Linking Global Trade and Human Rights - MyAssignmenthelp.com

Question: Discuss about the Linking Global Trade and Human Rights. Answer: Introduction: The provincial and central government of China in recent years have created special zones that have offered several benefits to the countries who are doing business poor operating in China. Such areas include free trade zone, special economic zones and trade development zones. One of the factors that can be considered by Australian sector for doing business in China is the benefits offered by different economic zones and free trade zone. Australian business is required to check with their state trade office for seeing that it has any relationship with special trade zone for setting up operations in China. Free economic zone has been opened by the city of China. Free trade zone of China has created business opportunities for Australian business[1]. One of the most important international business hubs that is Shanghai is recent development. The Shanghai free trade zone was launched on 29th September 2013. Establishment of Chinas national exhibition and trading centre is one of the first initiative of special free trade zone of china. Opportunities will be created for Australian business due to economic reforms and significant opportunities created by national exhibition and trading centre. For the private foreign investments, six service sectors have been opened up under the free trade zone. These sectors involve shipping services, financial services, business services, cultural services, social services and professional services [2]. It is indicative of the fact that Chinese government has signalled unprecedented level of economic liberalization. An innovative approach for promoting the exports of Australian country to China is represented by Australian national exhibition and trading centre. The fast growing Chinese market can be accessed by Australian business without any complex procedures involved in registration o f company in China [3]. China Australia free trade agreement: China has ratified and initiated implementing free trade agreements with Australia in year 2015 as it is the largest trading partner. This free trade agreement will help in encouraging international investment and trade by relaxing regulator barriers on foreign investments, eliminating and reducing tariffs by lowering trade barriers. Australia will face increased export competition in domestic markets by allowing free flow of cheaper goods across trade barriers. Investment in Australia by private Chinese investors will be stimulated to $ 1094 million due to increase in threshold in non-sensitive sectors by foreign investment review board. Investment and trade will be boosted between China and Australia as per the agreement. As per the agreement, tariff is eliminated on the vast majority of goods between the trading partners. Authorities of China has remained cautious about Trans pacific partnership and there will not be immediate negative impact on trade and investment due to implementation of agreement. Second largest source of foreign investment for Australia in year 2014 is China with the total value of investment stock amounts to AUD 64.5 billion [4]. ChAFTA is expected to stimulate trade flows between China and Australia will witness increase investment by China. Chinese companies will further incentivise to make investment in China due to lower cost of exports brought by tariffs reduction. For securing the supply of high quality of products, Australia will have investments from china. This will assist Australian companies to tap into evolving trend of Chinese consumption. Prior to the agreement, Chinese market was accessed by Australian business for increasing the processing capacity and agricultural production. There has been increase in investment value that is an encouraging factor for Chinese companies. Real estate of Australia has been witnessing increasing investment from the Chinese companies in addition to consumer related sectors. Investment facilitation arrangement made under ChAFTA under which Chinese workers will be entering Australia in temporary basis for participating in infrastructure projects of Chinese companies. Furthermore, tariffs on all types of pharmaceutical products will be removed. Overseas investment has been stepp ed into by Chinese companies in healthcare sector of Australia. Australian market access by Chinese companies will help in accessing technology, high quality trends and expertise[5]. This would help in satisfying the growing demand of Chinese market. The investment targets by Chinese companies in Australia under the free trade agreement would be mainly in the sector of financial services, computer and electronics, food, agribusiness, textiles, healthcare and transportation. A range of commitment has been agreed by china under ChAFTA that would provide assistance to service providers in Australia for establishing their commercial presence in territories of China. Some of the sectors includes sector of shipping, health aged care, architecture, mining and legal services, urban planning, fund management sectors, insurance and banking [6]. A clause of most favoured nation is involved in agreement that will help in protecting the competitive position of Australia provided the condition that if beneficial treatment is extended by China to their trade partners. Under ChAFTA, investors in Australia are provided with the opportunities of establishing wholly foreign owned entities. 