The Social Economic and Environmental Impacts of Trade

Document Sample
The Social Economic and Environmental Impacts of Trade Powered By Docstoc
					N ov. 2 00 3 Volume 2, No.4 (Serial No.5)

Ch i n e s e Bu s i n e ss R e v i e w, I S S N 15 37 - 1506 C hi na B usi nes s R e vi ew (Jour nal ),I nc.,USA

Thinking on Establishing Free Trade Area of Central Asia
Lunzhi He1 Ping Cai2 Abstract: With the economic integration all over the world, it is necessary to establish the free trade area of central Asia, including Xinjiang. This paper analyses the demands on establishing free trade area in central Asia. According to the present statues of Xinjiang and five countries of central Asia, the developmental patterns are suggested. Furthermore, some policies and suggestions are proposed about the existing problems. Key words: western development free trade area of central Asia developmental pattern suggestions

1. The need of establishing free trade area of central Asia
1.1 The trend of economic integration World's economic situation has changed greatly since 1980's. Each country in the world participates in the system of international division of labor, which makes the international trade and investment develop rapidly. Therefore the increasing economy of transnational boundaries is coming into being. The integration and internationalization of world economy makes economic relationship among countries come into a new stage of permeating, combining, cooperating and sharing interest each. China and five countries in central Asia stand in the center of Asia-pacific area and they are major countries that the second longest land bridge crosses and radiates. Japan and Korea are to the east of China and central Asian areas. From the west of China and central Asian areas, people can go to Russia and European countries. Hence central Asian countries play important roles in international economy and trade. Under the background of regional economic cooperation and international economic integration, strengthening the bilateral cooperation and establishing free trade area between north-west of China that is facing the western development and central Asian countries that are eager to develop economy are the needs of times and economic development of them. So to establish free trade area in central Asia will have great effect on economy and trade of Asia and the world. 1.2 The need of developing economy respectively The formation of any regional economic group is related to the geographic position, the natural resources, the economic development of every country in the area, the foreign trade, and the economic and technical co-operations among them. Since China's opening up to the outside world, the economy of China's western areas develop rapidly. However, there are great differences comparing with the eastern areas. Under the background of China's entering WTO and the western development, accelerating the economic development of western areas, especially of Xinjiang and making it the new growth point of China's economy are the eager desire of every government in western area. Western areas, especially Xinjiang should cooperate with five countries of central

Lunzhi He(1949-), professor of Economics and Management School of Xinjiang University, majoring in systematic analysis of sustainable development of economy. Address: No.14 Shengli Road, Urumqi, Xinjiang, China, 830046. Tel: 013909927801, 0991-8583344(h);Email: 2 Ping Cai(1970-), Ph. D candidate of Economics and Management School of Xinjiang University, majoring in economics of population, resource and environment, Address: No.14 Shengli Road, Urumqi, Xinjiang, China, 830046. Tel: 013562396092; Email: or 27

Thinking on Establishing Free Trade Area of Central Asia

Asia in economy by sharing the common of geographic position, the nationality, the culture and the customs in order to promote the economic development. But five countries of central Asia have not yet free from the crisis since they separated from Soviet Union ten years ago. At present, every country is developing economy gradually though there are many difficulties. So it is necessary for central Asian countries to strengthen cooperation with China, especially with Xinjiang so as to extricate from the economic difficulty.

