The TPP as a Pathway Towards Asia-Pacific Integration. Meredith Kolsky Lewis *

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1 The TPP as a Pathway Towards Asia-Pacific Integration Meredith Kolsky Lewis * Introduction In the international economic context, numerous competing visions have been proffered over the years as to what form Asia-Pacific economic integration should take, and which country or countries should lead that process. This paper examines the TPP as a potential pathway towards accomplishing the objective of more comprehensive Asia-Pacific integration. It first contextualizes the discussion by noting some of the major differences between the TPP and other recent mega-ftas and plurilateral trade agreements and those that came before them, identifying some of the implications of these changes for the Asia-Pacific. It goes on to introduce the history of the Asian economic integration concept, and the TPP s potential to realize that objective. In assessing the TPP, the paper also discusses the potential for the Regional Comprehensive Economic Partnership (RCEP) to serve as an alternative pathway. I. Dramatic Shifts in Trade Agreements in the Past Several Years During the first twenty years of the World Trade Organization s history, the multilateral trading system has become increasingly accompanied by free trade agreements (FTAs) 1 and * Professor and Vice Dean for International and Graduate Programs, SUNY Buffalo Law School; Associate Professor, Victoria University of Wellington Law School. 1 In this paper, I use FTAs to refer to reciprocal trade agreements. Such agreements are also sometimes referred to, e.g., by the WTO, as RTAs or regional trade agreements. For information about reciprocal trade agreements notified to the WTO, see the Regional Trade Agreements Information System, accessible at 1

2 preferential trade arrangements (PTAs). 2 Such agreements have proliferated steadily, with several hundred having been notified to the WTO as of early However, there have been some significant changes in the types of trade agreements being negotiated outside the WTO in more recent years. Prior to 2010, trade negotiations generally occurred either within the WTO framework or in the context of FTAs, which were primarily bilateral and never between two large economies. In the limited instances FTAs were negotiated amongst more than two countries, they generally comprised neighboring countries, such as was the case with the North American Free Trade Agreement (Canada, United States and Mexico). 3 During this time period, the scope of FTAs was generally similar to that of the WTO, but with frequent carve-outs for a portion or even the entirety of certain sensitive sectors. In addition, to the extent that WTO members engaged in subject-specific negotiations either on a multilateral or a plurilateral basis they were conducted within, rather than outside, the WTO framework. Since 2010, there has been a continued proliferation of traditional FTAs, but there have also been notable new developments. These include: an increase in multi-party FTAs; an 2 PTAs are unilateral trade preferences, including those provided pursuant to Generalized System of Preferences programs. For information about PTAs notified to the WTO, see the Database on Preferential Trade Arrangements, accessible at 3 The Trans-Pacific Strategic Economic Partnership Agreement, consisting of Brunei, Chile, New Zealand and Singapore, is a notable exception. This agreement, often referred to as the P-4, is the precursor agreement to the Trans-Pacific Partnership (TPP). See New Zealand Ministry of Foreign Affairs and Trade, Trans- Pacific Strategic Economic Partnership Agreement (P4), accessible at Office of the United States Trade Representative, Trade Facts, United States to Negotiate Participation in Trans-Pacific Strategic Economic Partnership (September 2008), accessible at Pacific_Partnership_Agreement/Fact_Sheets/asset_upload_file602_15133.pdf. 2

3 increase in FTAs featuring more than one major economy; FTA coverage extending beyond the scope of the WTO Agreements; and subject-specific plurilateral negotiations being conducted outside the WTO negotiating structure. A. The New Landscape: Mega-FTAs and Plurilateral Trade Agreements Traditional bilateral trade negotiations have been proliferating for all of the 2000s. In recent years, however, we have seen new types of negotiations also occurring outside the WTO context. In particular, several FTAs are under negotiation that link large economies and/or several countries. Such agreements are referred to here as mega-ftas. In addition, subject-specific negotiations, which previously occurred exclusively under the GATT/WTO framework, have also been taking place outside the WTO s auspices. 1. Mega-FTAs a. TPP The trend towards mega-ftas arguably began in 2007 or 2008 when the United States expressed interest in participating in scheduled negotiations amongst Brunei, Chile, New Zealand and Singapore to expand the scope of the Trans-Pacific Strategic Economic Partnership/P-4 trade agreement to include investment and financial services. This overture by the United States led almost immediately to Australia, Peru, Malaysia and Vietnam indicating they too wished to participate. While these discussions were originally positioned as an expansion of the P-4, they soon were reframed as negotiations for a new trade agreement the Trans-Pacific Partnership (TPP). The TPP negotiations expanded in 2012 to include Canada and Mexico, and in 2013 to include Japan. The negotiations concluded in October 2015, with the agreement formally signed 3

