Source:
https://scmp.com/article/433934/concerted-chaos

Concerted chaos

If there is one thing in which Hong Kong excels, it is in the show business of business. For as long as anyone remembers, the city has been known as a bastion of free trade - despite ample evidence that its economy has been managed to benefit a handful of home-grown conglomerates. And if it often displays anxiety relative to such mainland rivals as Shanghai and even Shenzhen, it retains its iconic status.

My favourite phrase from the lexicon of international trade is 'concerted voluntary unilateral liberalisation', invented by Hong Kong's permanent secretary for financial services and the treasury, Tony Miller, at a meeting of senior officials of the Asia-Pacific Economic Co-operation forum in early 1995. What this masterful bit of verbal fluff actually means is open to interpretation, but it was a great contribution to the show business of business. In the context of Apec, it has allowed the developing country membership (as well as advanced but protectionist countries, such as Japan and the United States) to have their liberalisation 'cake' and eat it too, associating themselves with the rhetoric of free trade while remaining commitment-free.

We now see Beijing pursuing its own version of trade show business through free-trade agreements with regional trading partners and the Closer Economic Partnership Arrangement (Cepa) with Hong Kong. Last Sunday, Premier Wen Jiabao delivered a classic endorsement for regional economic co-operation (read, 'free-trade agreements') by declaring at the Boao Forum for Asia that China's Asia policy was a 'win-win' proposition. Jemal-ud-din Kassum, the World Bank's regional vice-president for East Asia, helpfully pointed out that China's combined trade deficit with South Korea, Singapore and Taiwan might come close to offsetting its trade surplus with the US this year, estimated at US$125 billion.

China is taking its cue from the US, which has used free-trade agreements in the post-September 11 environment to reward allies and punish those indifferent to its war on terrorism. Washington can hardly object if China pulls together deals under the rubric of free trade, whether or not they advance a global trade regime which the US created, but now regards as second rung. Nor can China be blamed for taking over leadership of an Asian flotilla of trade organisations when the WTO is adrift.

Nonetheless, it is important to separate form from substance in international trade, especially when it comes to free-trade agreements. These violate most of the basic assumptions of global trade rules based on consensus and consent. Nobody has ever discovered any correlation between free-trade agreements and economic growth - both Canada and Mexico suffered near-economic collapse after they signed agreements with the US in the late 1980s and early 1990s.

Free-trade agreements do come in handy as a mantle for micro-deals across borders, for instance by preventing such destructive practices as needless duplication of industries in multiple tiny markets (cars are the best example). The promoters of Cepa are able to point to advantages for specific industries. But free-trade agreements are at best examples of managed trade, and interrupt the evolution and enforcement of a rules-based global trade regime.

The risk of putting semantics before substance is obvious. China has been careful to emphasise its faith in the World Trade Organisation, along with its new enthusiasm for free-trade agreements. But China's promise to its neighbours, let alone the world, needs to be based on more than endless growth. It needs to assert the primacy of rules that apply equally to all. Played out globally through the WTO, the United Nations and other multilateral institutions, it can take the concept of free trade and free markets beyond rhetoric to reality.

Edith Terry is the editor of the Post's opinion pages