Free Trade Agreement in China - Essay Example

Dissertation Proposal Business School: Department of International Business & Economics Foundations of Scholarship & Research (BUSI 1246) Student Name: Student ID Number: Dissertation provisional title: Free Trade Agreement (FTAs) in China Supervisor: 1. Introduction The previous discourse regarding whether trade agreements have proved to be a success mode or a tentative block for international trade liberalization has developed into a meticulously relevant subject matter today where East Asia’s biggest economies have been coming together to rush for preferential trade (Jiang, 2008). Currently, China is analyzing, negotiating, or applying Free Trade Agreements or FTA with over 20 nations and regions. This significant progress in China’s financial or economic mediation has caused other nations, chiefly the ones in Asia Pacific region, to go abroad on preferential trading agreements, thereby, causing consideration from the World Trade Organization regarding the propagation of prejudiced trade agreements (Jiang, 2008). Hence, we will discuss China’s two-pronged free trade agreements, thereby, discussing their ramifications for the World Trade Organization. Moreover, the centralization will totally be on the Chinese viewpoints regarding the association between FTAs and the World Trade Organizations. Also, we will discuss about China’s impetus behind its vigorousness in FTAs and its approach to the negotiations of the same, along with the local roots of China’s FTA strategies. The ramifications of FTAs in China for the World Trade Organizations are inclusive of whether China has discarded mutualism for bilateralism for the sake of its global trade cooperation, whether it anticipates the facilitation of trade liberalization under the World Trade Organization by means of Free Trade Agreements, or whether China has been attempting to maintain its FTAs acquiescent with the rules and regulations of World Trade Organization (Jiang, 2008). One of the most striking developments in foreign relations maintained by China and the Asian financial system in current times is that China, being a developing economy, is vigorously shoving for free trade agreements or FTAs in Asia and the world (Shulong, 2006). In a matter of few years, it is hooked with proposing and incorporating in the free trade agreement talks and discussions with various countries. China has signed a fundamental agreement with the Association of Southeast Asian Nations or ASEAN, thereby, getting involved in stern negotiations with Australia to set up an FTA. Moreover, in North-East Asia, China has put forward an FTA agreement among itself, Japan, and the Republic of Korea or ROK. These three chief financial systems have developed a joint commission so as to analyze the likelihood (Shulong, 2006). However, the free trade agreements in China aren’t the only ones pursued by the rest of the Asian countries. The Association of Southeast Asian Nations tends to negotiate and analyze the FTAs amongst many of its associates along with Japan, Republic of Korea, India, New Zealand, etc. Hence, we can construe to the fact that there is an FTA bash all over Asia (Shulong, 2006). From the times of the conclusion of the Cold War, the political as well as financial order of the South-east province has experienced a noteworthy alteration (Wang, 2007). However, one of the most significant sources for such a transformation proves to be China’s developing whack and impact. China’s swift financial development contributes to the various crucial attributes. The South-east countries are chiefly enchanted by the opportunities introduced by China’s financial expansion as well as trade liberalization. Moreover, they look forward to influence their free trade agreements with China to supplementary agreements with significant trading associates intrinsically or extrinsically. Nevertheless, due to the different gradations of development and strategic precedence of its associates, the free trade agreements of ASEAN with China possibly tend to cause a number of challenges to distinct associates and the institution as a whole (Wang, 2007). 2. Literature Review: 2.1 Free Trade Agreements or FTAs The configuration of free-trade agreements (FTA) has developed in to a universal drift in current decades. Various south-east countries, scrupulously, are illustrating an interest in a veer of trade agreements. As suggested by Vila, a Free Trade Agreement or FTA is an agreement between two nations or groups of countries that are focused at a strategy of any kind of non-interference by the state in trade between their countries (Vila, 2005). Usually, they are followed by the lowering or eradication of tariff and non-tariff hindrances for the reason that each nation sustains its own profitable strategy towards the nations which are not associated with the FTA. Moreover, in a research article, the analysts of the Philippine Institute for Development Studies suggested that FTAs augment a nation’s competence in the international financial system, and even though, if the FTAs happen to be quite a lot in to the market access as well as investment liberalization generally, they tend to serve as implements which enable the nation to analyze further in terms of investment desirability, trade provision, organizational development and form’s competence. The current trade agreements of the South-East involve the ASEAN-China Free Trade Agreement, ASEAN-India, ASEAN-Korea, and quite likely, RP-US FTA (Vila, 2005). Regarding the ASEAN-China FTA, the associates of the ASEAN anticipate the establishment of a free-trade area for the original ASEAN associates such as Malaysia, Thailand, Singapore, etc. and newer associates such as Cambodia, Laos, Vietnam, etc. The partnership targets comprise of the facilitation, promotion as well as liberalization of an environment for the