4 in February As of this writing, the agreement has yet to be ratified by any of the signatories. Collectively, the twelve TPP countries comprise approximately 36 percent of global GDP. It is therefore of a significantly greater economic magnitude than any previously concluded FTA. b. RCEP A second mega-fta that is currently under negotiation is the Regional Comprehensive Economic Partnership, a grouping that comprises 16 participants: the 10 ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) plus Australia, China, India, Japan, Korea and New Zealand. The RCEP has seven members in common with the TPP: Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam. RCEP negotiations commenced in May As of this writing, there have been eleven rounds, with the most recent held in Brunei in February The RCEP members account for approximately 30 percent of world GDP. c. T-TIP Another mega-fta of recent vintage is the Trans-Atlantic Trade and Investment Partnership (T-TIP) currently being negotiated between the United States and the European Union. The first negotiating round was held July 2013, and as of this writing, twelve rounds had been concluded, with the most recent held in February T-TIP is the largest combination of economic power of all the mega-ftas, with the parties accounting for approximately 46% of world GDP. 4

5 d. C-J-K China, Japan and Korea began negotiating a trilateral FTA in Ten rounds have been held as of March Collectively, these three countries account for 20 percent of world GDP. There are also plans for every twosome within C-J-K to form bilateral FTAs. Thus far, only China and Korea have concluded such an agreement, reaching consensus on provisions in November 2014 and formally signing in June Japan and Korea initiated FTA negotiations in December 2003 but talks were halted in 2004 and have not resumed. 5 China and Japan have not yet commenced bilateral trade negotiations. 2. Plurilateral Negotiations Outside the WTO In WTO parlance, plurilateral negotiations refer to ones engaged in by many, but fewer than all, members of the WTO. In the GATT era, a number of agreements were negotiated on a plurilateral basis. The first of these was the Kennedy Round Antidumping Code, and numerous others were negotiated in the Tokyo Round. One of the objectives associated with creating the WTO was to move back to multilateralism and do away with GATT à la carte. 6 Nonetheless, plurilateralism has continued to exist within the WTO. First, the Tokyo codes which were incorporated into the WTO have remained plurilateral in nature. They appear in Annex 4 of the WTO Agreements, under the heading Plurilateral Agreements. 7 The Annex 4 plurilateral 4 See It s Official: China, South Korea Sign Free Trade Agreement, The Diplomat (June 2, 2015), accessible at 5 See Ministry of Foreign Affairs of Japan, Japan Republic of Korea FTA (Overview), accessible at 6 See, e.g., JOHN H. JACKSON, THE JURISPRUDENCE OF GATT AND THE WTO: INSIGHTS ON TREATY LAW AND ECONOMIC RELATIONS (Cambridge University Press, 2000) Annex 4 contains four plurilateral agreements, but only two of them remain in effect: the Agreement on Government Procurement and the Agreement on Trade in Civil Aircraft. The 5

