Mega-Regional Trading Arrangements: TPP and TTIP - how China and other emerging
economy react to the new rules governing the trade and investment?
Jiang, Qing-Yun Shanghai University of International
Business and Economics & Co-Effort LLP, Shanghai
Mega-Regional Trading Arrangements: TPP and TTIP
How should China React?
Problems with Regionalism
• Trade diversion tendency to favour over trade creation
• Discrimination (Cordell Hull) • Inward focus – Market development – small and local – Cost to multilateral system
• Competing blocs – less flexible than countries
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Today’s Mega-Regionals
• RCEP – 10 ASEAN members plus China, Japan, Korea,
Australia, India and New Zealand (by 2016?) • TPP – Australia, Brunei, Chile, Canada, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, the United States, Vietnam (P4 2005, TPP by 2015?)
• T-TIP – United States and European Union (by 2015?)
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TPP combines existing RTAs
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Source: Fergusson et al (2013)
Comprehensive High Quality RTA
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Why TPP in 2008-2012? • Doha failing, – TPP signals ‘pivot’ to Asia – TPP preferences may attract US business – Counter China’s influence in WTO via East Asians
• Europe failing to grow or influence – Asia is the dynamic bit of the world economy
• Force the Democrats to state their position on trade
• Cement in the ‘US template’
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Benefits of a Single Agreement • More trade – and more advantage over
excluded • US model harder to change ex post • ‘Eclipse models offered by ..China ..EU-
Japan’ (Fergusson et al, 2013)
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US vs. Asian Templates
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Key implications of the US template
• Small partners – small voices; little differentiation by income level
• Excluded countries no voice; • IP provisions –extended even beyond US-Korea • Dispute settlement – more legalistic • Investor-State arbitration • SOEs
• Secret negotiations
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TTIP ambitious outcomes in …
• Market access; • Regulatory issues and non-tariff barriers; and • Rules, principles, and new modes of
cooperation to address shared global trade challenges and opportunities.
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TTIP Main Areas
market access for agricultural and industrial goods,
small- and medium-sized enterprises,
government procurement, sustainable development investment, services, intellectual property rights, dispute settlement, energy raw materials, competition, sanitary and phytosanitary measures,
customs/trade facilitation,
regulatory issues, state-owned enterprises.
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‘Living agreement’
Why TTIP? • EU – Stagnation – parallel of Single Market – Counter the ‘pivot’ – Fear of trade exclusion
• US – Access to sensitive markets – Extend US template or at least prevent emergence
of an alternative – Even if not, reinforce ‘standards’ in WTS –
justified by interest in GVCs
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What are these RTAs worth? TPP
• Without Japan and Korea 0.4% of world trade – USA 1.9%, Mexico 3.9%, Vietnam 19.8% of exports
• With Japan and Korea 1.6% of world trade – USA 4.4%, Mexico 6.2%, Vietnam 37.3% - exports – Japan 14.0%, Korea 12.4% - exports
• Big effects for big reformers • Non-members lose somewhat Source: Petri ,Plummer and Zhai (2012)
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What are these RTAs worth? TPP
• Without Japan and Korea 0.1% of world GDP – USA 0.1%, Mexico 0.7%, Vietnam 7.7%
• With Japan and Korea 0.3% of world GDP – USA 0.4%, Mexico 1.0%, Vietnam 13.6% – Japan 2.2%, Korea 2.2%
Source: Petri ,Plummer and Zhai (2012)
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What is TTIP worth (A) Trade?
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Source: Francois et al , (2013) RoW converges onto US-EU standards, thus reducing trade costs everywhere; everyone gains something
% change in exports by 2027, high spill-overs
What is TTIP worth (A) - GDP?
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Source: Francois et al , (2013) RoW converges onto US-EU standards, thus reducing trade costs everywhere; everyone gains something
% change in GDP by 2027, high spill-overs
Effects on China - % of GDP
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RTA Liberalisation
TPP TPP and TTIP
TPP and TTIP, China accedes
Tariffs only -0.17 -0.60 1.01 Tariffs and some NTBs -0.40 -0.90 1.43 Tariffs and all NTBs -0.67 -2.26 2.10 Tariffs, NTBs, spill-overs -0.41 -1.51 2.44 Source: Aslan, Mavus and Oduncu, 2014
How realistic are these plans?
• Less than 50:50 chance of TPP or TTIP occurring effectively
• Lack of US Trade Promotion Authority • Opposition probably growing – in USA and in
partners • But high commitment from some TPP
governments • EU/US political challenges massive
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How to react at a world level?
• Mega-RTAs are discriminatory • Multilateralism has served the world well –
especially the smaller powers – More voice and rights – Strength in numbers
• Complete Doha and start on WTO 2.0 – Keep agenda relatively simple – Create genuine alliances among challenger powers
• Try to make more use of Article 24 reviews
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China
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• China is excluded • Enter TPP?
TPP created fails Expected Value Probability 25% 75%
China in 1 N/A 0.25 China out 0 2 1.50
China
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• China is excluded • Enter TPP?
TPP created fails Expected Value Probability 25% 75%
China in 1 N/A 0.25 China out 0 2 1.50 TPP created fails Expected
Value Probability 75% 25% China in 1 N/A 0.75 China out 0 2 0.50
China: Macro responses
• Emerging market group – Large growing market – Shallower integration; – Less demanding standards – based on China’s
• EU-China – Counter-force ? – Constrain Europe options under TTIP – But what do you have to offer?
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China: Micro responses
• Press to be included in TPP? – Likely influence on outcome small – Press for information? Not successful so far
• Therefore - wait and see • Try to keep standards-deep processes flexible • Continue domestic reform process anyway • Press for WTO engagement • Establish US branches to use US law
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Thank you
Questions and Comments?
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