TRADE BLOCS THAT I NEED TO USE ARE (NAFTA AND THE ASEAN TRADE BLOCS)

Trade blocs that i need to use are (NAFTA and the ASEAN trade blocs)

Trade blocs that i need to use are (NAFTA and the ASEAN trade blocs)

Introduction

A Free Trade Agreement (FTA) between the Association of South East Asian Nations (ASEAN) and China came into effect on New Year's Day, creating the world's third largest free trade bloc behind the European Union (EU) and the North American Free Trade Association (NAFTA). While limited in scope, the agreement is further testimony to the expansion of China's influence in Asia and internationally at the expense of its rivals, above all the US.

Initially proposed by China, the FTA is the product of eight years of negotiations, with the details only being settled last year when investment rules were sorted out. As of January 1, tariffs have been abolished on more than 7,000 items or 90 percent of the total number for China and the six more economically developed ASEAN members—Indonesia, the Philippines, Thailand, Singapore, Malaysia and Brunei. The four remaining ASEAN nations—Vietnam, Laos, Cambodia and Burma—have until 2015 to end tariffs.

The FTA is a continuation of processes that have been developing over the past decade. Trade with China played a significant role for many ASEAN countries in their recovery from the devastating impact of the 1997-98 Asian financial crisis. Two-way trade between ASEAN and China amounted to $US19.5 billion in 1995, rose to $57.6 billion in 2003 and hit $231 billion in 2008. China has supplanted the US as ASEAN's third largest trading partner after Japan and the European Union (EU).

The combined population of the free trade bloc is 1.9 billion people and its combined GDP is $6 trillion. However, the agreement is more restricted than NAFTA and falls well short of the EU's economic integration. For China, the arrangement facilitates greater access to raw materials and manufacturing parts as well as markets in South East Asia. ASEAN countries, however, are concerned about being overshadowed by China—its GDP is three times that of the combined ASEAN.

The FTA's limitations reflect these concerns. Under the deal, each nation is allowed to list sensitive items on which some tariffs can remain, in some cases to 2020. Included in these lists are chemicals, some types of electronic equipment, motor vehicles and automotive parts. Even with this protection, Indonesia called for a last-minute delay on some provisions, reflecting fears that its steel, petrochemical, textile, farming and other sectors will not be able to compete with cheap Chinese imports. Jakarta could not get agreement from other ASEAN members.

An Asia Times article on January 7 highlighted concerns in Vietnam over China's economic involvement in the country, particularly a major investment by Chinese corporate giant Chinalco in bauxite mining and processing. Vietnam is seeking investment in exploiting its huge bauxite reserves, the world's third largest, but is worried about Chinese influence. Likewise it has doubts about a Chinese proposal to establish a rail and road corridor running from Nanning in ...