ASEAN to finalize plan for world's largest trade zone

ASEAN to finalize plan for world's largest trade zone

Martin Abbugao, Agence France-Presse, Bandar Seri Begawan

Southeast Asian economic ministers will meet here from
Thursday to finalize a framework agreement with China on how to
create the world's biggest free trade area of nearly two billion
people, officials said.

They are expected to endorse the framework for signing by
leaders of the 10-member Association of Southeast Asian Nations
(ASEAN) and China during a summit in Cambodia in November.

The ASEAN economic ministers are also expected to receive a
report by an experts' group on a proposal for broader ASEAN-Japan
ties as well as sign a declaration for closer economic relations
with Australia and New Zealand.

Japan proposed wideranging economic ties with ASEAN earlier
this year, in what was seen as an attempt to counter China's
rising influence in the region.

During their four-day meeting, the ASEAN ministers will also
hold discussions with business groups operating in the region,
and for the first time hold a dialogue with India, represented by
the Minister of Commerce and Industry Murasoli Maran.

They already hold annual dialogues with their counterparts
from China, Japan and South Korea, as well as Pacific neighbors
Australia and New Zealand.

But, the proposed ASEAN-China free trade agreement (FTA) "will
be one of the key agenda items", a spokesman for the Singapore
trade ministry said in a written reply to AFP.

"At their meeting in Brunei, ministers can be expected to give
guidance to progress the text, so that it may be ready in time
for signing by the leaders at the ASEAN-China Summit in
November."

While the FTA itself may sound straightforward, the
preparatory talks "had been bloody," one official said of the
hardnosed bargaining during the five rounds of negotiations on a
draft text of the framework agreement.

When the leaders of ASEAN and China agreed in 2000 to work out
an FTA within 10 years, they left it to senior officials to
hammer out the details.

Such a free trade zone would cover China's 1.2 billion people
and 500 million consumers in ASEAN. The economic region will also
have a combined gross domestic product of US$2 trillion, with
total trade projected at $1.23 trillion.

But preparatory talks have been marked by disputes, especially
over the so-called "early harvest" principle, officials familiar
with the talks said.

This calls for China to cut import tariffs on certain
Southeast Asian products before the implementation of the FTA.

ASEAN has already slashed tariffs on most products traded
within the region to a maximum five percent under the ASEAN Free
Trade Area, or AFTA, from this year.

Any liberalization by China is viewed by ASEAN as a goodwill
gesture, but Beijing wants "early harvest" as part of the formal
agreement, the officials said.

There have also been differences on the tariff rates and on
the sectors to be liberalized.

One proposal is for products with 15 percent tariffs to have
the rates cut to 10 percent by July 2003, five percent by 2004
and zero by 2005.

One ASEAN trade official said the regional bloc disagreed with
a proposal by China to focus early tariff liberalization mostly
on farm products and processed agricultural items as it would
favor their giant neighbor.

ASEAN wants coverage for non-farm products which form the bulk
of its exports.

Officials also said there are varying interpretations on the
starting point for the 10-year period when the FTA is to be
completed.

The framework agreement now being prepared will define the
parameters for negotiations such as the product coverage, the
timing and tariff cut rates.

A senior ASEAN diplomat familiar with the preparatory talks
said the ministers may issue a declaration in Brunei on the
launching of free trade negotiations with China.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.