Trade push in the right direction
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China and the ASEAN member states kept their markets open for each other even during the worst phase of the global financial crisis. This mitigated the negative impact of the crisis on their economies. Two years ago, China reduced the tariff on ASEAN goods worth 3.6 billion yuan, boosting their competitiveness. CAFTA is now set to make more such mutually beneficial arrangements possible.
CAFTA does not only mean enhanced trade relations. It also means cooperation and collaboration in infrastructure building, and investment of capital and talents, too.
China regards its cooperation with ASEAN as a priority and CAFTA is an important component of regional cooperation in East Asia. That's why the free trade area is just a start of all-around bilateral cooperation, which includes the construction of a regional foreign exchange reserve and interaction in non-traditional security fields, including energy security, environmental protection and disaster relief.
But CAFTA, like any other regional or global arrangement, has its share of hiccups. Indonesia wants to renegotiate some of the trade terms with China because a few of its businesspeople doubt the high quality of its cheap made-in-China goods.
Though some foreign media outlets have tried to play up the issue saying CAFTA is good only for China, they are wrong for two reasons. First, a long time has passed between negotiations on and opening of CAFTA. Negotiations began nearly eight years ago and the Early Harvest program was tried out two years later. A lot has changed in the meantime. Very few people expected China to weather the global financial storm with such alacrity and become an important global player so soon. So it's obvious that some CAFTA clauses may be renegotiated.
Second, the increasing trade volume between China and Indonesia shows the latter's fears are unfounded. According to the Indonesian Central Bureau of Statistics, China was the second largest destination for Indonesian (non-oil) goods in January, and the proportion of its (non-oil) exports to China rose from 6.1 percent in 2004 to 9.1 percent last year. Chinese products, too, have consolidated their position in the Indonesian market during this period, raising their share from 7.9 percent to 19.77 percent.
Besides, less developed countries are always likely to gain from free trade areas. This is not hearsay but the words of 2007 Economics Nobel Prize winner Eric Maskin. His comments are based on the experience of NAFTA (North American Free Trade Area). And though there are differences between NAFTA and CAFTA, Maskin is still optimistic about the region's bright future. So am I.
The author is a research scholar with the Institute of South & Southeast Asian Studies, China Institutes of Contemporary International Relations.
