The 13th AEM-MOFCOM Consultations was held in Nay Pyi Taw, Myanmar on August 26, when agreements for upgrading China-ASEAN FTA were passed and the launch of related negotiations was announced.

I Achievements of China-ASEAN FTA

China and ASEAN are closely connected with each other in location, culture, and common interest, and have maintained close trade and economic relations in history. When it’s cold that we can know the pine and the cypress are the last to shed their leaves. After suffering from the Asian financial crisis that broke out in 1997, East Asian countries have attached greater importance to regional economic integration and deepened communication and cooperation with China.

In November 2002, China and ASEAN signed Framework Agreement on Comprehensive Economic Cooperation between the People’s Republic of China and the Association of Southeast Asian Nations. In 2003, China and ASEAN established strategic partnership, starting the “Golden Decade” of bilateral cooperation. On January 1, 2010, the China-ASEAN FTA was fully established, with customs duties greatly reduced, bilateral trade in goods and service rapidly growing, two-way investment increasing steadily, the market opened wider and cooperation closer.

One strand of silk doesn't make a thread, nor dose one tree make a forest. China will carry out frank cooperation with ASEAN to achieve mutual benefits and common progress. The China-ASEAN FTA faces constantly strengthened connectivity, increasingly growing number of labor forces, and closer communication and cooperation in society, culture, science and technology, industry and training. Tariff has been reduced constantly, and the goal of more than 90% commodities enjoying zero-tariff will be realized gradually. With trade within the FTA sustaining a constant growth and investment increasing, trade and economic relations have boasted a rapid development. In 2013, bilateral trade totaled US$443.6 billion, 8 times that of 2002, with an annual growth of 20.9% at average. By the end of 2013, China had become ASEAN’s biggest trading partner for four years in a row, and ASEAN had been China’s third largest trading partner for three years in a row; with two-way investment amounting to US$110 billion. Chinese enterprises made a total of US$29.3 billion non-financial investment in ASEAN, of which US$5.7 billion was directly invested in 2013, up 29.8% year on year. Actually used investment from ASEAN in China amounted to US$85.4 billion, accounting for 6% of China’s attraction of foreign capital, among which, US$8.35 billion was directly invested in 2013, up 18% year on year. The China-ASEAN FTA has formed an all-round, wide-ranged and multilayered cooperation pattern, contributing to the stability, development and prosperity of the East Asian region.

II. Initiating of the upgrading of China-ASEAN FTA

After the global financial crisis in 2008, world economic recovery has gone through twists and turns, and regional economic integration has been paced up. In addition, China’s demand of promoting reforms through opening-up has become more urgent and the strategy of building a high-standard FTA network that is based on its surroundings and facing the globe has been carried out rapidly. Therefore, the demand of further raising the cooperative level of the China-ASEAN FTA has been growing day by day.

Premier Li Keqiang proposed to upgrade the China-ASEAN FTA on the sidelines of the 10th China-ASEAN Expo and China-ASEAN Business and Investment Summit held on September 3, 2013, which marked the beginning of the “Diamond Decade” of bilateral cooperation. In October of that same year, at the 16th ASEAN-China Summit, Li suggested launching negotiations on upgrading the China-ASEAN FTA as soon as possible. To upgrade the China-ASEAN FTA will update and enrich its contents and ranges, reduce non-tariff measures, put forward new commitment on trade in services, promote pragmatic opening in investment areas through entry conditions and talents exchanges, raise trade and investment facilitation levels and strive for US$1 trillion bilateral trade by 2020 and form a wide-ranged, multilayered, high-level, and all-round cooperation pattern.
ASEAN has paid much attention to China’s initiative of upgrading the FTA. With many negotiations and concerted efforts, the two sides reached consensus on launching the negotiations in June 2014. In the future, to upgrade the China-ASEAN FTA and further deepen bilateral cooperation in this respect will be the common choice of both China and ASEAN.

