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What is a free trade zone?

2022-11-25 16:358120

First, let's understand the differences between free trade zones and free trade ports.



free trade area

It refers to a multi kinetic economic special zone in a country or region, which is "outside the customs territory", mainly adopts preferential taxation and special customs supervision policies, and mainly aims at trade liberalization and facilitation. In September 2013, China established the first Pilot Free Trade Zone, namely Shanghai Pilot Free Trade Zone.


Free Trade Port

It refers to the port area that is located in the country and region and outside the customs management checkpoints, and allows foreign goods and funds to enter and exit freely. All or most of the goods entering and leaving the port area shall be exempted from customs duties, and free storage, exhibition, dismantling, refitting, repacking, sorting, processing and manufacturing of goods shall be allowed in the free port.


Differences between Free Trade Zones and Free Trade Ports

1. The free trade port has a wider range of designated areas. The free trade port is usually located in the seaport (and sometimes the airport) city, and includes the whole city. The free trade zone is the designated area around the city.


2. The "freedom" scope of the free trade port is broader. In addition to the freedom of trade, it also includes freedom of investment, freedom of employment, freedom of operation, freedom of entry and exit of operators, etc.


3. The free trade port allows offshore trade. On the basis of offshore trade, it further opens high-end service industry and develops offshore finance and other related businesses.


4. The functional orientation of the Free Trade Zone is mainly the "experimental field" of reform and opening up, aiming to form replicable and replicable experiences and practices; The focus of the free trade port is not on replication and promotion, but on benchmarking the highest international standards. Compared with the free trade pilot zone, the open field is wider and the degree of openness is higher.




NAFTA

The North American Free Trade Area is composed of developed countries and developing countries in the Americas in the process of regional economic grouping.  The United States, Canada and Mexico reached an agreement on the North American Free Trade Agreement (NAFTA) on August 12, 1992, and the leaders of the three countries formally signed it in their respective countries on December 17 of the same year. On January 1, 1994, the agreement came into force and the North American Free Trade Area was announced to be established.



EEA

On January 1, 1994, the European Economic Area (EEA), the largest free trade area in the world today, was officially established, which is composed of 12 European Community countries and 5 EFTA countries including Austria, Finland, Iceland, Norway and Sweden. The birth of the European Economic Area not only changed the relationship between the European Community and the European Free Trade Association, but also had a significant impact on the Western European Union and the world economy.


The European Economic Area is established according to the four freedoms advocated by the European Union: goods, people, services and funds can flow freely in the European Economic Area. Free trade between members of the European Economic Area and EU member states is allowed, but most EU laws must be observed.



Regional Comprehensive Economic Partnership Agreement (RCEP)

In 2012, the ten ASEAN countries launched the Regional Comprehensive Economic Partnership (RCEP). On November 15, 2020, the 10 ASEAN countries and 15 Asia Pacific countries including China, Japan, South Korea, Australia and New Zealand formally signed the agreement. On January 1, 2022, the Regional Comprehensive Economic Partnership Agreement (RCEP) officially entered into force. The first countries to enter into force include six ASEAN countries, including Brunei, Cambodia, Laos, Singapore, Thailand and Vietnam, and four non ASEAN countries, including China, Japan, New Zealand and Australia. The RCEP will enter into force for South Korea from February 1, 2022. Effective for Malaysia on March 18, 2022. On March 20, 2022, Japanese Prime Minister Takeo Kisada and Cambodian Prime Minister Hun Sen issued the Joint Statement after their meeting in Phnom Penh, agreeing to strengthen cooperation and ensure the full implementation of the RCEP agreement.


RCEP is a free trade zone with the largest population, the largest economic and trade scale and the greatest development potential in the world.



Shanghai Free Trade Zone

Also known as China (Shanghai) Pilot Free Trade Zone, the pilot zone was officially approved by the State Council on August 22, 2013 and officially opened at 10:00 a.m. on September 29. In December 2014, the Shanghai Free Trade Zone expanded from 28.78 square kilometers to 120.72 square kilometers. On July 31, 2015, the first two bulk commodity spot markets of Shanghai Free Trade Zone were officially launched in Yangshan Free Trade Port, and the supporting third-party clearing and warehouse receipt publicity systems were also launched simultaneously. In June 2018, the Management Committee of Shanghai Pilot Free Trade Zone issued 25 new measures to promote the linkage between the construction of Shanghai International Financial Center and the Free Trade Zone.


The Shanghai Free Trade Zone conforms to the new trend of global economic and trade development and is a major measure to implement a more proactive opening strategy. We will explore new paths and models for China's opening up to the outside world, accelerate the transformation of government functions and the reform of the administrative system, promote the transformation of the mode of economic growth and optimize the economic structure, and achieve the goal of promoting development, reform, innovation, and the formation of replicable and replicable experience to serve the development of the country.


In short, the main purpose of the Shanghai Free Trade Zone is to find new ways to promote China's economic development, expand new space for economic growth, and let China's economy break through the constraints at this stage to achieve "re upgrading" while building a new platform for cooperation and development with other countries.


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