The Greater Mekong Sub-region (GMS)—comprising Cambodia, Lao People’s Democratic Republic (PDR), Myanmar, Thailand, Vietnam and the southwestern province of Yunnan in China—has seen rapid social and economic changes over the past two decades, especially in trade liberalization through closer economic cooperation. In 2004, as members of the Association of Southeast Asian Nations
(ASEAN), the GMS5 countries (GMS countries minus Yunnan province in China) and China entered into the ASEAN China Free Trade Agreement (ACFTA). Under the ACFTA, each country is obligated to implement gradual tariff reductions for the exports of ACFTA partners. As a result of the commitments made in the ACFTA, tariff rates of Chinese exports to GMS5 countries have been lowered, as have been the tariff rates for exports from GMS5 countries to China. An analysis of trade flows before and after the ACFTA has shown that trade between China and the GMS5 countries has increased significantly since the signing of the ACFTA, in particular for goods whose tariff rates were reduced under the ACFTA. A similar trend can be observed in the trade relationship between China and
Cambodia, although some Cambodian exports eligible for lower tariffs have seen relatively slow growth due to difficulties faced by exporters in meeting China’s import standards for agricultural products such as cassava, live animals and fish. These findings suggest that the ACFTA has been a significant driver of the rapid expansion of trade between the GMS5 countries and China, at least for products that do not have to comply with extensive health and food safety standards. Relative
First, China is a huge and dynamic economy, and its growing demand for goods and services from ASEAN could serve as a new engine of growth. ASEAN looks to China as its future primary export market for energy raw materials and electronic and