| FTA boosts expansion into member countries, and | | | | building production facilities in ASEAN member |
| stabilizes imported raw material costs and supply. | | | | countries. Not only do such suppliers avoid having to |
| Despite general uncertainty in the global trading | | | | pay EU and US export tariffs, they also benefit from |
| environment, China manufacturers have one positive | | | | FTA agreements ASEAN has with countries such as |
| development going for them. Implemented at the | | | | Japan, South Korea and India. Lower land and labor |
| start of 2010, the China and ASEAN Free Trade Area | | | | costs, which are generally just two-fifths of worker |
| eliminated import tariffs for most articles exchanged | | | | expenses in China, are additional benefits. |
| between the countries. | | | | In fact, despite having to bring in raw materials from |
| The agreement affects more than 90 percent of | | | | China to Vietnam, candle manufacturer Aroma |
| China-made products, including white goods and | | | | Consumer Products (Hangzhou) Co. Ltd, is able to |
| furniture. The duty for split-type air-conditioning units | | | | save 20 to 40 percent in EU anti-dumping duties. This |
| with less than 4,000Btu cooling capacity, for instance, | | | | comes even while there is no well-developed supply |
| was 5 percent in 2009. In fact, taxes levied on the | | | | chain, and insufficient machinery and skilled labor pool. |
| $1.03 billion worth of various export items to ASEAN | | | | The company currently operates a 50,000sqm |
| member countries from January to November 2009 | | | | factory with 600 employees in the ASEAN country. |
| exceeded $73 million. With tariffs no longer in place, a | | | | Steady rubber stockpile |
| company with annual ASEAN sales of $3 million can | | | | Southeast Asia is the largest source of rubber in the |
| save more than $150,000 annually on duties. | | | | world, particularly Indonesia, Thailand, Vietnam and |
| This has encouraged many China suppliers to increase | | | | Malaysia. Each processing facility in Indonesia, for |
| their focus on the ASEAN market. During the first | | | | example, can produce between 20,000 and 60,000 |
| two months of 2010, Shenzhen's furniture exports to | | | | tons annually. The quality of output from the region is |
| member countries grew 307 percent to $250 million. | | | | good and stable as well. |
| Singapore is the top destination, accounting for | | | | China, on the other hand, can only turn out up to |
| almost half of overseas sales. Apart from the zero | | | | 10,000 tons per factory each year. But as the |
| tariff, such markets are viable alternatives to the US, | | | | biggest global manufacturer of tires, the country |
| which now requires wooden furniture exports to | | | | needs more rubber than it produces. Major tire |
| come with FSC certificates. This prerequisite has | | | | companies, for instance, each require more than 50 |
| made material sourcing more expensive and | | | | tons of the material annually. As such, at least 60 |
| time-consuming for makers targeting the US, and is | | | | percent of natural rubber used for the industry is |
| sufficient reason for some to boost their presence in | | | | currently sourced overseas. |
| ASEAN member countries. | | | | While the FTA does not eliminate import tariffs on |
| Moreover, there are fewer safety and environmental | | | | rubber, it can help ensure stable cost and supply for |
| standards that need to be met, which can translate | | | | China suppliers. The agreement can encourage |
| to 5 to 10 percent savings in testing, research and | | | | suppliers from Thailand, Indonesia and Vietnam to set |
| management. | | | | up distribution offices in China and sell directly to |
| Lucrative export possibilities have even led several | | | | downstream manufacturers in the country. |
| companies to establish factories that will furnish | | | | Tire maker Kaifeng Group Co. Ltd (Tyre), for |
| goods only for the ASEAN market. Computer | | | | instance, purchases rubber in small quantities, typically |
| products manufacturer Great Wall, for instance, set | | | | less than 10 tons. As such, importing directly from |
| up a factory in Beihai, Guangxi province, to fabricate | | | | providers is not a viable option for the company. |
| laptops targeting Southeast Asia. At present, Great | | | | Presently, similar small and midsize enterprises pool |
| Wall's monitors take one-sixth of total market share | | | | their requirements and direct orders via local traders. |
| in Vietnam. | | | | Having ASEAN rubber suppliers set up distribution |
| The FTA is also a means for businesses continuing to | | | | centers in China would help the manufacturer |
| target the EU and the US to circumvent anti-dumping | | | | streamline its sourcing strategies, and stabilize supply |
| duties and trade barriers. These enterprises are | | | | and lead time. |