economic commotions between both the parties by means of reduction or elimination of the custom errands along with other hindrances to trade in merchandise. Moreover, the partnerships are usually aimed towards the facilitation of mutual cognizance of the consequences of conventionality evaluation processes for the merchandise or procedures, thereby, removing blockades to trade in the services and reciprocally improvising the investment opportunities, along with reinforcing the security for investors and investments. In various studies, analysts have spotted out a couple of doctrines which are obvious to the national strategies of the government n involving in Free Trade Agreements. The first one is intrinsic or local in attribute which seeks for FTA to be advantageous to the country, whereas, the second one is international or global in view, that proposes that these trade agreements ought to be in appropriate harmonization with the nation’s mutual commitments, thereby, aiming at attaining the multilateral targets (Vila, 2005). For a successful free trade agreement, there is a need for an absolute target with regards to the components of a basic FTA. The FTA policy ought to be construed as a harmonizing instrument for the development and competence strategies, with appropriate influence on the three building blocks of the free trade agreements, viz. merchandize, services, and investments. In accordance to it, the recognition of the facilitations which can be discussed along these building blocks, along with the obligations and constraints of intervention, and the conditions which are required to be dealt with, must be taken in to account within the overall establishment structure of the country (Vila, 2005). It is important that the government identifies the apparent scopes of the agreement in terms of removing the blockades. A significant errand with regards to the agreement is the recognition of vulnerable products, and before the negotiation, it is essential that there is a categorization regarding the negotiation constraints associated with the merchandise. However, this is chiefly pertinent if at all, the FTA associates supposedly take up a negative inventory approach, or else, there may tend to be a state of affairs where a prospect tends to make corollary on all the merchandize covered, and by this means, attaining a point where all the merchandise appear to be barred and secured from the nation’s approach (Vila, 2005). More than the conventional FTA matters, it is a subject of great significance to deal with the alleged improving attributes of the new-age FTAs which are inclusive of the various rules and regulations regarding investments, competition strategies, administrative attainment, and trade provision steps. Lastly, apart from the provisional trade, the asserted provisions would also serve as organizational security nets for each of the FTA associates or member state (Vila, 2005). As a point in fact, the establishment of an assortment of criteria for the sake of opting for an efficacious FTA collaborator is another subject of pertinence. Being a financial implement, FTA obtains its worth from the stature of tariff blockades. The elevated the tariff blockades between the countries are, the superior the advantage of an FTA is to its element nations. Higher taxes denote that with free trade, the costs of imports of one nation from another tend to turn down precipitously. More to it, for the reason that the taxes with the rest of the countries in the world tend to stay high, the likelihood of rerouting trade to the generators within the FTA nations is far above the ground. As a result, this makes both the producers as well as the customers turn in to profiteers from a free trade agreement, thereby, alleviating the political opposition. In today’s world, China possesses a moderately lowered tax blockades with comparison to the rest of the world. Hence, there are no crucial market advantages which can be anticipated by the Indian producers post an agreement. 2.2 China’s Motivation towards FTAs China’s step ahead towards FTAs seems not to stem preliminarily from financial concerns. Trade, along with other economic considerations are logically behind the move, however, China keeps itself careful about the political relations that may be brought about by means of the economic relations. However, as far as trade or finance is brought in to consideration, South-east Asia does not contribute to the most significant area for China, nor do China’s FTA attempts are a result of the critical evaluation of the potential profits and losses from the agreement. The relations maintained by China with its Asian fellow citizens prove to be the most instantaneously significant aspect of its overseas relations. As a result, China would prefer doing everything it can for the sake of enhancing its relations in its very own continent. Moreover, the Chinese understand the fact that the rise of their country has brought some kind of restlessness in other countries which construe to it as an economic peril. However, China, in no case, appears to be anxious about this threat outlook, whether it comes from the overseas or the neighbourhood so as to cause abrasion between mounting China and other countries. Yet, whenever there takes place a threat concern from South-east Asia or other fellow citizens in Asia and the world, China tends to consider them sincerely. FTAs tend to generate substantial gains for countries which show interest in them, however, they may botch a considerable deal from them, chiefly in FTAs with urbanized countries. China realizes the stakes involves in case it puts forward free trade agreements with other countries, chiefly with Japan and the Republic of Korea, for the reason that they possess an economy much sophisticated than that of the Chinese (Shulong, 2006). China tends to accept stakes for the reason that