6 agreements only bind their signatories to provide benefits to other signatories, rather than to the whole of the WTO membership. In addition, the Annex 4 plurilateral agreements do not uniformly cover a very high percentage of the trade within the given sector. The WTO also features a different type of plurilateral agreement so-called critical mass agreements, including the Information Technology Agreement (ITA), the Financial Services Agreement and the Basic Telecommunications Services Agreement. These agreements require their signatories to make concessions on an MFN basis, meaning that all WTO members reap the benefits, but not all members must undertake obligations. These agreements only come to be if a very, very high percentage of the world s trade in the given sector (a critical mass ) is willing to be bound (for example, the threshold for the ITA was set at 90 percent). If a country with a significant share of the industry were to hold out, the other major players would not want to permit that country to free ride and obtain the benefits of the agreement without making concessions. The concessions made as a result of these agreements are applied to all WTO members, by virtue of the participants amending their GATS schedules on an MFN basis. 8 other two, the International Dairy Agreement and the International Bovine Meat Agreement, were terminated in See The World Trade Organization, Plurilaterals: Of Minority Interest, accessible at 8 Currently there are plurilateral negotiations progressing within the WTO with respect to liberalizing trade in environmental goods. The Environmental Goods Agreement negotiations currently comprise 17 WTO members that account for most of the world s trade in environmental goods and services. The participants are: Australia, Canada, China, Costa Rica, Chinese Taipei, the European Union, Hong Kong (China), Iceland, Israel, Japan, Korea, New Zealand, Norway, Switzerland, Singapore, Turkey and the United States. See The European Commission, The Environmental Goods Agreement (EGA): Liberalising trade in environmental goods and services (September 8, 2015) accessible at 6

7 The examples just discussed exist within the WTO framework. Until recently, there were no sector-specific plurilateral trade negotiations outside the WTO context. However, in recent years there have been two such examples. a. TiSA The Trade in Services Agreement (TiSA) is currently being negotiated outside the WTO s auspices by 24 parties, with the European Union counted as one, while representing its 28 Member States. 9 The goal of its participants is to expand services liberalization further than the WTO s General Agreement on Trade in Services (GATS). 10 Because many WTO members are opposed to making new services commitments, this group of services-oriented countries elected to negotiate outside the WTO. In the future, it is possible that a completed TiSA could be incorporated into the WTO under various mechanisms, but it is unclear how, or whether, that will happen. b. ACTA The Anti-Counterfeiting Trade Agreement (ACTA) is another example of a single subject matter (aspects of intellectual property) trade agreement being negotiated on a plurilateral basis outside the WTO. ACTA was negotiated by the US, the EU, Switzerland, Canada, Australia, New Zealand, Mexico, Singapore, Morocco, Japan and South Korea between 2007 and The current participants are: Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union (representing its 28 Member States), Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, Republic of Korea, Switzerland, Turkey, the United States and Uruguay. Mauritius also intends to join the negotiations. 10 See, e.g., The European Commission, Trade in Services Agreement, accessible at 7

8 The agreement will not take effect until six nations ratify it; however, its future is in question as only Japan has ratified the agreement thus far (as of April 2016). II. Features of the New Agreements A. Linkages Between Major Economies Multiple sources identify the largest economies by GDP for 2014 as being the United States, followed by China and Japan. 11 When the European Union is counted as a single unit, it eclipses the United States for the number one spot. We can therefore characterize the top four world economies as being the EU, United States, China and Japan. Remarkably, while there were no trade agreements in existence between any two of these only a few years ago, the following are currently either completed or under negotiation: The United States + the European Union (via T-TIP) The United States + Japan (via TPP) China + Japan (via RCEP and C-J-K) The European Union + Japan (via FTA under negotiation) The United States + China (via bilateral investment treaty (BIT) negotiations) 12 The European Union + China (via BIT negotiations) CIA Factbook, World Bank, IMF, United Nations. 12 These negotiations have accelerated of late. See The Wall Street Journal, U.S., China Make Progress Toward Trade and Investment Deal (September 25, 2015), accessible at

