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China’s Leading Role in Regional Economic Cooperation
2016-12-05
By Luo Yuze
Research Report Vol.18 No.5, 2016
I. Characteristics of Global Regional Economic Cooperation
First, the number of regional trade arrangements has been on the rise. Since 1991, the number of RTAs notified to GATT/WTO keeps rapid growth, from less than 100 in 1991 to 625 by the end of February 1, 2016 (separating newly-signed agreements on trade in goods and services from new members). A total of 124 RTAs were notified from 1948 to 1994, two or three annually on average. Another 401 were notified after WTO was founded, some 20 every year on average, reflecting much faster growth. A total of 419 out of the 625 notified RTAs have been implemented, which formed 454 free trade areas (combining newly-signed agreements on trade in goods and services with new members), 267 of which have been implemented. Among those RTAs, 90% are free trade areas (FTA) and the rest are tariff unions (TU).
After the international financial crisis, major powers pay more attention to regional trade arrangements. Between 2008 and February 1, 2016, the European Union notified 22 RTAs in force; Japan notified six, signed TPP and continued negotiations with the European Union (EU), Gulf Cooperation Council, and South Korea; nine RTAs in force in Russia were notified after 2012; five of the seven RTAs in force in India were notified after 2008; only five RTAs in the United States were notified since 2008, however, including mega agreements like TPP.
Second, the “spaghetti bowl effect” is strong. Major economies have signed a variety of RTAs, with EU countries like France, Germany, the Netherlands and Britain outnumbering other countries in terms of entity RTAs, followed by emerging markets such as Singapore, Turkey, and South Korea. Globally, there are 1991 and 840 newly-signed goods RTAs and services EIAs (economic integration agreements), and 2023 entity RTAs. Excluding repetitive counting, i.e. a regional trade agreement involves multiple parties, the numbers of newly-signed goods RTAs, services EIAs and entity RTAs are 234, 133 and 270 respectively. Based on combined calculation, the repetition rates of goods, service and entity agreements are 8.5, 6.3 and 7.5 respectively, partly reflecting RTAs overlap with each other (see Table 1).
Third, RTAs become larger and larger. Major economies have formulated more active strategies of regional integration and international economic cooperation, promoting FTAs newly signed or negotiated larger in scale, scope and better in quality, as well as covering a large number of countries, economic output, trade volume and population (see Table 2). With increasing members, their imbalanced development, and differences in culture, religion and values, regional mechanisms are more complicated. For example, there is no need for members to be the same in degree of opening-up or transition period, showing diversified and multi-layered cooperation good in theory and practice. For major economies, the long-term goal of advancing regional cooperation mechanism is to develop global rules, and strive for discourse power and dominance when formulating global rules.
Fourth, RTAs become more comprehensive and high-level. Simple goods FTAs are decreasing. In 2007, newly-signed goods FTAs accounted for 64.3%, while the proportion has been some 16% in the past three years. The majority of RTAs include goods and service trade agreements. Take 2015 as an example, among 13 RTAs, two are FTAs, eight are FTA&EIAs, and three are CU&EIAs (see Figure 1). Moreover, rules are getting better and more standardized. For instance, TPP involves the new round of economic and trade rules like competition neutral, labor and environmental standards; while TTIP involves the integration of standards in the United States and the European Union. According to China-Korea Free Trade Agreement signed on June 1, 2015, in terms of the opening level, the proportion of the liberalization of trade in goods of the two countries exceeds 90% of the tax items and 85% of the trade volume. The agreement covers 17 fields like trade in goods, trade in services, trade and investment, as well as economic and trade issues in the 21st century, such as electronic commerce, competition policy, government procurement, and environment. Different from the past international economic and trade rules involving “border measures” of market access (including tariff and non-tariff barriers and investment access), new rules focus on post-border measures.
II. Progress and Problems of China’s Regional Cooperation
Since early 1980s, China began to promote some bilateral and regional cooperation mechanisms, so as to create a favorable external environment for opening-up to and cooperation with the outside world. So far, a complete system has been created, including not only practical bilateral investment treaties and free trade agreements, but also all sorts of partnerships; not only Shanghai Cooperation Organization (SCO) with clear scope, but the Belt and Road Initiative (B&R Initiative) advocating open regionalism; not only multilateral developmental financial institutions like the Asian Infrastructure Investment Bank (AIIB) and BRICS Development Bank, but also unilateral Silk Road Fund. These mechanisms cover a wide area and range of fields, exerting impacts on all sides of China’s opening up to the outside world. There are, nonetheless, some problems under the new situation.
First, the coverage of FTAs is not satisfying. As of late 2015, China has signed 14 FTAs, covering 22 countries and regions. However, such FTAs concentrate in costal countries and regions, leading to imbalanced distribution. In addition, free trade arrangements with major economies besides ASEAN are yet to be seen (see Figure 2). ...
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