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Reciprocal free trade brings mutual benefits, promoting building of an open world economy

Zhou Jianjun

The Dalian International Conference Center, the main venue of the 15th Summer Davos Forum, Dalian, Liaoning Province, on June 24, 2024./CFP
The Dalian International Conference Center, the main venue of the 15th Summer Davos Forum, Dalian, Liaoning Province, on June 24, 2024./CFP

The Dalian International Conference Center, the main venue of the 15th Summer Davos Forum, Dalian, Liaoning Province, on June 24, 2024./CFP

Editor's note: The article was written by Zhou Jianjun, an assistant researcher at the Institute of State System Research and School of Economics, Zhejiang University. The article reflects the author's opinions and not necessarily the views of CGTN.

The multilateral trade system as we know it is currently caught in a bind and protectionism is accelerating globally. At the Summer Davos 2024 in China's Dalian, Premier Li Qiang had pointed out that China will stay on the path of building an open world economy and reject bloc confrontation and decoupling.

Free trade is the foundation of economic prosperity, and high-level opening up is essential for guaranteeing free trade. Before the 1990s, the world was long overshadowed by confrontation, and free trade was severely restricted. The end of the Cold War broke the bipolar confrontation between the US and the Soviet Union, ushering in a new era of global trade. 

In 1995, the World Trade Organization (WTO) was established, succeeding the earlier GATT (General Agreement on Tariffs and Trade) and making free trade a universal principle in international trade and economic exchanges. China's accession to the WTO in 2001 marked the integration of a major country with the greatest market potential into the global open economy system, significantly boosting the level of opening up in global markets. China's advocacy for free trade and high-level opening up has made a tremendous contribution to the global economy, benefiting countries worldwide. China's contribution to global economic growth has risen from less than 10 percent to over 30 percent, making the country the primary driver of global economic growth today.

Isolation and trade protectionism are against the prevailing trends of times, and decoupling and supply chain disruptions will severely damage the global economy. Under the globalized production network, supply chains have become increasingly interconnected, with countries depending on each other. Only by developing free trade and fully leveraging each country's comparative advantages can the resources of various countries be allocated efficiently. This will lead to a reduction in production costs and the maximization of welfare. 

While market isolation and protectionism may seem to shield domestic industries from external shocks, they are ultimately a poison that will cause domestic industries to stagnate and discourage them from innovation, significantly raising production costs. These unnecessary costs are ultimately borne by ordinary consumers, increasing the living costs for residents, especially lower-income groups. Following the escalation of the China-US trade frictions, Moody's has estimated that 92 percent of the costs of tariff hikes will fall upon US consumers, while average US household expenditure will increase by $1,300 annually. If the decoupling and supply chain disruptions initiated by the US continue to spread, trade exchanges will decrease considerably, and countries may regress to an era of isolation, severely damaging global economic growth.

 A skyline view of Beijing's Central Business District. /CFP
A skyline view of Beijing's Central Business District. /CFP

A skyline view of Beijing's Central Business District. /CFP

Promoting free trade and high-level opening up requires the collective efforts of all countries, with China and the US being key players. As the largest developing and developed countries, China and the US have formed a G2 pattern for the global economy. When China and the US exist in harmony, both nations thrive; when they confront each other, both suffer. 

Free trade and high-level opening-up require countries worldwide to work together. Therefore, China and the US, especially the US, must lead the way. European and American countries, led by the US, have repeatedly imposed additional tariffs on Chinese products and introduced policies to block Chinese imports, severely undermining the principles of free trade. 

The US's tariff hikes target not only China but also other countries. Trump has pledged to impose additional tariffs on neighboring countries like Canada and Mexico and even proposed imposing indiscriminate tariffs on all goods entering the US to protect domestic manufacturing. The US trade restrictions, framed as measures for "de-risking", are the biggest threat to the world economy. The restrictions will trigger a domino effect, prompting other countries to follow suit, sparking a global wave of trade protectionism and tariff increases. 

China has proactively assumed its responsibilities as a major power, leveraging its influence to accelerate trade negotiations with European and American countries, striving to remove unreasonable tariff hikes to curb the wave of tariff increases, and thus safeguarding free trade.

China has always been committed to free trade and mutual benefits, promoting the building of an open world economy. Since joining the WTO, China has consistently championed free trade and actively worked toward high-level opening up. On the one hand, as committed, China has reformed numerous systems not in line with the WTO rules, abolished numerous rules and regulations contradicting free trade, significantly reduced import and export tariffs, and opened up many previously strictly regulated sectors to improve access to the Chinese market. On the other hand, China has introduced a series of innovative measures to meet the contemporary demands of high-level opening up and free trade. These include launching the China Railway Express, embarking upon the Belt and Road Initiative, expanding free trade zones, developing free trade ports, and advancing the Regional Comprehensive Economic Partnership. These initiatives are conducive to building an open world economy, eliminating market access barriers, combating trade protectionism, and promoting the global development of free trade.

We still have a long way to go in building an open world economy, where China can serve as a model. Maintaining global free trade and building an open world economy is a challenging task that requires sustained efforts. China can take the initiative and introduce more incremental measures to further promote high-level opening up. 

Firstly, China can expedite the development of international transport networks across land, sea, and air to enhance its global connectivity. On land, the existing New Eurasian Land Bridge can be expanded, with branch routes reaching more countries. In maritime transport, the construction of overseas ports can be sped up, and additional dedicated maritime routes directly connecting China can be launched. For instance, Chile's cherry exports are now delivered directly to China via a dedicated maritime route known as the "Cherry Express". In aviation, more international routes and direct flights should be made available to closely connect Chinese and foreign cities. 

Secondly, China can further remove market access barriers and improve the efficiency of exchanges in personnel, capital, and information. On the personnel front, the scope of visa exemptions can be broadened, visa processes streamlined, and the duration of visa-free stays extended to make it easier for foreign visitors to live and work in China. In terms of capital, cross-border capital flows can be made more convenient, residents' foreign exchange limits can be raised or removed, and direct trade settlements in the renminbi can be encouraged to enhance the internationalization of the Chinese currency. As for information, China can expand pilot projects for opening up to the international internet and, within legal and regulatory bounds, introduce foreign apps and media outlets. 

Thirdly, China can continue deepening institutional opening up by aligning with high-standard international trade and economic rules. The country can fully play the role of free trade zones as experimental grounds to explore pioneering, integrated institutional measures that can be systematically replicated and promoted. Efforts should be accelerated to improve fundamental systems in areas such as market access, property rights protection, and data information, ensuring efficient alignment with high-standard international trade and economic rules.

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