Globalization is a phenomenon that is inevitable. The advent of mass media and satellite communications has caused an increase in the speed of news being spread as well as ideas. This makes the world smaller in the sense that people can be reached halfway across the world in a matter of seconds, and we can gain information on an event happening far away very easily.
The impact of globalization is also felt in the trade sector. The expansion of the world market is helped by technologies that allow faster sending of goods, and an almost instant transaction between two or more parties that are separated by thousands of miles. This rapid expansion leads to free trade, where powerful economies are able to influence the smaller markets into accepting their goods, and with the formation of the World Trade Organization, free trade is further emphasized. Trade barriers are eliminated to ensure accesses to states are made easier. Thus, products from overseas are pitted against local products, creating the competition we all know too well.
China is a growing world economy. Its economic growth has grown substantially in the past few years. In the last 30 years the rate of Chinese economic growth has been almost miraculous, averaging 8% growth in Gross Domestic Product (GDP) per annum. The economy has grown more than 10 times during that period, with Chinese GDP reaching 3.42 trillion US dollars by 2007. In Purchasing Power Parity GDP, China already has the biggest economy after the United States. Most analysts project China to become the largest economy in the world this century using all measures of GDP.
China has adopted a slow but steady method in implementing their economic reforms. It has also sold the equity of some of the major Chinese state banks to overseas companies and bond markets during the middle phase of the first half of the 21st century. In recent years the role played by China in international trade has also increased. [1]
It continues to dominate the Asian economy, and even the world economy at some rate. To this end, it has developed a free trade agreement with ASEAN, named the China-ASEAN Free Trade Area (CAFTA). This allows Chinese products to enter ASEAN Markets without any restrictions and can compete with ASEAN's local products.
This paper will address how globalization with integrating and trans boundary economic activities through China's expansion in the region will affect.
1. Definitions and History
Year 2010 is the 60th year anniversary of diplomatic relations between China and Indonesia. Indonesia and China has done much to strengthen the friendly relations between the two countries. One form of business from Indonesia and China friendly relations is the existence of CAFTA (China-ASEAN Free Trade Agreement). This cooperation is conducted on the basis of the encouragement to continue developing mutually beneficial diplomatic relations in the ASEAN region.
The ASEAN-China Free Trade Area (ACFTA), also known as the China-ASEAN Free Trade Area is a free trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and the People's Republic of China. The initial framework agreement was signed on 4 November 2002 in Phnom Penh, Cambodia, with the intent on establishing a free trade area among the eleven nations by 2010. The free trade area came into effect on 1 January 2010. The ASEAN-China Free Trade Area is the largest free trade area in terms of population and third largest in terms of nominal GDP. [2]
CAFTA is the regionalization of free trade between China and ASEAN countries. This agreement formed the idea of the shift of economic power balance began moving toward the "Kingdom of the Middle East" or the middle kingdom. Seeing this shift, Indonesia does not want to miss any like to be able to participate. Especially with the same interests with other ASEAN countries, Indonesia decided to join. It also saw the development of China's own economy is growing very well, for example like China's total investment to Indonesia comparatively large, only within a short time. Of course this also be one reason for Indonesia to use it as a good opportunity for developing countries that want to move forward also in the economy.
The idea of formation of CAFTA for the first time agreed in the Summit (Summit) ASEAN-7 in Bandar Sri Begawan, Brunei Darussalam, in November 2001. At the time it approved the establishment of ASEAN CAFTA within 10 years outlined in the ASEAN-China Framework Agreement on Economic Cooperation adopted at the next ASEAN Summit at Phnom Penh, Cambodia, November 2002 and several subsequent meetings.
View interests as well as continuing discussions about the purpose and role of Indonesia in promoting the economy, then the necessary effort to establish an economic integration in ASEAN countries and China. Then formed CAFTA (China-ASEAN Free Trade Agreement).
On July 1, 2005, a pivotal agreement on trade in goods between China and the Association of Southeast Asian Nations (ASEAN) took effect. The implementation of this free trade agreement marked the beginning of the China-ASEAN Free Trade Area (ACFTA), which is expected to become the world's largest trading bloc.
ACFTA's sheer size alone is sufficient to merit further analysis. When coupled with China's economic rise and World Trade Organization (WTO) accession, ACFTA has the potential to significantly impact the WTO-led multilateral trade system.
