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S.E. Asian Leaders to Sign Free Trade Pact with China


Senior Asian officials met for a second day in Laos to prepare for next week's summit of the Association of Southeast Asian Nations, ASEAN. Officials say one of the most important agreements due to be signed during the meeting is aimed a free trade deal with China. This is one of several FTAs under negotiation with Asia's largest economies.

China's Prime Minister Wen Jiabao is to sign the agreement creating the world's largest free trade area over the next six years. It will cover nearly two billion people in 11 countries with a combined gross national product of $2 trillion.

Officials say the first step in the process will be an accord on free trade in goods to be signed during the Vientiane summit of the Association of Southeast Asian Nations. Agreements on services and investment are to follow.

ASEAN spokesman Jun Abad says the Chinese and ASEAN leaders also will sign a dispute settlement accord.

"It is supposed to govern the disputes that may arise in the future in the course of [the] implementation of the ASEAN - China FTA," said Jun Abad.

ASEAN leaders also are working on free trade agreements with Japan, South Korea and India. And next week they launch negotiations on a deal with Australia and New Zealand.

China's economic boom has increased demand for raw materials from Southeast Asian nations, but it has also sucked away new foreign investment. In addition, there are fears that lowering trade barriers will cause an influx of cheaper Chinese goods that will threaten local manufacturers.

Business leaders such as the head of the FTA Committee of Thailand's Garment Manufacturers Association, Suchart Chantaranakaracha, say the agreements present challenges as well as opportunities.

"I'm not very pessimistic," said Suchart Chantaranakaracha. "And I'm not optimistic either. But I think the FTA between ASEAN and China creates a better trade opportunity. At the same time, manufacturers also have to well prepare for this change."

He says the rise of FTAs is due in large part to frustrations over the stalled talks at the World Trade Organization, which aims to eliminate trade barriers worldwide.

"The WTO negotiations move at a snail's pace," he said. "Countries like Thailand cannot wait because we are losing opportunities."

He notes that FTAs let countries pick which sectors will be affected. And he says governments still have recourse to measures such as quotas and temporary tariffs to safeguard their industries from dumping and other threats.