China Comment

Energy, Environment, and Economy

China’s Free Trade

The Capitalistic country controlled by a Communist Party has free trade agreements with at least nine countries. Below, I give an updated view on current and potential trade agreements.

A more in-depth analysis of cost-benefits of said agreements will have to wait until a later post. If you can’t wait, check out W. McKibbin and Tingsong Jiang and the Brooking’s Institution who did a good study of the impact of current and future trade agreements. Their article was a basis for this one.

ASEAN
* Agreement on goods signed on 29 November 2004 for implementation in Jan 2005;
* Agreement on services signed in 14 January 2007 for implementation in July 2007;
* Agreement on investment under negotiation (McKibbin and Jiang believe this may be concluded by 2010. 10.) However, a more recent article (August 27, 2008) postulates the agreement may be signed as early as December 2008. 
* Phase-Out period for normal items ends for China and original ASEAN countries by 2010.
* Phase-Out period for sensitive items ends for China and original ASEAN countries by 2013.
* Phase-Out period for normal items ends for the newer ASEAN members (Cambodia, Laos, Myanmar, Vietnam.) by 2015.
* Phase-Out period for sensitive items ends for the newer ASEAN members (CLMV) by 2020.

* “According to ASEAN statistics, the trade value between the ASEAN and China increased from 59.6 billion U.S. dollars in 2003 to 171.1 billion U.S. dollars in 2007, growing at an annual rate of 30 percent” (Source).

Australia Under Negotiation
* The tenth round of negotiations was held on 22-26 October 2007.

Chile
* Agreement on goods was signed on 18 November 2005 “immediately removing all tariffs on 92 percent of Chile’s exports.”
* Agreement on services signed on April 13, 2008.
* Agreement on services goes into effect on January 1, 2009.
* “[B]ilateral trade soared 65 percent year on year to 14.7 billion U.S. dollars in 2007, up from the 23.9 annual growth of 2006. Last year, Chilean exports to China surged 79 percent to 10.3 billion U.S. dollars, boosted by copper and grape wine trade. Meanwhile, Chinese exports to Chile jumped 42 percent to 4.4 billion U.S. dollars with strong growth in computers and communications technology, electronic products and automobiles” (Xinhua).

East Asian Free Trade Area (of ASEAN+China, Japan, Korea) Under Negotiation
* The Brookings report believes this may be concluded for goods by 2015. 11.
* A services agreement may follow in 2017.
* An investments agreement may follow in 2020.

FTAAP (Free Trade Area of the Asia Pacific) Under Negotiation
* The Brookings Report (11) believes that this may happen for goods by 2025.
* Services by 2027
* Investments by 2030.

Gulf Cooperation Council Under Negotiation
* The third round of negotiations was held on 17-18 January 2006.
* A fourth negotiation meeting was held on 19-22 July 2006.

Iceland Under Negotiation
* A third round of negotiations was held on 17-18 October 2007.
* Fourth round: March 2008

New Zealand
* Agreement was signed on 7 April 2008. [Two-way trade between China and New Zealand currently is worth more than $6.1 billion a year, with Chinese exports making up about 75 percent. (IHT)]
* On October 1st, 2008 “tariffs on New Zealand’s exports to China that are currently set at 5 percent or less will be cut to zero” (IHT).
* “31 percent of New Zealand’s exports to China slated for tariff-free status by 2013” (IHT).
* Dairy and almost all (96%) of NZ’s exports should be tariff-free by 2019.

Pakistan
* Agreement on goods signed on 24 November 2006;
* Went into effect on July 1, 2007 (People’s Daily).
* 36 percent of products will be tariff free by 2010.
* 85 percent of products will be tariff free by 2013, and Phase II begins, with a goal to reduce tariffs on 90 percent of goods.
* Agreement on services under negotiation (Brookings).
* The current agreement already covers investments (People’s Daily).
* “China-Pakistan trade volume exceeded 4.3 billion dollars in 2005, representing a year-on-year increase of 39 percent. The officials said the trade deal could triple bilateral trade to 15 billion dollars within five years” (People’s Daily).

Peru Under Negotiation
* The 2007 Joint-Feasibility Study.
* The second round of negotiations held on 3-7 March 2008.
* A third round was held in May 2008.
* The fifth round was held at the end of August 2008.
* On August 26th, Peru’s foreign minister of trade and tourism stated a belief that negotiations could conclude by November, 2008.

Singapore
* The first round negotiation was held on 26 October 2006. There were a total of eight rounds.
* On September 4, 2008, negotiations for a full free trade agreement including goods, services, and investments were concluded. The agreement should be signed by October 2008 (International Herald Tribune). [Bilateral trade between Singapore and China  was $63.83 billion, in 2007.]

Southern African Customs Union Under Negotiation
* Negotiation started on 29 June 2004

Feasibility Study
Costa Rica
* The 1st Joint Meeting was held on 9-11 January 2008

India
* The feasibility study on Regional Trade Agreement (RTA) concluded at the sixth meeting on 21-22 October 2007

Norway
* A feasibility study concluded on 13 December 2007

South Korea
* The 4th Joint Meeting was held on 18-20 Febuary 2008.
* December 2007 China Daily article.

Switzerland
* In July 2007, the countries agreed to study the feasibility of a free trade agreement.

From: Page 7 of Brookings report; originally People’s Republic of China Ministry of Commerce news releases; also edited and updated with data inter alia from the Brookings report and from various news sources from around the Internet.

Potential Free Trade Timeline
October 2008 – “[T]ariffs on New Zealand’s exports to China that are currently set at 5 percent or less will be cut to zero” (IHT).
October 2008 – Singapore-China Free Trade Agreement signed.
November 2008 – Peru-China Free Trade Agreement signed.
December 2008 – Agreement on investment with ASEAN signed.
January 2009 – Agreement on services with Chile goes into effect.
2010 – Phase-Out period for normal items ends for China and original ASEAN countries.
2010 – Pakistan: 36 percent of products will be tariff free.
2013 – Pakistan: 85 percent of products will be tariff free.
2013 – Phase-Out period for sensitive items ends for China and original ASEAN countries.
2013 – “31 percent of New Zealand’s exports to China slated for tariff-free status″ (IHT).
2015 – Phase-Out period for normal items ends for the newer ASEAN members (Cambodia, Laos, Myanmar, Vietnam.)
2015 – ASEAN single-market finally established.
2015 – East Asian Free Trade Area (ASEAN, Korea, China, Japan) for goods.
2017 – East Asian Free Trade Area (ASEAN, Korea, China, Japan) for services.
2019 – Dairy and almost all (96%) of New Zealand’s exports should be tariff-free by 2019.
2020 – East Asian Free Trade Area (ASEAN, Korea, China, Japan) for investments.
2020 – Phase-Out period for sensitive items ends for the newer ASEAN members (CLMV).
2025 – FTAAP for goods.
2027 – FTAAP for services.
2030 – FTAAP for investments.

8 September, 2008 Posted by | China Economy, China Future | , , , , | 4 Comments