Intra-Asia trade is set to grow sharply following the implementation of a free trade agreement between China and Asean.
Trade between China and the Association of Southeast Asian Nations (Asean) is set to soar following the slashing of tariffs on most goods.
On January 1 a free trade agreement (FTA) between the mainland and Asean came into force. But don’t mistake its quiet implementation for a lack of importance.
The FTA cuts the average tariff on goods from Asean to China to a negligible 0.1 percent from almost 10 percent. The six founder members of the trade bloc – Indonesia, Singapore, Thailand, Malaysia, the Philippines and Brunei – will eliminate barriers to investment and tariffs on 90 percent of products being traded.
The other Asean members, Vietnam, Laos, Myanmar and Cambodia, have until 2015 to follow suit.
The effect of the FTA will be momentous. Just look at the trade figures: Asean-China trade in the last decade grew from US$39.5 billion dollars in 2000 to US$192.5 billion last year.
And Asean -China trade with the rest of the world has reached US$4.3 trillion dollars, comprising about 13.3 percent of global trade.
Some experts have been reported making predictions that the agreement will see trade between China and Asean increasing by 40 to 50 percent in the next few years. That seems a bit of a stretch, but it will certainly lead to greater volumes for container shipping lines plying the intra-Asia trade routes.
However, putting the headline percentages and numbers aside for a minute, slashing tariffs may make import-export cheaper but it doesn’t address customs problems that plague the Southeast Asian countries.
The FTA is intended to facilitate customs clearance but at many of the smaller ports in the region, US dollars are far more effective at “facilitating” the clearance of goods than any free trade agreement.
In addition to that, there are no standardized customs procedures across Asean and this will continue to create delays. Immigration requirements also differ from country to country, and red tape abounds.
Having said all that, this journey has started with a single signature – or rather, a whole bunch of signatures – and with the trade growth predicted the signatories to the FTA are sure to waste no time tackling inefficiencies down at the customs office.