200501/2008724232241YZFT. PDF [retrieved 14. 10. 2008]
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