Similar to the Regional Comprehensive Economic Partnership Agreement (RCEP), the signing of new free trade agreements can focus on the characteristics and demands of the parties, reflect the new features of the global economic and trade environment and technological progress, promote market integration and reduce the risk of international development of enterprises. Various factors such as the new crown pneumonia epidemic have led to complex and profound changes in international economic and trade relations and a significant increase in uncertainty. China is still actively expanding its FTA network and seeking mutually beneficial cooperation for a synergistic recovery development path.


On July 12, China and Nicaragua signed an early harvest arrangement on FTA between the two countries, jointly announced the launch of China-Nicaragua comprehensive FTA negotiations, and formally established a bilateral governmental mechanism for economic and trade cooperation in the form of a mixed committee on economic, trade and investment cooperation. Considering that China and Nicaragua mutually recognized and restored diplomatic relations at the ambassadorial level on December 9 last year, the completion of the first step of FTA negotiations just six months after the resumption of diplomatic relations may also set a record. This speed reflects both the strong demand for resumed economic and trade exchanges between the two countries and the concrete manifestation of the long-term stability of business development guaranteed by both sides through the establishment of an inter-governmental agreement environment, which is conducive to the rapid development of bilateral economic and trade cooperation. China and Nicaragua have extensive complementarities in the areas of factor endowments, economic industries, markets and infrastructure, and the concerted promotion between governments will help reduce the difficulty for enterprises to explore on their own, reduce trade and investment costs, and enhance the protection of enterprises.

1658540745414_副本.jpg

Trade in goods is both an important element of international economic and trade relations and a large part of FTAs. According to Chinese customs data from UNCTAD (United Nations Conference on Trade and Development), in 2021, China's exports to Nicaragua totaled $790 million, with goods falling into 72 customs HS2 code categories; imports from Nicaragua were $25.064 million, with goods falling into 23 customs HS2 code categories. From January to May this year, the bilateral trade volume between China and Nicaragua maintained growth. Among them, Nicaragua's exports to China increased by 128.9% year-on-year, highlighting that Nicaraguan enterprises have been vigorously expanding the Chinese market with practical actions after the resumption of diplomatic relations between China and Nicaragua.


In 2021, the highest total value of Chinese exports to Nicaragua was knitted or crocheted fabrics (HS60), which reached US$180 million, accounting for 22.8% of China's total exports to Nicaragua, followed by machinery and equipment (HS84) valued at US$69.340 million, transportation vehicles (HS87) valued at US$65.379 million, and other goods and services (HS88) valued at US$1.5 million. (HS87), and electronic machinery (HS85) valued at $55.633 million. These four categories of goods accounted for nearly half (46.8%) of China's total exports to Nicaragua in that year. Nicaragua's exports to China in that year were ranked first in wood products (HS44), with a value of US$6.002 million, followed by animal and vegetable fats (HS15), copper (HS74), ores and minerals (HS26), raw hides and skins (HS41), and clothing and accessories (HS61), with a value of US$5.501 million, US$4.536 million, US$3.675 million, US$1.736 million and US$1.149 million. million, $1.736 million and $1.495 million, together accounting for 91.5% of total exports.


Nicaragua is a Central American country, a necessary land link between North and South America, located between Costa Rica and Honduras. Nicaragua has an area of 130,000 square kilometers, which ranks 98th in the world and is the same size as Anhui Province. The demographic structure of the country is very young, with 42.4% of the population between the ages of 25 and 64 and 25.6% of the population under the age of 14. This relatively young population structure not only provides abundant human resources for economic and trade cooperation, but also facilitates the upgrading of the market consumption structure and the development of innovative activities.

1658540787782_副本.jpg

Nicaragua's economy, which ranks low in Central America, is not growing fast, but it is likely to grow more significantly due to the establishment of stable economic and trade ties abroad. in April 2006, the Dominican Republic-Central America-United States FTA came into force, facilitating the connection of Central American countries, including Nicaragua, to the U.S. market. The United States is Nicaragua's top export destination, accounting for nearly half of the total, with China not yet in the forefront. The U.S. is also the most important source of Nicaragua's imports, with China in second place, and Nicaragua's imports from China are about 70 percent of its imports from the U.S. And the FTA promoted with China, if completed, will create another large market space for Nicaraguan producers. In fact, the current industrial structure of Nicaragua is still dominated by primary raw materials or simple processing, the textile industry and agriculture are the two main industries of Nicaragua, and exports of textiles and agricultural products account for nearly 50% of its national exports. Nicaragua's top three exports are beef, coffee and gold, none of which are among its top export categories to China. When comparing the process of establishing FTAs between China and economies such as ASEAN, early harvest arrangements tend to prioritize economic activities that support these economies to export their advantageous products to China at lower tariffs through more favorable tariff concessions. The signing of this China-Nicaragua FTA Early Harvest Arrangement will help Nicaraguan agricultural producers explore business opportunities in the Chinese market.


In the area of Nicaragua's infrastructure, there is no shortage of potential for cooperation between the two countries. Despite the small size of the country, Nicaragua has a good number of airports, 147 in 2013 alone, ranking 38th in the world. However, Nicaragua has only one airline, and further improvements and optimizations are needed in areas including waterway transportation and telecommunications. The issue of climate change has attracted more attention in recent years, with a particularly pronounced impact on coastal countries or regions. Nicaragua's domestic population is more densely distributed along the coast. Since Nicaragua, which is bordered by the Caribbean Sea in the east and the North Pacific Ocean in the west, is prone to natural disasters, mainly earthquakes, volcanic eruptions, hurricanes and landslides, there is a great demand for natural disaster prevention and post-disaster infrastructure reconstruction, while Chinese engineering contractors have rich experience and strong design, construction and operation capabilities in promoting infrastructure renovation and upgrading under the whole chain and various complex conditions. With the support of financial institutions, they are expected to participate in related projects and achieve a win-win situation for all parties.