How the FTAAP Incorporates the TPP
- By He Weiwen
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E-mail China.org.cn, November 20, 2014
Fragmentation is a potential danger
The necessity of the FTAAP lies not only in the tremendous benefit for all APEC members, but also in the synergy of the world most complicated and intertwined mix of numerous RTAs and FTAs in the region.
The APEC region currently accounts for roughly 70% of total world RTAs and FTAs. The APEC official website cited 56 RTAs within APEC. According to Professor Dan Steinbock citing the Asia Development Bank, there are 109 bilateral FTAs in force and another 148 FTAs under negotiation. If this trend continues, which is most likely, the world largest trade area will be highly fragmented, with different RTAs and FTAs intertwined, only to result in a much higher trading cost and trade non-facilitation. All the APEC members, including the US, will be in an unfavorable competitive position in the world marketplace. No one can image a free APEC connectivity and a strong APEC competitive advantage to be built on this “spagetti” basis. A comprehensive synergy is only inevitable.
The synergy is more imperative in the context of the bleak, uncertain outlook of the world economy over the medium-term. The economic advantages of APEC will not remain forever. If APEC economies waste time in removing APEC-wide trade and investment barriers, get easy access to all the best market resources, and cut down trading cost considerably, there will be a real threat to their sustainable growth and job creation.
TPP and RCEP are all pathways to FTAAP
The FTAAP does not cast aside all of the RTAs and FTAs. Rather, it hopes for an acceleration and smooth conclusion of them all. The FTAAP will not be mapped out from zero, but will be based on those RTAs and FTAs as pathways.
The TPP is the most important one among all the APEC RTAs and FTAs. The twelve TPP parties are all APEC members, with the U.S. playing the leading role. However, China is excluded so far. The Obama Administration put the conclusion of TPP as a top priority for 2014 trade agenda. However, it seems difficult to hit that goal by year’s end.
Another major RTA is the Regional Comprehensive Economic Partnership, lead by ASEAN, which covers all ten ASEAN countries plus China, Japan, South Korea, India, Australia and New Zealand. China is an important partner, but not a leader. In turn, the U.S. is also excluded so far. RCEP is envisaged to phase-out by the end of 2015.
The 2014 ASEAN Summit on November 12-13 declared a firm resolution to finish negotiations on ASEAN Economic Community (AEC) by the end of 2015. Meanwhile, China-ASEAN FTA upgrade negotiations are also expected to conclude by the end of 2015.
The question now is not whether the role of the TPP will be weakened, but rather whether the TPP can reach an agreement on time. During the two-year period for a strategic study, both the TPP and RCEP have opportunities to conclude, thus providing substantive standard and regulation inputs for the formation of an FTAAP. The FTAAP will continuously absorb the achievements and progresses of the TPP and other RTAs/FTAS, accumulating its “greatest common denominator” and further seeking the highest standards for common rules. The smooth progress of the TPP will contribute to FTAAP formation, and the latter in turn, will also amplify TPP results to an even wider area, with necessary adaptation.
Parallel to FTAAP, TPP, RCEP and others FTA progress, China and the U.S. are focusing on their bilateral arrangement talks, known as the Bilateral Investment Treaty (BIT). President Xi Jinping and President Obama, during their recent meeting the day following the APEC summit, reaffirmed their decision to conclude the core content and clauses by the year end and start talks on drafting a “negative list” early in 2015. The progress of China-U.S. BIT talks will contribute to the progress of the FTAAP, and a shared goal of the FTAAP, in turn, will provide fresh impetus to the BIT towards an early conclusion.
He Weiwen is co-director of the China-US/EU Study Center at the China Association of International Trade.
This article was first published at Chinausfocus.com To see the original version please visit http://www.chinausfocus.com/finance-economy/how-the-ftaap-incorporates-the-tpp/
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