The Association of Southeast Asian Nations (ASEAN) and China signed an updated version of their Free Trade Agreement (FTA) on Tuesday during a summit in Kuala Lumpur, Malaysia. The deal, which expands cooperation into new sectors, comes as the country seeks to ease the effects of global trade tensions, particularly with the United States.
The so-called FTA 3.0 version was formalized at the ASEAN leaders’ summit, which was also attended by US President Donald Trump on Sunday, Reuters reported.
What does the FTA upgrade entail?
The newly signed free trade agreement between ASEAN and China modernizes the existing framework, which originally entered into force in 2010. Negotiations on the modernization began in November 2022 and ended this May, shortly after Donald Trump imposed sweeping tariffs on major US trading partners.
The updated pact includes new sections on the digital economy, the green economy and other emerging sectors. China has previously indicated that the agreement will improve the market in sectors such as agriculture, digital economy and pharmaceuticals between China and ASEAN.
Economic significance of the agreement
China sees this increased engagement as a crucial development in response to the current global economic environment.
The 11-member bloc — ASEAN — is China’s biggest trading partner, with bilateral trade reaching $771 billion last year, according to ASEAN statistics cited by Reuters.
China is seeking to step up its engagement with ASEAN, a region with a collective gross domestic product (GDP) of $3.8 trillion, as a strategic counterweight to heavy import tariffs the Trump administration has imposed on several countries around the world.
By formalizing the deal, Beijing is trying to position itself as a more open economy, despite facing intense criticism from other major powers over its own export restrictions on rare earths and critical minerals, Reuters reported.
The landscape of regional trade
China and ASEAN are members of the Regional Comprehensive Economic Partnership (RCEP), currently the largest trading bloc in the world. It covers almost one-third of the world’s population and about 30% of global GDP.
Malaysia hosted the RCEP Summit in Kuala Lumpur on Monday, the first in five years, just ahead of the signing of a new agreement between China and ASEAN.
Some analysts suggest that participation in blocs such as RCEP could serve as a potential buffer against US tariffs, although its provisions are seen as weaker than some other regional trade agreements due to competing interests among its members, Reuters reported.
