Bilateral slam dunk
Mei Xinyu

THE three years of hard work on negotiating a free trade agreement finally paid off for China and New Zealand. Chinese Commerce Minister Chen Deming and Trade Minister of New Zealand Phil Goff formally signed a free trade agreement (FTA) on April 7 in Beijing. It was the first FTA that the Chinese Government signed with a developed country. New Zealand Prime Minister Helen Elizabeth Clark headed a delegation of political and economic leaders and witnessed the remarkable moment in the trade and economic development history of China and New Zealand, together with her Chinese hosts.
The two countries, which established diplomatic relations in 1972, seldom have had disputes. Therefore, their trade and economic cooperation has developed very stably, while their mutual political trust and mutual economic benefits have increased smoothly. New Zealand also was the first country that completed World Trade Organization (WTO) entry negotiations with China. In November 2004, Chinese President Hu Jintao and New Zealand Prime Minister Clark jointly announced that the two countries were going to start FTA negotiations, making New Zealand the first developed country to begin such talks with China. New Zealand then became the first developed country to acknowledge China’s market economy.
The two sides held 15 rounds of talks during the past three years. There was no great dissension between them, because they resolved all their problems on the basis of equality, mutual trust and negotiation. The leaders of two sides also expressed their strong wishes to advance bilateral political and economic ties through talks. In April 2006, Chinese Premier Wen Jiabao visited New Zealand and agreed with Clark on the goal of reaching an FTA within one to two years. They agreed it should be an overall high quality and balanced agreement that would be acceptable for both sides. In December 2007, China and New Zealand finally reached a consensus on all issues related to the agreement. It is no doubt that the FTA will bring great economic benefits to both sides. Neither country will need to increase their expenditures to adjust their economic and social structures, because they have complementary economies. According to statistics from the China Customs, their bilateral trade volume was $3.698 billion in 2007, an increase of 26 percent over 2006. China’s exports to New Zealand last year totaled $2.16 billion, a 33.4-percent increase over the previous year, while its imports were $1.538 billion, up 17 percent from 2006. China had a trade surplus of $622 million with New Zealand in 2007.
During the first two months of 2008, the bilateral trade volume reached $631 million, growing 20.4 percent over the same period in 2007. During those two months, China exported $370 million, an increase of 17.9 percent, and imported $261 million, an increase of 24.2 percent. New Zealand Government statistics indicate the bilateral trade volume reached 7.75 billion New Zealand dollars ($5.59 billion) last year, for an increase of 10.4 percent over 2006. The amount was $1.9 billion, or 51 percent, more than the figure calculated by the Chinese side.
China mainly exports electric machinery and equipment, mechanical equipment, clothing, furniture, toys and iron and steel products to New Zealand. The latter exports dairy products, lumber, paper pulp and other paper products and wools to the former. The New Zealand Government predicted that the free trade zone between the two countries would decrease the trade surplus on the Chinese side. Moreover, New Zealand’s export volume will increase 39 percent within the next 20 years, while China’s exports to New Zealand are expected to increase 11 percent. The New Zealand Herald said that after the FTA was implemented, New Zealand’s trade volume with China would grow to $225 million, while saving $120 million in tariffs. Chinese enterprises generally will enjoy more beneficial trade policies and the country’s citizens will receive better treatment in New Zealand, when they export to New Zealand or invest in the country. Meanwhile, the costs will be greatly lowered.
