Change for the better

To create a more predictable and favorable external environment, China should seek to sign high-standard free trade agreements with more countries and regions

China's remarkable growth after its accession to the World Trade Organization 20 years ago has not only changed the country, but also changed the world. It is beyond question that these changes are now exerting an influence on and posing new challenges to the multilateral trading system, regional trading agreements, bilateral free trade and investment agreements, as well as economic globalization. All parties are trying to adjust to the changes and are rethinking their development paths.

It is also beyond question that stable economic and trade relations between countries are the necessary bedrock for sound political relations.

Despite the populist wave of anti-globalization and trade protectionism in some countries, there is still a general belief in the free trade system, especially now that more emphasis is being placed on fair competition and investment facilitation and the construction of a high-standard free trade system.

Following its entry into the WTO in 2001, China has reaped concrete benefits from the free trade system, and thus the country has never changed and has no need to change the direction and goal of opening-up. China's opening-up policy has evolved from selective opening-up to all-round opening-up, and now to a higher level of opening-up as stated in the nation's 14th Five-Year Plan (2021-25). To achieve a higher level of opening-up, China has started to implement the free trade area strategy, with numerous pilot free trade zones spread across the country and a free trade port system covering the entire Hainan province. Such moves demonstrate China's firm stance on opening-up further. That is, it will open its door still wider to the world, no matter how the international situation changes. That said, the country needs to think more clearly about how to better adapt to new changes in the domestic and international situations and how to more effectively advance its FTA strategy.

To start with, China should see the limitations of its domestic pilot free trade zones.

Starting from Shanghai, China has built over 20 pilot free trade zones across the country and the construction of a globally influential free trade port in Hainan is well underway. However, these domestic pilot free trade zones and port mainly focus on market access in the goods and services trade, trade and investment facilitation, and the improvement of China's business environment. They do not involve bilateral or regional common tariff concessions with relevant countries and regions, relaxation of market access, or trade, investment and competition rules that all parties have to abide by. Such pilot zones, to a certain extent, represent a preferential regional policy or regional opening-up policy that various provinces or cities compete against each other to strive for. To have a pilot and demonstration effect for the promoting of China's FTA strategy, the content of reforms in these zones must be further enriched, with greater emphasis on piloting goods and services trade liberalization, currency convertibility under the capital account, alignment of market convenience between the regional market and outside markets, alignment of government management and policy mechanism with international rules, etc.

Second, there needs to be a clear strategy on how to build multilateral, regional and bilateral free trade systems that support and complement each other.

In general, China should strive to maintain the WTO-centered multilateral trading system and investment system, and vigorously take part in its improvement, as a stable multilateral trading system and investment system provide institutional guarantees for China－whose national interests are increasingly spread across the globe－and will enable China to defend its overseas economic interests at the lowest cost. China needs to systemically approach the negotiation topics, given the complexity of maintaining and improving the WTO system. As the United States is forming cliques and strengthening its alliances for private gain, China needs to establish a united front for participating in the improvement of the multilateral trading system by factoring in different countries' divergences and finding more common ground.

Furthermore, China should quicken the pace of expanding its free trade network by signing more regional and bilateral free trade agreements with its trade partners.

To date, China has signed 19 free trade agreements with 26 countries and regions, covering nearly 40 percent of its total imports and exports. However, it has yet to sign free trade agreements with some of its major trading partners such as the US and the European Union. China has officially filed an application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a clear and positive signal of its will to sign new free trade agreements that entail high-standard free trade rules and to further promote relevant institutional reforms at home to meet the high standards. It signals the country's firm stance on proactively advancing reform and opening-up, which is critical for the country to resolve external contradictions and facilitate and guide market-oriented reforms at home.

The country needs to demonstrate clearer strategic thinking on how to join high-standard free trade agreements. It should not wait until all major industries are strong enough to make the move. As a matter of fact, the stronger China becomes, the higher expectations the world will have of China and the higher the threshold will be for joining high-standard free trade agreements, due to other participating countries' concerns over more competition and challenges brought about by China's participation. Given the competitiveness and resilience that Chinese industries and businesses have demonstrated over the past 20 years in the wake of market opening-up, China is completely capable of making bolder pledges on market-oriented reforms to achieve a higher level of opening-up.

China has achieved great success during the two decades following its WTO entry, but it also faces new challenges. As the international trading system is undergoing difficult restructuring and improvements, China should more vigorously play a role in and integrate into the process.

The author is chairman of the US-China Green Fund. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn