With effect from January 1, 2010, China and Southeast Asia will embark on a free trade agreement (FTA) that will rival the EU-North American FTA in terms of value and surpass those markets in terms of population. Under the FTA, China and the 6 founding ASEAN countries -- Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, are to eliminate barriers to investment and tariffs on 90% of products. The average tariff rate China charged on ASEAN goods would be cut to 0.1% from 9.8%. Average tariffs imposed on Chinese goods by ASEAN states will fall to 0.6% from 12.8%. Other ASEAN members, including Vietnam and Cambodia, have until 2015 to follow.
This FTA that was 8 years in the making is considered as the largest in the world as it will ease up trade in billions of dollars worth goods and investments covering a market of 1.7 billion consumers. The FTA agent is expected to expand Asia's trade reach and boost intra-regional trade that has already been expanding at 20% pa. With this, China hopes to overtake Japan and EU to become ASEAN's largest trading partner.