The sub-regional economic cooperation under the framework of China-ASEAN Cooperation: The Case Study of Indonesian-China “Early Harvest Program” Tulus Tambunan Kadin Indonesia, 2007 Abstract Several studies have examined the idea of regional economic integration or cooperation in Asia. Most of these studies have focused on separate regions of ASEAN like North East Asia (China, Japan and Korea) and the ASEAN+3. By taking the implementation of the Indonesia-China “Early Harvest Program (EHP)” as one important element of the China-ASEAN cooperation as the case, this paper makes an attempt to estimate the possible positive or negative effects of the sub-regional cooperation under the framework of China-ASEAN cooperation for both countries. This EHP is considered as the most sensitive part of the China-ASEAN cooperation programs since agriculture is sensitive and vulnerable sector in countries like Indonesia and China. In Indonesia, agriculture is the key sector for poverty alleviation as the poor in the country are predominantly rural; food accounts for a major share of all poor people’s expenditure; and agriculture is their major source of income. Therefore, theoretically, it is expected that the ASEAN-China FTA agreement in the context of the EHP will bring a significant impact not only on Indonesian agriculture but also on poverty in the country. For this purpose, the paper will contain three parts. The first part will discuss regional economic cooperation from a theoretical perspective as the framework of analysis in this paper. The second part will evaluate recent development of trade and investment integration between China and ASEAN. The final part will assess the likely impact of the EHP on Indonesian export, import and production in agriculture. This part will use two approaches: competitiveness analytical approach by analyzing a number of competitiveness indicators on selected commodities included in the program from the two countries and simulation approach by using the Agricultural Trade Policy Simulation Model (ATPSM) designed by UNCTAD, also on selected commodities covered by the program. Part I Regional Economic Cooperation: Theoretical Discussion Naturally, the first step toward a regional economic cooperation (REC) is a regional economic integration (REI). REI focuses on the strengthening existing and new international linkages of commerce and trade between countries in a particular region (Daniels and van Hoose, 2001). REI is defined not solely within the confines of geographic proximity, but rather in terms of the relationship between economic flows and policy choice (Mansfield and Milner, 1999). REC strengthens REI or economic linkages or interdependence between states or countries in a particular region as REC goes beyond trade linkages. REC has broader activities than REI as it also involves regional investment and production activities. Theories of REI can be divided between classical and modern theories. Classical theories of REI are from the 1950s and 1960s which dealt primarily with European integration, which was dominated by governments and influenced by national interests. Modern theories of REI, on the other hand, are from the late 1980s onwards when there has been an explosion of various forms of regionalism and regionalist projects all over the world. The development of the European Union (EU) is perhaps the most debated example of this trend. Many other regionalization processes can be observed in other parts of the world such as the Association of Southeast Asian Nations (ASEAN), Economic Commission of West African States (ECOWAS), Southern Common Market (MERCOSUR), North American Free Trade Agreement (NAFTA), Southern African 1