Consolidation Abounds

[TRIPxCORE]

How do you foresee this affecting Thailand and the surrounding regions?

China forges landmark free trade pact with Southeast Asian nations

VIENTIANE, Laos (AP) — Rising power China moved Monday to expand its influence in a region long dominated by the United States, signing an accord with Southeast Asian nations aimed at creating the world's largest free trade area by 2010 — a sprawling market of nearly 2 billion people.

China's concerns about securing vital sea lanes and feeding its booming economy's ravenous appetite for oil and raw materials were seen as key motivations for the trade pact with the 10-nation Association of Southeast Asian Nations at the group's annual summit in Laos.

But some analysts believe the agreement shows how an increasingly bold China is forging new alliances that would reduce, and possibly eventually challenge, America's influence in Asia.

"China is using its huge market as a bait to lure ASEAN countries away from U.S. and Japan and build closer relations," said Chao Chien-min, a China watcher and political science professor at Taiwan's National Chengchi University.

"I think what Beijing has in mind is to forge good economic and trade relations now and then increase exchanges in other areas, particularly in the military and security arena," Chao said.

The agreements signed Monday removed tariffs on goods and created a mechanism to resolve ASEAN-China trade disputes. The accord aims to end all tariffs by 2010, drawing ASEAN's combined economies — worth $1 trillion — closer to China's $1.4 trillion economy.

Ong Keng Yong, ASEAN's secretary-general, said trade with China would speed up with the free trade agreement. "So by the time this whole FTA (free trade agreement) is done, as we want to by 2010, it should become quite substantial: $130 or $140 billion, perhaps," he told reporters.

In comparison, the annual ASEAN-U.S. trade is $120 billion and ASEAN-EU trade is $110 billion per year, he said.

Ong said it would be a long time before China surpassed the United States because the Americans are bigger investors in the region.

China's deal with the Association of Southeast Asian Nations was sealed as the 10-nation group agreed to another pact that would build an ASEAN community, much like the European Union, by 2020.

The run-up to the ASEAN summit in the Laotian capital was clouded by concerns that Thailand's crackdown last month on a protest that left 85 Muslims dead could inflame militants, and over Myanmar's failure to deliver on pledges to move toward democracy.

Some member countries indicated they might call those two ASEAN colleagues to task — in a break with the group's tradition of keeping out of domestic affairs. But both issues were kept off the table during the summit's ASEAN-only agenda Monday, Thai government spokesman Jakrapob Penkair said.

Thai Prime Minister Thaksin Shinawatra had threatened to walk out if the crackdown was raised at the summit of ASEAN members Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

On the summit sidelines, South Korea and ASEAN member Singapore concluded negotiations on a two-way free trade agreement. Japan and ASEAN member Philippines also agreed on major parts of a proposed accord — but officials from both sides said it would take six months to wrap it up.

With a long row of Laotian women in long silk skirts standing behind him, Chinese Premier Wen Jiabao witnessed the signing of the ASEAN-China accord along with Southeast Asian leaders.

"ASEAN and Chinese relations have now entered a new era of complete cooperation," Wen told reporters.

The annual ASEAN summit consists of several closed-door meetings among leaders: The 10 Southeast Asian countries alone, and in various combinations with summit partners China, Japan, South Korea and India.

This year, Australia and New Zealand also received a one-time invitation to boost trade ties — their first appearance at the summit in more than a quarter-century — but Australia resisted ASEAN's calls to sign the group's nonaggression pact.

The action plan also calls for cooperation in military training, agreements on internet security, tourism promotion and the creation of early-warning systems for illnesses like Sars, Aids and bird flu.

The document says that a highway between Bangkok, Thailand, and the south-western Chinese city of Kunming should be completed by 2007. It also foresees a new rail link between Kunming and the Burmese capital, Rangoon.

It also includes a preliminary study on building rail links that would connect Singapore with Kunming. The line would run through parts of Malaysia, Thailand and Burma.

[Dickie]

It was bound to happen, China has for a long time been growing stronger. The US is having problems economically and this is probably a good time for the Chinese to tie the SEA countries into a trade-organisation, having seen the EuroSovietUnion successfully become a massively expanded trading block.

Something to think about: we all know the USD has been the currency of choice for a lot of places with piss-poor money. Now the old soviet union republics are happily accepting euros along with USD. If the new SEA block also came out with its own currency then pressure on the USD could really increase.

