China-ASEAN Free Trade Area: economic influence and poverty reduction effect

YU Miaojie1 GAO Kailin1

(1.National School of Development, Peking University)

【Abstract】The China-ASEAN Free Trade Area (CAFTA) is the most populous free trade area in the world and the third largest economic cooperation area in the world. Most CAFTA member countries are developing countries and face the common challenge of economic development and poverty eradication. The establishment of the CAFTA not only bears huge economic significance, but also has a crucial poverty reduction effect. Since 2002, when China and the ASEAN signed an agreement to establish the CAFTA, a number of economic cooperation agreements have been reached in the fields of trade, investment, and infrastructure construction, which have contributed to the liberalization of trade and investment, the economic growth of China and ASEAN countries and the progress in poverty eradication. This article reviews the establishment of the CAFTA, summarizes the measures in trade and investment promotion and the cooperation in infrastructure construction.; it analyzes the status quo of trade and investment between China and ASEAN countries, the economic influence and poverty reduction effect of the CAFTA. Finally, the article elaborates on the main challenges facing the CAFTA and puts forward policy suggestions. In the future, promotion of global connectivity and liberalization of trade and investment will remain a very effective way to reduce poverty.

【Keywords】 free trade area; China-ASEAN; poverty reduction; trade liberalization;

【DOI】

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    [1]. [1] A population of about 1.9 billion. [^Back]

    [2]. [2] In 2016, economic aggregate of China and ASEAN reached nearly USD 34 trillion, which made up 74% of Southeast Asian economy. Measurement index was the GDP measured by purchasing power parity (PPP, in 2011 constant international dollar value) based on data of World Bank. Southeast Asian economy classified in World Bank is a conglomeration of economies of East Asia & Pacific and South Asia. [^Back]

    [3]. [1] calculated based on CEIC data. [^Back]

    [4]. [2] Ten member countries of ASEAN are Cambodia, Laos, Myanmar, Vietnam, Thailand, Indonesia, Malaysia, the Philippines, Brunei and Singapore. [^Back]

    [5]. [3] Implementation of “Early Harvest Programme” shall be no later than January 2004. The mode of tariff reduction is the different tariff reduction programme in different stages on three types of products based on tariff rate. See http://fta.mofcom.gov.cn/dongmeng/annex/zaoqijihuapdf [2018-04-01]. [^Back]

    [6]. [4] Protocol to Amend the Framework Agreement on Comprehensive Economic Cooperation between the People’s Republic of China and the Association of Southeast Asian Nations and Partial Agreements under this Agreement. [^Back]

    [7]. [1] Limited by accessible data, the seven member countries of ASEAN here are Vietnam, the Philippines, Indonesia, Malaysia, Thailand, Brunei and Singapore. [^Back]

    [8]. [2] Poverty rate data of Myanmar as the new member country of ASEAN are inaccessible in World Bank; poverty rate of Cambodia decreased from 19% in 2004 to 2% in 2012. [^Back]

    [9]. [3] Wan, Guanghua, and I. Sebastian, “Poverty in Asia and the Pacific: An Update,” ADB Economics Working article 267, 2011. [^Back]

    [10]. [1] The founding document of Association of Southeast Asian Nations. [^Back]

    [11]. [2] Indonesia, Thailand, Singapore, the Philippines, Malaysia and Brunei. [^Back]

    [12]. [3] Vietnam joined ASEAN in 1995, Laos in 1997, Myanmar in 1997, and Cambodia in 1999. [^Back]

    [13]. [4] Free trade area between China and six old member countries of ASEAN (Brunei, Singapore, Indonesia, Malaysia, the Philippines, and Thailand) was established in 2010; and that between China and four new member countries of ASEAN (Vietnam, Laos, Cambodia and Myanmar) was established in 2015. [^Back]

    [14]. [1] Refer to the official website of CAFTA. http://www.cafta.org.cn/show.php?contentid=63877[2018-04-01]. [^Back]

