Why the China-ASEAN Free Trade Area Needs to be Upgraded

China-ASEAN Free Trade Area

China-ASEAN Free Trade Area

On Feb. 7, 2023, the China-ASEAN Free Trade Area 3.0 negotiation launched the first round of consultations. The competent authorities of China and ASEAN countries and the officials of the ASEAN Secretariat discussed the rules, organizational arrangements, and work plans of the negotiations. In-depth discussions have been held on topics such as these, and a timetable and roadmap for follow-up negotiations have been drawn up. In this regard, Xu Ningning, executive chairman of the China-ASEAN Business Council and chairman of the RCEP Industrial Cooperation Committee, made an analysis.

Xu Ningning said that the China-ASEAN Free Trade Area is the first free trade area established by China and ASEAN with the outside world, aiming to promote cooperation through opening up and achieving development through cooperation. The establishment of the China-ASEAN Free Trade Area originated in 2000. After ten years of construction, the 1.0 version of the free trade area was completed in 2010, and the zero tariffs on trade in goods covered more than 90% of the tax items of both parties. In 2019, the 2.0 version of the free trade area was implemented. Upgrade, the two sides further open the market. At the China-ASEAN leaders meeting held in Nov. 2022, it was announced that China-ASEAN self-buying version 3.0 upgrade negotiations will be launched.

Xu said that 2022 is the 25th anniversary of the outbreak of the Southeast Asian financial crisis in 1997. This disastrous financial crisis has made people deeply appreciate the importance of regional cooperation. Xu Ningning, who has witnessed the promotion of China-ASEAN business cooperation for more than 30 years, said that after the outbreak of the financial crisis in Southeast Asia, China implement a series of measures to help Southeast Asia out of the crisis and greatly promoted the China-ASEAN mutual market component Free Trade Area. The establishment of the China-ASEAN Free Trade Area, the construction of version 2.0 and the upgrading of the free trade area, and the current version 3.0 of the free trade area are all proposed by the Chinese side. Approval and response reflect the common desire of both sides to deepen and expand economic and trade cooperation.

Xu pointed out that over the past 20 years, the construction of the China-ASEAN Free Trade Area has achieved remarkable results, which is the crystallization of mutual achievements and a shared destiny. China has maintained its status as ASEAN’s largest trading partner every year since 2009, and ASEAN has been China’s largest trading partner every year since 2020. In 2022, trade and investment between the two sides will grow against the trend. China’s trade with ASEAN will account for an increasing proportion of China’s foreign trade. China’s comprehensive cooperation with ASEAN in trade, investment, and infrastructure construction will contribute to ASEAN’s economic recovery.

According to Xu’s analysis, the achievement of China-ASEAN Free Trade Area construction benefited from the continuous consolidation and development of comprehensive strategic partnerships between China and ASEAN and its member states, and benefited from the fact that the two sides injects new vitality into cooperation from time to time, especially the joint construction of the “Belt and Road” has brought vitality to the development of the free trade zone; thanks to the active promotion of connectivity and cooperation in various fields between the two sides, the sub-regional economic cooperation between the two sides is innovative and pragmatic, and the local economic and trade cooperation between the two sides is becoming increasingly active, the industrial cooperation continues to deepen; benefited form the positive actions of the enterprises of the two sides to cooperate in the development of the free trade zone, the strong economic and trade complementary and bring more business opportunities.

Xu said that the construction of the China-ASEAN Free Trade Area 3.0 will include a digital economy, green economy, supply chain connection, competitiveness, consumer protection, and some cooperation areas that the small, medium and micro enterprises are all common concern about, and will promote mutual trade between China and ASEAN, new developments in the investment and trade in services will provide new impetus to the economic development of both sides, and will accelerate the construction of a closer China-ASEAN community of destiny; will promote the process of Asia-Pacific economic integration, and the “Regional Comprehensive Economic Partnership” (RCEP) the implementation of mutual complementarity and promotion will bring innovation and incentives to RCEP’s regional opening and cooperation, and help the construction of RCEP; it will attract more multinational companies from outside the region to invest in the free trade zone.

Xu suggested that as countries in the region open their markets to each other, entrepreneurs need to develop and innovate in a series of aspects such as business ideas, organizational models, and production technologies, and speed up the pace of cooperation in innovation. Chinese enterprises not only need to understand and master the new policies of the China-ASEAN Free Trade Area, but also understand the relevant institutional arrangements and development trends of the ASEAN Economic Community, and understand the free trade agreements signed between ASEAN and other countries, which is conducive to the development of Chinese enterprises in ASEAN. While the country develops, it can also open up a broader international market. In today’s international market competition, whoever can make good use of free trade agreements will have a chance of winning.

Xu finally pointed out that the economic and trade relationship between China and ASEAN has been as close and active as it is today. The in-depth development of this relationship brought about by the construction of 3.0 of the Free Trade Zone will benefit the economies of all countries in the Free Trade Zone, the East Asian economy, and even the growth of the world economy. The relationship between China and ASEAN has stood at a new historical starting point. It is believed that with the joint efforts of both parties, China-ASEAN economic and trade cooperation will achieve a historic new leap.