'World's largest' free trade zone agreed

By Maria Ressa
CNN

BANDAR SERI BEGAWAN, Brunei (CNN) -- China and ASEAN, the Association of Southeast Asian Nations, moved Tuesday to form the world's largest free trade area within ten years at their annual summit here.

The agreement would create a free trade area with a combined gross domestic product (GDP) of about $2 trillion.

ASEAN is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. China, Japan, and South Korea are also taking part in the association's seventh summit.

The deal will create a marketplace of 1.7 bllion consumers and total international trade of about $1.23 trillion.

It is estimated ASEAN exports to China would increase by 14 percent under an ASEAN free trade area, called AFTA, and Chinese exports to ASEAN would jump by 55%, pushing ASEAN's GDP up 0.9 percent and China's up 0.3 percent.

APEC given a push

CNN.com Asia More news from our Asia edition

ASEAN has also targeted its dialogue partners -- Japan, China and South Korea -- as growing export markets.

There is also hope that China's entry into the World Trade Organization (WTO) will have some trickle down effect.

"We see that as an opportunity for ASEANs exports into China," ASEAN secretary General Rodolfo Severino said Monday ahead of the agreement. "And at the same time, as China's economy grows, we expect China to be investing into ASEAN."

The 21-member Asia Pacific Economic Cooperation, or APEC, has also pledged to scrap all trade tariffs by 2010 for developed nations and by 2020 for developing nations.

The ASEAN pact would likely hasten that timetable, since most of its members are developing countries. APEC, which also includes the NAFTA nations of United States, Mexico and Canada, will ultimately create a much bigger free-trade zone that proposed by China and ASEAN.

China, Japan and South Korea also had their own separate summit on Monday, moving prickly relations between them some way towards improvement.

The three nations have agreed to broaden ties, with regular meetings of foreign and economic ministers, and to cooperate more deeply in anti-terrorism, culture and environmental efforts, officials said.

ASEAN leaders said they expect a short-term negative impact because of the free trade zone and will want special and differential treatment for ASEAN to smooth the transition to an open marketplace.