9 B. Commitments that go beyond the WTO Most of the new mega-ftas and plurilateral trade agreements differ from the standard FTAs in that they tend to contain commitments that extend beyond the scope or reach of the WTO. This includes new subject matter coverage, particularly with respect to behind the border issues. The TPP was characterized by negotiators from the start as being targeted to be a twenty-first century, high standards agreement. 14 The agreement includes various subject matters that do not appear in other trade agreements, such as promoting small and medium enterprises; disciplining state-owned enterprises; harmonization of standards; and other behind-the-border measures. The agreement appears to entail far more collaboration and harmonization than any other trade agreement to date. It also features an intellectual property chapter that in some respects goes beyond the protections provided in TRIPS; and chapters on labor and environmental standards two issues the WTO does not address. T-TIP is similarly ambitious, with the negotiations including issues such as transparency, anticorruption and competition; state-owned enterprises; small and medium-sized enterprises; government procurement; and non-tariff barriers and regulatory coherence issues. 15 ACTA is notable for, among other things, providing certain intellectual property protections that go beyond those found in the WTO s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). Given that the majority of the WTO s developing country members dislike the TRIPS Agreement and many have difficulties 14 Whether it achieves that goal is the subject of much discussion. See, e.g., C.L. LIM, DEBORAH KAY ELMS AND PATRICK LOW, THE TRANS-PACIFIC PARTNERSHIP: A QUEST FOR A TWENTY-FIRST CENTURY TRADE AGREEMENT (Cambridge University Press 2012). 15 See Office of the United States Trade Representative, T-TIP Issue-by-Issue Center, accessible at 9

10 complying with its obligations, it is highly unlikely that the WTO membership as a whole would agree at present to ACTA s anti-counterfeiting provisions. Thus a plurilateral agreement outside the WTO framework was a logical approach for the participating countries to adopt. TiSA is similarly more ambitious with respect to services liberalization than is the WTO s agreement on services, the General Agreement on Trade in Services (GATS). While GATS utilizes a positive list approach, whereby members are only bound to liberalize the services sector commitments they specifically listed, TiSA is using a negative list approach, whereby all services sectors are to be liberalized except those that participants specifically exclude. 16 It should be noted that there is one mega-fta that isn t particularly ambitious and doesn t strive to go beyond the WTO the RCEP. The RCEP includes several participants including India, Laos, Cambodia and Myanmar that have not shown themselves to be willing to lower trade barriers on a particularly accelerated basis. RCEP is therefore unlikely to break significant new ground in trade liberalization. Nonetheless, for reasons that will be discussed below, the RCEP s size and composition are significant. III. Asia-Pacific Implications The new mega-ftas and plurilateral trade agreements have systemic implications of relevance for the entire trading system that will not be discussed at length here, but include the potential for dispute settlement system inconsistencies and legitimacy concerns due to the lack of 16 The GATT operates on a negative list approach, meaning that newly acceding WTO members must bind their tariffs on all tariff lines except for those lines which they specifically excluded. The WTO membership approves accessions when meeting as the Ministerial Conference. While Article XII(2) of the WTO Agreement provides that accession can be approved by a two-thirds majority of the WTO membership, in practice this approval occurs by consensus rather than a vote. 10

11 widespread developing county inclusion. There are other implications, however, which are more specific to the Asia-Pacific, and it is to some of these issues that I now turn. The Asia-Pacific region is home to three of the new mega-ftas, the TPP, the RCEP and C-J-K. Since C-J-K overlaps entirely with RCEP however, the below discussion will focus primarily on the TPP and the RCEP. A. Setting the Rules of the Future? The TPP and RCEP both comprise large numbers of participating countries (12 and 16 respectively) and account for significant shares of world GDP (36 and 30 percent respectively). It therefore seems likely that, to the extent these agreements break new ground, they will have an impact on the new rules adopted by other countries in their FTA negotiations and ultimately in the WTO. This would occur in large part by the mega-fta members incorporating the mega- FTA terms into their future FTAs, until ultimately those provisions gain enough commonality to become multilateralized to a greater or lesser degree. This has occurred already to some extent with provisions in United States FTAs. Since the U.S. essentially uses a template to negotiate its bilateral FTAs, certain commitments such as heightened IP protections have spread into many other agreements. This has happened despite the fact that the United States FTA partners have generally opposed stricter IP protections in the WTO context. There is a path dependence element to FTA negotiations, and with a series of agreements already having adopted certain provisions, it becomes very difficult for the next negotiating partner to insist on something else. 17 This dynamic is likely to be magnified significantly in the context of novel provisions or 17 See, e.g., Oona Hathaway, Path Dependence in the Law: The Course and Pattern of Legal Change in a Common Law System, 86 IOWA L. REV. 601, (2001) ( The power to set the agenda can thus become, in a very real sense, the power to determine the result. ); Meredith Kolsky Lewis, The Politics and Indirect Effects of Asymmetrical Bargaining Power, in TOMER BROUDE, MARC L. BUSCH AND AMELIA PORGES (EDS), THE POLITICS OF INTERNATIONAL ECONOMIC LAW 29 (Cambridge University Press 2011). 11