Most importantly, ACFTA serves as a tangible reminder of China's growing influence in East Asia. While the rise of China has prompted significant debate and research, little attention has been paid to ACFTA, particularly in the legal field. Instead, most of the scholarship on ACFTA has focused exclusively on economic and geopolitical issues, despite the fact that creation of a free trade area is also a legal process.
Furthermore, one of the greatest impediments to ACFTA's long-term success is ASEAN's lack of a sufficient legal structure, namely a capable dispute resolution mechanism, hence the success of this groundbreaking free. [3]
2. The ASEAN Preparation for CAFTA
The launch of the China-ASEAN Free Trade Area (CAFTA) on January 1 brings hope of visa exemptions for Chinese tourists bound for ASEAN member countries. Thailand, Malaysia, Indonesia, Philippines, Singapore and Brunei cut their import tariffs to zero on New Year's Day, as did China and then Vietnam, Cambodia, Laos and Myanmar will join the zero tariff scheme in 2015. Under the agreement, trade between China and six ASEAN countries including Brunei, Indonesia, Malaysia, the Philippines, Thailand and Singapore has become duty-free for more than 7,000 products. [4]
Laos is in the preparation and adjustment stage as it seeks to achieve membership in CAFTA by 2015; Mr Somsavat said that the Lao government was working hard to handle the implementation of the agreement. Regarding transport links in the region, Laos has been involved in the construction of the Kunming-Bangkok Highway, which links China 's Yunnan province to Thailand via Laos. Thai and Chinese companies reached construction bid agreements on the Lao-Thai Mekong Friendship Bridge connecting Bokeo province's Houayxai with Xieng Khong in Thailand's Chiang Rai province jointly last Friday, Mr Somsavat said. The Lao government has negotiated with the Chinese side through bilateral and Greater Mekong Sub-region channels to facilitate cross-border transport and person-to-person exchanges. Regarding cooperation between China and Laos as well as ASEAN as a whole, Mr Somsavat identified the agricultural, mining and energy sectors and notably hydroelectricity as the main focus areas of economic cooperation, He said CAFTA is significant in promoting and enhancing cooperation in economic matters, trade and investment between both sides. [5]
In the other case, China as the most influential country in CAFTA, made some preparation such as Extending sea links with Malaysia, Singapore, Indonesia, Brunei, and the Philippines; Constructing a Nanning-Singapore economic corridor through highway and railway projects linking Nanning, Hanoi, Phnom Penh, Bangkok, Kuala Lumpur, Singapore; Deepening GMS cooperation among all member states and enhancing communication and cooperation between China's southern provinces and Southeast Asian countries. According to the 1st Pan Beibu Gulf Economic Cooperation Forum. [6]
As the last ASEAN member to join the CAFTA, Philippines has increased their productivity in the areas which include agro-based products, air travel, automotive products, e-ASEAN, electronics, fisheries, healthcare, rubber-based products, textiles and apparels, tourism, and wood-based products were proved to be cost competitive to which Member countries have a comparative advantage. [7]
But, in this case, Indonesia seems not too ready for the CAFTA, the fourth comittee vice chief of DPR, Mohammad Jafar Hafsah said that Indonesian peoples are too naïve, when they are ratificated the ASEAN-China Free Trade Agreement (CAFTA) without sufficient preparation especially in the agriculture sector. He said that to increase the agricultural sector, the government must motivate the village industry and increasing the defrayal of the agriculture sector and build more infrastructure in every village that have a potential agriculture sector. Besides that, the government must pay attention the human resources in Indonesia, doing the nature conservation and taking care of the natural resources. [8]
So not every member of the China-ASEAN Free Trade Agreement are ready to face the pact, just like Indonesia and the other country, they must be increase their preparation to face the global market like this.
3. China's Rise Through Economic Trade
Now we look at CAFTA in China's perspective as the country involved in this claimed largest free trade area in terms of the population that consists of 1.9 billion people. [9] We shall examine how China has become the rising state that it has become to the world in the light of globalization and its particular interest on the region of South East Asia.
