Monday, January 15, 2007 Asean signs free trade agreement with China
CEBU — China and the Asean signed a landmark economic cooperation deal yesterday that will further open market access in key services sectors.
The deal was signed as Chinese Premier Wen Jiabao met the 10 leaders of the Association of Southeast Asian Nations (Asean) on day two of the Asean’s annual summit meetings.
The accord, which comes into effect later this year, will liberalize sectors ranging from tourism and telecoms to energy and computers, as China looks to bolster its economic and trade clout in the region.
Wen described the agreement as a “major result (of) our economic and trade cooperation.”
“We are friendly neighbors and also important strategic partners,” he said. “China’s development cannot be separated from Asean’s, and Asean also needs China.”
Open doors
The agreement will open the doors to China’s multi-billion-dollar service industries, including banking, information technology, real estate, health, engineering, education, transport and construction.
Lu Jianren, an economist with the Chinese Academy of Social Sciences (CASS), told a seminar in Beijing recently that “both China and Asean have their respective edges” when it comes to services.
“China is competitive in computer services, Singapore in financial, legal and exhibition services and Thailand in tourist services,” he said.
But Confederation of Philippine Exporters (Cebu) Inc. (Philexport-Cebu) president Allan Suarez Jr. described the free trade pact as a situation where “David meets head-to-head against Goliath,” with China as Goliath.
Suarez said the deal will cause “a major trade imbalance,” particularly in the Philippines.
“We will still have to study the agreement but this is certainly a major threat on our end,” he told Sun.Star Cebu in a phone interview.
He said an imbalance will occur when Asean countries buy more products from China because these are cheaper while their own exports would not be as popular in the Chinese market.
Cheaper goods
“China will not have much to buy from us,” he said, adding that goods from China are cheaper by 25 percent compared to those from the Philippines.
Suarez said China has an added advantage because it has a strong labor force, cheaper power rates, lower labor costs and better infrastructure.
He said he fears that the free trade pact with China would cause local exporters to close shop.
“It will kill the SMEs (small and medium enterprises). Marikina shoes for example used to be very strong in the shoe business but it has become a sunset industry,” he said.
Suarez said local export industry players are not likely to challenge China head on.
He said this is why Philippine exporters are looking at new markets, particularly European countries, and improve product efficiency.
New markets
Suarez cited Russia as a feasible new market for the fashion accessories sector.
But Suarez said the local export sector is open to any positive outcome from the free trade deal.
Asean and China signed a framework agreement on comprehensive economic cooperation in 2002 and are expected to form a bilateral free trade area by 2010.
Together they have a combined economic output of $2 trillion and trade estimated at $1.2 trillion, according to Business World.
Asean is composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Last Saturday, Asean leaders ended their own summit with pledges to get tougher on terrorism, move faster towards a single market and reshape the bloc to keep pace with the competition of the 21st century.
They signed their first convention on fighting terrorism and pledged to create a charter that would transform the group into a legal entity with European Union-style rules and regulations. (AFP/with MMM)