III. Great significance of upgrading the China-ASEAN FTA

Upgrading the China-ASEAN FTA is the strategic demand of accelerating East Asian regional economic integration. Looking at the present East Asian regional economic integration pattern, we could find that Russia and Mongolia enjoy obvious regional advantages and resource endowment, increasingly closer strategic cooperation with China, and an extensive prospect of FTA cooperation. Japan and South Korea attach great importance to FTA construction, and are stepping up the China-ROK FTA, RCEP and China-Japan-ROK FTA negotiations together with China. ASEAN continues to deepen FTA construction with neighboring countries and positively advances RCEP negotiations. Under such circumstances, an upgraded China-ASEAN FTA will definitely be a driver of East Asian regional economic integration. At present, when major economies around the world are accelerating regional economic integration, to upgrade the China-ASEAN FTA would make East Asian integration to go shoulder to shoulder with that of Europe and America, play an important role in world economic integration, make East Asia to win more initiatives in international economic cooperation and an example of regional economic integration so as to play an exemplary role in reform of global governance and economic cooperation.

Upgrading the China-ASEAN FTA is the strategic demand for China and ASEAN to cope with the new international trade and economic situation. At present, global economy grows slowly as a whole, the WTO multilateral trade negotiations have made slow progress, and all countries have turned to seek trade arrangement under regional economic integration. Some super-large FTA negotiations like the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) are positively advanced and rules of higher standards concerning labor force and employment, environment improvement, intellectual property rights protection, government procurement, competition policy, state-owned enterprises and industrial policies have been proposed. Once FTAs of high standards come into being, international trade and economic rules re-construction will be paced up, and they will exert a significant impact on global trade pattern and trade and investment liberalization procession and make competition on capital and international market fiercer. Those areas the rules touch on are just China and most ASEAN countries’ weak points. He who does not advance loses ground. Against international trade and economic situation that is full of challenges, only when China and ASEAN respond positively, accelerate the upgrading of the FTA and make initial trials, can they make preparations for fighting against or weakening unfavorable factors, have more voice in working out global trade and economic rules and get a proper position in an open global market. Meanwhile, given some new standards put forth on RCEP negotiations by Japan, South Korea, Australia, and New Zealand, negotiations on upgrading the China-ASEAN FTA could also lay a sound basis for the two sides’ RCEP negotiations.

Upgrading the China-ASEAN FTA is a common choice for China and ASEAN to achieve win-win cooperation and common development. China and ASEAN enjoy similarities in economic development level and goals. Both of them are at a fast-developing stage of industrialization and urbanization, a crucial stage of urgent demands on structure transformation and industrial upgrading. The two sides have relatively complete industrial layout and industrial chains, and high trade complementarity, so they are equipped with conditions for mutually beneficial development. Take trade for an example. Among China’s exports at present, capital and technology intensive mechanical and electrical products take up a higher percentage while labor intensive textiles and clothing are declining. But many ASEAN countries export mainly resource intensive and labor intensive products, so the two sides could realize vicarious development. In industrial cooperation, the two sides could form reasonable industrial division to complement each other’s advantages, extend industrial chains and work together to seek higher position and share in global value chains. In addition, both China and ASEAN encounter strong pressure from domestic reforms. For China, domestic reforms have come to the deep water stage with increasing constraints on resources and energy, greater pressure on industrial upgrading and urgent demands on expanding markets overseas while ASEAN has increasing demands on attracting FDI, undertaking industrial transfer, making full use of labor force and resources advantages, and strengthening cooperation in finance, port, science and technology, environmental protection and culture areas. That requires both sides to further raise their trade and investment liberalization level, and reach more consensus on border measures, which can be satisfied through an upgraded FTA of a higher level.

In the future, China and ASEAN will strengthen cooperation in various areas concerning trade, investment, connectivity, security, service, culture, science and technology, training, industry and environmental protection. Upgrading China-ASEAN FTA will enhance the connectivity of Trans-Asian Railway, promote financial cooperation and financing platform construction and boost industrial matchmaking and cooperation. “One should help others establish what he himself wishes to establish and to achieve what he himself wishes to achieve.” China would like to sign cooperation agreements including long term trade agreements for farm produce with ASEAN. In the coming five years, China plans to import products with over US$1 trillion, make direct investment of more than US$500 billion and have 500 million persons touring abroad. China’s development is bound to benefit its neighboring countries, ASEAN countries in particular, and China and ASEAN will integrate into each other more and more.

“Now I am swimming across the great Yangtze,looking afar to the open sky of Chu.” China would like to go hand in hand with ASEAN, jointly upgrade the FTA, set an example of regional economic cooperation and promote a common and steady economic development.

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