China should actively participate in the process of regional
economic integration to meet the challenges of globalization, to
sustain trade and economic growth, as well as to promote the
regional and world economies.
It is strategically important for China to join regional
integration rather than develop in an isolated environment,
following its entry into the World Trade Organization.
With the tide of globalization accelerated, the world's major
economies are revving up efforts to form regional integrations to
maximize the advantage of the tide as well as avoid its negative
impact.
China should also attach greater importance to constructing and
participating in regional economic blocs.
Strengthening regional integration also echoes China's efforts
to push its enterprises to go global.
The process of regional integration usually begins from trade
liberalization and then reaches to the opening-up of
investment.
If China participates in this process, its enterprises will find
more opportunities and face less risks when they invest in
neighboring countries and regions.
At the beginning of this century China has quickened its pace of
regional integration.
It has entered into a few regional cooperative arrangements
featuring free-trade elements.
In May 2001, China became a member of the Bangkok Agreement, the
first free trade area (FTA)-analogue the country joined.
The spirit of the agreement is to offer preferential tariffs and
dismantle non-tariff barriers among Asian-Pacific members.
China implemented the tariff reduction in line with the
agreement beginning in 2002.
The move boosted trade between China, Bangladesh, South Korea,
Laos and Sri Lanka.
The Chinese mainland signed free-trade pacts Closer Economic
Partnership Arrangement (CEPA) with Hong Kong and Macao in June and
October of last year, respectively.
The CEPA came into effect beginning this year.
The arrangements include trade of goods, services and investment
facilitation, and were the first free trade agreements the Chinese
mainland officially participated in.
China and the Association of Southeast Asian Nations (ASEAN)
drafted a framework to build the FTA by 2010.
Free trade arrangements have already been carried out on some
items since October 2003.
Last month the two sides signed an agreement on trade of goods,
and will implement tariff reduction starting in 2005, marking the
official launch of the FTA.
The China-ASEAN FTA will promote trade and investment in the
region. Consumers will also benefit from price drops on imports
from other member nations.
Aside from neighboring nations, China is also active in talks
with close trading partners across the globe in the establishment
of FTAs.
New Zealand, Chile, Australia and the Gulf Cooperative Council
(GCC) have announced the launching of FTA negotiations with
China.
Currently, China is still at a beginning stage in terms of
development of regional economic integration.
All the regional preferential economic arrangements that the
Chinese mainland has officially entered the Bangkok Agreement,
CEPAs and the China-ASEAN early-harvest program are based on trade,
the preliminary phase of regional integration.
All these arrangements were signed or implemented in recent
years.
Such free trade arrangements are still undeveloped compared with
economic blocs such as the European Union and the North America
Free Trade Area.
However, initial success has paved the way for deeper and wider
cooperation in the future.
China also talked with these regional trading partners about the
liberalization of investment and services.
The pace of China's involvement in regional integration is by no
means slow.
For example, China and ASEAN only spent three years on
negotiations and preparations before they launched the
early-harvest program.
The two sides discussed the feasibility of the establishment of
an FTA in 2000. In 2001, they vowed to spend 10 years in completing
the FTA construction. A year later, they signed a framework
agreement over the establishment of the FTA.
They began the construction of the FTA this year by reducing and
eliminating tariffs on fruits and vegetables.
In addition, the FTAs in which China participates feature high
degrees of flexibility.
Exceptions exist in agreements, as nations greatly differ in
development level and culture.
For example, the Philippines did not participate in the
early-harvest program for fear of hurting its agricultural
sector.
It is necessary to adopt such a flexible attitude when China is
promoting regional integration.
In the future, China should stick to the principles of "being
from easy to difficult," and strive to first form FTAs with
neighboring countries and regions.
In the short term, China should fast-track the construction of a
China-ASEAN FTA to maximize the complementarities between the
two.
It should also push for the Bangkok Agreement to increase in
influence.
In addition, China should pursue the establishment of a Central
Asian FTA. This has become the ultimate goal of the Shanghai
Co-operation Organization (SCO) that consists of China, Kazakhstan,
Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.
Currently, economic relations between China and other SCO
members are still about trade facilitation.
In the medium term, China should strive for the establishment of
a China-Japan-South Korea FTA.
China proposes to launch an FTA feasibility study when the time
is ripe.
Meanwhile, an FTA that groups China, Japan, South Korea and the
10-member ASEAN (10+3) group of countries should be another goal
China strives for.
In the long run, an FTA that covers the whole of Asia is the
ultimate goal of this regional integration progress.
(China Daily December 7, 2004)
