Spotlight: China's FTAs with S.Korea, Australia tremendous boon

China's free trade agreements (FTAs) with South Korea and Australia officially came into force on Sunday, marking a tremendous boon for the three countries.

The Chinese Ministry of Commerce said Wednesday that a first round of tariff cuts will take effect on Sunday, and a second on Jan. 1, 2016.

The hard-won trade arrangements will also provide an unrivalled opportunity for regional economic integration.

FTA BETWEEN REGIONAL HEAVYWEIGHTS

Seoul's free trade accord with Beijing has been widely anticipated by its major multinationals to expand presence in the world's largest consumer market and the general public to boost political, economic and people-to-people exchanges.

As China has become South Korea's largest trading partner, and the latter China's third-biggest single-country partner of trade, Beijing has seen its exports to South Korea account for over a quarter of the total from January to November this year.

Negotiations on the China-South Korea FTA were first brought up in September 2004. The agreement, after negotiations of a total of 14 rounds, began picking up pace after Chinese President Xi Jinping and his South Korean counterpart, Park Geun-hye, agreed in July 2014 to step up efforts to finalize the talks.

The South Korean Parliament ratified the free trade pact on Nov. 30, and the two sides reached a final agreement to implement the deal.

With the similar aim to boost bilateral economic and trade exchanges with China, the Australian Senate passed legislation surrounding the China-Australia Free Trade Agreement (ChAFTA) earlier this week, clearing the final hurdle to enact the agreement signed by representatives of both nations in Canberra.

The trade deal was reached after decade-long talks that began in 2005. The process was greatly accelerated after Xi paid a state visit to Australia in November last year.

Australian Trade Minister Andrew Robb said in October that the parliamentary ratification of the agreement will bring enticing prospect for the burgeoning Sino-Australian relationship.

"ChAFTA represents an agreement of outstanding quality between two highly complementary economies," Robb said.

WELFARE OF RELEVANT COUNTRIES

Once implemented, the China-South Korea FTA will witness tariff cuts on more than 90 percent of traded goods within the next 20 years. Seoul estimated that South Korean manufacturers are likely to see its exports to China grow 1.35 billion U.S. dollars within a year.

South Korea expected the deal to raise its real GDP by 0.96 percentage points, create 53,800 jobs and enhance consumer benefits by 14.6 billion dollars.

If the liberalized trade reaches its goal 20 years later, South Korean companies are expected to reduce tariff costs by up to 5.44 billion dollars annually, much higher than tariff savings of 930 million dollars from the South Korea-U.S. FTA and the 1.38 billion dollars from the South Korea-EU FTA.

China's free trade deal with Australia will also result in the removal of a number of tariffs, such as those on Australian beef, dairy and wine, while Australians will also have access to cheaper Chinese goods such as electricals and homewares.

Australian Shadow Trade Minister Penny Wong also said of late that ChAFTA has the potential to deliver significant economic benefits to the resource-dependent country.

After being severely hit by slumping commodity prices and waning mining investment, the Australian economy has been tipped to slow further than the official estimates next year.

"Trade with China has been critical to Australia's recent economic performance and it will be critical to Australia's economic future," Wong said, adding that China is already a major new market with hundreds of millions of affluent consumers increasingly demanding new goods and services.

POTENTIAL FOR REGIONAL INTEGRATION

South Korean experts said the FTA between Seoul and Beijing is an important milestone to boost economic integration in the region, as it will serve as a good starting point to speed up negotiations on the trilateral FTA with Japan and boost negotiations on the Regional Comprehensive Economic Partnership (RCEP).

China and the Association of Southeast Asian Nations (ASEAN) have sealed a deal to upgrade their free trade area, and the negotiations on the RCEP, a free trade pact involving the 10-member ASEAN and six other countries has also entered a crucial phase.

Despite these efforts, economic integration in the region still faces challenges such as the exceeding regional trade arrangements among countries, which may lead to the "spaghetti bowl" dilemma.

At a CEO summit of the Asia-Pacific Economic Cooperation (APEC) forum in Manila last month, Xi called for efforts to boost the openness of the Asia-Pacific economy and uphold the multilateral trade regime.

Citing the "historic step forward" APEC leaders took in Beijing last year by launching the FTAAP (Free Trade Area of the Asia-Pacific) process and the worries about fragmentation that have been on the rise with various new regional free trade deals cropping up, Xi urged Asia-Pacific economies to "accelerate the realization of the FTAAP and take regional economic integration forward."

Ken Waller, director of the Australian APEC Study Center at RMIT University, also said that for regional economic integration in the Asia-Pacific, it is important to push forward the establishment of the FTAAP. Endi