Priming China-ASEAN Trade

In the most recent online edition of Cargo News Asia, Gary Dale Cearley out of Kuala Lumpur discusses the potential impact of a FTA between ASEAN-member nations and China. This was actually reported on even earlier at Asia Times Online.

Of course, given geographic considerations, an FTA between China and ASEAN would quite positively impact trade flows between the two entities, affecting decisions on supply chain architectures across the entire Asia region. Mr. Cearley starts with this lead: 

"The recent meeting between the leaders of the Association of South East Asian Nations (ASEAN) and China in Kuala Lumpur on a free trade agreement (FTA) has made freight forwarders optimistic about future trade implications, and many are planning to increase their trade with China. A final agreement will eventually have far-reaching implications for all cargo transport between the two regions.

Quotes in the article from industry and related organizations:

"If this comes to pass we expect to see big demand," said Maritha Limen of Green Air Indonesia. "Right now, we don't have significant trade with China but hopefully as a result of this agreement we will see it increasing."

"The prospect of trade with China is very high," said Richard Chua of Yusen Sea & Air's Singapore operation, "Right now, our exports to China are not significant but we see the China market as a good prospect. We see it as moving ahead fast, even though we don't expect a significant improvement in exports to China in the very near future."

Xu Ningning, the deputy secretary-general of the China-ASEAN Business Council and well-known proponent of a China-ASEAN free trade zone, has described China-ASEAN trade as "a marriage of ideal partners" and reiterated that a surplus in the favour of ASEAN is more likely than one in favour of China.

"Right now there is much trade going on with China, both legally and illegally, which is mainly conducted across the borders overland in the northern ASEAN areas," said Nguyen Thi Hiep Hang of Aeroceanetwork, a Vietnam-based logistics consultancy. "Lowering the tariffs on this trade both ways will promise to grow the legal trade and shrink the illegal trade. Elimination of tariffs would only make prohibited items real Customs targets. Economies will grow and smuggling will shrink.''

Nelson Cho of Singapore Technologies Log-istics, part of the government-owned Sembawang Group in Singapore, agrees that the benefits are there but doesn't think that this will cover all areas promised by China. "We are already handling export trade from ASEAN to China so I can say that this will improve the balance of trade," said Cho. "But I envisage the import will be mainly raw materials from China or high-end components. If China works out a free trade agreement with ASEAN we will see an increase of trade," said Cho. "Also with the proposal of India, Korea and Japan joining China and ASEAN to form an economic and trade zone, I forsee fast growth in trade annually."

Jewell Truong, a Ho Chi Minh City-based freight forwarder, said: "Europe and North America are far away and they have their own agendas. Other regions are too small or too weak to help us. So we need to keep China and India in future growth plans. There will be very big cargo growths from these two countries. Of course, we will still see some growth from Japan, Korea and Taiwan, but nothing to match China and India."

The move towards a China-ASEAN FTA will definitely pull in Korea and Japan eventually and has tremendous implications for the entire region if India also enters into any final agreements. Assuming that "greasing the wheels" of trade in this way assuages any significant, negative political history and issues between neighboring countries, the long-term prospects for the logistics services industry are very positive indeed. In particular, I believe those individuals and firms with tried and true cross-border expertise and capabilities will be in ever increasingly high demand.