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ASEAN‐China Free Trade Area: A Bane or Boon for ASEAN Countries?

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  • Jose L. Tongzon

Abstract

At the ASEAN Summit in November 2000, the leaders of ASEAN and China agreed to enhance economic cooperation and integration with the goal of establishing an ASEAN‐China Free Trade Area (FTA). This decision was a natural response to a number of important global and regional developments of the past decade. Since the signing of the framework agreement, policymakers from China and ASEAN member states have already started their negotiations on the specific terms and features for this proposed FTA. While such an FTA would hold the potential of yielding enormous economic benefits, it also causes some sense of apprehension and uncertainty in some quarters, due to the common perception that China is already a strong competitor in trade and attracting foreign investment. To examine the economic basis for such concern, this paper analyses the economic implications of this proposed free trade area from the ASEAN economies’ perspective. Specifically, it examines how competitive ASEAN countries are vis‐à‐vis China, evaluate the scope for strengthening China‐ASEAN trade and the impediments facing Chinese and ASEAN investors in each other's markets, and recommends policy measures to maximise the benefits and minimise the hardships resulting from an ASEAN‐China FTA.

Suggested Citation

  • Jose L. Tongzon, 2005. "ASEAN‐China Free Trade Area: A Bane or Boon for ASEAN Countries?," The World Economy, Wiley Blackwell, vol. 28(2), pages 191-210, February.
  • Handle: RePEc:bla:worlde:v:28:y:2005:i:2:p:191-210
    DOI: 10.1111/j.1467-9701.2005.00643.x
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    1. John Gilbert & Thomas Wahl, 2002. "Applied General Equilibrium Assessments of Trade Libereralisation in China," The World Economy, Wiley Blackwell, vol. 25(5), pages 697-731, May.
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    Cited by:

    1. Azhar A. KM & Elliott Rob J. & Liu Junting, 2012. "Product Quality, Trade, and Adjustment: The China-ASEAN Experience," Global Economy Journal, De Gruyter, vol. 12(2), pages 1-28, June.
    2. Ganeshan Wignaraja, 2013. "Regional Trade Agreements and Enterprises in Southeast Asia," Trade Working Papers 23718, East Asian Bureau of Economic Research.
    3. Ian Coxhead & Sisira Jayasuriya, 2010. "China, India and the Commodity Boom: Economic and Environmental Implications for Low‐income Countries," The World Economy, Wiley Blackwell, vol. 33(4), pages 525-551, April.
    4. Lee Jones, 2010. "Still in the “Drivers’ Seat†, But for How Long? ASEAN’s Capacity for Leadership in East-Asian International Relations," Journal of Current Southeast Asian Affairs, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 29(3), pages 95-113.
    5. Donghyun Park & Innwon Park & Gemma Esther B. Estrada, 2009. "Prospects for ASEAN–China Free Trade Area: A Qualitative and Quantitative Analysis," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(4), pages 104-120, July.
    6. French, Scott, 2017. "Revealed comparative advantage: What is it good for?," Journal of International Economics, Elsevier, vol. 106(C), pages 83-103.
    7. Guanyi Leu, 2011. "ASEAN’s Preferential Trade Agreements (PTA) Strategy," Journal of Current Southeast Asian Affairs, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 30(2), pages 31-64.
    8. Christopher Edmonds & Sumner J. La Croix & Yao Li, 2006. "The China's Rise as an International Trading Power," Economics Study Area Working Papers 88, East-West Center, Economics Study Area.
    9. Anne Booth, 2011. "China’s Economic Relations with Indonesia: Threats and Opportunities," Journal of Current Southeast Asian Affairs, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 30(2), pages 141-160.
    10. Antonio Alleyne & Zhaoyong Zhang & Yifei Mu, 2020. "Sustaining International Trade with China: Does ACFTA Improve ASEAN Export Efficiency?," Sustainability, MDPI, vol. 12(15), pages 1-30, July.
    11. Shanping Yang & Inmaculada Martínez-Zarzoso, 2013. "A Panel Data Analysis of Trade Creation and Trade Diversion Effects: The case of ASEAN-China Free Trade Area (ACFTA)," Ibero America Institute for Econ. Research (IAI) Discussion Papers 224, Ibero-America Institute for Economic Research.
    12. Nguyen, Dao Thi Hong, 2019. "Inward foreign direct investment and local wages: The case of Vietnam’s wholesale and retail industry," Journal of Asian Economics, Elsevier, vol. 65(C).
    13. Dieter, Heribert, 2012. "The drawbacks of preferential trade agreements in Asia," Economics Discussion Papers 2012-68, Kiel Institute for the World Economy (IfW Kiel).
    14. Hayakawa, Kazunobu & Yang, Chih-Hai, 2013. "How do free trade agreements change import prices? : firm-level evidence from China's imports from ASEAN," IDE Discussion Papers 436, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    15. Wignaraja, Ganeshan, 2014. "The determinants of FTA use in Southeast Asia: A firm-level analysis," Journal of Asian Economics, Elsevier, vol. 35(C), pages 32-45.
    16. Wong, Larry C.Y., 2007. "The Role of Supply Chains and International Networks in Enhancing the Agricultural Sector’s Competitiveness in Cambodia, Laos, Myanmar, and Vietnam (CLMV)," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 4(1), pages 1-9, June.

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