Asean FTA with China 'a mixed blessing'

The upgrade of the China-Asean free trade agreement last year brings the region closer but it may prove to be a double-edged sword.

Panellists at a FutureChina Global Forum discussion yesterday were divided on the benefits of closer ties between Asean nations and China.

Dr Sarasin Viraphol, executive vice-president of leading Thai agri-business conglomerate Charoen Pokphand Group, made the case for better engagement with China. "It's important for us to think seriously about what Asean countries can do to be more receptive with the outflow of Chinese investment."

He added that China's "Belt and Road" initiative was an important commitment to developing Asean's infrastructure, which the region needs. But he noted that Asean needed to consolidate frameworks for trade and investment.

"We should try to urge Washington and Beijing to find some way to come to terms with each other. Maybe they can merge the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership," Dr Viraphol noted.

Other panellists at the discussion, moderated by Straits Times business editor Lee Su Shyan, warned about closer integration with China, noting it could be disadvantageous to Asean countries.

Mr Shoeb Kagda, editor-in- chief of Globe Asia Magazine, highlighted how the free-trade deal was a mixed blessing for Indonesia.

While Indonesia was able to export commodities to China, the flooding of Chinese products into Indonesia hurts the local manufacturing sector.

Mr Clyde Prestowitz, president of the Economic Strategy Institute, said Asean faced a huge trade deficit with China, which was "probably costing Asean a lot of jobs".

He added that while Asean had exported relatively advanced components to China, recent data showed that its major shipments now were low valued-added goods.

The shift in the type of exports will cause Asean's wealth-producing capacity to suffer, he warned.

"If I were Asean, I would think very hard about what truly is it that creates wealth, and what had created wealth in Japan, Korea and China," said Mr Prestowitz.

Lee Xin En

A version of this article appeared in the print edition of The Straits Times on July 19, 2016, with the headline 'Asean FTA with China 'a mixed blessing''. Print Edition | Subscribe