China expands trade role in landmark agreement

China’s landmark trade agreement with Southeast Asian leaders is the latest example of how the communist giant is claiming a growing role in a region long dominated by the United States.

Leaders plan to sign the agreement today at the Association of Southeast Asian Nations (ASEAN) summit in Laos, to begin creating the world’s biggest free trade zone and adopt a wide-ranging “plan of action” to boost ties in security, politics, technology, medicine and transportation.

China is seeking to protect vital sea lanes and secure a steady supply of oil and raw materials from Southeast Asia that have been feeding the booming Chinese economy. Linking up with ASEAN also helps Beijing further isolate Taiwan, the self-ruled island China claims as its own.

The agreement between China and ASEAN’s 10 nations calls for the two regions to begin creating a massive tariff-free market over the next five years in their combined market of 2 billion people.

It also creates a three-person panel of independent experts to resolve trade disputes between ASEAN and China.

A copy of the agreement’s final draft revealed: “This plan of action is formulated to serve as the master plan to deepen and broaden ASEAN-China relations and co-operation.”

The vaguely-worded action plan also calls for co-operation in military training, agreements on cyber security, tourism promotion and the creation of early-warning systems for illnesses like SARS, AIDS and bird flu.

The plan says that a highway between Bangkok, Thailand, and the south-western Chinese city of Kunming should be completed by 2007. It calls for railways linking Kunming and Myanmar’s capital of Yangon.

The agreement also includes a preliminary study on building rail links that would connect Singapore with Kunming. The line would run through parts of Malaysia, Thailand and Myanmar.

Chao Chien-min, a China-watcher and political science professor at Taiwan’s National Chengchi University, said that Southeast Asia is extremely important for the “big country” diplomacy China has been promoting since the 1990s. Beijing is forging strong trade ties before increasing political and military ties.

“China is using its huge market as a bait to lure ASEAN countries away from the US and Japan and build closer relations,” Chao said.

“China’s initiative has put both the US and Japan on the defensive,” he added. “Japan is in a terrible dilemma now. China’s move has forced Japan to do something in order to remain as a major player in the region.”

Nizam Idris, an economist at the IDEAglobal research house in Singapore, cautioned that ambitious trade deals like the China-ASEAN pact promise much on paper but often lack specifics. They could also fall foul of a reluctance among some ASEAN states to open their markets further to more efficient Chinese companies, he added.

“We have to be realistic in terms of expectations,” Idris said. “Some of the (ASEAN) countries are not too comfortable with the opening-up of the manufacturing sector in particular. Countries like Indonesia, for example.”