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ASEAN members will benefit from lowering barriers to goods and services

By Liu Jianchao (China Daily)
Updated: 2010-02-08 13:46
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MANILA: As today's global economy offers unparalleled opportunities for all countries across the world, continuing to expand trade by lowering barriers to goods and services is in the common interest of China and ASEAN countries.

Our concerted and unremitting efforts during the past decade are reaping fruits with the full establishment of the China-ASEAN Free Trade Area (CAFTA) on Jan 1 this year.

ASEAN members will benefit from lowering barriers to goods and services

This means that more than 7,000 zero-tariff commodities could be traded among China and ASEAN countries. The removal of trade impediments will lower the costs of transactions, further increase China-ASEAN trade volume, and enhance economic efficiency. With market risk and uncertainties lowered, more investments would be generated from both Chinese and ASEAN companies into an integrated and rewarding market.

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The comprehensive China-ASEAN cooperation dates back to the early 1990s. Since then, economic relations and trade among us have been increasing with each passing year.

When the financial crisis struck in 1997, China held out by not depreciating the yuan, which served as a strong force for the recovery of the regional economy. Our similar cultural traditions and history and inter-dependence define the China-ASEAN bond that enables us to reach consensus towards common prosperity. Therefore, it is fair to say that we have secured a solid foundation for CAFTA.

In Sep 2000, then Chinese Premier Zhu Rongji first came up with a proposal for CAFTA. It was well received and applauded by ASEAN countries. In November 2001, the leaders from China and ASEAN countries declared a goal of full establishment for CAFTA within 10 years at the Brunei Summit. On Nov 4, 2002, the China-ASEAN Framework Agreement on Comprehensive Economic Cooperation was signed to kick off the drive towards CAFTA.

There were doubts among ASEAN countries that opening domestic markets to Chinese goods may bring with it tough competition. The Early Harvest Program was therefore put in place in 2004 to offer preferential arrangements in advance to ASEAN countries by unilaterally opening the Chinese market to ASEAN agricultural produce. Words were put into action and benefits materialized. 2004 witnessed China-ASEAN trade volume topping $100 billion.

The Agreement on Trade in Goods and the Agreement on Trade in Services between China and ASEAN countries were signed respectively in November 2004 and January 2007. On Aug 15, 2009, the Investment Agreement was signed, marking the successful completion of the main CAFTA negotiations. With a population of 1.9 billion and a combined gross domestic product (GDP) of $6 trillion, CAFTA would be the biggest FTA not only for developing countries, but also in terms of population and market size. We have every reason to believe that the full inception of CAFTA will not only bring benefits to the Chinese and ASEAN peoples, but also contribute to economic growth in Asia and the world at large.

CAFTA will bring greater opportunities to the Philippines. With strong export potential in electronics, agricultural produce, fruits, fishery products, and minerals, the Philippines will enjoy considerable comparative advantages and expand market share for its competitive goods.

There have been, is, and will always be some concerns over the Philippines' future after CAFTA is up and running. Some fear more competition among manufacturing industries, some stressed the vulnerability of domestic agriculture, and some even went as far as saying that free trade was not fair at all.

However, the idea that free trade is fair only if countries share identical labor costs and economic regulations or if domestic producers are compensated for market losses to more competitive foreign producers does not hold water. The economic benefits of free trade derive from the fact that trading partners are different, allowing any country embracing world markets a chance to be competitive. Free trade is fair when countries with different advantages are allowed to trade with a minimum of restriction and capitalize on those differences.

The Philippines is endowed with comparative advantages in terms of natural resources, wage costs, language skills and education levels. What is more, this country has a very dynamic private sector which keeps growing even in times of crisis. China held similar worries when standing at the threshold of entry into the World Trade Organization. When something new comes along, it always takes time to learn, experiment and finally excel. Therefore, CAFTA for the Philippines is a blessing in disguise.

Free trade allows China, the Philippines and other ASEAN countries to compete in CAFTA on the basis of our fundamental economic strengths and to reap the productivity and efficiency gains that promote long-run wealth and prosperity for all in the region. In reality, there is no distinction between free trade and truly fair trade. On the road to recovery, China and ASEAN countries share a common fate and shoulder a common responsibility. To advance regional economic cooperation to unprecedented levels is particularly significant at this moment. Putting CAFTA in place is surely a move in the right direction. Let's work to turn this blessing in disguise into real benefits.

The author is Chinese ambassador to the Philippines