13th five year plan provides the Australian investors with further liberalization opportunities. Due to increase in import competition, the merger clearance rates in Australia is likely to have a favourable impact. Further growth in import competition in areas such as manufacturing, electronics and household products, is likely to be supported by elimination and reduction of tariffs under ChAFTA. Australian companies can source cheaper supply from China with this agreement. Import competition effectiveness can be softened by the applications of anti-dumping policies and using standards of Australia to impose additional trade barriers on importing of goods. Increasingly global nature of competition can provide with the remote side effect of ChAFTA as it seeks that Australian companies intend to merge for creating efficiencies and competing effectively with counter parts [7]. The international competitiveness can be related under the provisions of formal merger authorization. It will help Australia in becoming more exposed to export market and import competition and seeking and el iminating trade barriers. Five year plan of China: The economic development of China is achieved through a plan of five years in the most recent year from March 2016 to March 2021. Realising of national and economic development plan in form of the five year plan has outlined several targets and economic policies for driving development of industry inn China by year 2020. The main focus of plan is continued efforts in reforming measures and maintaining social stability and economic growth. Some of the key priorities that have been addressed in this particular five year plan involves investment promotion across sectors, nationwide industrial capacity resolving, supporting development of private sector, and strengthening protection of properties, innovation in technology, encouraging population of workforce and re balancing of rural area entrepreneurship. International business activity and international investments has been further opened in terms of Chinas free trade zone under 13th Five year plan. International presence of china is on path of increasing continuously that will help in further expanding of free trade zone for stimulating foreign investments in these zones. The increasing face value of business opportunities is attributed from increased access to Chinese markets coupled with western level of free trade. As per the plan, there will be provisions for substantial change in flow of capital out and into China[8]. This would facilitate navigation of foreign invested enterprise by accessing to market of China. Production will also be made attractive due to proposed incentives of tax under the five year plan. China has taken considerable step for gaining greater freedom in global market in terms of international financial liberalization. The plan made in 13th five year plan will be made forward due to likely expansion and creation of free trade zone and making provision of movement of capital flows. Gradual liberalization of foreign investment is indicated by five year plan of China. It involves the implementation of national treatments for foreign and domestic investors eventually and this is done pre establishment and managing foreign investments with negative list approaches [9]. There will be unified foreign and direct investment system. Formulation of basic laws have been highlighted in the plan by indicating the growing need to emphasize on finalization of legislation such as drafting the foreign investment laws. The policymakers of China has been consistently advocated to do away with the classification of foreign investments and governing of all the established companies in china under same regulations and laws. Under this plan, some areas that have been noted for making alterations relating investment includes reduce barriers to access market, expand openings, encouraging foreign capital and improving overall quality of foreign investments in China by adopting advanced technology. For achieving goals related to foreign investments, plan have some targeted goals that re required to achieved in order to enhance such investment opportunities. For liberalization, the targeted sectors include construction, education, accounting, designing and auditing [10]. Market access for foreign companies such as insurance, banking, securities and pensions are suggested for expansion under the plan. Plan would also encourage development of industries involved in high and new technologies, manufacturing and efficiency in energy sectors. It is envisaged in the plan to create strong system and enabling environment for supporting the variety of manufacturing planned activities. Establishment of export processing zone and special economic zones is one of the key interventions in the plan. Increasing investment is being witnessed in service and manufacturing sectors and over the last few years, there have been change in the patter of inflow and outflow of foreign direct investments. China is being viewed by international investor as end destination market due to growing investment in service sector of country [12]. Goods produced by manufacturing firms are designed in a specific way for meeting the needs of Chinese consumers and they are producing high quality goods. Over the past years, there have been rapid growth of foreign investors in high tech manufacturing industries. This would provide opportunities to manufacturing companies in Australia to make investment in China under the new plan. Nonetheless, China has been in the early stage of transition of service driven economy. It is perceived that foreign direct investment in china would be concentrated in East due to establishment of free trade zone in Fujian, Tianjin and Guangdong [13]. Such investments would be eventually moving to western area through Belt and road initiative of country. Manufacturing sub sectors target: One of the most important objective of the five year plan is to enhance the total factor productivity by shifting innovative led growth from capital accumulated led growth. Under the banner of supply side reform, innovation has increased in last two years. Opening up is another strategy of this particular plan that incorporates dual strategy formation for encouraging Chinese business to make investment in other countries such as Australia and compete at global level accompanied by attracting foreign investments into the country. An alternative concept of economic integration is promoted by China through building of multilateral development banks and Belt and Road initiative [15]. The guiding principle under