ASEAN And China Close To Agreement On Free Trade Area

by Mary Swire, Tax-News.com, Hong Kong

13 September 2002

Meeting in Brunei this week, Southeast Asian economic ministers are finalising a framework agreement with China on the creation of a mammoth free-trade area which would cover nearly two billion people.

The framework agreement is expected to be signed by leaders of the 10-member Association of Southeast Asian Nations and China during a summit in Cambodia in November.

Officials say that while the agreement itself appears straightforward, the preparatory talks have been extremely difficult. The leaders of Asean and China agreed in 2000 to work out a free-trade agreement within 10 years, but left it to senior officials to hammer out the details. Preparatory talks have been dogged by disputes, especially over the so-called "early harvest" principle, said officials. This calls for China to cut import tariffs on certain Southeast Asian products before the implementation of the agreement.

The regional bloc disagreed with a proposal by China to focus early tariff liberalisation mostly on farm products and processed agricultural items as it would favour their giant neighbour. Asean wants coverage for non-farm products which form the bulk of its exports.

The free-trade zone would cover China's 1.2 billion people and 500 million consumers in Asean. The economic region will have a combined gross domestic product of US$2 trillion, with total trade projected at US$1.23 trillion.

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