High-standard FTAs to promote China's reforms

It's not new to see the Chinese government pledges to embrace free trade initiatives, but it is new when Premier Li Keqiang specified in his Government Work Report that China must actively participate in developing "high-standard" free trade areas (FTAs).

It was the first time that the term, "high-standard" FTAs, was used in a Government Work Report. This can be seen as a sign of China openness toward, if not increasing interest in, the United States-led Trans-Pacific Partnership (TPP) talks, among some other deals it is negotiating.

As the World Trade Organization negotiations make little progress, the US is promoting its own agenda of creating a set of high-level free trade standards. The TPP is serving this strategy.

Although TPP talks are conducted in a closed-door way, there is little doubt that the pact will create the world's highest-standard FTA, with the potential to provide a template for other free trade initiatives to follow.

Media reports have revealed that the talks not only focus on trade of goods, but also aim to create an open market in terms of investment. In this sense, the TPP is more like an all-round free-economy pact that promotes regional integration and openness. The pact has high thresholds, with a focus on dismantling investment barriers. It features minimum government intervention into the enterprise sector, greater protection of the environment, respect of labor rights and equal treatment of foreign and home players.

All these are also goals that China' reforms are heading for.

Although it is generally believed that China is not keen to become a founding member of the TPP, the country clearly does not want to be left behind by the new trend that is taking shape in the global trade.

After South Korea started negotiations to join the TPP, China becomes the only East Asian giant that is away from the talks.

Whether China should join the TPP right now is open to debate, but it is not for debate that the country should seriously think of embracing high-standard free trade deals to propel its long-awaited opening-up in the service sector and reforms of its investment system.

Fears of facing international competition should now be thrown into the dustbin, since past experience has proven that the country, with its market size and labor pool, can gain much more than what it loses by embracing globalization.

Since China became a World Trade Organization member, it has emerged as the world's largest exporter and has also recently become the largest trader of goods, overtaking the US.

The economy opened up as authorities reduced tariffs, dismantled trade barriers and undertook reforms in the trade system in keeping with the WTO commitments.

Another remarkable progress lies in the country's quick mastery of the global trade rules and its skillful use of them.

In the first few years since the WTO entry, Chinese companies were reluctant to answer lawsuits when they were accused of dumping their products in foreign markets, partly because they had no idea of how to deal with such cases. But nowadays they respond actively, either individually or in groups, when facing similar charges. China also skillfully use trade remedy measures to protect its interest.

But when it comes to investment system, China has lagged behind and it knew very little of the global investment rules, because it didn't enthusiastically open up its services sector to foreign and private investors in the past decade.

As top Chinese policymakers are determined to leverage free trade initiatives to push for domestic reforms as it did with the entry into the WTO, the TPP stands out to be an option for the country.

Apart from that, Beijing is pressing ahead with negotiations of bilateral investment treaties with the US and the European Union. During the talks, China has been embracing globally adopted investment rules such as negative list. That was remarkable progress.

The author is a Shanghai-based analyst.