The free trade agreement between Southeast Asian countries and China, known as the ASEAN-China Free Trade Area (ACFTA), is nearing completion of an upgrade after nearly two years of negotiations. Leaders from both sides made this announcement during a summit in Vientiane, indicating that only some legal details need to be finalized before the signing of the agreement next year. The upgrade is seen as an important step, particularly in a time of increased protectionism around the world, sending a message on the value of free trade and collaborative market efforts.
The ACFTA was highlighted as the first FTA between the Association of Southeast Asian Nations (ASEAN) and an external partner, as well as China’s first FTA. It has significantly boosted trade between the two sides, with both becoming each other’s top trading partner since 2020. Trade in goods between ASEAN and China has tripled since 2010, reaching US$696.7 billion last year. China has also become a significant investor in ASEAN, contributing US$17.3 billion in foreign direct investment in the bloc last year. The upgrade to the agreement is expected to facilitate further growth, particularly in emerging areas such as the digital and green economies.
The ACFTA covers a substantial free trade area consisting of over 2 billion people and a combined gross domestic product exceeding US$20 trillion. The Ministry of Trade and Industry in Singapore stated that negotiations for the upgrade commenced in 2022 to ensure the agreement remains relevant, future-ready, and able to tackle global challenges. The focus on modernization and adaptation reflects the need to stay competitive in a rapidly changing economic landscape and to capitalize on emerging opportunities.
Singapore’s Prime Minister Lawrence Wong emphasized the significance of the ACFTA upgrade in the context of rising protectionism globally. The agreement sends a strong message on the importance of free trade and cooperation in the market, demonstrating a commitment to expanding mutually beneficial trade relations. Recognizing the success of the ACFTA in boosting trade and investment between ASEAN and China, the upgrade is anticipated to further enhance opportunities for both parties in various sectors, including the digital and green economies.
The continued growth and success of the ACFTA demonstrate the importance of fostering strong trade relationships and collaboration in the region. The agreement has been instrumental in driving economic activity and investment between ASEAN and China, solidifying their positions as significant trading partners. By focusing on future growth areas and strategic cooperation, the upgraded agreement is poised to build on this foundation and unlock new opportunities for both sides. The commitment to remaining relevant and adaptable in the face of evolving global challenges underscores the determination to ensure continued success and prosperity through free trade and market cooperation.
