Since 1st January, 2010, China and 10 Southeast Asian nations created the world’s third-largest free trade area. While many industries are eager for tariffs to fall on everything from textiles and rubber to vegetable oils and steel, a few are nervously waiting to see whether the agreement will mean boom or bust for their businesses.

Trade between China and the 10 states that make up the Association of Southeast Asian Nations has soared in recent years, to $192.5 billion in 2008, from $59.6 billion in 2003. The new free trade zone, which will remove tariffs on 90 percent of traded goods, is expected to increase that commerce still more.

The zone will rank behind only the European Economic Area and the North American Free Trade Area in trade volume. It will encompass 1.9 billion people. The free trade area is expected to help Asean countries increase exports, particularly those with commodities that resource-hungry China desperately wants.

The China-Asean free trade area has faced less vocal opposition than the European and North American zones, perhaps because existing tariffs were already low and because it is unlikely to alter commerce patterns radically, analysts say.

However, some manufacturers in Southeast Asia are concerned that cheap Chinese goods may flood their markets, once import taxes are removed, making it more difficult for them to retain or increase their local market shares. For example, Indonesia is so worried that it plans to ask for a delay in removing tariffs from some items like steel products, textiles, petrochemicals and electronics - and prompting the government to say that it would ask for a delay on some provisions.

 Cambodian textile industry does not hold much hope that Cambodian textile exports would be able to compete with China’s highly developed garment industry and the free trade area might entice more Chinese garment factories to set up operations in Cambodia, where production costs and labor are cheaper.

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