12 commitments in the TPP (I omit RCEP here because most of the innovation in the Asia-Pacific agreements lies in the TPP). Furthermore, given that T-TIP and the EU Japan FTA have also been under negotiation at the same time as the TPP, it seems likely that there will be certain commonalities in the WTO-plus and WTO-beyond provisions of the TPP, T-TIP and the EU Japan FTA. With three of the world s four largest economies (the European Union, the United States and Japan) agreeing to adopt the same rules, it is only a matter of time before those rules work their way into more and more agreements and become the multilateral trade rules of the future. 18 Given this likely spread of at least some aspects of the TPP, its Asia-Pacific members could be on the early adoption end of these new obligations. Why could instead of will? Because the TPP agreement concluded later than the parties would have preferred, its ratification path is now uncertain. Had the agreement been finalized in summer 2015 or earlier, President Obama could have had Congress vote on the deal before the United States election cycle was in full swing. The deal was not reached until October 2015, however, and as of this writing in April 2016, trade in general and the TPP in particular are being denounced by most of the U.S. presidential candidates on a regular basis. It is therefore unclear when, or whether, a safe time will materialize during the remainder of President Obama s term, to present the TPP to Congress 18 In addition to participating in the mega-ftas described above, these countries have also been active in negotiating sector-specific plurilateral agreements both outside and within the WTO. The rules established in these agreements similarly become the de facto multilateral rules. To the extent these negotiations are conducted on an MFN basis, with the benefits being applied even to non-participants, such agreements should prove beneficial to the Asia-Pacific s poorer members as well as to its economic leaders, as such countries would not have to make any commitments themselves but would still be able to take advantage of new market opportunities. See Matthias Helble and Ganeshan Wignaraja, Asian Development Bank Institute: Asia Pathways, Plurilateral trade agreements: an overlooked but powerful force for international trade opening for Asia? (February 10, 2015), accessible at 12

13 for a vote. It is possible this could be accomplished during the lame duck period between November 8, 2016 when the new president will be elected and January 20, 2017 when the president-elect will be inaugurated and take office. However, passing major legislation during the lame duck is often criticized as anti-democratic. If no vote occurs during President Obama s final time in office, however, the TPP is unlikely to be ratified by the United States until at least 2018 and probably later. Indeed under certain election scenarios the TPP could end up shelved indefinitely. Senator Sanders, for example, would not seek passage of the TPP in its current form, nor would he be likely to try to renegotiate aspects of it. While Secretary Clinton s objections to the TPP seem to be more campaign rhetoric than reality, given that she supported an iteration less favorable to her own policy positions while she was Secretary of State, she would nonetheless likely require that some aspect or aspects of the agreement be renegotiated so that she can claim to have improved it. Renegotiating even something very minor amongst twelve countries with their own election cycles and political sensitivities would be very difficult. Indeed, a number of TPP trade ministers have ruled out the possibility of re-opening the negotiations. 19 Notwithstanding these statements, if ratification in the U.S. does not occur prior to January 20, 2017, there would likely need to be some way to alter certain aspects of the agreement in order for the new president to 19 See, e.g., LAW360, Froman Dismisses Notion of Renegotiating the TPP (March 18, 2016) accessible at Ross Marowits, Huffington Post Canada, Trans-Pacific Partnership Can t Be Renegotiated, Canadians Must Pick Yes or No : Freeland (January 14, 2016) accessible at 13

