The views expressed in this presentation are the views of the author and do not

necessarily reflect the views or policies of the Asian Development Bank Institute
(ADBI), the Asian Development Bank (ADB), its Board of Directors, or the
governments they represent. ADBI does not guarantee the accuracy of the data
included in this paper and accepts no responsibility for any consequences of their
use. Terminology used may not necessarily be consistent with ADB official terms.

Shanghai FTZ and Trade

Facilitation
Dr. and Prof. XU Mingqi
Shanghai Academy of Social Science
Secretary-General of Coordination Center for
Shanghai FTZ Studies
November 3, 2016

Changes in Global Trade System

After global financial crisis, international trade

has been slowing down. Even after world

economic recovered, the trade growth rate is
still at very low level.
In 2015, growth rate of global export volume
was estimate at 2.8%, UNCTAD figure even
showed -13.23% decrease.
Low trade growth rate has very negative impact
on world economy.
Countries tried to build bilateral and regional
FTAs to promote trade.

Global export growth rate

12

12

-4

-4

-8

-8

-12
1995

-12
1997

1999

2001

2003

2005

2007

2009

2011

2013

Trade in Commodity plus Service

18

18

12

12

-6

-6

-12

-12

-18

-18

2000

2001

2002

2003

2004

2005

2006

2007

2008

::

2009

2010

2011

2012

2013

 Under this background, Chinas export and

import growth rate became negative. Chinas

overall trade in the first 9 month of 2016
dropped by 0.5%% to US$ 2.68 trillion
In the same period, Chinas export declined by
3% to RMB 6.57 trillion while Shanghai declined
by 5.5% to US$b1.54 trillion.
This also put a lot of pressure on Chinese
economic development as China is the No. 1
trading and export county in the world.

 Many countries try to use regional and bilateral

arrangements to gain favorable external conditions

to promote their trade.
In the Asia pacific region, there are many regional
FTA arrangements and is still increasing. There
are many ASEAN+ and also many bilateral ones.
The most notable ones are TPP, RCEP and
AFTAAP.
So regional trade arrangements are on a upsurge
stage and it is going to change the pattern of trade
in Asia pacific as well as the whole world.

 Beside using FTA to promote trade, trade facilitation is

the most important vehicle to boost trade.

Trade facilitation is also the main measure taken by
WTO and many countries to promote trade.
After WTO Doha round negotiation stand still for more
than 12 years, WTO Ninth Ministerial Conference in Bali
Indonesia reach trade facilitation agreement in 2013.
Actually, trade facilitation has been adopted by WTO as
one of the target right after Uruguay Round negotiation
finished. Later in 2004, this
was adopted as one of the negotiation content of Doha
round negotiation.

 This agreement has a great significance in

maintaining multilateral free trade system.

In Bali agreement, information transparence and
easy processing is the key content. WTO
member has the obligation to upgrade their
trading regime and meet the standard.
The most important measure is to merge
different government departments to one single
window to handle trade and establish single
electronic platform to process the all the
information and data.

Shanghai FTZ and Regional trade and

investment arrangements
China (Shanghai) Pilot Free Trade Zone has been
operating for 3 years. Now Guandong, Tainjin,
Fujian FTZs have been operation for more than
one year. 7 new FTZs are to be established soon.
FTZs are testing ground of further reform and
opening measures for whole China.
The reform measures are basically focus on
eliminating unnecessary government license
approval procedures and to form a rule of law and
more transparent governing system which is
comparable to international standard.

 So FTZ is not same as all other previous zones

or parks established in China, which their main
purpose is to attracting foreign investment with
some special policies. FTZ is trying to set up a
new open economic system that can meet
international standard.

Trade in the FTZs is further liberalized

although is not yet totally free as other

countrys traditional FTZ.
Most new measures are basically in reducing
and simplifying the customs and quarantine
procedures.

 One stop and single window handling was

adopted in Shanghai FTZ.

An electronic platform for processing import and
export has been established.
Customs, quarantine port authority and other 20
government departments all go through this Eplatform to handle their checking regulating
duties.
Paper documentation are greatly reduced as they
processed through this e-platform on internet.

 This greatly reduced the cost for trading companies

and foster trade in terms of faster handling goods in

the port and provide more business opportunities.
For example, originally, 5 working days would needed
by customs and another 5 working days would
required by quarantine and quality checking bureau.
Now in one processing window, 2-3 days would
finished all these checking and documentation.
Customs authority in Shanghai FTZ also choose more
than 40 companies to do a trial on a new system of
goods passing through customs first and document
procedure finished later.

 Other measures include connecting nearby

provinces customs inner area customs without

seaport facilities to port customs and save
redundant checking and documentation.
This enhance the integration of nationwide
network of customs and quarantine and increased
efficiency of government work.
Shanghai FTZ is trying to follow Singapore
efficient trade handling checking system and
reach the level and efficiency the same as
Singapore by 2020.

 Trade facilitation benefits SMEs the most

because SMEs lack of expertise to following

complicated requirements different government
department set.
After reducing and removal of many license and
checking, one window and unified E-platform
give SEMs easy way to access the trade
authority and reduce their cost.
This is also enhance the flexibility of export and
import of different kinds of goods usually SMEs
is engaged.

 One stop and single window handling was

adopted in Shanghai FTZ for trade facilitation of

course is only in the preliminary stage.
For instance, E-platform has been established,
but different government departments
participate in the platform are not yet
automatically sent with all information they
need. So they need to go to the website to up
load the information and then handle it in the old
way. This is not efficient.
Paperless ratio is not up to the standard of more
than 90%.

 So there is long way to go to the level of that many

developed countries.
Internal procedure of different governments also
need to be rebuilt.
Most importantly, governments attitude towards the
checking and regulation should change from pure
governing to also service providing.
I think, there is a great hope that Shanghai FTZ will
workout to be the most efficient port and customs in
China and experiences gain in Shanghai will lead to
China among the pioneers of implementing Bali
trade facilitation agreement.

 In the financial sector, further reforms and

opening measures have already finalized.

Companies could open FTZ account with which
funds could be freely moving between FTZ and
oversea accounts.
Convertibility of RMB is also applied to FTZ and
oversea accounts.
MNC are granted with rights to set up RMB pool
to use the pooling fund freely.
International petroleum and gold futures market
are being built in FTZ.

 By all these further reform and opening

measures, FTZ served as a pioneer for whole

China next stage reform and opening. It also
serves as preparation for responding external
pressure of new area and new industries
opening and international negotiation.
So with successful operation of FTZ and
expanding the experience of FTZ, China
becomes more confident to take responsibility of
further opening of its market and implementing
international standard of so called high quality
FTA and investment treaty.