2. The economic cooperation condition of five countries of central Asia
The total area of five countries of central Asia that includes Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan is 4 million square kilometers with the population of about 53 million. Five countries of central Asia were integrated in the economic region of the Soviet Union. The infrastructure that formed in the past, the allocation and cooperation of labor make them close and integrate in economy. Although five countries of central Asia have independed after the break-up of the Soviet Union, the economic condition of five countries worsen because the economic contact with other republic unions is stopped. In order to extricate from the economic difficulty, five countries of central Asia have carried out the economic reform. Each of them determines the policy of opening up to the outside world in all respects to accelerate the economic development. After 12 years' economic transformation, each country has basically established the economic system. Central Asia that played important role in the history of culture exchange between the western and eastern world is a place that the old Silk Road must go through. Five countries of central Asia have plentiful natural resources and are the base sources of agriculture, raw materials and energy. They have become the region that have tremendous potentiality in economy in world economic structure with wide land, important position, plentiful natural resources, the growing population, the complex nationality composition and the transforming political and economic system, and the ideology although there are many undetermined factors in central Asia. After the political and economic transformation, five countries of central Asia have focused on developing economy. At the same time, a series of economic legislations are carried and the national cooperation in central Asia is strengthened in order to accelerate the local economic development. The shape that is as an economic cooperation of sub region has formed. In May,1995, the president of Kazakhstan, Kyrgyzstan and Uzbekistan met at Almaata and reached an agreement of establishing integrate economic region. Ten countries such as Pakistan, Iraq, Turkey, five countries of central Asia and Afghan signed DECLARATION and JOINT COMMUNIQUE and decided on establishing free trade area in Istanbul in March, 1995. Five countries of central Asia and Azerbaijan held a second meeting to establish cooperative organization of regional economy like the eastern union. Since 1994, with the promotation of China and every country of central Asia, the intertrade, the economic and technical cooperation have come into a new stage.

3. The practical foundation and condition of establishing free trade area of central Asia
The first is the geographic vicinity between Xinjiang and five countries of central Asia. Xinjiang is near to central Asian countries in geographical region. In Xinjiang, the front line is 3500 kilometers. 1700 kilometers of it is adjacent to Kazakhstan, 1100 kilometers to Kyrgyzstan and 550 kilometers to Tajikistan. Although Xinjiang is not adjacent to Uzbekistan and Turkmenistan, it is near to them. Seven of ten frontiers of Xinjiang are adjacent to central Asian countries. By the end of 2002, China has opened up 15 ports to the neighboring countries. 11 of them are trade ports that open up to central Asian countries, which is the exclusive that other countries and regions don't have. In particular, with the link of the new Silk Road and the running of the second land bridge, Xinjiang's


Thinking on Establishing Free Trade Area of Central Asia

blocked and hard-reaching transportation are changed and roads to other countries are opened. This is convenient for Xinjiang to cooperate with other regions such as central Asian countries, the west and east Europe in economic and technical cooperation and in trade. Therefore, Xinjiang must become the important passage and material distributing center. The second is the national understanding of Xinjiang with five countries of central Asia. By the end of 2000, the population of Xinjiang is 19.25 million. The population consists of 47 nationalities. Among them, Han nationality is 39 percent, the minority is 61 percent. 13 of 47 nationalities such as Uygur, Han, Kazak, Hui and so on live in this area from generation to generation. 10 of 13 nationalities such as Kazak, Uzbek and Tajik live in central Asian countries. They share the common in living and nationality customs, religious believes and clothing with nationalities in central Asian countries. The minority nationality of Xinjiang and central Asian countries can understand each other. There are over 300 thousand people in central Asia and western Asian areas, who go abroad from Xinjiang. Many of them concern China's development and often contact with relatives in China. They often exchange each other and trust each other. The third is Xinjiang is a very important assemble region where China's minority nationality live. Many nationalities in Xinjiang are the same as that in central Asian countries such as Uygur, Kazak, Tajik, Uzbeki and Kyrgyz. Major nationalities' share the common in living customs, traditions, religious believes, languages and characters. Hence they are easy to approve, to understand, to communicate and to trust each other, which are the best privilege for them to cooperate in economy and trade. Since the second land bridge that is 10937 kilometers long from Lianyungang to Rotterdam runs, the old Silk Road has recovered and the transportation of goods and materials have become convenient, which make the trade cooperation easier. The forth is Xijiang's opening up to five countries of central Asia. China and five countries of central Asia carry out the same policy of opening up to the outside world. Under the guidance of the strategy of opening up in all respects of China, Xinjiang has formed the new economic structure that is along the bridge and depending on the bridge, introducing from abroad and cooperating at home, coming from east and going out of west, sloping down to the western areas. In order to develop economy and extricate from the difficulties, central Asian countries also desire to achieve the aim of economic development by introducing technologies and capitals and striving for economic aids. China's and central Asian countries' policies and strategies of opening up to the outside world lay a political foundation for economic cooperation. The fifth is the economic complement of Xinjiang with five countries of central Asia. The industrial structure of central Asian countries is irregular. The industries such as petrel chemistry, metallurgy, electric power, traffic transportation are developed but the light industries are less developed. Daily consumer goods such as spinnings and weavings, foods and home appliances are very short. While the industrial structure of Xinjiang is harmonious. The spinnings and weavings and foods in Xinjiang are more developed and have developed into major industries. Agriculture is in a harvest for several years. So agriculture goods are very plentiful. The differences between Xinjiang and central Asian countries have promoted the economic and technological cooperation. Therefore, from the mentioned above, that is the vicinity of geographic position, the understanding of nationality, the policy of opening up and the complement of economy, I think it feasible to establish free trade area of central Asia.