it would not lose from the FTAs. With a couple of decades of swift economic development in its sack, China is considerably self-assured regarding foreign-trade as well as the global market. Chinese, being the world’s third-largest trading group, realize that they are well-off with the free-trade vicinity. Moreover, China efficaciously realizes its competitive benefits the biggest of which are its labor force, contributing as the finest advantage. China happens to have the largest and cheapest labor force in the entire world which enables it to generate merchandize at a considerably low cost (Shulong, 2006). Moreover, according to China Daily, China is presently the second largest trading partner of Australia, which happens to be a large trading entity across the world. Australia possesses a trade excess wit China of more than 13.5 billion USD, thereby, reflecting export materials of iron ore, petroleum, and copper (China Daily, 2004). Competing with the competition at a global level, China believes it will benefit more than other countries for such reasons. 2.3 Persuading Multi-lateral Experience China has been one of the most unenthusiastic, inert, and down-beat authorities for a long time in case of multilateralism or mutualism in Asia. However, since the concluding twentieth century, China developed in to one of the most vigorous authorities of the world, for which there are a number of reasons. To start with, for the reason that China has profited good experience in multi-lateral organizations, it comprehends them in a better way and, as a result, has developed in to an established and confident authority with regards to those institutions. Furthermore, China went through the multi-lateral procedures in the early twentieth century which was apprehensive and critical (Shulong, 2006). China took hold of the multi-lateral organizations, fearing that they might be exploited by the big-guns so as to harm it, thereby, discussing all the issues associated with China, along with criticizing the strategies proposed by China, chiefly over critical privacy subjects (Shulong, 2006). The genuine experience of taking part in multi-lateral organizations in the current years has rendered more self-assurance to China and the Chinese are competent enough to have been able to keep the subject matters associated with China that are out of the discourses of the organizations. As a result, they have developed in to much more comfortable with provincial communes such as the ASEAN Regional Forum, and China, eventually, has discovered that it is capable enough of benefiting from the multi-lateral procedures. Also, the multi-lateral procedures allow China delineate increasing faith and lessened distrust. 3. Methodology 3.1 Appropriate Techniques/Approaches Trade can prove to be an authoritative force for the development and dearth reduction. In the correct contexts, the strategies that tend to lessen taxes and other blockades for the movement of merchandize can augment trade and support development. Nevertheless, to comprehend such gains and profits, there is a need to manage the tax liberalization in a careful and effectual way. Still, a successful development does not only seek for flexibility in the recognition of tariff gradations, but other associated strategies such as subsidies, export tariffs and non-tariff measures. Such policies are not only under threat in the FTAs, but tend to get eradicated within a short period of time. While signing free trade agreements with China, any country ought to be cautious as it may appear to affect the interest industry. Moreover, a suitable approach would be the conclusion of Preferential Trade Agreement or PTA should be carried out prior to the finalization of FTAs so as to secure the interests. Trade agreements have been signed in the past amongst many countries, where the provincial blocks which have led to various misconceptions, thereby, harming the financial interest of the national industry. The recent proposal by China to the ASEAN countries for developing a free trade agreement between them has proved to mark a significant landmark in the development of the relations between China and ASEAN. This proposal has generated powerful academic curiousness, thereby, bringing about challenging view-points. Hence, there is a sheer need of understanding the evolutions, developments and motivations on the Chinese part of the FTA, which may depict its political, strategic and financial basis. The occurrences that have formed the FTA are inclusive of augmented globalization, the current economic catastrophes, and China’s way in to the World Trade Organization (Lijun, 2003). The most appropriate strategies for effective FTAs between China and other countries are a result of suitable study of technical issues which are associated with the import approaches, and must be in the front of negotiations which would help them in ceasing to continue as non-tariff blockades to trade (Wells, 2005). Moreover, it is necessary for China that the negotiation procedure is inclusive of a commitment so as to considerately abridge and accord the subject matters for example, customs procedures for making sure their appropriate application related to trade. Further, it is significant that the discussions or negotiations involve an obligation for the establishing and sustaining processes which are quite obvious and imitate international norms. Negotiations regarding an agreement ought to assure the development of communication hubs to reply to the import associated investigations, thereby, counsel about transformations in pertinent decrees and processes (Wells, 2005). The discussions must take timely and considerable measures to speak of the concerns of overseas business so that it brings the Chinese commerce vicinity in line with its commitments under the World Trade Organization (Wells, 2005). In addition to it, the