Are you ready for ASEAN 2015? The integration of ASEAN in 2015 and the free trade agreements signed by China with ASEAN and its member states will change the nature of production and exports geared towards production and exports from China and Asia. In this important edition of Asia Briefing, we discuss these developments and the impact they will have on China and the global supply chain. This is particularly striking in the case of Thailand, which has a bilateral free trade agreement with China, with an increase of 117% in apple imports, 346% for Chinese pear imports and 4,300% for grape shipments. However, they also recorded an increase of 986 per cent for fresh longan exports, 21,850 per cent for Durian exports, 1,911 per cent for mangosteen and 150 per cent for mango. It is therefore clear that in the event of strong competition, specialization would occur, since trading companies are inclined to manufacture these products where they have a comparative advantage. In the end, the surviving companies would become competitive in the global market with their own niches. The CEPT only applies to products originating in ASEAN. The general rule is that the local content of ASEAN must be at least 40% of the FOB value of the treat. The local content of ASEAN can be cumulative, i.e. the value of contributions from different ASEAN members can be combined to meet the 40% requirement. The formula is as follows: other ASEAN treaties are being negotiated, notably with Japan, which already has a number of global economic partnerships, while South Korea already has a free trade agreement.
Both resemble the above – the reduction of more than 90% of all goods traded between ASEAN and these countries. Over the past decade, trade and investment between ASEAN member states and China has increased significantly under the ASEAN Free Trade Area (ACFTA). The Convention on Trade in Goods was signed in 2004 and implemented by all Member States in July 2005. As part of the agreement, the six asean and Chinese members decided to eliminate tariffs on 90% of their products by 2010, while Cambodia, PDR, Myanmar and Vietnam, commonly known as CLMV countries, had until 2015 to do so. Since the signing of the agreement, China has maintained its position as ASEAN`s largest trading partner. In 2015, ASEAN`s total merchandise trade with China amounted to $346.5 billion, or 15.2% of ASEAN`s total trade. In addition, ASEAN received $8.2 billion in FDI from China in 2015, making it the fourth largest source of foreign direct investment for ASEAN. By 2020, ASEAN and China have committed to a common goal of $1 trillion in trade and $150 billion in investment through ACFTA. The ASEAN-India trade agreement came into force on 1 January 2010. The signing of the agreement paved the way for the creation of one of the world`s largest free trade area markets and created opportunities for more than 1.9 billion people in ASEAN and India, with a total GDP of $4.8 trillion. AIFTA is setting up a more liberal and easier market access and investment system between Member States.