OPINIONS Contours of a new international economic order


Contours of a new international economic order

Global Times

05:08, November 14, 2018


(Photo: Global Times)

The first China International Import Expo (CIIE) that successfully concluded on November 10 in Shanghai presents China as the world's most promising market for imports of goods and services in the decades to come. Moreover, this prospect is opening the way to imaginative ideas that will broaden the horizons of international economic cooperation.   

It is ironic that many Western commentators hesitate to recognize this. Ironic, yes, but not entirely surprising. The Western mind is focused on the immediate - the existing tariffs, the existing practices in the protection of intellectual property and above all, the immediate likelihood of increased profits. This logic is understandable but no longer sufficient. A long-term perspective is necessary. Otherwise the world will become victim of short-term measures and countermeasures and the resulting tensions, a pattern in which everybody will lose. What we need today is a vision of medium and long-term development in which everybody can win. In Shanghai, China has offered such a vision.

This vision does not have to be abstract - it can be expressed in very concrete business decisions. Many of them were made in Shanghai. Moreover, new decisions on expanding economic cooperation with China fit well with some recent experiences. Let us take a recent specific example from economic cooperation between China and Slovenia. Earlier this year, Chinese company Hisense from Shandong Province acquired the Slovenian company Gorenje, an internationally renowned manufacturer of home appliances. China has a very big and expanding market for home appliances where Hisense is a major player. With its growing standard of living it is expected that China will be the world's most important market for home appliances in the decades to come. Gorenje, being itself active in the global markets, is very well aware of this dynamic. After all, it was the dynamic of constantly improving standard of living of the West in which Gorenje grew in the past decades and became a globally recognized player. In that process it developed technologies, design, know-how and business practices which fit very well with the needs of Hisense today. For Gorenje, it would make no sense to expand manufacturing in the existing factories in Europe. It is better to join forces with partners in China and find a win-win formula for the future cooperation.

One of the interesting aspects of the Hisense-Gorenje experience was how quickly the public in Slovenia understood the win-win logic of the acquisition and how easy it was to gain public opinion. And this understanding relates to both - the short-term transaction of purchase and the longer-term vision of a win-win cooperation. 

There are thousands of such stories like these in all parts of the world and they are all relevant to the message of the first CIIE. Every informed observer today understands that China is rapidly developing from an export dependent, largely manufacturing economy toward a fully-modernized economy based on domestic demand and the growing importance of services. A single statistical indicator tells a story of global importance: In 2006, the gross exports from China to all countries equaled 35 percent of its GDP, while in 2017 the figure was only 18 percent. And this change happened at the time of high growth rates that for the most of the period exceeded 8 percent annually. The magnitude of this change is not difficult to understand. Neither is it difficult to understand that the transformation of China into potentially the largest import market of the world has to have global effects. 

This is why the first CIIE in Shanghai is so important. But the Expo also helps us to form the necessary imagination of the future world. All this was surely on the mind of foreign visitors, including Slovenian and other European businessmen and government representatives who participated in the opening ceremony and subsequently walked through the Expo. They could see the dimensions of the current phase of the opening-up of China. They could also think about the opportunities for further improvement of economic and social well-being worldwide through strengthened cooperation and connectivity. The ambitious objectives of the UN sustainable development agenda until 2030 can be achieved through such cooperation.

The keynote speech at the opening by President Xi Jinping offered an encouraging vision of the future engagement of China with the world. This vision is realistic and proceeds from very fundamental conditions. They include lowering of Chinese tariffs, simpler customs clearance and administrative procedures and broadening market access for goods more widely. But there is much more that is expected to happen in the coming years: liberalization and improved investment climate for foreign investors and opening of services sector, including in the fields of telecommunications, education and medical services. President Xi recognized an opportunity arising from the combination of the existing interests of foreign investors and the shortages in domestic supply in China that can be reduced through international cooperation.

All this should help develop world class business environment in China and create synergies, including in the field of intellectual property. Innovation should be stimulated through cooperation in science and technology and with an adequate level of protection of intellectual property. This will enable an improved mutual understanding between foreign and Chinese partners in this effort. New horizons of opening up will include "pilot free trade zones" that would provide the opportunity to develop new paths to innovation and new models of international technological and economic cooperation.  

The vision of the future offered at the CIIE requires an adequate global business environment and effective multilateral institutions, in particular WTO. It is the right time now to start considering reforms in earnest. Here too, vision and innovation will be necessary. WTO should not only help reducing barriers to trade and settling trade related disputes. The discussion about its reform will have to embrace such complex issues like protection of social rights and decent work as well as a preferential treatment of investments that strengthen the ecological sustainability of development.

Is this too much to expect? The answer is no. The first CIIE teaches us about the possibility of further global transformation. And yes, this means nothing less than creating a new international economic order.

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