Jiang, Qing- Yun Shanghai University of International Business and Economics

1. 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

2. Mega-Regional Trading Arrangements: TPP and TTIP How should China React?

3. 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 Center for International Economic and Trade Governance

4. 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?) Center for International Economic and Trade Governance

5. TPP combines existing RTAs Source: Fergusson et al (2013) Center for International Economic and Trade Governance

6. Comprehensive High Quality RTA Source: Fergusson et al (2013) Center for International Economic and Trade Governance

7. 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’ Center for International Economic and Trade Governance

8. 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) Center for International Economic and Trade Governance

9. US vs. Asian Templates Center for International Economic and Trade Governance

10. 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 Center for International Economic and Trade Governance

11. 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. Center for International Economic and Trade Governance

12. TTIP Main Areas ‘Living agreement’ Center for International Economic and Trade Governance

13. 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 Center for International Economic and Trade Governance

14. 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) Center for International Economic and Trade Governance

15. 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) Center for International Economic and Trade Governance

16. What is TTIP worth (A) Trade? 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 Center for International Economic and Trade Governance

17. What is TTIP worth (A) - GDP? 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 Center for International Economic and Trade Governance

18. Effects on China - % of GDP Center for International Economic and Trade Governance

19. 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 Center for International Economic and Trade Governance

20. 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 Center for International Economic and Trade Governance

21. China • China is excluded • Enter TPP? Center for International Economic and Trade Governance

22. China • China is excluded • Enter TPP? Center for International Economic and Trade Governance

23. 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? Center for International Economic and Trade Governance

24. 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 Center for International Economic and Trade Governance

25. Thank you Questions and Comments? Center for International Economic and Trade Governance