Download Pragmatically Promoting Economic and Trade

Pragmatically Promoting Economic and Trade Cooperation between
China and EU in the International Joint Efforts to Build the “Belt and Road”
---Speech at the 7th China-EU Forum
Chi Fulin
According to the list of outcomes of the 19th China-EU leaders' annual meeting
earlier this month, the two sides agreed to strengthen the link between the “Belt
and Road” Initiative and the European Investment Plan in order to promote
relevant cooperation. Here, I would like to propose a few ideas on pragmatically
deepening economic and trade cooperation between China and EU in the
international joint efforts to build the “Belt and Road”.
Ⅰ. Promoting integration of the economic and trade cooperation between
China and EU into the Asia-Europe Cooperation
1. Joint construction of the “Belt and Road” holds in store the largest
global market. Joint construction of the ““Belt and Road”" involves nearly 70
countries, which mainly belong to Asia and Europe, with a population of about
4.6 billion and accounting for more than 60% of the global total (63%).
According to statistics issued by the World Bank, Asia and Europe took up
around 62% of the World's total GDP in 2016, with Asia accounting for 33.84%
and Europe for 21.37%1. And 3/4 of the countries（72.3%）along the “Belt and
Road”, whichare either emerging or developing economies, all still have large
development potentials. So strengthening cooperation between Asia and EU in
building the “Belt and Road” will further unleash their respective development
potentials to make a great contribution to the new round of global economic
1.World
Bank.“Global GDP reached $74 trillion and Shares of different economies”,Pheonix Economics and Finance, 2017-02-24.
http://news.10jqka.com.cn/20170224/c596602586.shtml
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growth. For example, in 2015, foreign direct investment (FDI) absorbed by Asia
was as large as $540.7 billion, which accounts for about 30.7% of the global
total. And the FDI absorbed by Asia，EU and other European developed
economies, if put together, accounts for almost for 60% of the World’s total. In
the next few years along with the progress of the international joint building of
the “Belt and Road”, the market demand in both Asia and Europe will enter a
period of even faster discharge.
2. Cooperation between Asia and Europe in building the “Belt and Road”
will blow up the space of cooperation in trade and investment between
China and EU. The wide participation in building the “Belt and Road” not only
provides significant opportunities for China and EU to deepen their bilateral
cooperation, but also offers a huge potential third-party market. And China and
EU can achieve mutual benefit through jointly developing third-party markets.
Now, China and 13 out of the 16 Central and Eastern European countries have
signed cooperative documents on jointly building the “Belt and Road”. From
2010 and 2016, the volume of the annual trade between China and the 16
Eastern European countries expanded from $43.9 billion to $58.7 billion, which
means a 33.7% growth.
Cooperation between China and EU will help accelerate the process of unifying
and integrating the markets in Asia and Europe. According to some researchers’
estimation, interconnectivity and facilitation of transport infrastructure between
China and Europe can reduce their overland transportation costs by 50%, raise
the speed of customs clearance by more than 30%, and drive EU’s international
trade to grow by more than 6% and that of Asian countries along the “Belt and
Road” to grow by over 3%. If China and EU seize the new opportunity out of the
cooperation between Asia and Europe in jointly building the “Belt and Road” to
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further deepen institutional arrangements for trade and investment liberalization
and facilitation, they will make a great contribution to the process of accelerating
the integration of the markets of Asia and Europe, and at the same time,
unleash an even larger market demand.
Ⅱ. Deepening economic and trade cooperation between China and EU in
the joint building of the “Belt and Road” by focusing on China-EU FT A
1. FTA is a pragmatic choice for deepening economic and trade
cooperation between China and EU. With rising protectionism and
ultra-conservatism, further deepening economic and trade cooperation between
China and EU depends on further enhancing institutional arrangements for
trade liberalization and facilitation. It also depends on joint efforts to establish
China-EU FTA oriented towards being open and inclusive, and win-win and
balance. China-EU FTA will set a good example for South-north cooperation in
perfecting the governance of global trade and investment, thus enable China
and EU to make a great contribution to the maintenance of economic
globalization and the multilateral trading system.
2. Trade in services is the key to launching of China-EU FTA. On the one
hand, the economic complementarity between China and EU is mainly
embodied in the great potential in bilateral trade in services. Many EU member
countries have unique advantages in electronic technology, aviation,
information and communication technology, life science and technology, energy,
environmental technology, and other producer services areas, as well as in
consumer services such as health management，health care and medical
treatment, while China has a huge market demand for these services.
According to SHBC’s estimation, by 2030, China will become globally the
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largest importer of services with its service import taking up 13.4% of the global
total, which will be as large as 3 times of what it imports at present. On the other
hand, the potential of trade in services between China and EU is far from being
released enough. In the past one or two year, China's foreign trade in services
has increased from 15.3% to 18% of its total foreign trade, growing at a
double-digit annual rate in the past four years. Nevertheless the growth of trade
in services between China and EU seems to have somewhat slowed down. In
2016, volume of trade in services between them was only €65.1 billion with an
annual growth rate of 5.4%, almost 9%(8.8%) lower than the growth of China’s
foreign trade in services. In the same year, EU’s trade in goods with China took
up 15% of its total foreign trade in goods, while its trade in services with China
was only 4.3% of its total foreign trade in services.
