mega-regional trading arrangements: tpp and ttip · 2014-07-07 · mega-regional trading...

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

April  2014   Center  for  Interna3onal  Economic  and  Trade  Governance   6  Source:  Fergusson  et  al  (2013)    

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

April  2014   Center  for  Interna3onal  Economic  and  Trade  Governance   18  

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

April  2014   Center  for  Interna3onal  Economic  and  Trade  Governance   19  

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?

April  2014   Center  for  Interna3onal  Economic  and  Trade  Governance   25