Zhang Yuyan: Countries should take practical actions to prevent the shrinking trend of global openness
In recent years, the international trade and investment landscape has undergone profound adjustments, with global open policies becoming significantly tighter. In contrast, China's commitment to opening up has only grown stronger, as evidenced by the recently held China International Import Expo. To explore the factors affecting global open policies and strategies to promote the growth of global trade and investment, a reporter from China Economic Times conducted an exclusive interview with Zhang Yuyan, a member of the Chinese Academy of Social Sciences, the director of the Institute of World Economics and Politics, and the director of the National Global Strategy Think Tank.
Zhang Yuyan noted that amid the continued weakness of the global economy, trade and investment openness face greater downward pressure, and the overall trend of global openness in the future is not optimistic.
Five Major Factors Influencing World Open Policy
China Economic Times: In recent years, the trend of "anti-globalization" has persisted, expanding from trade and investment into the fields of science, technology, and even cultural exchanges. What factors are hindering global openness?
Zhang Yuyan: The rise of "anti-globalization" does not imply that economic globalization no longer benefits all countries. Instead, globalization has exacerbated domestic income distribution issues, preventing some people from enjoying the dividends of the global division of labor. Support for openness and opposition to it has fluctuated, thus affecting the openness policies of governments worldwide. According to the Heckscher-Ohlin model, international trade improves the overall welfare of all participating countries, but owners of scarce factors suffer, and industries using these factors intensively shrink. The new trade theory suggests that intra-industry trade can maximize economies of scale and benefit all participating countries, but it also leads to the expansion of some industries and the elimination of others. The impact of economic globalization on global open policies requires a balanced consideration of fairness and efficiency. While implementing more active opening-up policies and promoting economic globalization, appropriate measures must be taken to mitigate related negative effects.
In recent years, changes in global open policies have largely depended on developed economies, though the influence of developing economies is also rising. Some developed economies have raised tariff levels and adopted various non-tariff measures, tightening open policies. Conversely, developing economies have lowered tariff levels through independent initiatives and signed more inclusive trade and investment agreements, alleviating some of the negative effects of the tightening of global open policies.
Technological progress has influenced the entire process of global open policy formulation. The latest scientific and technological developments, particularly in information technology, have reduced resistance to the flow of goods, services, and information, promoting global openness and policy adjustments. Technological innovation will undoubtedly support further global openness.
The multilateral trading system remains the main channel for world trade liberalization and facilitation. China has proposed relevant position papers and recommendation documents on WTO reform, participated in creating the "Multi-Party Interim Appeal Arbitration Arrangement," led negotiations for the investment facilitation agreement, and actively promoted digital economic cooperation. However, the WTO faces issues such as the principle of consensus and diverse interest demands that complicate multilateral negotiations. The paralysis of the Appellate Body hinders the dispute settlement mechanism's ability to restrain unilateral protectionist measures, putting pressure on global openness that must be addressed.
The international economic situation is complex and volatile, with frequent "black swan" and "grey rhinoceros" events impacting countries' open policies. For instance, the bankruptcy of Silicon Valley Bank in the U.S. caused financial sector turmoil, and countries like India implemented grain export bans or restrictions. These short-term impacts negatively affect global openness.
Promoting Steady Progress in Global Open Policies
China Economic Times: Despite the tightening of global open policies, China has consistently been a major proponent of global openness. What measures should countries take to promote global openness?
Zhang Yuyan: First, trade policies in key areas should be opened up. This involves enhancing international cooperation to improve trade flexibility. Countries should take practical measures to stabilize and smooth supply chains, improve cross-border trade facilitation, especially for critical medical supplies, food, and consumer goods, support the multilateral trading system, and strengthen international consultation and cooperation in key trade areas to enhance global industrial and supply chain resilience and security. Additionally, restrictive trade measures should be effectively regulated and reduced. The surge in non-tariff measures is a major factor in the pressure to open up. It's necessary to review trade policies on restrictive measures exceeding reasonable limits, assess their negative effects, enhance transparency and standardization of trade-restrictive measures like export controls, curb protectionism, and maintain a favorable trading environment. Furthermore, trade policies should address new issues such as digital and green developments. With increasing attention on innovative development, digital economy, intelligent manufacturing, and green and low carbon, trade policies should foster communication and coordination, reduce confrontation in new areas like cross-border e-commerce and service trade, and support the development of global digital trade and green trade transformation.
Secondly, reasonable adjustments to investment policies should be promoted. The investment security review system should be used appropriately to standardize reviews, scientifically define and safeguard national security, and avoid generalizing security or politicizing economic issues, that disrupt rational transnational business operations. Accelerating the reform and adjustment of investment agreements is also crucial. With major changes in international investment rules, the successful text negotiations for the WTO's "Investment Facilitation Agreement" mark a significant step towards the first multilateral investment agreement. Bilateral agreements also incorporate high-level investment liberalization and facilitation clauses, balancing host country regulatory rights and investor protection. Adapting to global tax reform is essential. The international tax framework will be adjusted due to tax base erosion and profit shifting, affecting cross-border investments. Countries should assess the impact on existing investments, adjust policies to attract investments, guide multinational companies to adapt existing tax treaties and enhance their ability to respond to tax-related risks.
Lastly, short-term adverse factors should be eliminated. It's important to actively respond to financial risks, geopolitical tensions, public health security issues, and other factors affecting global openness. Strengthening policy research and judgment, effectively preventing and responding to emergencies, and adhering to multilateral frameworks are necessary. International organizations like the United Nations and the WTO play key roles in global governance, and their roles should be fully utilized. Increasing transparency and international coordination of open policies through dialogue and consultation is essential to jointly address the risks and challenges of globalization.
Source: China Economic Times