problems associated with unbalanced commerce vicinity in China are common with the instability in business maintenance that consequents in unprotected relationships. There are many proofs of Chinese units which function in one province or the other, thereby, unpredictably diminishing without any obvious cause for leaving. By the time these may be the commercial facts of a business, there exists an actual grade of ambiguity which stays extrinsic to a rational business risk silhouette. However, it is serious that there is an alleviation of the uncertainty of business agreements in China, in case the trade tends to augment. The indiscretion prevailing in the processes opted by government regarding the regulation presently holds back the trade. As a result, it leads to discrepancy with product imprisonment, along with the testing and denial that differs between the point of entry and the particular official involved in it (Wells, 2005). Intricacies as well as hold-ups in acquiring permissions, along with deficiency of accurate information with regards to specific agencies in China for several trading investigations has augmented the aggravation for exporters al over the world. Hence, as a point in fact for China, there is a requirement for efficacy and transparency within the Chinese business and government vicinity. Moreover, for the reason that there is an envisaged deficiency of a transparent administration which assures even-handed resolution of the squabbles that crop up in the business, there is a strict call for overcoming such recognized technical hindrances which should be of high precedence to the negotiators. 3.2 Effective questionnaire For the leaders of China, there is a need for developing meetings on areas such as trade, finance, communication, and the environment. An effective questionnaire regarding the aspects to ponder upon would help in maintaining it as a fine economy across the world. For a free trade agreement, the following questions need to be taken into account: 1. Why does China seek for an FTA with the country? 2. What are the potential gains involved? 3. What kind of trade blockades does a country face with China and vice-versa? 4. In what ways is the FTA significant for China? 5. What will the FTA mean for other subject issues in relation to the country? 6. For what reason did the countries think the other country has a preferential market economic system? 7. Why is China interested in signing an agreement when there are better options in the line? 8. What are the WTO provisions? 9. What are the consultations and analyses that need to be carried out in the possibility study? 10. What does the China FTA negotiation interpret to any other proposed agreements? 11. What does the agreement with China construe to in terms of the other country’s hold up for the World Trade Organization and the multi-lateral trading system in general? 4. Conclusions In going on board upon the negotiation with this developing network of trade agreements, China has followed a course analogous to that opted for by the fellow large units in the trading system, that is the US and EU (Antkiewicz and Whalley, 2004). A noteworthy attribute of the Chinese approach for trading, nevertheless, is the pace at which both the large units have been given succession in the World Trade Organization. Equivalently noteworthy is the appearing disparity in the anatomy of these provincial agreements as compared to those of the larger entities. The current US and EU agreements appear to trail a common pattern anatomy (Antkiewicz and Whalley, 2004). Not only is the pattern disparate in the Chinese case, it differs in the consequential materialization of an Asian trading coalition around such agreements. This, in turn, imitates no only the practicality of the recognition of differences across associates, but also the apparent links that tend to develop between the traditional trade interests and China’s interest in broader financial, political, and strategic affiliations. Such strategy appears to be one of the practical management of a sequence of associations in a modified way, which comprises of the merger of conventional financial and trade agreements in to a widened and more encircling association building and not in a specific slender lawful context (Antkiewicz and Whalley, 2004). References 1. Antkiewicz, Agata and Whalley, John. 2004, Chinas New Regional Trade Agreements. Economic Governance Programme of the Centre for International vernance Innovation, Waterloo, Ontario. 2. China daily. 2004, Free Trade Talks to Begin Next Year. August 18. accessed April 22, 200 . 3. Jiang, Yang. "Chinas Free Trade Agreements and Implications for the WTO" Paper presented at the annual meeting of the ISAs 49th ANNUAL CONVENTION, BRIDGING MULTIPLE DIVIDES, Hilton San Francisco, SAN FRANCISCO, CA, USA, Mar 26, 2008. Accessed 22 April 2009 . 4. Lijun, Sheng. 2003, China-ASEAN Free Trade Area: Origins, Developments and Strategic Motivations. ISEAS Working Paper: International Politics & Security Issues Series No. 1(2003). Institute of Southeast Asian Studies. 5. Shulong, Chu. 2006, China’s Approach to the Free-Trade Area. Presentation at the Roundtable Discussion on Free Trade And East Asia held in Philadelphia on October 4. Accessed 22 April 2009 < http://www.fpri.org/pubs/20061102.chu.chinafreetradearea.pdf>. 6. Vila, LARISSA C. Free trade agreements. BusinessWorld (February 28, 2005). 7. Wang, Vincent Wei-cheng. . The Logic of China-ASEAN Free Trade Agreement: Economic Statecraft of “Peaceful Rise”. China in the World, the World in China International Conference "Implications of a Transforming China: Domestic, Regional and Global Impacts", 5-6 August 2007. Institute of China Studies, University of Malaya. 8. Wells, Dick. 2005, Negotiation of a Free Trade Agreement (FTA) between Australia and China. Australian Food and Grocery Council. Read More