The FTA between China and ASEAN and Impact on East Asian Economy

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The main purposes of this research are to analyse the impacts of the free trade agreement (FTA) concluded between China and ASEAN (hereafter ACFTA) in November 2002 and to point out some issues that ASEAN and Japan should consider to respond to this movement. More concretely, the following issues have been analysed. First, what were the economic and political aims of China and ASEAN in ACFTA? Second, what are the impacts of this FTA on the economic development of South-Western region of China and the countries in the Greater Mekong sub-region (new members of ASEAN) ; Third, what are the impacts of ACFTA on other ASEAN countries? And finally, how ASEAN countries and Japan should respond to the new economic relations with China?Our analysis has been based on the international trade data (published by UNCTAD), the survey on the literature and the results of our field surveys in Thailand and Yunnan province (of China). Major conclusions can be summarized as follows :Firstly, under the enfo … More rcement of ACFTA, the export volume of agricultural and mining products from old members of ASEAN to China has increased evidently, and in manufactured products, the horizontal division of labor between the two also showed a substantial progress. Both China and old members of ASEAN are benefiting from the trade creation effect of ACFTA. However, this FTA may hit the labor-intensive industries of new ASEAN members and hinder the industrialization of these countries. In order to avoid this trap and to utilize the positive effects of ACFTA, new member countries of ASEAN should have appropriate industrialization policy (emphasis on the comparative advantage and enhancement of foreign direct investment), as well as making efforts in producing high quality agricultural products to exploit the benefits of the Early Harvest measures.The impact of ACFTA on Japan at the time-being can be expected as follows. Because the structure of export product of Japan is quite different from that between China and ASEAN countries, the trade diversion effect of the FTA on Japan is small. However, along with the rapid expansion of Sino-ASEAN trade and the ambitious offensive strategy of China toward ASEAN, the presence of China in this region will be increasingly apparent. Japan should enhance the cooperation on trade and investment with ASEAN, in particular step up on technology transfer and other economic cooperation efforts with new members of ASEAN. Less