The direct effects of the FTA will not be the same for the two sides. According to the FTA, New Zealand will cancel all tariffs on products imported from China before January 1, 2016, while China will fulfill the same commitment for New Zealand before January 1, 2019. In services, New Zealand made commitments in 16 areas in four sectors-commerce, architecture, education and environment-which are greater than those it made to the WTO. China made the same commitments in 15 areas in four sectors-commerce, environment, sports and entertainment, and transportation. The two countries also promised each other in the FTA that they would offer job opportunities for the other. The agreement also contains stipulations on promoting and protecting investment through an efficient established mechanism for resolving investment-related disputes. The FTA also makes institutional arrangements on bilateral cooperation in the areas of customs, quarantine and inspection and intellectual property. China is currently New Zealand’s third biggest trade partner, as well as its fourth biggest importer and second biggest exporter. China’s trade volume with New Zealand accounted for only 0.17 percent of its total foreign trade volume in 2007. Therefore, the FTA will bring China more exemplary effects in its relations with other trade partners than economic benefits.
The first exemplary effect is that the FTA will help make current international and multi-lateral trade rules advantageous for China’s proper interests. There is a regulation in China’s WTO entry protocol that lets other WTO members maintain their rights not to treat China as a market economy for 15 years. Another regulation says that other members can take special protective measures for products imported from China for 12 years. These regulations bring big risks for Chinese enterprises trying to defend their interests against foreign countries’ anti-dumpling moves. For China, the best way to eliminate these risks is to invalidate these regulations through bilateral or regional trade agreements. The majority of WTO members that have acknowledged China’s market economy are developing countries. But exporting to developed countries is an important part of China’s foreign trade, which makes the latter significant in the trade and economic arenas. Under such circumstances, New Zealand was the first developed country that acknowledged China’s market economic position. To China, this means more than the amount of its bilateral trade volume growth.
A second exemplary effect is that the FTA can encourage other trade partners, especially developed ones, to treat trade and economic issues with China more rationally by strengthening cooperation instead of creating trade disputes. For example, it will help advance Australia’s current FTA talks with China. Australia and New Zealand have an extremely close relationship. As early as the mid-1960s, the two countries started discussions about setting up a bilateral free trade zone and signed an elementary FTA. In the early 1980s, they signed and implemented an agreement to strengthen their economic ties. Now their FTA is one of the most wide-ranging ones that have created the most practical benefits. Now that New Zealand has signed an FTA with China, China and Australia will accelerate their negotiations on signing a Sino-Australian FTA. It will bring both sides even bigger economic benefits than the Sino-New Zealand FTA, because Australia’s gross domestic product (GDP) of $746 billion in 2007 was seven times greater than New Zealand’s GDP of $102 billion. The Sino-Australian trade volume reached $43.846 billion in 2007, which was 11.9 times more than the Sino-New Zealand trade volume of $3.698 billion.
New Zealand actually looks forward to the signing of a FTA between China and Australia. Goff said that if such an FTA were signed, it would be advantageous to New Zealand, because New Zealand and Australia have their own trade agreement. Regional economic integrity has played an important role in the world economy since the 1980s. Trade volumes inside regional economic groups currently account for more than half of the global trade volume. The trend for regional economic integrity in the world includes almost all regional economic communities. Every country has to take measures to cope with the trend to avoid being marginalized. China, as a big exporter, must improve its position in its negotiations of multilateral trade systems by signing FTAs and creating advantageous international trade rules, so as to protect its proper interests.

