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China: the tricky chessboard of the free trade agreements

By valeriosoldani on October 10, 2014

RCEP and TPP Countries

US and China are facing each other with similar but opposite strategies in the whole Asia-Pacific area: The Trans Pacific Partnership (TPP), of which China isn’t a part, and the Regional Comprehensive Economic Partnership (RCEP) led by China and the ten nations of ASEAN that will create a regional free market of more than 3 billion people and a share of the global GDP close to 27%.

In the regional challenge China is betting its best chips on the free trade agreements (FTAs) in a regional hype that counts more than 200 agreements registered by the WTO, in the effort to shorten the time needed and establish its negotiation leadership compared to the other players.

RCEP negotiation rounds have already covered a wide range of products and services, including the definition of intellectual property standards, competition and antitrust regulations, and also investment rules, with a concrete impact on the potential business in this area.

The next (sixth) round is scheduled for the first week of December in New Delhi, India. This is a key round after the goals achieved in the previous one, with the maximum coordination level in terms of goods trade (especially concerning tariffs negotiation), and relevant achievements in the technical regulations and the sanitary and phytosanitary measures. However, there are still big issues on the table, including the non tariff barriers (NTBs) challenge and the rules of origin (ROOs).

This is definitely the right moment. The fifth round of the FTA involving South Korea, Japan (that’s part of the TPP), and China has just ended, and the expectations are sparkling on the 1.5 billion people market valued at least US$15 trillion.

China’s pushing the throttle. Zhang Yansheng released an interesting interview to the Italian Sole 24 Ore business newspaper: “China must have an open minded attitude towards every FTA, either multilateral that bilateral […] China needs the FTAs, in this moment, to amplify the effects of the internal reforms, especially in the Asia-Pacific area.” It’s quite interesting coming from a top brass of the Chinese establishment – he’s secretary general of the academic committee of the National Development and Reform Commission and one of the main authors behind the reforms carried out after the third party’s plenum.

A tricky chessboard in the region that carries unanswered key questions – can we imagine a TPP without China? What will be the effects for the foreign companies operating in this area? What will be the concrete effects of the Bali WTO agreement?

The game is still in its thrilling part, and no one dares risky bets.