Zhou Mi: China Forum Expert, Researcher of Chinese Academy of International Trade and Economic Cooperation

In 2020, China’s trade in goods reached a historical high level of $4.17 trillion, which played an even more important role in the global industrial chain and supply chain. China will be more important in the global trade not only because of its trade volume. The enterprises in wide diversified sectors provide more possibilities for a sustainable trade, help absorb impact from the pandemic and created vast demand space for exporters in the world with vertical and horizontal trade relationship.

China benefited from the international trade and believe it will benefit all the countries, no matter developed or developing, by using its advantages if we can have a fair, reasonable and effective system. In the past decades, China is willing to learn from the trade routines and agreements and has changed a lot to modify our domestic laws and regulations especially after became a WTO member in 2001. While believing the goal of Development in Doha negotiation should take care of the concerns of the majority of members (especially the least developed countries), we are also actively to cooperate with all other members on the possibilities to improve the trade mechanism to better adapt to the changes and innovations on technology and business modes. Maybe the voices of new members or developing members are weak, they have the same right to avail the agreement to have a better environment for improvement of its positions in global supply chain. China is willing to do more on the trade promotion activities both on the trade-related facilities improvement and better use of WTO platform to reduce the trade cost.

The most important issue in the multilateral system is to make the people believe that they can rely on the rule-based system as they used to. When the commitments of dealing the disputes under the platform are fulfilled, members will be more active on further commitments. It is understandable when trade regime expands, more concerns will emerge. But it may be better to improve the mechanism instead of destroying it. There has been more than 1 year since the dysfunction of dispute settlement body and it will become more difficult with longer period. An update of treaty is definitely necessary after 26 years of its birth. It seems there are more concerns that the dispute settlement mechanism may challenge the members’ domestic judiciary independence, maybe it’s time for the WTO members review the past disputes to conclude the areas of concerns and try to define the range of disputes authority with more details.

China is also open for more regional trade agreements (RTA) and free trade agreements (FTA). We attended the negotiation held by the ASEAN countries and cooperate with Japan, South Korea, Australia and New Zealand to sign the FTA named RCEP last year. When come into effect, RCEP will provide stronger support for the involved members to coordinate on the trade-related measures both on the border and behind the border. While more and more countries have established FTAs, the tariff on import has generally decreasing trend. It may be important for some sensitive products like agricultural products, but the marginal effects of impact on reducing tariff are getting less significant. On the other hand, it is becoming more important for the trade partners to cooperate on reducing the barriers of non-tariff barriers, which is what we are discussing with trade partners and has been addressed to some extent in RCEP. In RCEP, the members will establish mechanism to coordinate their administration process and qualification requirements to make the trade accomplished easier. A credit-based system of enterprises will support the smooth trade flow while reduce the administrative workload and risks of trade. FTA network can be more effective. We are also in negotiating new or updated version of FTAs with other 10 partners. In the coming years, China will keep on communicating with other trade partners to explore the possibility of establishing flexible trade arrangements to provide a predictable trade environment for the enterprises and more choices for the consumers.

The trade system should not be one-way only, some good experiences we had may be also good for other countries. After 2013, China initiated the construction of Free Trade Zones to explore and experiment opening-up policies. These zones are one of the pioneer regions for the trade facilitation practices of customs which reduced as much as 90% of clearance time and procedure in some cases. These practices can be good examples to encourage more WTO members to speed up the enforcement of Trade Facilitation Agreement, the only new achievement reached after the establishment of WTO in 1995.

Innovation is a key force to move on in the changing world both on trade activities and institutional arrangement. It is true that the overcapacity become more serious after the financial crisis in 2008. But the main reason is not because the supply is stronger. It is the demand is weaker. Industrial development and technology decide the basic relationship of supply and demand. They are like the water which are both difficult to be compressed. When the pressure is too high, they may break the container to spillover to other space. The best way to deal with the insufficient demand issue is through cooperation instead of trying to grab a bigger share in the market by unilateral activity or as a group of a few strong players.

The pandemic has brought a lot of changes to all of us. Actually the supply chains have been restructured and optimized according to the market for decades even centuries. While the pandemic is speeding its speed. Some supply chains are shortened and become regional, and some new trade are created and become more popular even necessary, e.g. the e-commerce. But the Lockdown policy does not necessary mean the reduction of demand. In most cases, the demand is only suppressed temporarily. After the vaccination and better public health management, the world economy will gradually recover, maybe not in the original way like before the pandemic. Quite a few countries take it more serious to establish its own medical supply chain domestically.

Trade is important. Let’s take the agricultural product as an example. Trade has played crucial role in the poverty reduction issue. There are so many countries rely on the trade to have food while some others to plant and sell food. The uncertainty of trade environment will make them not sure about the judgement of the future and decision of planting plan cannot be made, which then may have an serious impact for the price and quantity of international market in 3 to 6 months. If all the countries are going to rely on its own domestic supply chain, it would be much more inefficient and waste a lot even to meet the low level of demand, no matter it may not possible for quite a few countries to do it. Chinese enterprises will definitely be harmed if the trade shrunk and kept unpredictable. We want all the trade partners, direct or indirect, can work together to create better environment for the trade. And the people deserve to have better lives no matter where they are.