China Looks to Solidify World’s Largest Free Trading Zone at ASEAN Summit in Singapore

Chinese Premier Li Keqiang has arrived in Singapore for the substantial end of year ASEAN conference. As part of the summit, China and Singapore look to work with multiple partners to solidify an agreement to streamline existing free trading agreements (FTAs) in order to finalise draft agreements relating to the establishment of the Regional Comprehensive Economic Partnership (RCEP). The proposed RCEP which may be ratified this week in Singapore would establish the world’s largest free trading zone that would incorporate all of ASEAN (Indonesia, Malaysia, Brunei, Singapore, The Philippines, Thailand, Vietnam, Laos, Myanmar and Cambodia) along with nations that ASEAN currently trades freely with according to bilateral agreements. This group of nations includes, China, Japan, South Korea, India, New Zealand and Australia.

If solidified, the RCEP would not only be the world’s largest single free trading zone, but it would cover nearly half of the world’s total economic output and bring new economic opportunities to over 3.4 billion people. The prospects therefore are very positive for all of the national partners involved. This is especially the case as the current US administration has jeopardised long standing commitments to free trade and global connectivity. By forming a large free trading zone incorporating most of Asia, the RCEP partners can help to firmly establish not only a commitment but a long term mechanism to help secure a multilateral trading environment that can help to shelter emerging markets from the hostile actions of those seeking to foment instability in global markets.

Beyond creating a wider safety net for nations who share common principles and seek a common destiny in terms of moderate prosperity, the RCEP can create new opportunities for businesses and entrepreneurs throughout the global bloc while helping to create new jobs and enhance long term sustainable living standards.

According to Chinese Premier Li,

“Amid rising protectionism and unilateralism, China will actively work with all relevant sides to promote China-ASEAN strategic partnership and the integration of East Asia, and to jointly deliver positive messages of focusing on cooperation, East Asia, development, multilateralism and free trade”.

As 2018 marks the 15th anniversary of the strategic partnership between China and ASEAN while also marking the 40th anniversary of China’s reforms under Deng Xiaoping, seeing the formal creation of the RCEP before the end of the year would help to mark an important milestone in a meaningful way that shows clear purpose among all partner nations.

To better contextualise the broad dynamism of RCEP, it helps to understand that of the world’s top twenty fastest growing economies, eight are in RCEP while the world’s largest economy in terms of purchasing power parity (PPP) is China – a vital component to RCEP. In addition to streamlining trade between ASEAN and the strong Chinese, Korean and Japanese economies of north east Asia, RCEP would also see China and India enter into a common trading zone in a way that could help ease tensions between the large neighbours.

As China and Singapore have already upgraded their own prominent free trading agreement, hopes are high for the ASEAN summit being fertile ground for the consecration of RCEP.

Below is Eurasia Future’s full report on ASEAN’s goals and accomplishments in 2018 

This week welcomes the end of year ASEAN summit of world leaders and dignitaries held in Singapore. In addition to ASEAN heads of state, attendees at the November ASEAN meeting will include Chinese Premier Li Keqiang, South Korean President Moon Jae-in, Russian President Vladimir Putin, Japanese Prime Minister Shinzo Abe, Indian Prime Minister Narendra Modi, American Vice President Mike Pence and new Australian Prime Minister Scott Morrison.

The ASEAN summit will focus on the initiative of creating smart cities throughout the region that will become hubs for new digital infrastructure and innovation.  Among the cities selected for a pilot programme are Bangkok, Thailand, Cebu City in The Philippines and Yangon, Myanmar. Additionally, the meeting will continue to discus the importance of expanding free trade both within ASEAN and working towards robust and sustainable free trading agreements with partner nations that reject the unilateral model. Finally, further discussions will be held regarding this year’s historic agreement between ASEAN and China to resolve remaining issues in the South China Sea through a constructive dialogue process.

China, Japan and Korea are generally considered the great economic giants of east Asia while Singapore is rightly included in this list when also considering south east Asian economies. However, the Association of South East Asian Nations (ASEAN) should be increasingly thought of as a major economic power as a collectively united force. While ASEAN works to build a single market on the basis of dialogue, compromise and democracy – something quite different from the European Union’s top-down and often coercive model, ASEAN’s ability to strike successful trade deals with other great economic powers proves that today, ASEAN is itself representative of the pooled strengths of its members which collectively represent a substantial contribution to the organisation as a whole.

As China is well on the road to becoming the world’s most powerful overall economy while in many areas China has already eclipsed the United States, the opinion of policy makers in Beijing as to which direction the global economic winds are blowing ought to be listened to carefully. China clearly sees multiple opportunities for win-win partnerships with ASEAN. When extrapolated further, as a free trading partner with China, Japan and South Korea, ASEAN is now a marketplace where the top economies in Asia and some of the most robust economies in the world engage in healthy competition with one another for the heart and soul of new projects base don the spirit of 21st century economic connectivity.

What’s more crucial is that while ASEAN began life in 1967 as an alliance of either non-aligned or pro-American south east Asian powers that largely excluded partnerships with China and its regional allies, today, all of ASEAN including traditional western partners are at the forefront of Sino-ASEAN win-win trading initiatives. One such example of this is the growing fruit trade between Thailand and China.

China’s most internationally recognised entrepreneur Jack Ma recently praised the fruit trade with Thailand while complimenting Thai durians as being internationally popular items on Ma’s Alibaba and AliExpress e-commerce giants. According to Ma,

“China is on its way to be the world’s largest consumer, driven by rising income and a growing middle class of 300 million. There is no better time than now for trade-oriented countries to seize this opportunity to export to China as the country continues to open its doors wider for global trade”.

