6 - ASEAN-China Free Trade Agreement: Negotiation, Implementation and Prospect

Summary

FTA is the abbreviation for Free Trade Agreement or Free Trade Area when it is referred to regional cooperation, and it is more popularly used than PTA (preferential trade agreement) or RTA (regional trading agreement). FTA can be seen as a part of the WTO system for free trade and comprehensive economic cooperation; it is rule-based and member-driven. All decisions should be made by consensus and the agreements are the outcome of negotiations between or among members. The one-vote-down principle of WTO decisions is also applied to FTAs. This makes the negotiation slow but it allows for different ideas and protects the interests of the small or weak economies. As an FTA is much smaller with fewer members, it is much easier to make a decision than at the WTO.

ASEAN-CHINA FTA: FROM PROPOSAL TO FRAMEWORK

Relatively speaking, Asia paid attention to FTA later than other areas in the world, especially Europe and America. In 1990, the Prime Minister of Malaysia, Mahathir Mohamad proposed to establish a regional cooperation group named “East Asia Economic Group” (EAEG) consisting of ASEAN, China, Japan and Korea (South Korea, or Republic of Korea), but the proposal was not accepted mainly because it was opposed by the United States of America, one of the initiators of APEC. However, the situation changed a year later after the United States initiated in 1991 to establish the North America Free Trade Area (NAFTA) with Canada and Mexico. ASEAN quickly responded by establishing the ASEAN Free Trade Area (AFTA) in 1992 as a qualitative leap in the history of ASEAN economic cooperation. In 1992, Singapore, the most active free trade promoter, successfully encouraged Thailand to initiate the AFTA at the ASEAN summit held in Singapore. This is the first FTA in Asia. Through careful negotiations, ASEAN completed most negotiations on trade and investment in the 1990s, especially on tariff and non-tariff arrangements.