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My vision of China free trade role: academic

The Standard, Hong Kong

21 May 2004

My vision of China free trade role: academic

Mark Lee

China should become the focal point of an East Asian free trade zone to rival other blocks such as the European Union and the North American Free Trade Area (Nafta), a leading academic claims.

Such a grouping with China at its centre was the best alternative in the short term following last year’s failed World Trade Organisation (WTO) talks, Lingnan University president Edward Chen said.

He was speaking at an international conference on Asian development in Hong Kong.

``China can become the hub of a new greater East Asian free trade area,’’ he said. ``China is increasingly providing the leadership in the development of a hub development model in Asia.’’

He said slow progress at the current round of Doha WTO negotiations means that multilateral agreements are not as practical and effective in the short term as regional trade agreements covering a smaller number of countries.

The WTO meeting in Cancun failed last year after the United States and the European Union refused to open talks on farm subsidies.

The next WTO ministerial meeting will be held in Hong Kong in 2005.

``We are seeing an increasing trend towards tighter regional groupings in the rest of the world, such as Nafta in North America, and the European Union. This is the geopolitical situation at the moment,’’ Chen said.

China signed a framework agreement with 10 Southeast Asian countries in 2002 aimed at forming a China-Asean free trade area by 2010. A free trade deal with Hong Kong - the Closer Economic Partnership Arrangement, known as Cepa - came into effect in January. But Shujiro Urata, a professor at Waseda University in Japan, said proliferation of free trade agreements (FTAs) in Asia, especially since the financial crisis in 1997, could make future WTO negotiations more difficult.

``Countries who have FTAs offer preferential trading conditions to their partners. This is against WTO principles.’’

He said the current trend towards more bilateral FTAs should not continue at the expense of multilateral trade agreements within the WTO. They should remain the ultimate goal.

However, Trade and Industry deputy director-general Philip Yung, who was a member of the Hong Kong government delegation at the Cancun WTO meeting, said the trend towards more FTAs may be irreversible.

``Hong Kong wants to see FTAs become a building block, rather than a stumbling block, to multilateral trade,’’ he said.

Professor Robert Scollay of Auckland University said his research showed that China could benefit much more if FTA negotiations with Asean countries were extended to the greater Asia Pacific region, including Japan.