Taiwan seems set to sign the Economic Cooperation Framework Agreement (ECFA) with the mainland in the coming weeks. Once signed, Hong Kong, Macao and Taiwan - all Chinese territories but with separate WTO membership, would each have free trade agreement arrangements with the mainland. It would mean that China can become one single market again. This represents not so much the rise of China, but more a restoration of the golden days of China that spanned a millennium until the late Qing period. The symbolic significance of such restoration is that this could pave the ground for a fuller restoration of China and the China model of historical evolution. The China model differs from the mercantilist, capitalist and imperialist West of recent centuries. The implications for the global system would be enormous and epoch-making/breaking.

Yet a ECFA and CEPA-based single market at this stage would still be incomplete. It will be a mainland-centric system with each of the three territories having no direct bilateral or trilateral free trade agreements among themselves. Some in the past argued that free trade agreements could be signed only between sovereign states. However, one could not find any evidence in international law to support such a claim. In the case of the WTO, the Faroe Islands, an autonomous province of the Kingdom of Denmark and a WTO member, has entered into free trade agreements with the EU (EC at that time as early as 1974), Iceland, Norway and Switzerland, and is negotiating similar agreements with Turkey and EFTA in Europe. Of course, the Faroe Islands had to receive the blessing, if not approval, from Denmark first before it could sign the agreements. But the fact that it is not a sovereign state should constitute a precedent for other WTO members. In fact, in the past, before the CEPAs for Hong Kong and Macao there had also been doubts about the legality of such arrangements, since both Hong Kong and Macao are special administrative regions of China and not sovereign states. The name of the CEPA does not change its nature as a free trade agreement.

If the Beijing government believes that a single market or institutional economic integration is beneficial to the functioning and development of the Chinese economies and that CEPAs and ECFAs are not just political tools to confer one-way economic advantages in exchange for political compromise, it should work to build upon the CEPAs and ECFAs, to create a full single market for the whole of China. That would allow Hong Kong, Macao and Taiwan to forge similar free trade agreements between and among themselves through negotiations. Economic integration between Hong Kong and Macao on one hand and Taiwan on the other could have better complementarities for an open regionalism to create a more dynamic, interactive and interdependent force benefiting all three plus the mainland. The single market comprising the mainland and the three smaller economies could be the core of the now evolving China-centric economic network in the Asia-Pacific region and should also be a major stabilizing force in East and Southeast Asia.

The EU represents a very good example of "national" market integration. Historically, Europe had been united as a single political entity, under emperors who might have actual ruling power or rule in name only. This is the reason why some European scholars have described the current EU integration process as neo-feudal in nature. The solid progress made in the EU integration process has been built upon expanding single market institutions through mutual obligations of all current members. This is also true for all bilateral and multilateral free trade agreements, even though other agreements are much less integrative than those building up the EU. The Chinese case is not exactly like that of the EU. China has not had the same decentralized polity in the past. Unlike European feudalism China's system has always been unitary and centralized. Of the four members of Greater China now, the mainland obviously dominates in all dimensions of development. Yet, the willingness of the Beijing government to sign a true free trade agreement should point to a possible trend for two-way integration that would not apply to Taiwan only. In fact with growing experience with bilateral free trade agreements, China is becoming more market or economically oriented than politically oriented in its external economic cooperation. There should be a good chance for Hong Kong, Macao and Taiwan to start their own CEPAs or ECFAs with each other. Probably Taiwan should take the lead.

The author is Head of China Business Centre, Hong Kong Polytechnic University.

(HK Edition 06/25/2010 page2)