China and Taiwan apply to join the CPTPP five questions about free trade-BBC News

A free trade agreement is an agreement between two or more countries to reduce barriers to import and export between countries. Under the free trade policy, goods and services can be traded across borders, and the government only sets very low or completely abolished tariffs, quotas, subsidies or prohibitions that restrict cross-border trade.

The opposite concept of free trade is trade protectionism or economic isolationism.

However, governments with free trade policies or agreements do not necessarily give up all control over imports and exports or eliminate all protectionist policies. Therefore, in modern international trade, few free trade agreements lead to complete free trade.

Adam Smith, the famous British economist in the 18th century, is regarded by many as the founder of free trade theory and the advocate of free trade.

His most well-known theory is the “absolute advantage theory”, that is, countries should specialize in producing and exporting products with “absolute advantage”, and not producing but importing products with no “absolute advantage”.

The economist from Scotland said that Scotland can use greenhouses to grow grapes and then produce fine wines, but the cost is 30 times higher than abroad. It would be ridiculous if Scotland banned the import of all foreign wines and insisted on its own production.

But then another famous British economist David Ricardo put forward the viewpoint called “relative advantage theory” in the 19th century, which solved the problem of free trade that the “absolute advantage theory” could not answer to a large extent.

The point is not that a country has lower production costs and higher efficiency than other countries, but that a country can still have a comparative advantage in manufacturing a certain product even if it is less efficient than its trading partners.

If two countries trade on the basis of the so-called “opportunity cost” and concentrate on the commodities they have a comparative advantage, they will eventually get better returns.

Throughout the history of international trade, we can see that there have been two major camps since modern times. One advocates free trade. Under the impetus of this camp, the mainstream of globalization has been created. Numerous free trade agreements have been signed all over the world.

The other camp advocates trade protectionism and believes that countries have different levels of development, and if completely free trade, it will inevitably lead to the hindrance of the industrial development of some countries.

In the decades since the Second World War, protectionism has risen from time to time in the mighty mainstream advocating free trade. In fact, no country has fully promoted free trade. All countries will implement protection policies to protect their own industries that lack international competitiveness.

The process of global trade liberalization is simply the opening of domestic markets in exchange for entering the markets of other countries. But the key controversy in free trade today is: Does free trade really create a win-win situation? Still lose or lose?

At least during the time of former U.S. President Trump, the outside world often heard that China is the winner in trade relations with the United States, and the United States is the loser. Therefore, the Trump administration must increase tariffs to create a level playing field. , For the welfare of American workers.

On the other hand, China recognizes that it is a beneficiary of free trade and emphasizes that it is also a contributor. The top leader Xi Jinping has repeatedly stated that China will “defend” free trade.

The first international bilateral free trade agreement, the Cobden-Chevalier Treaty (the Cobden-Chevalier Treaty), was signed on January 23, 1860. The signatories were two major industrial powers in the 19th century-Britain and France.

Subsequently, Britain and France signed trade treaties with other European countries to reduce tariffs, thus enabling Western European countries to embark on the path of free trade.

After the Second World War, in 1947, 23 countries including the United States, Britain, France, Australia, India, Norway, New Zealand and the Republic of China jointly concluded the General Agreement on Tariffs and Trade (GATT), which was the 1995 World Trade Agreement. The establishment of the organization laid the foundation.

The purpose of the General Agreement on Tariffs and Trade is to eliminate differential treatment in international trade and promote the freedom of international trade by reducing tariffs and other trade barriers.

So far, in addition to the World Trade Organization with 164 members, there are many regional free trade agreements between the world, among which the most influential ones include:

According to information from the World Trade Organization, the countries that have signed the most trade agreements are EU member states, and 46 trade agreements have been signed with other countries and regions.

Compared with EU countries, the world‘s largest economic power, the United States, has signed only 14 free trade agreements. There is no free trade agreement between the United States and the European Union.

After Brexit, the UK still has 35 trade agreements. Under the “Global UK” policy, the UK is actively signing bilateral free trade agreements with many countries, and it has also submitted an application to join the CPTPP.

As the world‘s second largest economy, China has reached 19 free trade agreements.

But the countries with the fewest trade agreements in the world are concentrated in Africa and the Middle East.

For a long time in the past, the international community seems to have a consensus that the advantages of free trade outweigh the disadvantages. In North America and Europe, which are the first to enter the free trade agreement, both politicians and economic figures actively promote international free trade policies.

It is against this background that the United States signed the North American-Mexico Free Trade Agreement, and the United States also supported China’s accession to the World Trade Organization in 2001.

However, with the rise of China’s economy, its influence on the Asia-Pacific region and the world has increased. In particular, China has vigorously promoted the “Belt and Road” initiative. The trade war last year.

The integration of trade into the field of competition between the two countries began as early as Obama’s presidency. The CPTPP, which China and Taiwan both apply to join, was formerly the Trans-Pacific Partnership (TPP), a proposal for a free trade agreement proposed by Obama at the APEC summit in 2010.

The original intention of this agreement is an important part of the Obama administration’s Asian strategy. It is considered to be aimed at strengthening the bond between US allies in the Asia-Pacific region and Washington and countering China, the largest economy in Asia. However, with Trump withdrawing from this agreement, the economic layout of the United States in the Asia-Pacific region is still not in place.

During the Trump administration, the US-China trade war lasted for several years. Although after the new Biden administration of the United States came to power, Sino-US trade is no longer the most interesting contradiction between the two countries, but in fact the power contest surrounding trade has not stopped.

Now that China applies to join the CPTPP, how will the United States respond?

A common view of international public opinion is that only by joining the CPTPP can the United States use its economic strength to help formulate international trade and investment rules while ensuring its leadership in the Asia-Pacific region.