Economic Relations Between Laos And China Under The Cooperation Framework Of China-ASEAN Free Trade Area

The economic relation between China and ASEAN has a long history, although it was impacted and constrained by the world situation after the Second World War. Fortunately, the relation has resumed and developed through that joint efforts. At present, it is in the best period and the bilateral economic relation enters into a new stage of development. During the China-ASEAN (10 +1) summit ,which was held in Cambodia, On November 4, 2002, Chinese Premier Zhu Rongji signed the "China-ASEAN Framework association on Comprehensive Economic Cooperation" , identifying the CAFTA to be built in 2010,and planning to build a free trade area by 2015, including a new member of ASEAN, Myanmar, Cambodia, Laos. The agreement was put into practice on July 1, 2003. CAFTA's setting up is not just the ASEAN's facing challenges from economic globalization and regional economic integration, it was also the objective selection, which was made to promote the economic development of their own under the new changes in the environment. It owns special significance and advantages: In the long run, after CAFTA's setting up, the elimination of trade barriers will no doubt reduce the transaction costs between china and ASEAN, improve economic efficiency and product competitiveness, and increase intra-regional trade. At the same time, it will strengthen economic capabilities of ASEAN and China in the Asian region's, which will be similar to the power of European Union, NAFTA. Then it will have a significant impact on the world economic situation.Laos and China are friendly neighbors linked by mountains and rivers, and a far-reaching history exists between the two countries. The cooperation areas are expanding in the course of time. Since 2002, with launching of CAFTA, the relationship between Laos and China has been further deepened in various fields, particularly the trade relations. However, in the CAFTA framework of economic cooperation, there are still many economic difficultics between them, for example, the bilateral trade structure, the problems of Chinese investment in Laos and the Laos border trade with China. Therefore, this thesis is set up in the context of CAFTA, to sort out the old process of economic co-operation, to explore questions existing in the economic cooperation between two countries, to look for the economic strategy which Laos takes to deal with CAFTA cooperation framework, as well, to search an effective way achieving a win-win situation in the framework of cooperation between Laos and China.The thesis contains six chapters.The first chapter is the preface, introducing the background of thesis topics. Specifically, it contains three main areas as follows: First, the development of economic globalization and regional economic integration; Second, the increasingly close co-operation of East Asian region; Third, the deeper bilateral economic relation between Laos and China. In this context, it provides a synthesis of thesis research about a theory of regional economic integration, theoretical research of regional economic integration trade effects, even that of developing countries, CAFTA study research of relationship between Laos and China under CAFTA Shelves cooperation, shows the definition of the concept, structure of thesis and research methods, simultaneously, and put forwards the innovation and possible shortcomings of the thesis.In the second chapter, the thesis discusses the development process of the relationship between Laos and China. After analyzing the overall profile of ASEAN, this thesis provides the economic development of two countries during various historical periods. There have been thousands of years for the two countries having economic relations, but in the last few years, changes took place between China and these countries in economic and trade exchanges. After the Second World War, due to various conditions and constraints, China's economic relations with ASEAN went through the tortuous course of development. Since the mid-70s, the bilateral economic relations was restored and developed. After the Cold War, the economic relations entered into a new stage of development. In the recent years, it develops in a rapid speed. Because of geographical proximity, friendly bilateral political relations, and the economic complementarities, the two sides have fruitful cooperation in many areas such as the import and export trade, mutual investment, labor contract. This paper briefly describes the economic environment of Laos as well as trade exchanges between the two countries. After the arrival of new century, China-ASEAN relations have been continuously deepened, on November 4, 2002, China and ASEAN signed the"People's Republic of China and the ASEAN Framework Agreement on Comprehensive Economic Cooperation". The framework agreement, identified the objectives, scope, measures, timetable for implementation of free trade advance the "Early Harvest" program, the specific arrangement in the field of economic and technological cooperation, multilateral most-favored-nation commitment to treatment for Vietnam, Laos, Cambodia, Myanmar, as well as arrangements for future negotiations in goods, services and investment. It outlined a blueprint for the development to set up the basic structure of CAFTA, and to build a closer economic tie between China and ASEAN in the 21st century. During the close cooperation over the years, the investment is becoming more expanded, the scope of cooperation becomes more broaden, and trade structure shows characteristics. ASEAN and China become important trade partners to each other.The third chapter discusses the formation and cooperation framework of CAFTA. First of all, introduces the proposing of CAFTA, the origin, and signing of the document. Secondly, analyses internal and external factors on the formation of CAFTA. Thirdly, proposes the important economic and political significance of establishing CAFTA on the bilateral economic cooperation. First, Economic significance. CAFTA is proposed after considering a common economic interest, and on a base of that the two sides have long-term economic exchanges interaction and cooperation. In the long run, after the setting up of CAFTA, the elimination of trade barriers will no doubt reduce the transaction costs between china and ASEAN, improve economic efficiency and product competitiveness, and increase intra-regional trade. Second, political significance, CAFTA's built will strengthen the economic capabilities of ASEAN and China in the Asian region, not only for its own profit. The former Prime Minister of Singapore, Gaucho Tong considered that CAFTA "will help the economic development in the region and maintain stability in the geopolitical area". At last, the paper provides the main elements and the four characteristics of cooperation in the framework of CAFTA, the main elements of co-operation framework includes a majority of three sections, 16 articles and four annexes.The fourth chapter explores the historical process of economic development of Laos and China. This chapter make a summary introduction on Laos geography, history, politics, economic development, respectively introduce economic and trade exchanges in different historical periods (ancient times, near the modern period, the contemporary period), and fatherly introduce bilateral economic cooperation in the new century .The fifth chapter explores the cooperation between the two countries in the framework of CAFTA economic cooperation. Introduce the meaning of bilateral cooperation in the development; the advantages of economic cooperation; the effect of CAFTA cooperation in improving economic cooperation between the two countries; the problems of cooperation between them; and then give direction and specific implementations in order to promote economic cooperation between the two countries.Bilateral cooperation between Laos and China could be explained as follows: though Laos is a small landlocked country adjacent to the southern China, it is an important Channel for Chinese goods entering to the ASEAN market, that is, the regional center of CAFTA. Belonging to the socialist countries, Laos and China have similar social environment. This provides one basis of promoting further communication and coordination between China and ASEAN countries. The economic and trade co operations facilitate the infrastructure construction and improvement of investment environment, improving the friendly diplomatic relations, social and cultural exchanges.The advantages of cooperation are divided into six aspects: First, Laos and China have good political relations; Second, the convergence of social consciousness and cultural traditions; Third, location advantages; Fourth, the level of economic development and industrial structure are complementary; Fifth, the complementary aspects of Scientific and technological cooperation and resource development; Sixth, the complementary nature of tourism resources.CAFTA cooperation framework strengthens economic cooperation between two countries, incarnating four aspects as follows: First, trade friction to develop uniform standards to reduce the framework of cooperation between countries; Second, the cost and difficulty to reduce Laos with China's variety of agreements; Third, a co-operative institutional and legal framework for the protection of help at a deeper level of mutual trust based on the development of Laos and China to deepen economic cooperation between the two countries;Fourth, a fair and reasonable settlement of Laos and China in bilateral trade disputes will be in the trade dispute settlement mechanism. The problems of bilateral economic cooperation exist in three main aspects: First, the trade structure; Second, problems in Chinese investment in Laos; Third, border trade problems. To resolute these issues, there are four methods: First, reconstruct the merchandise structure, formulate long-term, stable and effective policies; Determine the import and export of goods in accordance with the comparative advantages of the two countries, Increase technology and value-added product, promote the upgrading of the structure; reduce tariffs gradually, implement special exception in special situations; Encourage and promote the development of bilateral trade between them; China should expand exports, minimize the trade deficit, meanwhile, Laos should also reduce tariff and non-tariff barriers; Second, strengthen the norms of trade and governance. Promote co-operation between Customs, standardize clearance of merchandise and border trade; Strengthen financial cooperation, improve banking settlement system in the trade to reduce eliminate smuggling and other illegal acts; Pay attention to improve the quality of export commodities, strengthen product promotion, change dependence from Price to the quality; Third, promote investment and cooperation to a higher level accompanied by the industrial and technical cooperation between the two countries; Forth, strengthen the economic cooperation in infrastructure construction. Such as: strengthen the transport, communications, financial services and other infrastructure construction, improving the investment environment in the border areas; Fifth, strengthen the Lancang - Mekong River sub-regional cooperation.The sixth chapter analyses the opportunities and challenges which are taken to Laos economy through CAFTA cooperation, and suggest six measures: First, improve international competitiveness by adjusting and integrating the opening-up policy; Second, Exert their own advantages and promote the Greater Mekong Sub region economic cooperation; Third, economic development of agroforestry as a main task; Fourth, tectonic the commodities circulation structure that is relative balance of import and export; Fifth, cultivate backbone enterprises through the introduction of capital and technology; Sixth, adjust and improve the economic system even laws and regulations.