Trade first: joint efforts for an open world economy

#CriticalThinking

Global Europe

11 Nov 2019

Chi Fulin

President of the China Institute for Reform and Development (CIRD)

Since the founding of the ultimately ill-fated League of Nations in 1920, global governance has been dominated by a succession of supranational bodies, culminating in the foundation of the United Nations and the diverse Bretton Woods institutions at the end of the Second World War. These organisations have largely worked to ensure peace between the Western powers in the security sphere but also in finance and trade. In a changing world, however, with the rise of new powers, it is imperative that the voices and needs of emerging nations are also adequately reflected. Given that 21st century global concerns focus far more than ever before on hybrid threats, human rights and the environment, is it time to draw a line under the past 99 years of global governance and look to re-evaluate and reform our established systems?

This article is part of Friends of Europe’s discussion paper on global governance reform, in which we ask the ‘unusual suspects’ to share their views on what reforms are necessary to make the rules-based order work for us all.

Today, the world stands witness to significant developments as well as great changes to established structures. On the one hand, the acceleration of economic globalisation and technological progress has brought developed and developing countries closer, and the common need for developmental cooperation has become more apparent. On the other hand, the international community is facing increasing instability and uncertainty as it attempts to carry out sustainable development initiatives. To complete these objectives, the current state of global economic governance is in urgent need of reform and improvement.

To cope with the challenges and contradictions in globalisation and global economic governance, it is more advisable to work together to reform the existing system than to try to reinvent the wheel and start from scratch again. China has repeatedly emphasised, on a number of international occasions, that it firmly defends the standing international system rooted in international law.

Furthermore, Beijing has put forth a series of propositions to improve the system. These recommendations include building a community of shared future and shaping a global economic governance structure devoted to equality, openness, cooperation and sharing.

Both China and the European Union have a role to play in upholding the international multilateral trade system and safeguarding free trade

Many far-sighted people are deeply concerned about the economic frictions provoked by the United States and are actively seeking to mitigate tensions. Faced with trade protectionism and unilateralism, the global community should make coordinated efforts for a transparent, inclusive and non-discriminatory multilateral trading system well-suited for fairer and more reasonable free trade. This is the common position held by most countries and it is the key to addressing inadequate and unbalanced development of the global economy.

Be it fighting against protectionism or improving global governance, both would not be possible without the participation and support of major economies. Therefore, both China and the European Union have a role to play in upholding the international multilateral trade system and safeguarding free trade. Despite the differences on specific economic and trade issues, both parties have the same stance on upholding multilateralism. For instance, on the WTO, China and the EU advocate reform without changing the basic principles.

In addition to further strengthening economic and trade cooperation, they need to coordinate between themselves to achieve these common goals. Three years ago, the China Institute for Reform and Development (CIRD) and the Centre for European Policy Studies (CEPS) conducted research on a potential free trade agreement (FTA) between China and the EU. At that time, it was proposed that China and the EU should start the feasibility study and negotiation of a China-EU FTA as soon as possible, and that it was not advisable to wait until 2030 to reach such an agreement. If this proposal were to be undertaken and a preliminary agreement could be reached by 2020, both China and the EU would have better cards to play when faced with unilateralism, populism and trade conflicts.

A country that prioritises its own interest over the interests of all other countries and does whatever it wants will not go far

Since opening up in 1978, China has made remarkable economic progress thanks to considerable reforms. This has benefited citizens worldwide. In the past two years, China’s trade of services has contributed to the growth of global service trade by about 25%, a major factor in international economic growth. Should the potential of its trade be fully tapped, China’s imported services could triple by 2030, becoming the world’s largest importer of services and accounting for 13.4% of the global total.

The history of mankind shows that no country can develop well on its own. Trade protectionism and unilateralism inevitably meet a dead end. A country that prioritises its own interest over the interests of all other countries and does whatever it wants will not go far.

‘America First’ will not take the United States where it wants to go. It will only lead the nation in the opposite direction by increasing uncertainties and risking its own development, and that of the rest of the world. On the contrary, China aims to promote development by expanding its reform and further opening to the global economy. A more open China will lead to more positive interaction with, and bring more growth and prosperity to, the international community.

*Translated from Chinese to English by Wei Wenfeng