(The Daily Mail-Beijing Review Articles Exchange Item)
 

The real debate we need
Henry A Kissinger

THE long-predicted national debate about national security policy has yet to occur. Essentially tactical issues have overwhelmed the most important challenge a new administration will confront: how to distil a new international order from three simultaneous revolutions occurring around the globe. These are (a) the transformation of the traditional state system of Europe; (b) the radical Islamist challenge to historic notions of sovereignty; and (c) the drift of the centre of gravity of international affairs from the Atlantic to the Pacific and Indian Oceans. Conventional wisdom holds that disenchantment with President Bush’s alleged unilateralism is at the heart of European-American disagreements. But it will become apparent soon after the change of administrations that the principal difference between the two sides of the Atlantic is that America is still a traditional nation-state whose people respond to calls for sacrifices on behalf of a much wider definition of the national interest than Europe’s.
The nations of Europe, having been drained by two World Wars, have agreed to transfer significant aspects of their sovereignties to the European Union. Political loyalties associated with the nation-state have proved not to be automatically transferable, however. Europe is in a transition between its past, which it is seeking to overcome, and a future that it has not yet reached. In the process, the nature of the European state has been transformed. With the nation no longer defining itself by a distinct future and with the cohesion of the European Union as yet untested, the capacity of most European governments to ask their people for sacrifices has diminished dramatically.
The disagreement over the use of NATO forces in Afghanistan is a case in point. In the aftermath of September 11, the North Atlantic Council, acting without any request by the United States, invoked Article 5 of the NATO Treaty calling for mutual assistance. But when NATO set about to assume military responsibilities, domestic constraints obliged many allies to limit the number of troops and to constrict the missions for which lives could be risked. As a result, the Atlantic Alliance is in the process of evolving a two-tiered system — an alliance la carte whose capability for common action does not match its general obligations. Over time, one of two adaptations must take place: either a redefinition of the general obligations or a formal elaboration of a two-tiered system in which political obligations and military capabilities are harmonised. This might be accomplished by assigning out-of-area projects to a European reaction force, which would then create an ad hoc alliance of the willing. While the traditional role of the state in Europe is diminished by the choice of its governments, the declining role of the state in the Middle East is inherent in the way they were founded. The successor states of the Ottoman Empire were established by the victorious powers at the end of the First World War. Unlike the European states, their borders did not reflect ethnic principles or linguistic distinctiveness but the balances achieved by the European powers in their contests outside the region. Today it is radical Islam that threatens the already brittle state structure via a fundamentalist interpretation of the Koran as the basis of a universal political organisation. Radical Islam rejects claims to national sovereignty based on secular state models, and its reach extends to wherever significant populations profess the Muslim faith. Since neither the international system nor the internal structure of existing states has legitimacy in Islamist eyes, its ideology leaves little room for Western notions of negotiation or of equilibrium in a region of vital interest to the security and well-being of the industrial states. That struggle is endemic; we do not have the option of withdrawal from it. We can retreat from any one place like Iraq but only to be obliged to resist from new positions, probably more disadvantageously. Even advocates of unilateral withdrawal speak of retaining residual forces to prevent a resurgence of Al Qaeda or radicalism.
These transformations take place against the backdrop of a third trend, a shift in the centre of gravity of international affairs from the Atlantic to the Pacific and Indian Oceans. Paradoxically, this redistribution of power is to a part of the world where the nation still possesses the characteristics of traditional European states. The major states of Asia — China, Japan, India and, in time, possibly Indonesia — view each other the way participants in the European balance of power did, as inherent competitors even when they occasionally participate in cooperative ventures. In the past, such shifts in the structure of power generally led to war, as happened in the case of the emergence of Germany in the late 19th century. Today the rise of China is assigned that role in much alarmist commentary. True, the Sino-American relationship will inevitably contain classical geopolitical and competitive elements. These must not be neglected. But there are countervailing elements. Economic and financial globalisation, environmental and energy imperatives, and the destructive power of modern weapons impose a major effort at global cooperation — especially between the United States and China. An adversarial relationship would leave both countries in the position of Europe after the two World Wars through self-destructive conflict with each other, while other societies achieved the pre-eminence they sought.
No previous generation has had to deal with different revolutions occurring simultaneously in separate parts of the world. The quest for a single, all-inclusive remedy is chimerical. In Europe, the civil society is congruent with the political structure of states but not — at least yet — with the political structure of the European Union. In the Middle East, civil society is being shaped by transnational forces at odds with the internal structure of many states. In the Atlantic area, the challenge is how to evolve institutions that bring the willingness to sacrifice for the future into balance with the requirements of international order. In the Islamic world, the jihadists are prepared to sacrifice all notions of civil society to the pursuit of an apocalyptic utopia. In Asia, in terms of classical diplomacy, two kinds of adjustments will define 21st-century diplomacy: the relationship between the great Asian powers, China, India, Japan and possibly Indonesia, and how America and China deal with each other. In a world in which the sole superpower is a proponent of the prerogatives of the traditional nation-state, where Europe is stuck in a halfway status, where the Middle East does not fit the nation-state model and faces a religiously motivated revolution, and where the nation-states of South and East Asia still practice the balance of power, what is the nature of the international order that can accommodate these different perspectives? Are existing international organisations adequate for this purpose? If not, which changes would be desirable? What goals can America set realistically for itself and the world community? Can we make the transformation of major countries a condition for reliable progress, or need we concentrate on a less crusading purpose? What objectives must be sought in concert, and what are the extreme circumstances that would justify unilateral action? What is the style of leadership most likely to achieve these aims? This is the kind of debate we need, not slogans driven by focus groups for daily headlines.

