Long line for big free-trade club

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China Daily | 2013-03-29

Long line for big free-trade club

By Yang Yang ( China Daily)

Japan has become the latest to fill in an admission form

It threatens to be the mother of all free-trade agreements, which probably explains why countries are falling over themselves to join this exclusive new club.

Japan recently announced that it, too, was joining talks on the Trans-Pacific Partnership, conscious no doubt that if it and the other 11 members can reach an agreement, their combined heft will account for 40 percent of the world economy.

On March 19, four days after Tokyo made its announcement, Beijing announced that it would join its neighbors Japan and South Korea in Seoul on March 26 for talks on forming their very own, smaller, free-trade club.

So what is behind the current eagerness to sign free-trade agreements considering that the European Union and the United States also have their own behemoth in sight and what does China have to gain or lose from them?

Before Tokyo joined the TPP fray, its members were Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam, and this month 600 delegates representing them met for 10 days in Singapore, the 16th round of negotiations since 2010.

Zhao Jianglin, senior fellow at the National Institute of International Strategy at the China Academy of Social Sciences, seems to be in no doubt that beyond the economic gains Japan hopes for in joining the TPP, it has at least one other agenda.

"Strategically, by joining with the US and other Asian countries, Japan plans to check China’s rise," China Business News quoted Zhao as saying.

China is becoming increasingly influential in Asia as the world’s second largest economy, and while it has not been invited to join the TPP, that may one day happen, Zhao said.

"So Japan is joining the TPP early to take the initiative and, like the US, wants a role in making the rules, which will serve its interests."

But Chen Xin, director of the Economic Office of the Institute of European Studies of the Chinese Academy of Social Sciences, insists that as the TPP and EU-US free-trade deals are discussed, with China nowhere to be seen, Beijing has little to fear.

"We should push forward our free-trade agreement talks step by step, like those with Iceland, Switzerland and Australia," Chen says, "and if we are strong enough, they cannot ignore us."

In January, the sixth round of talks on a pact with Iceland were held in Beijing, and officials of both countries say a deal is imminent.

At the beginning of the month, the eighth round of talks on the China-Switzerland deal ended in Beijing. Substantial progress is said to have been made in talks that began a little more than two years ago.

Since the announcement in February of the EU-US talks, concerns have been voiced, mainly by people in emerging economies, that a free-trade deal between two such economic heavyweights would undermine the current multilateral framework of the World Trade Organization.

Xu Kai, in a commentary in the newspaper International Business Daily in China, poured scorn on the proposed EU-US deal.

"It demonstrates the protectionism that has prevailed in the EU and the US in recent years, but that is all dressed up as trade liberalization. What the two parties really want is to build a new trade area that not only boosts their own trade, but also undermines the trade competitiveness of emerging economies."

The BBC quoted Miriam Gomes Saraiva, a professor of international relations at the State University of Rio de Janeiro in Brazil, who is doing research on Brazil-Europe relations at Oxford University, as saying: "For Brazil and other emerging economies striving to have more weight in multilateral and global economic debates, at first a project that points to a greater alignment between Europe and the US does not seem to be good news."

However, Bart Kerremans, professor of international political economy and American politics at the University of Leuven in Belgium, says that while the concerns of emerging economies are legitimate, he does not think bilateral rules in an agreement between the US and the EU would directly go against WTO rules.

"That wouldn’t be in the interest of the EU or the US. In addition, the rules to be negotiated in an agreement between the two would be WTO-plus in nature. This means that they would deal with issues that have not been regulated yet in the WTO, and the EU and the US want to integrate their economies more deeply than is feasible in the current WTO context."

Chen Xin disagrees that the proposed EU-US deal points to a rise in protectionism as a result of the financial crisis.

"It is more an active response of the developed countries to the challenges of emerging economies under the existing WTO framework, which has come to a standstill."

Zhang Chunyan in London and Liu Jia in Brussels contributed to the story.


source: China Daily