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‍Concept, features, influence of TPP and China’s reaction

SHENG Bin1 GAO Jiang1

(1.Naikai Institute of International Economics)

【Abstract】TPP finally reached a deal after five-years intensive negotiations. It embodies fundamental concepts of trade rules, namely, free trade, fair trade, trade in value chains, value in trade, security trade and inclusive trade. As a comprehensive, far-reaching, high-standard, innovative and balanced free trade agreement, it provides a template and benchmark for 21st-century trade rules based on global value chains and will destine to have a crucial impact on the global trade governance in the future. Considering the fact that China is excluded to join the agreement, TPP will impose a challenge and potential threat to China through trade diversion effect, rule of origin effect, investment competition effect, rule competition and spillover effect. To minimize the negative effect of TPP, China should take necessary warning and hedging measures in the short run. In the long run, the goal of the TPP agreement and most part of its disciplines seem to be consistent with China’s reform agenda which aims to establish a new system for open economy. It will offer China a valuable reference for shaping market-oriented, internationalized, rule-based business environment and government regulations.

【Keywords】 TPP; high-standard FTAs; a new system for developing an open economy;

【DOI】

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    [1]. [1] The TPP attempts to reduce the uncertainties of medium and small-sized enterprises in global division of labor and strengthen their roles in facilitating global trade through reducing tariff, increasing the efficiency and transparency of customs procedures, eliminating trade barriers, promoting the development of digital trade and e-commerce, strengthening the intellectual property protection and the ability of medium and small-sized enterprises to resist external risks. [^Back]

    [2]. [1] Schott J. Jeffrey, Barbara Kotschwar and Muir Julia, “Understanding the Trans-Pacific Partnership,” Policy Analysis in International Economics, No.99, Peterson Institute and East West Center, Washington: 2013. [^Back]

    [3]. [2] For example, only through joint ventures will services be offered. [^Back]

    [4]. [3] Requiring that service providers should make cross-border service trade on the condition of establishing or maintaining representative offices or any other form of enterprise, or applying for residency. [^Back]

    [5]. [4] Including insurance and related service, banking services, financial data and information, financial consultation, etc. [^Back]

    [6]. [5] Including line renting, web hosting, electrical towers and poles, international submarine cable and other infrastructure. [^Back]

    [7]. [6] Including frequency, number section and network right. [^Back]

    [8]. [7] In the chapter “Financial service,” there is content about submission of two individual negative lists. [^Back]

    [9]. [8] The template format requires listing: 1) department; 2) the rules and fields involved in the non-conforming measures (national treatment, most-favored-nation treatment, performance demand, the management and the board, market access of service industry, commercial presence in the service industry); 3) government level (including the central government and local governments); 4) legal basis for specific non-conforming measures (government laws and decrees); 5) specific description. [^Back]

    [10]. [1] Once it has been activated for above one year, the intervention needs to be lifted gradually. [^Back]

    [11]. [2] Including “fair and equal treatment” and “adequate protection and safeguard.” [^Back]

    [12]. [3] Including requirements for export performance, local content, foreign exchange equilibrium, restrictions on sales in domestic market, technology transfer, localization of technology and technical protection, etc. [^Back]

    [13]. [4] In the face of unbalanced international payment and systematic financial risk, non-discriminatory and temporary safeguard measures can be taken to restrict the investment fund transfer. [^Back]

    [14]. [5] The investor-host country dispute settlement mechanism allows investors to “directly take legal action to the third-party arbitration tribunal according to the ICSID Convention and ICSID arbitration procedures and rules for compensation when they think their interests are infringed and the problem cannot be solved through negotiation and consultation within six months, investors do not need to resort to all domestic remedies in the first place.” ICSID is the International Centre for Settlement of Investment Disputes of the World Bank. [^Back]

    [15]. [1] For example, the agreement stipulates that it is forbidden to bring a lawsuit or arbitration to governments if they cannot pay back the public debt in time. In Chile, Peru, Mexico and Vietnam, disputes on investment can only be settled in the national court or through administrative procedure rather than ISDS procedures; in Australia, Canada, Mexico and New Zealand, security examination to foreign investment is excluded from the dispute settlement mechanism, either. [^Back]

    [16]. [2] Including subsidies for fishing, fishing boats and fuel. [^Back]

    [17]. [3] Excluding measures to reach the goal of public policies. [^Back]

    [18]. [4] Excluding software for key infrastructure and supplementary terms with source code in the commercial contracts. [^Back]

