FT: Asian leaders look to free trade area with China

Asian leaders look to free trade area with China
Financial Times; Nov 7, 2001
By JOHN BURTON



South-east Asian leaders yesterday endorsed a proposal to create a
free-trade area (FTA) with China over the next 10 years in what would be the
first step towards a larger east Asia trading zone.

The decision taken at the annual summit of the Association of South-East
Asian Nations in Brunei is aimed at reducing the region's trade dependence
on the US.

Beijing advanced the proposal at last year's Asean summit in Singapore, in
part with a view to easing nervousness in south-east Asia about the growing
competitiveness of China as a manufacturer and recipient of foreign direct
investment.

The endorsement of the FTA proposal comes when south-east Asia is suffering
an economic slowdown due to falling exports to the US, which has prompted
calls for closer economic co-operation within Asia.

"For us to depend on the US alone as a market for growth for east Asia will
be much more difficult in the future, because the US economy is going to
slow down," said Goh Chok Tong, Singapore's prime minister.

Asean believes an FTA agreement with Beijing would further open a
potentially large market, with China growing rapidly and about to enter the
World Trade Organisation.

But some Asean nations still have concerns that their resource-based
economies would be overwhelmed by manufactured products from China.

"An FTA with China could prove to be unworkable since there is already
resistance to free trade within Asean, with some countries wanting to
protect local manufacturing industries such as Malaysia with its car
industry," said Kostas Panagiotou, regional economist with Kim Eng
Securities in Singapore.

Asean is still having difficulty agreeing the scope of an internal free
trade agreement, due to come into full effect next year.

Officials will now study the form and scope of the FTA, which would create a
trading bloc of nearly 2bn people and a combined gross domestic product of
Dollars 2,000bn.

China has identified five important areas for co-operation under FTA,
including agriculture, information technology, human resources, direct
investments and development of the Mekong river basin.

South Korea, fearing it could be frozen out of the region, has proposed a
wider east Asia FTA that would extend to all of north-east Asia, including
Japan. A final report on this is scheduled to be discussed at next year's
summit in Cambodia. However, Japan has indicated it is not enthusiastic
about an east Asia FTA.

Copyright: The Financial Times Limited