[This is a good way for China to reduce the dependency on US exports.] --"China, ASEAN to sign deals paving way for world's largest trade zone"
BEIJING: China and 10 Southeast Asian nations will sign a series of agreements in Laos this week, taking the two sides one step further towards the goal of setting up the world's largest free trade area by the end of the decade.
The growing integration between China and the Association of Southeast Asian Nations (ASEAN) reflects a global surge in regional trade deals, as well as Beijing's wish to be seen as a benevolent force by its neighbours.
"The development of regional economic cooperation is a trend of today's world. East Asia will also go along with this trend," Chinese Vice Foreign Minister Wu Dawei said. "China's development is an opportunity for the region, not a challenge."
If the current momentum is sustained until 2010, the result will be a single market stretching from the frozen steppes of Manchuria to the jungles of Irian Jaya, covering 1.7 billion people, or one fourth of humanity.
Most important among the documents to be inked in Vientiane is one establishing a dispute resolution mechanism, according to observers.
"It's the very first time it's happened within ASEAN, so it's actually quite a significant development," said Nick Thomas, an expert on China-ASEAN relations at the University of Hong Kong.
The two sides will also complete an action plan for forging the area into one market, but implementing the grand vision is likely to entail trial and error, since nothing quite like it has been done before.
"It's the first time that China sets up a free-trade area, and the first time ASEAN sets up a free-trade area with a country outside its own region," said Xu Ningning, a member of the semi-official China-ASEAN Business Council.
"So for both parties, there are many new questions that need to be solved," he said.
The ultimate objective of the free-trade area is to reduce average customs duties among its members to between zero and five percent.
But liberalization will not come easy, and foot-dragging has been reported when it comes to a planned pact on trade in goods, also to be signed in Laos.
"We have one or two questions with Vietnam," said Vice Foreign Minister Wu. "But the two sides have already agreed to solve these questions."
China, widely blamed for stealing jobs from other countries, is finding itself in the paradoxical position of fearing that cheaper imports may hurt parts of its own labor force.
Policy makers in Beijing are concerned that more efficient producers of rubber and palm oil in the ASEAN region could threaten the livelihoods of one million farmers in the south Chinese provinces of Hainan and Yunnan.
It is conventional wisdom that in an era of rapid Chinese growth and growing clout on the global stage, ASEAN needs China more than the other way around.
But China could also see advantage in more lively exchanges across its borders with mainland Southeast Asia, Chinese researchers said.
"China is very interested in the free-trade area," said Zhao Zhongxiu, professor of international trade at Beijing's University of International Business and Economics.
"It hopes it can help push development in some of its southwestern areas that unlike southern Guangdong province have not been in a position to prosper from the vicinity of Hong Kong," he said.
Populous regions in China's southwest such as Yunnan, Guangxi, Guizhou and Sichuan, home to a total of more than 210 million people, are likely to benefit from a free-trade area, he said.
A key issue in all ASEAN matters -- and, more generally, in Asian integration -- is the enormous disparity among the different member economies.
This is likely to be no less an obstacle in China's dealing with the ASEAN trade bloc.
"The biggest problem is that China is facing not one partner, but several different partners, which are all unlike each other in terms of economic development," said Xu of the China-ASEAN Business Council.
Given uneven development, and uneven commitment to the goal of free trade, China could end up with a series of bilateral pacts with individual ASEAN countries, rather than a regional agreement.
"The potential of it is large, but only if the countries are committed to a truly regional arrangement," said Hong Kong University's Thomas. - AFP
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