14 push for its ratification 20 and that ratification would not be likely to occur until deeper into the presidency. The prospects for T-TIP are also cloudy. The negotiations probably will not be concluded during President Obama s time in office, meaning that the new president could insist on changes in approach without re-opening an already signed agreement. However, any changes in negotiating mandates could complicate the work that has already been done. There is also significant opposition to T-TIP within Europe, so its path to ratification may also take a substantial amount of time. For these reasons, it may be that the RCEP and perhaps the EU Japan FTA will be ratified before the TPP or T-TIP. Nonetheless, it is unlikely that the fundamental terms of the TPP or T-TIP will be altered significantly, and even if not ratified for years, these agreements surely give us a view of the types of provisions we can expect to see in other trade agreements in the future. 20 It is possible this could be accomplished via side letters or other agreements kept outside of the TPP itself. 14

15 B. Coming Together, or Pulling Apart? One significant question that is raised by the advent of the new, large and economically powerful agreements in Asia is whether having multiple such agreements will result in the Asia- Pacific coming together and forming a regionwide trade agreement along the lines of a Free Trade Area of the Asia-Pacific (FTAAP) concept, or whether it will lead to a more enduring divide, with China and the United States each heading one large agreement but the two remaining separated from each other. The pursuit of an FTAAP has been a goal in the Asia-Pacific Economic Cooperation (APEC) context for over two decades, 21 with numerous pathways identified but no clear route yet agreed upon. 22 Although the concepts have varied, Asian economic integration models all excluded the United States. One of the earliest such visions was proffered in 1991 by the Malaysian Prime Minister, Mahathir Mohamad, who proposed an East Asia Economic Group ( EAEG ) comprising the members of the Association of Southeast Asian Nations ( ASEAN ), 21 The goal of free trade across the Asia-Pacific was promulgated by APEC leaders at their 1994 meeting in Bogor, Indonesia. However, APEC has not had the institutional strength to lead efforts to create a regionwide free trade area or agreement. See, e.g., Ming Du, Explaining China s Tripartite Strategy Towards the Trans-Pacific Partnership Agreement, 18 JOURNAL OF INTERNATIONAL ECONOMIC LAW 407, 410 (2015). 22 For more about the FTAAP concept, see, e.g., C. Fred Bergsten, Peterson Institute for International Economics, Toward a Free Trade Area of the Asia Pacific (November 27, 2007), accessible at Peter A. Petri, Michael G. Plummer and Fan Zhai, The TPP, China and the FTAAP: The Case for Convergence (May 19, 2014) in TANG, GUOQIANG AND PETER A. PETRI, EDS. NEW DIRECTIONS IN ASIA-PACIFIC ECONOMIC INTEGRATION (Honolulu: East-West Center 2014) Available at SSRN: or ; Peter A. Petri, and Ali Abdul-Raheem, Can RCEP and the TPP be Pathways to FTAAP? (October 12, 2014) Available at SSRN: Meredith Kolsky Lewis, The TPP and the RCEP (ASEAN + 6) as Potential Paths Toward Deeper Asian Economic Integration, 8 ASIAN J. WTO & INT L HEALTH L. & POL. 359 (pp ) (2013). 15

16 Japan, China and South Korea. 23 This concept, among other developments, led U.S. Secretary of State James Baker to warn that the U.S. needed to be careful not to be on the wrong side of a divided Pacific. A few years later, the goal of eventually achieving a Free Trade Agreement of the Asia- Pacific, or FTAAP, was elaborated within APEC. 24 While there was little agreement as to the way to accomplish deeper international economic integration, there was broad buy-in of the FTAAP concept. One formulation was for the FTAAP to develop through the leadership of APEC; another path, proposed by China, was for itself, Japan and Korea to form a Northeast Asian Free Trade Agreement which would serve as the driver. China also suggested using Mahathir s EAEG country grouping to create an East Asia-wide free trade agreement comprising the ASEAN countries, China, Japan and Korea the so-called ASEAN+3; and a variant on this was an ASEAN+6 agreement, adding India, Australia and New Zealand to the ASEAN+3 countries. 25 Nonetheless, the various economic integration models were primarily in conceptual form, without negotiations or other formal movement towards deeper integration. 26 Recently, however, a new dynamic has developed. 23 See, e.g., Mahathir Mahamad, Let Asians Build Their Own Future Regionalism, 1 GLOBAL ASIA 13 (2006), At that time, ASEAN comprised its original five members Indonesia, Malaysia, the Philippines, Singapore and Thailand as well as Brunei, which joined in See, e.g., Pathways to FTAAP, APEC (Nov. 14, 2010), Papers/Leaders-Declarations/2010/2010_aelm/pathways-to-ftaap.aspx. 25 Four other countries Cambodia, Laos, Myanmar and Vietnam joined ASEAN between 1995 and Thus the discussions of ASEAN+3 and ASEAN+6 began when ASEAN consisted of its current ten members. 26 See, e.g., Masahiro Kawai & Ganeshan Wignaraja, ASEAN+3 or ASEAN+6: Which Way Forward? presented at WTO/HEI Conference on Multilateralising Regionalism (Sept , 2007), kawai_wignaraja_e.pdf. 16