this plan is one belt and one road. Distinguishing short term and long-term turmoil is important that is nurtured by exacerbated financial speculators and international investors collective pessimism. It is an initiative that is led by China is one of the critical area of global g rowth in foreseeable future. Provisions for encouraged economic growth is provided by 13th Five year plan mainly in Western areas of China. Industries from foreign countries are provided opportunities to make investment in such areas as they are underdeveloped. Such industries involve construction, retail sector and other retail services. New markets will be created that will provide opportunities for urban developments, financial services, transport, high tech manufacturing industries, infrastructure, finance and e commerce [16]. It is believed by Chinese government that the basis for financial globalization alternative model is the multi polar monetary system that would help in supporting multilateral infrastructure projects. Future transformation of IMS that is international monetary system into multilateral system is the grand design for achieving the above mentioned objective. The transformation structure would be based under the auspices reformed International monetary fund based on institutionalized monetary coordination. Global financial cycle counter cycle needs would be managed by issuing of special deposit rights and radical reformation of quota system. Chinese authorities have perceived that monetary basis of transformation of global finance is the international monetary system evolution. Over capacities in heavy industries of China would be reduced by making investment in infrastructure throughout Asia. Despite huge amounts of saving, world economy is suffering from colossal lack of infrastructure and slow growth[17]. Therefore, financial system of China should be overhauled and there should be massive increment in the capacity of public development banks for making investment in infrastructure. The funding of long maturity and large sized projects is done prominently by public development banks which will help in generating positive externalities. Such banks are mandatory to fianc and funds such large projects and capital of such projects is owned by national and international financially credible sovereign entities. Therefore, funds can be borrowed at lower cost from international bond markets. The governance of investment projects from countries such as Australia is assisted by development banks as they have expertise in selecting. For the choice of techniques and localization of investments made in infrastructure are done by such banks in partner with the investment projects. One of the preferred tool for sustainable development in emerging economies such as China is linking of central banks with development banks. Development banks helps in financing the cost of infrastructure projects in coordination with managing risks at different levels[18]. Asian international infr astructure bank is one such bank that has been created under leadership of China with public shareholders. Financing of new economic routes from Europe to China are Silk Road banks. The new strategy of opening up of investment is leading to outflow of capital in the form of foreign direct investments. Meanwhile, trade surplus has been reduced due to related increase in cost of labour and redeployment of domestic production to domestic demand. The growing internationalization Chinese firms and financing of infrastructures in Asia due to structural demand has the likelihood of creating investment opportunities for Australia. Private domestic agents would add foreign currency holding and foreign debt repayment along with speculative moves generated by valuation effect [19]. There has been dramatic change in the structure of balance of payments and there is requirement of steady capital inflows by China in the absence of large surplus of current account to offset the outflow of money. In this regard, it is considered crucial to efficient regulation and development of capital markets in China. Internationalization of Chinese currency is one of the ambitious step for restructuring of the financial sector. For the purpose of accommodating the challenge of transition and achieving long-term objectives of this pattern of globalization, it is essential for Chinese government to decide on the way it should proceeds. The long run ambition of China requires an independent monetary policy and free flow of capital and one of the logical consequence is flexible exchange rate regimes. At the same time, Chinese government is required to retain a mix of capital controls and preserving monetary policy autonomy by managing exchange rate regime against currency basket. Observers and market participants are required to understand the position of monetary policy. China has requirement of Western markets in the same way as such nations requires huge consumer market of China[20]. The construction trade facilitation and free trade zone has made a breakthrough. The ministry of Commerce has furth er deepened trade and economic cooperation with foreign countries that would actively propel joint building of silk belt. Laws applicable to Australian business operating in China. Various laws are applicable for the foreign investors seeking to make investment and doing business Australia. Modern system of property rights will be improved under this plan for ensuring well defined ownership, rights and interest protection under all forms of entities. There is improvement in market regulatory and anti-monopoly laws for ensuring standardization and unification [21]. Sound codes of regulatory and conducts methods are established and compulsory standards are established for workplace, quality of products, environmental impacts, consumption and energy. The principle of law based taxation will be fully implemented and system of taxation will be optimized [22]. This plan helps in understanding the economic future of country from both internal and external view point. Public