    [15]. [1] Including Free Trade Agreement between the Government of the People’s Republic of China and the Government of the Republic of Singapore and Memorandum of Understanding on Bilateral Labor Service Cooperation between the Government of the People’s Republic of China and the Government of the Republic of Singapore. [^Back]

    [16]. [2] Refer to reports of Ministry of Commerce of the People’s Republic of China. http://fta.mofcom.gov.cn/article/ftanews/200810/266_1.html[2018-04-01]. [^Back]

    [17]. [3] Refer to reports of Ministry of Commerce of the People’s Republic of China. http://fta.mofcom.gov.cn/article/fzdongtai/201803/37337_1.html[2018-06-29]. [^Back]

    [18]. [4] For specific timeframes for tariff reduction and coverage of products of “Early Harvest Programme,” refer to the website of Ministry of Commerce of the People’s Republic of China. http://fta.mofcom.gov.cn/dongmeng/annex/zaoqijihua.pdf[2018-04-01]. [^Back]

    [19]. [1] By 2010 when CAFTA was officially established, China and the six old member countries of ASEAN had realized zero tariffs on more than 90% of products. China’s average tariff on products of ASEAN declined from 9.8% to 0.1%, and the average tariff of the six old member countries of ASEAN on products of China declined from 12.8% to 0.6%. Refer to Ministry of Commerce of the People’s Republic of China.http://www.mofcom.gov.cn/aarticle/ae/ai/201001/20100106728230.html[2018-04-01]. [^Back]

    [20]. [2] For specific timeframes for tariff reduction and coverage of products of Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between the People’s Republic of China and the Association of Southeast Asian Nations, refer to the website of Ministry of Commerce of the People’s Republic of China. http://fta.mofcom.gov.cn/dongmeng_phase2/dongmeng_phase2_special.shtml[2018-04-01]. [^Back]

    [21]. [3] Memorandum of Understanding on Strengthening Sanitary and Phytosanitary Cooperation (SPS MOU). [^Back]

    [22]. [4] Memorandum of Understanding on Strengthening Cooperation on Standard, Technical Regulations and Qualification Assessment (TBT MOU). [^Back]

    [23]. [5] Protocol to Include Chapters of Technical Barriers to Trade and Sanitary and Phytosanitary Measures into Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between the People’s Republic of China and the Association of Southeast Asian Nations. [^Back]

    [24]. [6] Refer to China Council for the Promotion of International Trade. http://www.ccpit.org/Contents/Channel_3429/2015/1123/505163/content_505163.htm[2018-04-01]. [^Back]

    [25]. [1] Ishido, Hikari, “Liberalization of Trade in Services Under ASEAN + n FTAs: A Mapping Exercise,” Working articles 16. 2 (2015), ERIA Discussion article Series. [^Back]

    [26]. [2] Meng, Y. & Lin, Y. Asian-Pacific Economic Review (亚太经济), (3): 50–56 (2014). [^Back]

    [27]. [3] Refer to the official website of ASEAN. http://asean.org/?static_post=asean-china-free-trade-area-2[2018-04-01]. [^Back]

    [28]. [4] By January 2018, for foreign economic and trade cooperation areas in ASEAN regions jointly established by Chinese enterprises, seven of them had been assessed and confirmed by Ministry of Commerce of the People’s Republic of China, which were distributed in Cambodia, Thailand, Laos, Indonesia and Vietnam. There are three in Indonesia. http://www.guojiribao.com/shtml/gjrb/20180109/391883.shtml[2018-06-29]. [^Back]

    [29]. [1] Dave Donaldson, “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure,” American Economic Review, 2018. [^Back]

    [30]. [2] Memorandum of Understanding on China-ASEAN Transportation Cooperation. [^Back]

    [31]. [3] They are respectively Dali-Ruili Railway, Yuxi-Mohan Railway, and Xiangyun-Lincang Railway. Meanwhile, construction of China’s sections of eastern, central and western projects of pan-Asian railway has been included into China’s Mid- and Long-Term Railway Network Plan. [^Back]