[ProfessorFart]

It will be interesting to see what role India will play in this new Asia. They certainly won't want to be left out of all of this.

Nice to see Thaksin being up front and ready to face his critics.........

As for road and rail lines joining up the region, I'll beleive that when I see it. Last thing I heard on the matter was that there was also to be a link to China via Ho Chi Minh City.

[Dickie]

It will be interseting to see what role India will play in this new Asia. They certainly won't want to be left out of all of this.

<{POST_SNAPBACK}>

Yes, that will be interesting too... I think the USA will have to find a 'new' new kind of war... Atomic will not suit them well, with so many countries having and developing nuclear weapons. America will not want to see a new ballance of power between itself and China as it was with Russia... and China will not only reach the ballance, it will surpass it... I think the new, new war will be in the form of genetically designed viri and massive culling... in 'secret'.

<{POST_SNAPBACK}>

No, I think the US will eventually become just 'another' country within a group of countries though, with that ridiculous national debt, it may not be as part of a larger economic group, like the ESU is. Who'd take on a debt like that? India, though a huge market, is still having problems being so close to the 'jihad action' which limits its ability to form close links with its neighbours. Mind you, some would say that a sub-continent of 1,100M people doesn't need to link up with anyone. It's possible the White House will use foul means in an attempt to stop its hegemony from being toppled, but I don't see it myself. With the US's position as number one hate figure in the world it needs all the friends it can get and if it were discovered to be doing the stuff you mention then its current friends will be quick to distance themselves from the perpetrator of these crimes against humanity, which is what they would be.

Still: dubya managed to circumvent the Constitutional Freedom of Speech with that patriot act so gawd only knows what he's capable of doing.

[thedude]

There's a lot more happening that meets the eye. ASEAN is separately exploring FTAs with India, Japan and ANZ, although the latter is undergoing some problems because Australia is hesitating to sign a non-aggression pact (it fears this may undermine its lap-dog status with the USA).

ASEAN itself is looking to expand to a new ASEAN +3 grouping which will include China, Japan and Korea, called the East Asia Summit, and they are still trying to figure out how this new grouping will relate to the original ASEAN or if it will in fact replace it.

Most of these ASEAN related FTAs are limited in scope because many industries are still protected when so many countries are involved, for example the ASEAN-China FTA only covers 11 industries. However, in the wake of the WTO failures, Asian nations (Thailand included) have been going round signing their own bilateral FTAs for a few years now. I believe Thailand has signed an FTA with India and is exploring one with Singapore. Japan, Singapore, New Zealand, Australia, China, India, Korea among others, are each pursuing thier own trading pacts with each other. What all this amounts to is a very complex web of liberalised trade relations between countries and industries in the region, each managing industries it feels most ready to join while holding back others that still require protection, and the picture changes with each trading partner. The overall picture is yes, Asian countries are undergoing gradual, even if somewhat messy, trade liberalisation and are forming themselves loosely into a trading block. In this way, i see the larger multilateral ASEAN FTAs as being more symbolic than effectual.

Its no secret that China has sought to increase its influence over its neighbours, but what will such a large grouping of some 2 billion people and 2.4 trillion in combined GDP mean? I think it definitely means a reduced reliance in US trade because it will be cheaper to source many goods and services within the region. On the other hand, the US will not be able to resist cheaper and increasingly higher quality goods from Asia. In this way, Asian countries will, by working as a block, speed up their wealth accumulation and lift themselves to the next level of advancement.

The trend of global deflation precipitated by the foregoing means that the structural problems in the US economy will not cease in the medium term. The US will need to lift its education levels and value added per head in order to maintain its pre-eminent economic position. All is not lost, because for higher technology goods and services, there is still a strong reliance on the west, for the time being. Here is where the competition will be fiercely fought between the US and Europe. Which explains the recent landmark visit by Jacques Chirac of France to China. Clearly, Europe is trying to forge closer ties with China and Asia because despite it wealth of technological expertise, it has a relatively limited growth potential because of its mature markets and stagnant population. Asia could become Europe's growth engine. Which makes the continued slide of the USD such a devious thing for the Europeans. However the Europeans are no slouches, for they are yet to fully reap the new found opportunities in their nascent grouping, and besides, it could be argued that in many areas of technology and services, they are ahead of the US, eg telecommunications, energy, banking, aviation, design, transportation etc. I read that there are now more European companies in the Fortune 500 than there are American, a worrying sign for the US if technology and services are their survival.