private partnership- China has experimented with public private partnership for quite ling time. However, many foreign investors have been deterred from investing or conducting business on partnership basis. The reasons are attributable to the fact of perceived risk and due to long contract length. Management measures on franchised operations on public utilities and infrastructure is implemented by NDRC for protecting the investment of private and foreign companies. As per the 13th Five year plan, private capital is sought for public infrastructure and is aimed at reducing restrictions for market access for private investment in public operations and infrastructure [23]. Loan contracts- Under the 13th five year plan, loans and technical assistance have been approved by Asian development bank to increase the distribution and energy generation. Investors can enter into loan contracts under article 196 -211. Under article 202, lender must provide accounting reports. Under article 204, People bank of China is liable for stipulating the interest applicable to all loans that are provided by financial institutions[24]. Donation contracts- The budget and planning process of large number of projects by increasing number of operating agencies in association with donors. Development is supported by mobilizing extra budgetary funds from donor community operating internationally. Under article 191, a donor community is not liable for any defects in gifts. Under the current plan, state government of China is cooperating with INGO and NGO for funding small loans to agricultural producers [25]. When Australian business are provided with the opportunities of doing business in China by opening up the potential. Firms and sectors to establish their business in China are exposed to competition laws of both trading countries. In some case, it is certainly possible that business might not be acquainted and familiar with the knowledge of laws operating in each country. This raises the possibility of getting exposed to risk of non-compliances. The ministry of commerce must be notified about specified notification threshold under China Anti-monopoly law merger and acquisition. Transactions pertaining to such merger and acquisitions cannot be completed or closed without the clearance obtained from Ministry of commerce. In event of companies failing to notify any transactions can impose a penalty of half a million RMB. There are few merger filings from Australian companies resulting from small amount of revenues generated from such companies operating in China. Implementation of ChAFTA would help in increasing business activities of Australian companies[26]. ChAFTA has the possibility of merging of Chinse companies with their Australian counterparts by entering into joint ventures. Joint ventures are direct provisions of civil law that are divided into three categories. There are several types of joint ventures in which Australian companies can enter into partner with China such as corporate, contractual, partnership and partnership enterprise laws that are regulated under laws of Chinese government. Chinese merger filing threshold will be reached by more Australian companies due to increased exports to China from Australia. For the first time, China opened its market for overseas private fund managers in year 2016 by joint ventures and allowing wholly foreign owned investors [28]. This would help in raising capital in stock market and private companies. 13 five year plan has the target set for year 2020 that would enhance measures for enabling and promoting business environment that would reduce the cost of doing business in terms of easing registration, regulatory reform and requirement of licence for promoting the foreign as well as domestic investors. This would help in improving the working of land registries and courts, simplifying regulations and amending laws[29]. There would be enforcement of legal instruments and property rights. The effective implementation of development plan is aimed at eliminating conflicting regulations and laws. For supporting socio economic transformation and envisaged industrialization needs to review Village land act for elimination conflicts with other laws[30]. Conclusion: The pattern of globalization is likely to be changed by transformation of economy of China over the next twenty years. Globalization is entering new stage driven by the redeployment of growth into domestic and international markets. Supporting infrastructure investment massively will help in proving momentum of deeper integration. Huge change in incipient regime leads to assertiveness of China in politics and world markets. China has the objective of developing political, economic, technological, cultural and financial relationship for securing global public goods to cooperate politically. The progress of reforms of economic liberalization has been sceptic due to general global economic uncertainty, stock market volatility and Renminbi depreciation during third and second quarter of year 2015. However, in spite of this uncertainty, it is strongly believed that there is high chance of occurrence of liberalization due to significant market potential of China. On the global front, Chine se government has remained active in securing trade deals in support for the establishment of Asian infrastructure investment bank and one belt one road project. Free trade zone is the platform for liberalizing the markets for foreign investors interests and a very small proportion of capital markets is represented in such zone. Concerns of foreign interests would be eased by more consistent free market. Some of the areas that could be explored for opening up the opportunities for foreign business activities and financial trading include information, trade, professional services and logistics. New foreign investors intending to do business in China would face several challenge in terms of project financing. Challenge would be faced in terms of infrastructure investment opportunities. 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