4. The developmental pattern of free trade area of central Asia
Drawing on the experiences of group development of regional economy in the world, we think the general

Thinking on Establishing Free Trade Area of Central Asia

strategic aim of establishing free trade area is perfect infrastructure, largerer scale, harmonious industrial structure and largerer central city. The developmental pattern of free trade area of central Asia should be carried out in different stages. It can be divided into three stages: The first stage is the loose economic cooperation. Every country in free trade further desires to strengthen the cooperation while trading at home or at the frontier. Establishing free trade area in frontier can attract economic resources such as manpower, capitals and materials to cooperate in the international market. Some policies of the developmental region can be coordinated to some degree and economic cooperation can be developed fundamentally. The cooperative pattern that develops economy without reaching an agreement is called loose cooperation. In this stage, every country need to have a trade relationship based on the frontier trade and have a sound trade net to enlarge the trade scale and decrease the obstacle of commodity circulation. Every country should also need to build important infrastructure, especially to select and construct central cities in free trade area and to build traffic road that links central Asian region to neighboring developed cities and to central cities. The second stage is the semi-compacted economic cooperation. In addition to carry out the favored policies that are decided in loose economic cooperation, every country in the area should consult widely in policy, sign bilateral or trilateral agreements, reduce tariffs, cancel the trade quotas, cooperate closely in traffic transportation, resources, industrial policies, communications, traveling, commerces and trades, tariffs and develop favored trades each other. At this stage, the most important task is to adjust the industrial structure in all the trade area and build important enterprises. According to industrial privileges and the need of industrial structure, construct new enterprises and reform old enterprises, including constructing and reforming the first, the second and the third industries. In particular, constructing the enterprises of second and third industries are the important part of the strategy because the enterprises' foundation of the second and the third are not sound, some enterprises have no foundation. The third stage is the free trade stage. Free trade stage is to cooperate further based on the semicompacted corporation. The premise of free trade is to guarantee the sovereignty. Then every country in the area cooperate closely about all the regional developments, signing free trade and tariffs alliance agreements, or building more higher regional economic groups such as common market, economic alliance and so on. Furthermore, a president committee is formed to execute the agreement, to deal with the important questions on home trades, technical corporations, labor corporations, capital flow, resource allocation and tariffs. Generally speaking, central Asian countries have enjoyed the favorable conditions given by the countries participating in the cooperation because the superegional economic group has been formed. In particular, Xinjiang has made great progress in trading at frontiers and in economic and technical cooperation. And Xinjiang has established economic cooperation region at frontiers such as Yining city, Bele city and Yecheng city. At the same time, China has enlarged trades from central Asian countries to east Europe, west Europe and far east areas while central Asian area have expanded its trades from Xinjiang to west-China, mainland and coastal areas of China. Now there are 20 provinces participating in corporations with central Asian areas. However, there are no agreements in essence between China and central Asian countries. The cooperation between China and central Asian countries is in a transition stage from loose cooperation to semicompacted cooperation. As an imperfect market system of China and central Asian countries, the government and national organization should strengthen the interference and guidance to domestic and local enterprises, corporations, and individual trades. They also should offer chances of cooperation and convenience for domestic and local business organizations. As it a