    [19]. [1] Including Trade in Service Agreement (TISA), Agreement on Government Procurement(GPA), Environmental Goods Agreement (EGA), Information Technology Agreement II (ITA II). [^Back]

    [20]. [1] Among the four issues, except the conclusion of multilateral agreement for trade facilitation, the other three issues were all drawn from the Doha round of negotiations because of the opposition from the developed economies and the least developed economies in the Cancun Ministerial Conference in 2003. [^Back]

    [21]. [2] Or issues without clear and substantial goals in the WTO agreement or Doha round of development agenda. [^Back]

    [22]. [3] Such as the negative list model adopted in the field of service trade, investment, government procurement and SOEs, and the common regulation model on technical trade barriers. [^Back]

    [23]. [4] Such as protection to intellectual property right, E-commerce, environment and labor standard, etc. [^Back]

    [24]. [1] America’s trade policies have always been tied up with political and security goals. Among the 17 bilateral or regional FTAs signed during the Bush administration, many of them were made out of political or diplomatic goals (including the FTAs signed with Bahrain, Oman, Morocco, Singapore and Australia; The FTAs between America and South Korea, Colombia and Panama have both economic and security reasons). After President Obama took office, he even appointed the National Security Council (NSC) to decide important strategic and political trade issues instead of the U.S. Trade Representative office. See also Claude Barfield: “The Trans-Pacific Partnership and America’s Strategic Role in Asia,” International Economic Review, 2015, Volume 3., P. 160–162. [^Back]

    [25]. [2] The principles and ideas shown in the TPP is almost the same with the President’s 2015 Trade Policy Agenda released by the U.S. government, including realizing America’s interest and value through high standard trade with employment support(such as guarantee to workers’ rights and environmental protection), safeguarding U.S. trade rights across the world (protecting intellectual property rights, strengthening supervision and execution to the trade rules) enhancing partner relationship of trade and investment, eradicating poverty trough trade and development, promoting global economic growth, maintaining policy transparency and working out a balanced trade policy. [^Back]

    [26]. [3] Sheng, B. Nankai Journal (Philosophy, Literature and Social Science Edition) (南开学报(哲学社会科学版)), (4): 70–80 (2010). [^Back]

    [27]. [1] “Integration: A Quantitative Assessment,” Policy Analysis in International Economics No.98, Peterson Institute and East West Center, Washington: 2012. [^Back]

    [28]. [1] By October, 2015, the number of China’s FTAs under construction was 19, involving 32 countries and regions. Among them, 14 agreements have been reached involving 22 countries and regions, including FTAs with ASEAN countries, Singapore, Pakistan, New Zealand, Chile, Peru, Costa Rica, Iceland, Switzerland, South Korea and Australia, Closer Economic Partnership Arrangement (CEPA) with Hong Kong and Macau, and the cross-strait Economic Cooperation Framework Agreement (ECFA). [^Back]

    [29]. [2] Sheng, B. & Guo, T. World economics and politics (世界经济与政治), (10): 4 –21 (2014). [^Back]

    [30]. [1] Including intellectual property, trade facilitation, investment protection, government procurement, environmental protection, E-commerce, regulatory cooperation and facilitation of natural persons' movement. [^Back]

    [31]. [2] Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform, November 12, 2013; Several Opinions on Establishing A New System for An Open Economy by the Central Committee of the Communist Party of China and the State Council, May 5, 2015; Recommendations for the 13th Five-Year Plan for Economic and Social Development by the Central Committee of the Communist Party of China, October 29, 2015; Several Opinions on Speeding up the Implementation of Free Trade Development Strategy by the State Council (2015 No.69), December 17, 2015. [^Back]

    [32]. [1] The State Council: Several Opinions on Speeding up the Implementation of Free Trade Development Strategy by the State Council (2015 No.69), December 17, 2015. [^Back]

    [33]. [2] Dong, Y. International Economic Review (国际经济评论), (1): 45–64 (2014). [^Back]

    [34]. [1] Shen, Y. Building FTAs with the Highest Level of Liberalization (建设开放度最高的自由贸易试验区). Shanghai: Shanghai People’s Publishing House, (2015). [^Back]

This Article

ISSN:1007-0974

CN: 11-3799/F

Vol , No. 01, Pages 20-36+4-5

January 2016

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Article Outline

Abstract

  • The structure, concepts and features of the TPP
  • TPP’s influence on global trade governance
  • The influence and challenges of the TPP to China
  • Ideas and strategies of China to deal with the TPP
  • Footnote