Asean to upgrade free-trade area with China in fields of digital and green economies
China is Asean’s top trading partner since 2009; the regional bloc is also the country’s largest trading partner, overtaking the European Union in 2020
ASEAN member states and China have concluded negotiations to upgrade their free-trade area in relation to the digital and green economies, a move that both sides feel will provide a much-needed boost to trade and support international supply chains.
Singapore Prime Minister Lawrence Wong, alongside other Asean and China leaders, announced this at the Asean-China Summit on Thursday (Oct 10), after an hour-long meeting between the regional bloc and the world’s second-largest economy. Leading the Chinese delegation was Premier Li Qiang.
The upgrade covers new and enhanced rules on customs procedures, non-tariff barriers including standards and technical regulations covering food, agriculture and industrial products, the digital and green economies, and supply chain connectivity, among other areas.
Both sides are now working towards the full conclusion of negotiations targeted for next year, said Singapore’s Ministry of Trade and Industry (MTI) in a release.
This is the second upgrade since the 2010 inception of the Asean-China Free Trade Area (ACFTA).
Negotiated by MTI, the ACFTA 3.0 upgrade negotiations were launched in 2022, with the aim of ensuring the agreement remains relevant, future-ready, and responsive to global challenges, said the ministry in a press statement.
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In a speech at the summit, PM Wong said the upgrade to the free-trade agreement (FTA) is an “important move”, especially in this time of growing protectionism in the world.
“It will send a very clear and important message to everyone on the importance of free trade and win-win market cooperation,” he said.
He added that the countries should “leverage this momentum” to progressively liberalise the Asean-China Air Transport Agreement.
PM Wong also said that China can contribute to Asean’s transition to cleaner and low-carbon fuels, and help strengthen energy resilience in the region.
In particular, China’s expertise in clean energy can help advance Asean’s plans for the regional power grid, he added.
Singapore, Thailand, Malaysia and Laos are currently involved in a power integration project that marks the first collaboration among four Asean countries on multilateral cross-border electricity trading.
Since 2022, Singapore has been importing up to 200 megawatts of renewable hydropower from Laos, via Thailand and Malaysia, using existing interconnectors.
Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong said in a statement: “The introduction of new chapters on supply chain connectivity, digital economy and green economy – a first for Asean agreements – positions our businesses and people to leverage emerging areas, ensuring competitiveness and resilience against future challenges.”
Series of firsts
This is Asean’s first FTA with an external dialogue partner, and also China’s first.
China has been Asean’s top trading partner since 2009. The association is also the country’s largest trading partner, after overtaking the European Union in 2020.
The ACFTA covers a free-trade area of over two billion people with a combined gross domestic product exceeding US$20 trillion.
Since its inception in 2010, Asean’s trade in goods with China has more than trebled, from US$235.5 billion to US$696.7 billion in 2023.
Last year, foreign direct investment (FDI) from China to Asean amounted to US$17.3 billion, making China Asean’s third-largest source of FDI.
The Asean-China free-trade pact had earlier undergone one round of upgrades that were launched in 2014, signed in 2015 and entered into force in 2018.
The first upgrade saw improvements to rules of origin, customs procedures and trade facilitation, market access for services, as well as enhanced economic and technical cooperation.
The treaty comprises three agreements: trade in goods, trade in services and investment, which entered into force in 2005, 2007 and 2009, respectively. Collectively, the FTA entered into force in 2010.
With this free-trade zone, tariffs for 94.6 per cent of exports to China that originate from Singapore are eliminated.
South China Sea dispute
In his speech on Thursday, PM Wong brought up the South China Sea conflict – a longstanding flashpoint in the region – noting that Asean and China must continue to engage each other regularly to maintain peace and stability, and ensure the peaceful resolution of disputes.
“Singapore’s consistent position is that all parties should adhere to international law (and) ensure freedom of navigation and overflight,” he said.
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