Thinking on Establishing Free Trade Area of Central Asia

foundation, every country in the area should establish arbitrating organizations cooperatively to deal with trade disputes, to perfect legislations, and to attack all kinds of commercial swindles to reach common understanding in the end. Therefore, the establishing of free trade area of central Asia is not only good to China and central Asian countries, but also good to economic development of Asia and to the formation of synthesis entity of economic region of Europe-Asia continent center. As a result of synthesis, the economic development of central Asia will accelerate economic development of free trade area of central Asia and neighboring areas and promote economic combinations and mixture growths between free trade area of central Asia and neighboring areas. In the end, free trade area of central Asia will develop into a synthesis entity of regional economy.

5. The safe questions on establishing free trade area in central Asia
21 century is an age that world's new situation is taking place of the old one. World's situation is confronting severe challenge. Every country in the world pays more attention to its safety than before. So the international environment that central Asia faces is so severe. Although some political, economic and social foundations, intrinsic necessity and real feasibility lay a foundation for the establishment of free trade area of central Asia, there are some specific questions as follows. In regarding to political safety, central Asia is in the central of Europe-Asian continent, so the position is very important no matter in history or at present. Furthermore it is easy to be affected by the change of international relationships. Firstly, as developing countries, central Asia countries are troubled with the economic integration of the world; Secondly, with large countries competing each other in the world, central Asian area will be a place that large countries contend for the important strategic position and plentiful resources. Thirdly, central Asian area is a multinational region, so the national relationships are so complex. Recently, three bad phenomena such as the national splittism, religious extremism and international terrorism are rising, which have become a threat to the safety. At the same time, the permeation and impact of external force are also increasing. And there are some interest conflicts among central Asian countries, between central Asian countries and Russia, between central Asian countries and other countries, which are not good to central Asian area's stability. In regard to economic safety, under the background of economic integration, world economy develops rapidly and the interdependence of every country increase further. Though central Asian countries have plentiful resources and great potentiality in development, the reform has not succeeded at present and economy develops slowly. Furthermore, as the foreign debt increasing, the technology falling behind, the people's living standards being not high, the society is unstable. Meanwhile, world's economy is not so optimistic. Within ten years, the situation of five countries of central Asia will not change, probably it will worsen. Although there are some economic complement between Xinjiang and central Asian countries, their economy of is still undeveloped with imperfect law mechanisms and the worried credits. The economic undevelopment will be an impact on the political stability of central Asian areas. In regarding to the culture, western large countries quicken to permeate central Asian countries by the ideal and ideology of western value. However, with the economic development and increasing power of China and Russia, the safe situation of central Asian area will become better. The reason is that American, Russia, China and other countries all desire central Asian area to be stable in their own interests. At the same time, with the help of international society, central Asian countries strike intentional crime severely. Furthermore, the combination of China, American and Russia is also good to settle regional disputes peacefully.

Thinking on Establishing Free Trade Area of Central Asia

6. The suggestions of establishing central Asia free trade area
In order to settle existing disputes on establishing central Asia free trade area, we can take measures from such aspects as follows: First, desire China's government to pay more attention to the establishment of free trade area of central Asia and cooperate actively at home and abroad. Next, increase investments in western area, especially in Xinjiang. Accelerate innovation in science and technology, speed up the introduction and cultivation of qualified personnel and give the privilege of local resources play by knowledge economy to strengthen growth motive and international competition of local regional economy. References: 1.Dunquan Bao, “The Cooperation Research of Technical Economy between China and Fives Countries in Central Asia--Take Xinjiang for Example”, the collection of World Economy, 1995(5). 2.Lunzhi He, Abulikemu, “The Economic Development in Xinjiang and the Feasibility of Breaking out the Market in Central Asia”, The Developmental Research, 1996(5). 3.Lunzhi He, Qijin Tang, The Statues and the Developmental Trend of Economic Cooperation in Central Asia”, The papers Collection of the Third International Trade Forum, Macao Publishing House, 1998. (Edited by Amy Wang)


Shared By: