China and the Association of Southeast Asian Nations are scheduled to lower tariffs on traded industrial goods from July 20, according to the Ministry of Commerce.

The tariff reduction is the second phase in a strategy to forge a free trade area (FTA) between China and ASEAN.

In line with a bilateral agreement on commodity trade reached in November last year, tariffs have gradually been reduced for more than 7,000 industrial commodities excluding agricultural products, which are not subject to a tariff.

"The tariff reduction is to be carried out step by step," said Fan Ying, a scholar at the Foreign Affairs College.

She explained negotiations are expected to be more complicated than those covering agricultural produce, a sector that has already been opened.

Some manufacturing enterprises based in ASEAN countries may be afraid that low-priced Chinese products will undermine their businesses.

"The two sides might encounter real rocks concerning services and investment," Fan said. "Most of these 11 countries are so weak in this area that few of them dare to open their domestic markets to foreign rivals."

An early harvest programme (EHP), in place since the beginning of last year, is the first step towards allowing China and ASEAN to enjoy the early benefits of the trade agreement.

Customs statistics show this programme has spurred fast growth in bilateral agricultural trade.

"EHP has laid a solid foundation for the overall FTA between them," Fan said.

The current round of negotiations will be followed up by talks on service trade. The complete FTA package should be established by 2010.

(China Daily June 28, 2005)