China’s Xinhua further reports:

“Thanks to the on-line sales, the volume of Thailand’s durians exported to China rose 700 percent year-on-year in April, according to the Thai Commerce Ministry.

The surging overseas sales of Thailand’s durians came as leaders of the ASEAN countries have agreed to work toward an early conclusion this year of the Regional Comprehensive Economic Partnership, a free trade agreement (FTA) scheme of the 10 ASEAN member states and its FTA partners, namely China, Australia, India, Japan, South Korea and New Zealand”.

 

As part of China’s ‘3+X’ format for open ended long term cooperation with ASEAN, many crucial goals have already been achieved including the overall increase of trade between ASEAN as a whole and China. China also recently overtook the United States as the number one destination for Vietnamese exports. This is especially significant as Vietnam has in recent years been the ASEAN member with the most disagreements with Beijing although in an new era of dialogue based problem solving, this too is improving. Likewise, after being pioneered by Philippine President Rodrigo Duterte, ASEAN has collectively adopted a new approach to South China Sea disputes which prioritises a harmonious long term economic partnership between ASEAN and China over hostility in areas which constitute the maritime borders between China and its ASEAN partners.

At the conclusion of this year’s ASEAN Foreign Ministers Summit in Singapore which attracted non-ASEAN partners from across the world, Chinese State Councilor and Foreign Minister Wang Yi announced that after discussions with his ASEAN counterparts in Singapore, a new draft for the Code of Conduct (COC) had been mutually agreed between Beijing and the Association of South East Asian Nations regarding the positions of all parties with South China Sea claims. This agreement will serve as the basis for the rules governing maritime action and connectivity in the South China Sea until a final settlement can be reached on the issue after a period of continued respectful dialogue between Beijing and ASEAN members.

This is a milestone not only because it looks to chart a clear course towards a negotiated settlement regarding the rules of engagement and status of claims in the Sea but it also demonstrates that the quickest and most mutually just path to the harmonisation of cooperation among nations in the South China Sea region is through direct dialogue which is underscored by the reality that China and ASEAN are growing economic partners who can gain much from mutual cooperation and who stand to lose a great deal by succumbing to non-Asian meddling in a regional dispute.

Speaking shortly after the agreement was solidified, Wang Yi told the press, “I believe that the negotiations on COC can be speeded up if we exclude external interference“. As part of the new draft COC, China will station rescue and relief ships in the Sea as part of an effort to provide aid to crews who experience safety hazards in the sea. China further proposed other joint cooperative efforts between its own expert crews and those of ASEAN members throughout the wider region in a clear embrace of the spirit of peace through prosperity.

Singaporean Foreign Minister Vivian Balakrishnan who hosted the meeting said of the agreement,

“I am pleased to announce yet another milestone in the COC (Code of Conduct) process. AMS (ASEAN member states) and China have arrived at a single draft COC negotiating text, which will be a living document and the basis of future COC negotiations”.

But beyond rapidly growing positive relations with China, ASEAN is also opening up its vast and diverse markets to the wider world. Other nations outside of the region including Turkey whose prominent Foreign Minister Mevlut Cavusoglu attended the Foreign Ministers ASEAN summit in Singapore earlier this year, look expand trade and other cooperative ties with the south east Asian bloc. A free trading agreement between ASEAN and Ankara looks to be the medium term logical conclusion to the rapidly intensifying relations between Turkey and ASEAN. Likewise, as Pakistan’s new government looks to diversify its trading relations across global regions, I have suggested that an ASEAN-Pakistan free trading agreement could be mutually advantageous in both the near and long term.

Taken in totality, ASEAN has a bright future. The key for ASEAN leaders at this stage in time is to work more intensely than ever on continuing the development of an internal single market while singing free trading agreements with a combination of developed and moderately prosperous economies. Positive trading relations with others can help ASEAN not only to resolve its own conflicts but to also reach a Montreux Convention style agreement with China regarding the South China Sea.

In an age where the United States, a long time partner of many ASEAN states is retreating behind walls of economic protectionism, China has helped to foster a spirit of reinvigorated optimism regarding free trade as has been made clear by Chinese State Councilor and Foreign Minister Wang Yi’s recent visit to Malaysia and his subsequent visit to neighbouring Singapore within the framework of the ASEAN Foreign Minister’s summit earlier this year. Speaking with Singaporean Foreign Minister Vivian Balakrishnan, Wang stated

“With growing uncertain and unstable factors in the world, we should make concerted efforts to ensure East Asia’s peace and stability as well as maintain its momentum of marching forward”.

Balakrishnan later said,

“China has been ASEAN’s top trading partner for the past eight consecutive years. We upgraded the China-ASEAN Free Trade Agreement in 2015 and we’re working to fully implement this upgrade protocol. We are also striving toward a joint target of $1 trillion in trade and $150 billion in investment by 2020”.

 

While ASEAN continues to develop strategies designed to harmonise an internal single market, simultaneous to this, ASEAN is also at the forefront of new initiatives which will see the bloc of nations become a key hub of global trade linking the Asia-Pacific region to the Indo-Mediterranean region. Above all, as a united trading bloc, ASEAN should now be considered an economic giant – a collective Asian tiger whose influence in the wider world is as important as that of China, Japan and Korea.

The end of year ASEAN summit looks to built on the substantial progress made throughout 2018 on a number of issues that are vital to ASEAN’s continued success and development. From trade to South China Sea cooperation and dialogue, to economic connectivity initiatives, it is clear that the wider world outside of ASEAN is taking interest in the developments of the world’s most economically dynamic and vibrant geographical region.

 

 

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