—Khaleej Times




Baglihar rigmarole
Deeba Jaaved

INDIA has decided to build three more dams on the River Chenab within the next four years. To achieve this purpose, a Chenab Valley Power Projects company has been established. All the three dams will be constructed in Doda district of occupied Kashmir. The dams— Kiru (600 MW), Pakal Dul (1,000 MW) and Karwa (520 MW) — are to be constructed in the Doda district. The three projects, with cumulative installed capacity of around 2,120 MW, will cost Rs 12,720 crore. India claims that the projects would be immensely beneficial for Kashmiris. But, past projects belie India’s claim. For instance, the bulk of power, generated by Salal, Dul Husti and Uri dams was transferred to Rajasthan, Punjab, Haryana and Delhi. The net benefit to disputed state was only just about 12.5 percent power, supplied to the state, as royalty. India constructed the three dams at total cost of Rs 9,454 crore. However, the profit earned during the previous year, alone, was Rs 300 crore.
Pakal Dul project envisages construction of a reservoir on the Marusudar River, the main right bank tributary of the Chenab River, in the Kishtwar tehsil (Doda district). The reservoir would have rock-filed 167 metre-high flanks at Drangdhuran village, coupled with an underground powerhouse. Obviously, the reservoir would choke downhill water flow to Pakistan. Such an eventuality would be a stark violation of the Indus Water Basin Water Treaty. The treaty has remained intact despite wars between the two neighbours. India’s current initiatives reflect that she has no qualms about violating the letter and spirit of the treaty.
India’s intransigence appears to have been actuated by the Baglihar `award’. The `neutral’ expert did not stall the construction of the submerged spillway. His plea was that the there was no provision in the Indus Water Treaty to stop further construction of the spillway, under supervision of Israeli engineers. India intends to build not only three additional dams on River Chenab, but also 48 more dams on rivers originating in Kashmir. India believes that the Baglihar award is a rebuke to Pakistan’s point of view. Besides, under Article 81 of the Hague Convention 1 of 1907, awards are definitive and without appeal. Furthermore, there is no international mechanism to declare an award null and void.
Pakistan’s view is that it acclaims the award as a `great victory’. However, it has reservations concerning the `neutral’ expert’s opinion in favour of the spillway. Pakistan has made it clear that it reserves `the right to take up the spillway issue anytime at an appropriate forum’. Aside from India’s euphoria, Pakistan does have a sound case to challenge the `award’ on several grounds, subject to World Bank’s nod. Pakistan could point out that the expert’s opinion is not an award. The textual construction of the IWT by the neutral expert is at variance with the object and purpose of the treaty. The Vienna Convention directs that a treaty should not be interpreted stricto sensuo on the basis of the text. The underlying object and purpose, also, have to be kept in view. Pakistan should reject the whole `award’ as a nullity. The World Court accepted the case (1960), concerning the Arbitral Award made by the King of Spain. The Court observed that, in certain circumstances, an award could be so vitiated as to amount to a nullity. India’s euphoria would peter out, if Pakistani lawyers are able to prove that the `neutral’ expert committed exces de pouvoir and made an essential error of judgment.