17 The Trans-Pacific Partnership, itself an outgrowth of the Trans-Pacific Strategic Economic Partnership Agreement (also known as the P-4 Agreement) between Brunei, Chile, New Zealand and Singapore, has emerged as a new contender to expand into an FTAAP, and unlike any previous models, the TPP does include the United States, but does not include China. In turn, the momentum of the TPP appears to have spurred China to push more actively for its own multiparty grouping, the ASEAN+6, currently known as the Regional Comprehensive Economic Partnership ( RCEP ). In considering the prospects for the TPP to expand into an FTAAP, we must therefore also acknowledge and weigh the impact of the RCEP. With the TPP and RCEP both comprising significant numbers of APEC members, perhaps the path to an FTAAP lies either in one of these agreements expanding or the two in some way being connected. Regardless of how this would occur, it seems fair to conclude that there cannot be a true FTAAP without the inclusion of both China and the United States 27 a marriage that will prove difficult to accomplish. Seven countries are in both agreements (Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam). However, for the RCEP countries not party to the TPP, accepting the full measure of TPP commitments seems more feasible for some participants than others. In particular, while Thailand, the Philippines and Indonesia have all expressed interest in joining the TPP, thus signaling at least a theoretical willingness to adopt its standards, other RCEP participants such as India, Cambodia, Laos and Myanmar would have to open their economies as never before, and do not seem likely to be interested in doing so. 27 Peter A. Petri and Ali Abdul-Raheem, Can RCEP and the TPP be Pathways to FTAAP?, chapter 2 in Pacific Economic Cooperation Council, State of the Region, 2014 ( much of the economic and political benefits of regional economic integration would still be unrealized as a result of the RCEP and TPP alone) (October 2014) (obtained from SSRN). 17

18 Furthermore, China might have the will to adopt most of the TPP s standards, but could determine that it is politically unappealing to join the TPP, with no ability to renegotiate its provisions. Accepting what some see as the United States rules could be perceived as China accepting a subservient role vis-à-vis the United States. This indeed seemed to be China s interpretation (and that of some outside of China) 28 of the TPP early on in the negotiations, when some of its rhetoric suggested the TPP was primarily intended to be an anti-china agreement. Nonetheless, more recently, China has adopted a more neutral approach to the TPP. 29 In addition, China has responded to the TPP by urging that efforts be put into creating an FTAAP. 30 China pushed the FTAAP message at the 2014 APEC summit in Beijing, and while the U.S. was rumored to have tried to quash the issue, 31 the Leaders Declaration included a plan to conduct a study into an FTAAP with results due by the end of It is understandable that the TPP has led China to put energies into FTAAP and similarly for the U.S. to back away from the concept. Notwithstanding China s current interest, for the above-mentioned reasons, it might not be feasible for the TPP to expand to include all the RCEP countries and others. More likely might be for the TPP to expand to include the more advanced members of RCEP not currently in the agreement. The easiest of these would be Korea, as it already has an FTA with the United States, followed by Thailand and the Philippines. Indonesia has expressed 28 See, e.g, Peter A. Petri and Michael G. Plummer, The Trans-Pacific Partnership and Asia- Pacific Integration: Policy Implications 2 (June 2012) (noting commentary positing the TPP as an effort to contain China but arguing the TPP and Asia-only agreements are not zero-sum propositions). 29 See Ming Du, Explaining China s Tripartite Strategy Towards the Trans-Pacific Partnership Agreement, 18 JOURNAL OF INTERNATIONAL ECONOMIC LAW 407 (2015). 30 The Diplomat, As TPP Leaders Celebrate, China Urges Creation of Asia-Pacific Free Trade Area (November 19, 2015), accessible at 31 Wall Street Journal 32 The Diplomat, supra note (Nov 19, 2015). 18

