East Asian Nations Make Headway in Trade Talks

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Last updated at: (Beijing Time) Monday, July 21, 2003

East Asian Nations Make Headway in Trade Talks

Asia's staggering economic integration process has reached another milestone, as East Asia's three largest economies have made progress in their efforts to create a free trade zone.

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Asia's staggering economic integration process has reached another milestone, as East Asia's three largest economies have made progress in their efforts to create a free trade zone.

The proposed trade bloc, when combined with similar other agreements in the region - including the "10-plus-three summit" - will help unfetter and enhance regional economic co-operation.

"A very dynamic discussion is under way between China, South Korea and Japan about possible free trade areas," said Long Yongtu, China's former vice trade minister. Long had also been China's chief WTO (World Trade Organization) negotiator.

Long, addressing a high-profile seminar last week in Sydney, Australia, said he believes the process will take a long time to complete.

"But I foresee we can first create East Asia economic integration, including the East Asia free trade areas," Long said.

The Sydney meeting, co-hosted by the Economic & Commercial Office of China's Consulate General in Sydney, the Australian China Business Council, the Australian Industry Group and some other Chinese mainland and Hong Kong trade promotion organizations, focused on post-SARS (severe acute respiratory syndrome) business opportunities in both Hong Kong and the Chinese mainland.

Former Chinese Premier Zhu Rongji in November signed a landmark deal with ASEAN (Association of Southeast Asian Nations) leaders to form before 2010 a regional free trade zone.

That agreement marked a great leap forward in regional co-operation.

Japan has since signed similar deals with individual ASEAN countries. South Korea is reportedly considering similar deals.

But, until now, there had not been significant, vital progress in trade-bloc talks between China, South Korea and Japan, the largest economies in East Asia.

"Because this process is already under way, China will start negotiating with the 10 ASEAN countries to reach a free trade agreement," Long said.

"Then a 10-plus-three - with China, South Korea and Japan - free trade agreement is also being discussed."

Long was appointed secretary-general of the Boao Forum for Asia in late 2001. The non-official forum was established the same year to boost regional co-operation.

China's Ministry of Commerce recently completed a feasibility study on a possible free trade zone between China, South Korea and Japan.

Ministry officials suggest creation of such a zone would benefit the three nations, as their trade structures are complementary, and enhance their competitiveness internationally.

Long did not indicate when a deal could be reached, or how extensive it could be.

Experts suggest the proposed deal remains in its infancy, with many thorny issues to be resolved.

Experts also suggest differences in the three nations' cultural, economic and political systems could affect negotiations.

Long, however, is more optimistic.

"I believe when we're talking about East Asian economic co-operation and an East Asian free trade agreement, we should also include Australia and New Zealand," Long said.

Economically, Australia and New Zealand have already become part of Asia.

"Because 60 per cent of Australia's trade involves Asia, we should include Australia in the process, even though there is some minor resistance to the idea," Long said.

"I believe Australia's participation in the ... economic integration process is important. It's not only in the interests of Australia and China, but the whole Asian economy."

Long also called for greater inflows of foreign direct investments (FDI) into China's fast-growing economy, which suffered few effects during the SARS outbreak earlier this year.

"SARS did not alter China's economic fundamentals. I believe there are two major factors contributing to China's ability to attract FDI - China's huge market and the excessive supply of cheap, but high quality, labour," Long said.

China last year attracted US$52.7 billion in FDI. That was a historic high, and a 25-per-cent increase over 2001. China led all nations in FDI received.

Even in May, when the SARS epidemic was at its peak, China achieved a 17-per-cent increase in FDI , and a 40-per-cent increase in funds actually received.

"These factors are fundamental reasons why China is so attractive to foreign investors," Long said.

"We're very confident, in spite of SARS, that China will still become the largest FDI destination, because we overtook the United States last year.

"We believe this trend will continue this year," Long added.

Many analysts believe China's gross domestic product this year could hit 8 per cent. That would make China one of the few bright spots in the sluggish global economy.

However, China's export growth faces increasing pressure, and restrictions, against the backdrop of the gloomy world economy and the rise of global protectionism.

"(China's rapid increase in exports) is the result of our competitiveness, not because of unfair trade with other nations," Long said.

Fifty-four per cent of China's exports are conducted by foreign investors in China.

Long said countries should not establish barriers, under the pretext of WTO rule violations, to such trade.

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