    [32]. [1] In 2009, China’s trade with ASEAN was in surplus, which merely made up 0.03% of bilateral trade volume that year; China’s trade with ASEAN was continuously in deficit during 2000–2011 except for 2009. [^Back]

    [33]. [2] CEIC database classified major products for trade into 11 types like coal, crude oil, petroleum products, liquefied petroleum gas and other gases, liquefied natural gas, iron ore and its concentrates, steel products, copper products, aluminum products, automobiles and chassis, and saloon cars (including CKD and SKD products), but it did not cover all products for trade. During 2008–2016, the sum total of import and export of the 11 types of major products for trade made up 12% of China-ASEAN bilateral trade. [^Back]

    [34]. [1] Fan, L. Special Zone Economy (特区经济), (8): 95–96 (2010). [^Back]

    [35]. [2] Goldberg, Pinelopi Koujianou, et al, “Imported Intermediate Inputs and Domestic Product Growth: Evidence from India,” Quarterly Journal of Economics, 125. 4 (2010) :1727–1767. [^Back]

    [36]. [3]Yu, Miaojie, “Processing Trade, Tariff Reductions and Firm Productivity: Evidence from Chinese Firms.,” Economic Journal 125. 585 (2015): 943–988. [^Back]

    [37]. [1] In China’s foreign investment in 2015, China’s investment in Singapore increased by a factor of 2.71 compared with that in 2014. This article adopts the average level during 2011–2015 to calculate proportion of China’s investment in each member country of ASEAN to lessen the influence of extremum. [^Back]

    [38]. [2] Ge, S., Liu, C. & Luo, W. Journal of International Trade (国际贸易问题), (1): 82–92 (2016). [^Back]

    [39]. [1] Data on poverty rate of China and member countries of ASEAN in specific years are partly lost. Therefore, the year before and after the decline in poverty rate are not necessarily the same among these countries. Nonetheless, the overall change can reflect the downward tendency for poverty rate. [^Back]

    [40]. [1] National income per capita here adopts the index of “national income per capita, Atlas method (current dollar price)”of World Bank. The index for Myanmar and Brunei in 2016 was lost, and data in 2015 are used for corresponding analysis. [^Back]

    [41]. [2] Similar results can be obtained in line with the poverty line of 3.1 dollars a day. [^Back]

    [42]. [1] Aslam, M, “The Impact of ASEAN-China Free Trade Area Agreement on ASEAN’s Manufacturing Industry,” International Journal of China Studies, 3. 1 (2012): 43–78. [^Back]

    [43]. [1] Lancang-Mekong Cooperation is the new sub-regional cooperation mechanism that is jointly launched and constructed by China and Cambodia, Laos, Myanmar, Thailand, and Vietnam. On November 12, 2015, the First Lancang-Mekong Cooperation Foreign Ministers’ Meeting was held in Jinghong City, Yunnan Province. [^Back]

    [44]. [2] Refer to 2017 ASEAN Investment Report. [^Back]

    [45]. [1] Construction of economic corridors is the crucial component of the BRI. As the principal pivot of the Belt and Road, the six economic corridors are China-Mongolia-Russia, new Eurasian Land Bridge, China-Central Asia-West Asia, China-Indo-China Peninsula, China-Pakistan, and Bangladesh-China-India-Myanmar economic corridors. [^Back]

This Article

ISSN:1007-0974

CN: 11-3799/F

Vol , No. 04, Pages 102-125+7

July 2018

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Article Outline

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Abstract

  • 1 Course of establishment of CAFTA
  • 2 Measures to promote trade and investment of CAFTA
  • 3 Economic influence and channels of poverty reduction in the construction of CAFTA
  • 4 Effect on poverty reduction of China and member countries of ASEAN
  • 5 Existing problems and policy suggestions
  • 6 Conclusion
  • Footnote