In Southeast Asia, Unease Ahead of Free Trade Zone (China and ASEAN)

[pampango]

Source: New York Times

When the clock strikes midnight on New Year’s Eve, China and 10 Southeast Asian nations will usher in the world’s third-largest free trade area. While many industries are eager for tariffs to fall on everything from textiles and rubber to vegetable oils and steel, a few are nervously waiting to see whether the agreement will mean boom or bust for their businesses.

The zone will rank behind only the European Economic Area and the North American Free Trade Area in trade volume. It will encompass 1.9 billion people. The free trade area is expected to help Asean countries increase exports, particularly those with commodities that resource-hungry China desperately wants.

The China-Asean free trade area has faced less vocal opposition than the European and North American zones, perhaps because existing tariffs were already low and because it is unlikely to alter commerce patterns radically, analysts say.

Asean and China have gradually reduced many tariffs in recent years. However, under the free trade agreement — which was signed in 2002 — China, Indonesia, Thailand, the Philippines, Malaysia, Singapore and Brunei will have to remove almost all tariffs in 2010. Most of the goods that will become tariff-free in January — including manufactured items — are currently subject to import taxes of about 5 percent. Some agricultural products and parts for motor vehicles and heavy machinery will still face tariffs in 2010, but those will gradually be phased out.



Read more: http://www.nytimes.com/2009/12/29/business/global/29trade.html

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With 1.9 billion people this ASEAN-China zone will have twice the population of NAFTA and the EU combined. Sounds like tariffs were already pretty low between these countries, so "free trade" may not make much of a difference in their trade with each other. It will be interesting to see how this affects Asia's development. If its consumers continue to get better off, China may over time focus more of its trade on other Asian countries rather than the US and Europe.

I didn't realize that trade in the European free trade zone exceeded that in NAFTA.