China Trading Agreements

China has trade agreements with many countries.

China is an emerging superpower. Few would disagree with that statement. This is manifested by the many free trade agreements world powers have signed with China. The country is now a major world player in all areas of economic life.

Features

China has trade agreements with dozens of countries in the world. The basic features of many of these agreements have much in common. They exist because China has a low-paid, highly-educated workforce that has now moved into the high tech sector. Therefore, the basic features include areas of dispute resolution, environmental and labor standards, as well as the more common lowering of tariffs.

Benefits

China benefits from trade agreements because it has become an accepted member of the global trading order. Its accession to the World Trade Organization in 2001 proved this is no uncertain terms. In being involved with so many diverse trade agreements, China has committed itself to substantial state reform in areas of labor, transparency and banking. This was shown by the 2004 Export Control agreement with the United States. One of the purposes of this agreement was to extract promises from China on "dual use" items. This refers to items, such as sensitive industrial or computer equipment, that could be put to military use. China has promised through this act that "dual use" items be used solely for the "intended" use and no other.

Significance

Parts of the former Third World are no longer helpless victims of western "aggression." Countries like China and South Korea have become major trading powers in their own right. China must, however, play by the rules. Under the 1999 Trade Deal with the United States brokered by the World Trade Organization, China must open its markets to a broad range of U.S. goods. Tariffs against any U.S. goods must be slowly lowered over time. Significantly, the agreement stipulates a lessening role for the state and state-connected middlemen involved in trade with the United States, thus empowering China's private sector to become more independent of state mandates.

Function

The purpose of trade agreements is to take advantage of China's labor and growing market while also encouraging reforms. In the 2008 agreement between China and New Zealand, tariffs are being eliminated for most New Zealand exports. Rules and procedures are now in place to take advantage of unfair trade practices such as dumping. This agreement permits a freer flow of persons to and from China, thus eliminating an important area of state power. Labor standards are also mandated through this agreement. The rule of law is strengthened through increased protections for New Zealander investments in China.

Insight

One approach when considering Chinese trade agreements is to realize that China has received a taste of real prosperity. The price, however, is playing by the rules of the game designed by the west with the World Trade Organization or World Bank. There may come a time when China becomes so powerful that it will be able to change the rules of the game, or safely ignore them. Until then, however, China has committed to substantial reform through these trade agreements.

References

• US Department of Commerce: U.S.-China End-Use Visit Understanding (2004)
• Sinomania: China Trade Relations Act (1999)
• New Zealand Department of Trade: NZ-China Free Trade Agreement (2008)