China is world's most promising service consumption market and EU the world's
largest service producer respectively. It is a common interest for them to expand
trade in services. As a matter of fact, EU’s trade in services with China has
already become an important source of its trade surplus. From 2010 to 2016,
EU’s trade surplus from its trade in services with China rose from €2 billion to
€11 billion. If substantial breakthroughs are made in deepening liberalization
and facilitation of trade in services between China and EU, EU will enjoy
pioneer dividend as an earlier entrant of China’s huge service market. By
entering the huge service consumption market of 1.3 billion people, EU will
create a large space for its members’ economic and employment growth.
3. China-EU Investment Treaty negotiations should be combined with
negotiations on trade in services. First, convergence of investment
agreements and service trade agreements is a big trend. With the development
of global economic servitization, the service sector has become an important
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area of foreign investment, which makes service trade rules and investment
rules more and more integrated. For example, terms of the General Agreement
on Trade in Services (GATS) under the WTO framework largely focus on market
access and national treatment, and at the same time involves terms such
business presence, profits repatriation and investment. Thus in essence, GATS
is an agreement not only on liberalization of trade in services and but also on
the service sector investment liberalization. Secondly, trade in services has
been a focal point of negotiations for China-EU Investment Treaty. In other word,
a considerable part of negotiations on China-EU Investment Treaty has been
about trade in services. Third, the key is that China needs to open its service
industrial market to EU, while EU needs to liberalize its service export markets
to China. That is to say, China needs to accelerate structural reforms primarily
for the purpose of further opening its service sector and EU needs to have a
concrete action plan for opening its service export markets, such as lowering
and removing hidden technical trade barriers to, and controls of exporting high
and new technologies to China with the exemption of those concerning security.
III. 2020: time window period for launching China-EU FTA
1. 2020: a key point for economic globalization. At present, economic
globalization is at a historic turning point with the US and Europe both facing
increasingly serious challenges of populism and ultranationalism. China and
Europe account for more than 1/3 of the world's GDP and also 1/3 of the world's
trade. In order to build an open world economy, to safeguard the multilateral
trading system of the WTO and to adhere to trade liberalization and investment
facilitation, China and EU need to work together more closely. Especially, when
the United States is fading out of the multilateral trading system and has
announced its abrogation of the Paris Agreement, it has never looked
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so
urgent and important for China and EU to jointly promote economic
globalization and improve the global economic governance as it is now today. It
is just based on this consideration, I would like to propose that time from now to
2020 should be the time window period for launching China-EU FTA. If we wait
until 2030, we will miss out on the historic opportunity and it will be reduced
from a “promising silk road for tomorrow” to a “withered flower of the past for
tomorrow”.
2. 2020: key point for China’s economic transformation and upgrade. The
transformation and upgrade of China’s industrial structure, consumption
structure, urbanization structure and opening-up structure are now in a critical
period. It is estimated that by 2020, the proportion of service consumption of
urban and rural residents in China will be increased from about 40% at present
to about 50%, and the share of the service sector in GDP will grow from 51.6%
to about 60%. To accommodate to this trend, China is now at a critical point to
change its opening-up structure from trade in goods as the mainstay to trade in
services as the priority. In the past 5 years, China's foreign trade in services
has been growing at an average annual rate of over 14%. In the next few years,
if it continues to grow at an average annual rate of above 10%, the total volume
of China's annual foreign trade in services will reach at least us $1.1 trillion by
2020, accounting for more than 20% of its total foreign trade. Thus, by 2020,
China will become the world's largest market for trade in services. At present,
trade in services between China and EU is only about 10% of China's total
foreign trade in services. If China-EU FTA is launched to significantly improve
the level of liberalization and facilitation of trade in services between the two
sides, their trade in services is expected to expand to more than 20% of China’s
total foreign trade in services. This means that the annual volume of trade in
services between China and EU will reach around €200 billion.
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3. 2020: key point for the process of European integration. Objectively
speaking, risks for European integration have been increasing. In the coming
years, European integration will still face serious challenges of protectionism,
populism and ultranationalism, which are making economic recovery of EU
members more difficult. Meanwhile, the coming years will be critical for EU to
look for new market space. In this context, China and EU’s joint orientation of
the development of their economic and trade relationship towards FTA will
expand the space for EU’s employment growth and for its development of
people's livelihood.
2020: launching China-EU FTA will have a significant impact not only on China’s
economic transformation and upgrading but also on EU’s economic recovery
and the process of economic globalization. We do hope that China and EU will
react to the situation and seize the opportunity to jointly work out a pragmatic
action plan for launching China-EU FTA as soon as possible.
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