China is fast becoming a regional hegemony in the Asia Pacific region with its new openness and embracing of world affairs. Embarking from the low-profile foreign policy conceived by Den Xiaoping, Hu Jintao formed the basis of zhonghe guoli or comprehensive national strength, which includes international competitiveness, efficient and flexible diplomacy, and compatible military capability. Also without its economic modernization and political stability, China will never gain what it has described in the slogan quanxin quanyi mufazhan, yixin yiyi kao jianshe or can be translated as, wholeheartedly seeking development and single-mindedly working on reconstruction. [10]
China as a rising power has its own implications towards its neighboring regional states. According to the theory of balance of power, if weaker states see a new threat then they are more likely to group themselves together and balance the new threat by building up their military or armies, but if they perceive it as a new power and bandwagoning is more beneficial, then they are most likely to follow the lead. India is an example of a state that is balancing the act to the growing Chinese influence in the region. While South East Asian countries are yet to be analyzed in terms of the direction of the foreign policies, Indonesia has been reported by The Times that a growing number of Javanese people are studying mandarin language to reflect that the increasing influence of Chinese influence is taking place. [11]
Chinese foreign policy's main characteristics are stated fairly clearly in the speech of Premier Li Peng in 1996 that they are putting high priority on advanced friendly relations with neighboring countries, worked diligently for regional peace and stability, and promoted regional economic cooperation. [12] China obviously worked itself to conform with the globalized world by modernizing and actively engaging with current world affairs. The rise of China has also coincided with the influence decline of world's only hegemony, USA, due to ill-conceived decision-making, such as the Iraq invasion, and the 2008 financial crisis.
China now promotes multilateralism to spread its wings. One of the key projects is of course the strengthening of partnership with the ASEAN countries as a strategic region by assuring them that it will be the major driving force behind regional project and cooperation. [13] Thus China has been very actively participating in many sessions of ASEAN conferences and asserting its good intentions mainly through partnership in the economic sector. The peak of this cooperation materialized in the form of CAFTA.
According to Zhang Xinwen, it will bring extensive communication and increased cooperation, not only on economic, but also agriculture,environment protection,energy, intellectual property rights, and mutual development. [14] This is reinforced by a statement by Chinese Foreign Minister Yang Jiechi that said agriculture development is the key to productivity by drawing on advanced technology and to accelerate the cooperation on new and renewable energies. [15] Also if by population it boasts to be the largest trading area, then the estimated total trade volume of $1.2 trillion will make the area the third largest market in the world, after the European Union and the North American Free Trade Area. [16]
To have its economic partners as developed and mutually benefitting of this trade area, China has maintained high-level exchanges, enhanced political mutual trust, shared development expecience, and strenghtened confidence in cooperation. They have also set up a 10 billion U.S. dollar "China-ASEAN Fund on Investment Cooperation" to support infrastructural development in the region. [17] Not only is China increasing the ties of trade partnership, but it also balances with development support to warm the relationship between China and the ASEAN members. [18]
China is becoming increasingly indispensable to ASEAN, as a close neighbor and a large regional power. CAFTA enables small ASEAN countries to jointly engage China as an equal party and generate mutual gains. On the international arena, CAFTA also increases ASEAN's standing. [19] According to Chinese economist Angang Hu, this free trade will incoorporate China into the global economy as the "center of the world's manufacturing industry." China wants ASEAN to absorb as much as 8% of Chinese manufactured products. ASEAN is also strategic because US and the EU have implemented a protectionist acts on China. He also said that China's trade strategy is "half-open model", which is open or free trade on the export side and protectionism on the import side. [20]
China has emerged from the closed state ignoring all plights of world affairs to become a country most active in embracing the globalized world using means of regional multilateralism, especially in the economic sector. Whereas US as still the world hegemony promotes it's preferred type of goverment everywhere it goes, China never does and that makes China seems less intimidating. As said by Prof. Colin Brown in a lecture, this globalized century is fast becoming the Asian Century with more great powers coming from the Asian continent. Now it is up to every other states to balance against those powers or bandwagon with them.
Conclusion
It was all started by the expansion and the rise of China and its most prime condition towards economy that made China as the leading and most important trade on today's global phenomenon. In order to strengthen its partnership with the ASEAN countries, china has been very actively participating in many sessions of ASEAN conferences and asserting its good intentions mainly through partnership in the economic sector.
CAFTA (China-ASEAN Free Trade Agreement) is a cooperation that conducted on the basis of the encouragement to continue developing mutually beneficial diplomatic relations in the ASEAN region. The ASEAN-China Free Trade Area is the largest free trade area in terms of population and third largest in terms of nominal GDP.
The ASEAN preparation is the preparation and adjustment stage as it seeks to achieve membership in CAFTA but many have difficulties to adjust with China because is frankly leads the trade.
The phenomena of globalization should be taken as an opportunity for each country to spread its capability and gain more relations with the other but they must be fully aware on their own principles and state's boundaries, world imperialism or hegemony are many of the most unwanted conditions that the less-developed countries usually struggles. Every country should now be fully ready to face the global market.