19 interest in joining the agreement, but its history of maintaining protectionist measures calls into question whether it would have the political will to make the necessary commitments. The other potential expansion partner is, of course, China. While the idea would have seemed absurd a few years ago, 33 there would be significant economic gains for both the United States and China if such an agreement could be reached. 34 However, even with 17 members, arguably additional integration would be needed to constitute an FTAAP. One possibility would be for an expanded TPP and the RCEP to form the boundaries from within which a middle-ground FTAAP could be forged. Under this scenario, the FTAAP would be based upon a hybrid of the TPP and RCEP approaches with more liberalization than RCEP will produce but less breadth and depth than the TPP. 35 This pathway could leave the TPP and RCEP to exist in parallel, with the FTAAP growing out of some core commonalities to which the members of the two agreements all could agree. With these commonalities forming the basis for a more modest, less comprehensive agreement than the TPP, it would be more feasible for APEC s poorer and less open economies to adhere to such an agreement. Although combining or linking or bridging the TPP and RCEP have been raised as potential pathways to achieving an FTAAP, the reality is that we are a long way away from any of these pathways being followed. More likely, in the short-to-medium term, will be a gradual expansion of the TPP and the conclusion of the RCEP. Perhaps the most important fork in the 33 In Petri and Plummer s 2012 article (above n. 26 at 3), they dismissed the possibility of China joining the TPP because China is unlikely to agree now to various concessions on state-owned enterprises, services, intellectual property, and labor that the United States would likely demand to open its markets further. ), but two years later, they had come to see this as a feasible development. See Peter A. Petri, Michael G. Plummer and Fan Zhai, The TPP, China and the FTAAP: The Case for Convergence (2014). 34 See Peter A. Petri, Michael G. Plummer and Fan Zhai, supra note 30 at 7 (arguing that TPP enlargement to 17 members through the addition of China, Indonesia, Korea, the Philippines and Thailand would lead to significant economic benefits). 35 Id. at 7 (Petri, Plummer and Zhai). 19

20 road will come if/when China expresses interest in joining up with the United States (or viceversa). This could occur through the suggestion of a bilateral FTA; China seeking to join the TPP; or a joint discussion of linking the TPP and the RCEP. The likelihood of achieving an FTAAP probably depends in significant measure on the reaction of the United States to China s overture (or the reverse, in the less likely scenario that the discussion is initiated by the United States). The possibility of cooperation should not be dismissed; the U.S. China relationship has been fluid and continues to evolve, and the economic benefits of joining together are undeniable. Nonetheless, significant groundwork is probably needed before such a step is likely to be pursued. Conclusion There have been dramatic changes in the types of trade agreements under negotiation in the past few years. These have included linkages of larger numbers of countries; linkages including more than one major economy; the inclusion of WTO-plus and WTO-beyond subject matter; and sector-specific plurilateral trade negotiations outside as well as within the WTO. These changes have significant implications for the world trading system as a whole, and call into further question how the WTO can move forward with further trade liberalization in the multilateral context. Within the Asia-Pacific, these changes have put the region front-and-center in creating the rules emerging from the new agreements. As such, some, but not all, Asia-Pacific economies are having a say in establishing the rules of the future. While the rise of the TPP and the RCEP has sparked renewed consideration of the possible pathways for achieving an FTAAP, many challenges remain before such an agreement could be realized. In particular, much will hinge upon whether the United States and China elect to join forces, or to remain as separate leaders of their own complementary yet currently separated spheres. 20