CAFTA Initiative Gave China a Diplomatic Advantage

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in 1998 to expand cooperation in the fields of economy, politics and culture exchange. However, the economic issue is always a priority among the regional issue due to the Asian Crisis. As a consequence, finance, trade, environment, labor, agricultural and tourism have been the focus of discussion within APT framework since 2000. (Suzuki, 2004) Besides, to ensure free flow of goods among APT nations, tariffs and non-tariffs barriers were gradually removed on the basis of the agreement of WTO resolutions and preferential tariff treatment to products of least developed countries. Without tariffs and non-tariffs barriers on China-ASEAN trade, the trade volume of bilateral trade has been increasing in an uncertain global economy. In 2013, total trade between ASEAN and the Plus Three countries grew by 1.8%, making USD$ 726.4 billion with occupation of 28.9% of ASEAN’s total trade, in which ASEAN goods imported from the Plus Three countries recorded an increase by 2.1% while ASEAN goods exported to the Plus Three countries rose by 1.5%. (InterAksyon.com, 2014)

4.1.2. CAFTA Initiative Gave China a Diplomatic Advantage

Looking back on China-ASEAN relations during post-Cold War era, there are four features in the bilateral ties. First, the absence of ideological rivalry between China and Southeast Asian countries was gradually restored to amity, which gave China-ASEAN ties an opportunity to establish diplomatic relations with each other by 1991. Secondly, the vital role of economic interdependence created several multi-level cooperative mechanisms in China-ASEAN relations, which makes economic diplomacy a central aspect of China’s foreign policy. China’s involvement in a range of multi-level and multi-sector cooperation with ASEAN since the 1990s was part of China’s “Good Neighbor Diplomacy”. Bilateralism was actually the leading idea of China’s diplomacy in ASEAN. In the view of

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ARF’s creation in 1994, however, several multi-level and multi-field cooperation are greatly developed. Among regional cooperative mechanisms, CAFTA is undoubtedly a landmark in China-ASEAN economic cooperation. Thirdly, the Spratly territorial disputes and the ASEAN-China interactions are inextricably linked. Lastly, emerging multilateralism in China-ASEAN diplomacy is

considered an indicator on diplomatic interaction between China and the ASEAN nations. (Chwee, 2005)

Multilateral diplomacy actually existed in the Asia-Pacific region, which its distinguishing characteristics are increasing interaction, reaching a consensus and clearing disagreement with other regional countries. ASEAN is exactly a multilateral organization, but it was widely criticized after the 1997 Asian

Financial Crisis broke out since the organization wasn’t expected to play a role to provide stability and resource and to solve the financial problem in this region.

When the financial crisis ended, regional free trade area became a hit subject. In fact, ASEAN proposed the concept of free trade area in the early 1990s and took active measures to enhance regional economic cooperation. Nowadays, major achievement in China-ASEAN relations is the growing economic cooperation between the two sides. When the ASEAN+1 framework launched after the 1997 Asian Financial Crisis, the bilateral economic partnership also moved to a new level. In truth, the bilateral trade volume was 36 times as much as that in the early 1990s, which is even expected to reach 500 billion U.S. dollars in 2015.

ASEAN member states have benefited a lot from China’s rapid and marvelous economic growth. At the ASEAN Summit held in 2000, both China and ASEAN reached a agreement on the improvement of strengthening economic cooperation and integration between the two parties. The cooperative mechanism was

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advanced to China-ASEAN FTA to reinforce complementarities with each other.

(Chirathivat, 2002) Since the launch of CAFTA in January 2010, the average tariff rate of Chinese goods to ASEAN nations has reduced to 0.1% from 9.8%.

So far, CAFTA has a population of 1.9 billion, its GDP is approximately USD$ 6 trillion. The trade value of this area is also close to USD$ 4.5 trillion, making it the most populous free trade area on the globe with the world’s third largest trade volume after European Union (EU) and North American Free Trade Area

(NAFTA). China and ASEAN launched the CAFTA with the intention to harvest tangible economic benefits from the collaboration among eleven nations by 2010.

In the context of China’s rise in Southeast Asia with its giant economy, it’s not hard to find that in three ASEAN countries, Singapore, Malaysia and Thailand, per capita GDP is actually higher than China while in two ASEAN states, Indonesia and the Philippines, per capita GDP is below China, have developed industrial and modern service sectors for forty years. Even though Cambodia, Laos, and Vietnam were heavily hit by domestic insurgencies or internal and external strife, these countries contrived to lift growth in GDP at a remarkable pace since the early 1990s. (Booth, 2011) Consequently, in the past decade, bilateral trade volume between China and ASEAN had quintupled reaching USD$ 213 billion in 2009 up from 41 billion U.S. dollars in 2001. (Wang and Tong, 2013) (See Table 4-1 and Table 4-2)

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CHINA-ASEAN TRADE, 2001-2013 (USD billion)

China’s Exports to ASEAN China’s Imports from

ASEAN China’s Trade

with

Table 4-1. CHINA-ASEAN Trade, 2001-2013

Source: Wang and Tong (2013); The Ministry of Commerce, PRC (2015)

China recorded trade deficits with ASEAN members until 2012. The trade deficit has turned into trade surplus since 2012, when China’s trade surplus with

ASEAN came to USD$8.5 billion by2 percent of the trade value, reflecting an almost balanced trade. Over the past decade, it’s obvious to see China-ASEAN trade volume has increased from USD$54.8 billion in 2002 to USD$ 400.1 billion in 2012.

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Country Exports Value

Table 4-2. CHINA-ASEAN Trade by Country, 2013

Source: Journal of Economics and Sustainable Development (2014); The Ministry of Commerce, PRC (2015)

The ASEAN thus has become China’s third biggest trading partner, and China also evolves to be the largest trading nation for ASEAN, which reflects China’s emerging economic clout in this region.