ASEAN eyes free trade zone with China

ASEAN eyes free trade zone with China

Chris Foley, Agence France-Presse, Bandar Seri Begawan

Southeast Asian leaders pushed back their economic frontier on
Tuesday, confirming plans for the world's largest free trade zone
with China and beginning work on a broader bloc taking in Japan
and South Korea.

Approval for the landmark deal with China was reached as the
leaders of the Association of Southeast Asian Nations (ASEAN)
held separate talks with their key dialog partners China, Japan
and South Korea on closer integration.

"For the countries of Southeast Asia this agreement is of
enormous historic significance," the meeting chairman, Brunei's
Sultan Hassanal Bolkiah, said.

The free trade area will cover two billion consumers in a
region with a combined gross domestic product of two trillion
dollars, and two-way trade of US$1.23 trillion.

"We wish to signal that we are more determined than ever to
accelerate the liberalization of trade in East Asia," the sultan
said following the ASEAN summit.

"ASEAN cannot simply sit back and wait for our traditional
export markets to recover from the current global economic
downturn."

But the euphoria came with a warning that the zone was at
least 10 years away and would not solve the immediate problems
facing a region struggling with the global economic slump.

Indications on the eve of the summit that the Chinese proposal
could be scuttled by ASEAN's golden rule of consensus proved
unfounded.

"My suggestions were all accepted by them. They agreed that
China will become a part of the ASEAN Free Trade Area," Chinese
Premier Zhu Rongji said.

"Today Malaysia's prime minister said it very well: 'When our
friends are doing well, we will do well. When we are doing well,
we don't forget our friends'," Zhu told reporters.

But Malaysian Prime Minister Mahathir Mohamad still harbored
reservations.

"The details need to be worked. If we are not careful we may
lose out," he said, after earlier warning: "We must make sure the
influx (from China) will not cause our industries to shut down."

The trade agreement highlighted a new urgency by ASEAN, often
criticized as a sunset body, to engage China as the world's most
populous nation stands on the verge of entry to the World Trade
Organization.

Analysts questioned whether it would be carried through. It
appeared to be a "backs to the wall" strategy by a group with an
unimpressive track record, said Singapore-based regional
economist Song Seng Wun.

The sultan set the tone for the new look, saying ASEAN must
"improve its credibility as a regional organisation and respond
decisively to challenges."

With the ASEAN-China trade area approved, an even larger zone
taking in the two other dialogue partners Japan and South Korea
is now being examined.

But ASEAN Secretary-General Rodolfo Severino warned the group
still needed greater economic integration to get out of its
second downturn in four years as it prepares to launch its own
free trade area in 2003.

"We have to do more to integrate the economy in terms of
infrastructure, trade facilitation, investment flows,
transportation and so on," he said.

Japanese Prime Minister Junichiro Koizumi pledged help to open
up development "corridors" in eastern and western parts of
Indochina rather than back a key $2.5 billion dollar railway
linking Southeast Asia to southern China.