China gets excited about free trade agreements

China will accelerate talks over free trade areas, said its Commerce Minister Gao Hucheng on March 8.

The country will “will accelerate talks over free trade areas with Japan and the Republic of Korea” he said in a speech about what China must do to keep its exports growing.

Reuters also reported that he said on March 6 that “China would work hard to wrap up talks for the RCEP, or Regional Comprehensive Economic Partnership (which includes Australia, New Zealand, the ten members of the Association of South East Asian States  and India) before the end of this year.

These are extraordinary commitments.China has agreed an FTA with Korea, subject to ratification by the Korean parliament – but has no two-way negotiations with Japan currently in progress. It has been running talks on a three-way deal with Japan  and Korea since May 2012, but no progress has been reported.  Chinese and Australian leasers have agreed terms for a free trade agreement, but there have been no significant talks with India.

India’s FTA talks with the EU, like Japan’s TPP talks with the US, appear stuck for the moment, as lobbies in both India and Japan are reluctant to open up to more foreign competition for the benefit of different sectors of the economy. It is hard to see substantial further progress with China in just nine months.

Gao argued that China should:

• strengthen support for businesses in the process of industrial upgrading,
• produce higher-value products,
• focus on innovation-driven competitiveness
• and encourage the development of new export models like e-commerce.

He also argued that China would need to speed up its review of proposed investment treaties with the EU and US. It seems clear that China is clear it needs to enter new territory if it is to keep its  foreign trade growing – but not at all clear its trade officials understand how long trade agreements take with democracies