The China-Asean Free Trade Area (Cafta), which kicked in at the start of this year, has been greeted with little enthusiasm in the region.This article begins with Thailand, which China absolutely screwed:
A Philippine Daily Inquirer story, headlined 'The China-Asean Free Trade Area: Propaganda and reality', contended that contrary to the positive spin by the country's leaders, 'most of the advantages will probably flow to China'.
A Jakarta Post analysis urged Indonesian companies to 'face the music' and take on the challenge of competition from China. The most telling headline was in Beijing's China Daily: 'China allays fears of Asean nations over Cafta'.
Thailand, in particular, had a bitter experience. In 2005, tariffs for 200 items of vegetables and fruits were abolished. Thailand expected to export tropical fruit to China and import winter fruit from it at zero tariff. But what happened was that Thai farmers of garlic, longan and other fruit and vegetables were decimated by cheap Chinese imports. Worse, Chinese officials reportedly either refused to lower tariffs on Thai imports or left the Thai produce to rot in warehouses.This piece, after discussing hopes for change in this situation (yeah, good luck with that), goes on to make the connection between China's duplicitous, mercantile trade policies and its territorial ambitions...
The Thai experience fanned fears that Asean would become the dumping ground for cheap Chinese agricultural and manufactured products. And that fear is not unfounded.
Already, smuggling of cheap Chinese shoes into Viet Nam has done damage to the shoe industry there. In Indonesia, cheap imports of clothes, toys and electronic goods, often through smuggling, have hurt local manufacturers of such products. What would happen when the floodgates to cheap Chinese products are thrown wide open? It is no wonder that Indonesia has asked for a two-year delay in tariff reductions for 228 items.
The trade and foreign direct investment (FDI) figures are not encouraging either. Since 2004, tariffs between the two sides have been coming down, and Asean's trade deficit with China has widened. From 2000 to 2008, China-Asean trade grew sixfold to US$198 billion (S$280 billion). But Asean's trade deficit also widened five times to US$21.6 billion. Asean's cumulative FDI in China was US$52 billion in 2008. By comparison, China's FDI in Asean was just US$2.8 billion.
Still, if the Chinese hope to allay the fears of Asean, they should do more to assure that bilateral trade and investment flows are not skewed in their favour. If Beijing cannot reassure Asean that the grouping has little to fear from it economically, how can it begin to address fears over its intentions in issues such as the territorial disputes it has with various countries in the region?So many of Taiwan's industries have counterparts in China. Cheap Chinese junk is going to go through the island's economy like a tsunami. Hey journalists! Someone needs to ask Ma at a press conference a direct question about these economic realities: how can Taiwan expect to succeed where everyone else is experiencing problems?
Note also that according to the FDI figures, China doesn't reinvest in its ASEAN partners. Money comes in, but it doesn't go out. US Establishment China policy is to tame China by ensconcing it in the global financial and trade system like Gulliver pinned to the sand by the ropes of the Lilliputians. This policy appears to be a failure (except for the well connected foreign policy types making the big bucks off consulting and similar work, which is why the "tame China by binding it to us" approach will always have spokesmen): the world system is finding China too big a mercantilist nugget to swallow.
UPDATE: Walden Bello has a long piece on this problem in the NI (h/t to David in comments), similar to a piece of his I blogged on earlier.
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