“From the broader to inside of the border” New trends in FTAs

Nowadays, the development of Free Trade Agreements (FTAs) has shown a trend of caring about the things inside the country more, rather than just about goods crossing the border. It shows the progress and high quality of present FTAs. The Free Trade Agreement between China and Serbia entered into force on 2024 July 1. It’s the first free trade agreement signed between China and a Central and Eastern European country. The FTA will not only expand bilateral trade but also promote investment cooperation and industrial chain integration, giving better play to the economic advantages of the two countries. Meanwhile, Serbia could also be a potential channel for Chinese goods to be exported to the EU. China and Serbia will gradually eliminate tariffs on 90%. And more than 60 percent of tariff items were eliminated immediately on the day the agreement came into force. Ultimately, the proportion of zero-tariff items on both sides reached about 95%, covering each other’s main export products.

Beyond the tariffs, the FTA also pays great attention to the research, production, and selling of the goods. It establishes institutional arrangements in many areas. For example, it set rules about trade facilitation, ranging from trade remedies to dispute settlement. It also set rules about intellectual property rights protection, investment cooperation sanitation, and phytosanitary measures. They are rules beyond the broader, which will provide a more convenient, transparent, and stable business environment for enterprises of the two countries.

Like the China-Serbia free trade agreement, many high standards of free trade agreements show a trend of caring about things surpassing the border, such as CPTPP and USMCA. The international trade rules extend from the border to the border after the measures, including not only economic factors but also many non-economic factors.

Traditional economic and trade rules mainly target the measures when goods, services, or investments cross the border, including tariffs, quotas, quantity restrictions, customs supervision, etc. They mainly care about improving market access. The direction of the agreement is to make reciprocal concessions until the complete elimination of trade barriers. However, for the reasons of interests and operating way, they have the nature of downward competition.

Issues such as competition policy, environmental protection, labor, investment, digital trade, state-owned enterprises, and intellectual property issues outside the TRIPS agreement are the focus of nowadays trade agreements. The aim is to reduce economic distortions and achieve fair competition. With the purpose of achieving the jointly recognized minimum standard through regulatory coordination and integration, the direction of these agreements is to gradually start from the low standard to the high standard and have the nature of upward competition.

For example, the content of the USMCA agreement is nearly three times that of the original NAFTA, covering not only trade in goods and rules of origin, but also intellectual property rights, digital trade, financial services, labor rights, environmental protection, etc. It has become the most extensive trade agreement in history and joined the macro policy and exchange rate chapter for the first time.

Compared with border rules, nowadays the trade agreement rules have a wider coverage and promote more connectivity, focusing on international trade issues beyond tariff quotas. These rules are a new development trend of existing international trade rules, with higher standards and better opening-up and trade cooperation.

By Le Tianyu