Research and negotiations on China-EU free trade agreement needs to be accelerated to tap potential demand

China unveiled proposal for the 13th Five-Year Plan (2016-2020) after the Fifth Plenum of the 18th Communist Party of China Central Committee, held in Beijing from Oct 26 to 29, and said the country needs to play an active role in global economic governance.

During the 12th Five-Year Plan (2011-15), China incorporated this strategy into its long-term development plan and, in recent years, the country has endeavored to contribute more to global affairs.

For example, China has been active in improving the multilateral trading system, and in establishing bilateral and multilateral free trade agreements; in participating in the reform of the International Monetary Fund and the G20; in committing to emissions reduction; and especially in promoting the Belt and Road Initiative.

Compared with the 12th plan, the 13th has an even clearer focus on global economic governance.

In doing so, China needs to speed up the process of setting up free trade agreements. Among China's top three trade partners - the European Union, the United States and the Association of Southeast Asian Nations - the EU, as a united economy, is China's biggest trade partner. The bilateral trade volume between China and the EU accounts for about 14 percent of China's total foreign trade, followed by the US and ASEAN, which are 12 percent and 11 percent respectively.

Free trade and investment cooperation with the EU, the US and ASEAN remain crucial for China's global trade and investment process.

However, China has only set up a free trade area with ASEAN. There is still no specific timetable for a free trade agreement between China and the US or the EU, although efforts can be seen, as negotiations on bilateral investment treaties are at different stages.

The China Institute for Reform and Development has set up a taskforce to explore the feasibility of speeding up progress on a China-EU free trade agreement. We think free trade between China and the EU has great potential and that there is enormous space to develop.

To give impetus to the China-EU free trade agreement negotiation, it is worth considering these points.

First, the China-EU Bilateral Investment Treaty and the China-EU Free Trade Agreement should be handled at the same time. The two negotiations should go hand in hand when the right time arises so they emerge as one high-quality free trade agreement, consisting of agreements on customs, services trade, goods trade, investment, intellectual property and environmental standards.

Second, the service trade barrier should be reduced. We should focus on the service trade barrier in subsidy reduction, government procurement, technology licensing and environmental standards. We should establish a mechanism for China and the EU to recognize each other's product certification and producing systems. In doing so we can speed up China and the EU's FTA negotiations, and synchronize China's huge market needs in services with the EU's rich human capital, producing capacity and advanced technology in the services sector.

Third, the opening-up process of two-way markets between China and the EU should be accelerated. China should continue working on the transformation of its government supervision system. It should shorten its negative list and make sure that a unified market access negative list system is applied nationwide by 2018.

China should also loosen its market access to healthcare, innovation, pension services, vocational education and other service sectors to EU companies. The EU should also loosen its export controls on China in electronic technology, aviation, information and communication technology, life sciences and biotechnology, and energy.

Fourth, we should forge cooperation between the Renminbi and the Euro. European financial institutes should be encouraged to use cross-border trade settlement in Yuan. We should build a two-way investment channel between China and the EU and complete our market infrastructure to facilitate Chinese and European companies to invest, list and issue bond in each other's markets.

Fifth, we should launch China-EU trade zones and industrial parks. We should take full advantage of the established free trade zones in the cities of Shanghai, Tianjin and Guangzhou as well as Fujian province, and open-up experimentation in the services sector.

On that basis we could explore more possibilities regarding the acceleration of China-EU trade liberalization and related reform. For instance, we could set up a China-EU deep cooperation park where policies and systems of the China-EU free trade agreement can be tested. This experimentation will also facilitate the synchronization of rules and standards for investment and trade between China and the EU.

Sixth, joint research on the feasibility of a China-EU FTA between Chinese and EU think tanks should be supported. We suggest that governments from both sides encourage think tanks to propose joint research.

Currently, the China Institute for Reform and Development is sparing no effort on this topic and initial research results can be expected early next year.

The author is vice-president of the China Institute for Reform and Development, a think tank in South China's Hainan province.