Trading up

Free trade gets regional boost

Trading up

“It is difficult to achieve the status of a global power without first becoming the dominant power in one’s own region,” writes Martin Jacques in his recent book When China Rules the World. “It is in China’s own backyard, that the reverberations of its rise are already being felt most dramatically and in the most far-reaching ways.”

Trade, Jacques believes, is China’s trump card and it has been using the size of its home market to court its neighbours in the 10 member Association of Southeast Asian Nations (ASEAN). He points out that, for ASEAN countries, the Chinese market is now three times the size of Japan’s. For many ASEAN exporters, China is fast becoming the most important market in the region.

Jacques predicts that the next step will be the creation of an East Asian Free Trade Zone. In fact, this is already becoming a reality, with China and ASEAN having agreed this week to something similar next year – eliminating tariffs on 7,000 products. China’s commerce minister, Chen Deming told media the free trade zone will make it cheaper for Chinese people to buy Southeast Asian fruit and for ASEAN consumers to purchase Chinese clothes and electrical goods.

This is the culmination of a long courtship of the ASEAN nations. Jacques puts the starting point as the Asian financial crisis in 1997, when China elected not to devalue its currency, winning neighbourly thanks.

In the ensuing 12 years countries that were historically closer to the US have seen relations with China blossom. While America has devoted most of its recent energies to the Middle East, China has been building its reputation as a ‘good neighbour’ in its own backyard.

For example, Beijing now gives four times more aid to the Philippines than Washington does. Jacques says it is also no accident that China prefers to work through ASEAN rather than APEC. The US is not a member of the latter body, and thus can be excluded. The result? A marginalisation of its regional influence to China’s benefit.

Premier Wen Jiabao has been quoted as stating that “winning the trust [of ASEAN] is of the utmost importance”. The Beijing leadership expects China to emerge as the key player in the region, and Jacques agrees that it is inevitable. After all China was the dominant power in Asia for 1800 of the last 2000 years.

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