A trade agreement, also often referred to as a trade pact, is a broad treaty including taxes, tariffs and trade regulations. The most common trade agreements are preferential and free trade types: these are designed to specifically reduce the amount of tariffs, trade quotas and all other restrictions that may be in place.
The extent of reduction determines the type; it would be a free trade agreement if tariffs are completely abolished to mutually benefit both parties.
The level of China trade agreement complexity, however, depends on the policies adopted by the trade bloc or association. For example, to join the European Union, a country must enter free trade agreements with all other current members, allowing for free importation and exportation of goods throughout the region.
As the European Union often requires joining a specific currency and the principals stretch further than basic economic integration but also political. In the Association of Southeast Asian Nations (ASEAN), a framework focusing on services has been developed rather than complete transfers of manufactured goods.
China is not part of the ASEAN but bargains with them collectively when it comes to trade.
Current China Trade Agreements
China currently has many quotas in place controlling the amount of imports and exports with other countries. There are, however, there are currently several China trade agreements with certain trade partners already in place. The ASEAN-China Free Trade Area (ACFTA) came into effect as of 1st January 2010 and is currently the largest free trade area in terms of population, and third largest in terms of nominal GDP.
Additionally, there is a China trade agreement with Chile, Hong Kong, Macau (CEPA), Pakistan, Peru, New Zealand, Thailand, Singapore, Switzerland, Taiwan (Economic Cooperation Framework Agreement). These agreements allow for free trade between two sides, where each party may be a: country, trade bloc, customs territory or an informal group of countries.
The negotiations about details of international trade agreements often take a long time.
The Future of China Trade Agreements
While China trade agreements are an on-going process (becoming increasingly common in the current nature of the globalisation of the world’s economy), it is highly likely that significantly more will proposed, signed and executed in the future.
Free trade agreements are always being proposed. China currently wants to join such agreement to have influence on standards set globally, as well as benefiting from trade flows. As a result, China is seeing some of the fastest adoption of agreements in comparison to other countries, as many countries see China as an upcoming economic powerhouse and want to benefit from free trade proposals.
Currently several countries have started negotiations with China to enter into such agreements: Australia (Australia-China Free Trade Agreement), South Korea (China-South Korea Free Trade Agreement), Costa Rica, India and ASEAN. Since 2012, China has being trying to agree a bilateral agreement with the EU. One notable snub is that they are currently not part of the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
Even though many more agreements are in negotiation that does not mean they are always going to be finalised. The process can be long and can rarely produce the outcomes initially intended. Geopolitical aspects can also bring about the agreements for trade.
The political climate can often interfere with free trade agreements, and if there is political unrest it could threaten the future of any possible new agreements to be made.