Further ASEAN-China Cooperation for Joint Prosperity: Envisioning ACFTA 3.0 in the Digital Era

Edited byLurong ChenAladdin D. Rillo Further ASEAN–ChinaCooperation for JointProsperity: EnvisioningACFTA 3.0 in the DigitalEra Lurong ChenAladdin D. RilloEdited by Further ASEAN–China Cooperation for Joint Prosperity: Envisioning ACFTA 3.0 in the Digital Era © Economic Research Institute for ASEAN and East Asia, 2024. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted inany form by any means electronic or mechanical without prior written notice to and permission from ERIA. The findings, interpretations, conclusions, and views expressed in their respective chapters are entirely those ofthe author/s and do not necessarily reflect the views and policies of the Economic Research Institute for ASEANand East Asia, its Governing Board, Academic Advisory Council, or the institutions and governments they represent.Any error in content or citation in the respective chapters is the sole responsibility of the author/s. Material in this publication may be freely quoted or reprinted with proper acknowledgement. Cover Art by ArtmosphereBook Design by ArtmosphereNational Library of Indonesia Cataloguing-in-Publication DataISBN no. 978-602-5460-56-2 Foreword ASEAN–China bilateral trade has seen exponential growth, increasing 85-fold since the establishmentof dialogue relations in 1991. Today, ASEAN and China are each other’s largest trading partners,with total bilateral merchandise trade continuing to rise steadily despite challenging economic andgeopolitical environments. Central to this robust economic relationship is the ASEAN–China Free TradeArea (ACFTA). In the light of recent shifts in the global economic landscape, it is imperative for ASEAN and Chinato enhance the ACFTA to ensure its continued relevance and responsiveness to market demands.Key challenges include the dynamic changes in global and regional supply chains, the reverberatingeffects of the COVID-19 pandemic, the increasing importance of technical standards and regulations,transparency measures, the integration of technology-based trade facilitation measures such aselectronic document exchange, and emerging trade issues like digital trade and sustainable economicdevelopment. The research team led by Lurong Chen and Aladdin D. Rillo critically examines the economic impacts ofthe existing ACFTA, considering the evolving market conditions in the region. Drawing comparisons withother free trade agreements involving ASEAN and/or China, particularly the Regional ComprehensiveEconomic Partnership (RCEP), this ERIA work envisions ACFTA 3.0 as a vehicle to consolidate abusiness-friendly, trade-facilitative, and future-ready free trade area, promising mutual economicprosperity for both parties. It is noteworthy that the policy recommendations presented in this report hold relevance beyondthe scope of ASEAN–China relations, extending to many other ‘ASEAN-plus’ trade negotiations. Thisoffers a continuous driving force for pan-regional market integration. As an international organisation,ERIA remains committed to conducting economic research in support of regional integration anddevelopment in ASEAN and East Asia. Tetsuya Watanabe President of ERIA Acknowledgements ASEAN–China economic relations play a pivotal role in the Asian economy. The establishment of theASEAN–China Free Trade Agreement (ACFTA) has solidified the foundation of the production sharingnetwork in Asia, known as ‘Factory Asia.’ With technological advancements and shifts in the globaleconomic landscape, it is imperative for ASEAN and China to enhance their bilateral relations in marketintegration and economic cooperation. This publication, a collaborative effort by experts from theregion, outlines key policy issues for the upgrade of ACFTA and highlights its significance in promotingASEAN–China cooperation. We extend our sincere gratitude to all contributors for their unwavering enthusiasm and dedication tothis research project and the ensuing policy dialogues. We also express our appreciation to TetsuyaWatanabe, President of ERIA, Koji Hachiyama, Chief Operating Officer of ERIA, and Le Quang Lan,Director of the Market Integration Directorate of the ASEAN Secretariat, for their trust and steadfastsupport, which were instrumental to the project’s success. Special thanks are due to Fukunari Kimura, ERIA Chief Economist, and Shujiro Urata, Senior ResearchAdvisor to the President of ERIA, for their invaluable advice and generous assistance throughoutthe compilation of this book. We also acknowledge the contributions of Yuanita Suhud and MichelleChandra Kasih, ERIA research associates, in project management and information collection, as well asthe support from Tika Aulia Dewi and Denis Ann. We are grateful to Stefan Wesiak, Fadriani Trianingsih, and Eunike Septiana for their diligentproofreading and insightful comments on the manuscript. Lastly, we appreciate the various forms ofsupport from our colleagues, including Toru Fu