TPP or ASEAN+N: a Regional Perspective Stephen Yan-Leung Cheung Chair, Hong Kong Committee for Pacific Economic Cooperation 4 October, 2012 Taipei.

TPP or ASEAN+N:a Regional Perspective

Stephen Yan-Leung CheungChair, Hong Kong Committee for Pacific Economic Cooperation4 October, 2012Taipei

Overview

Part I: Asia and the ASEAN track Part II: Asia and the TPP track Part III: Case study on Impacts

Asia and the ASEAN TrackPart I：

Regional Strategy in the 21st Century

Actively involved in the Asian economic integration Implementing FTA strategy Deepening economic reforms Maintaining stable regional environment

China’s FTA Map

Region Implemented FTAs

Asia-Pacific Asia-Pacific Trade Agreement

East Asia CEPA (Hong Kong, Macao)

China-ASEAN (CAPTA)

China-Singapore

South Asia China-Pakistan

Latin America China-Chile

China-Peru

China-Costa Rica

Oceania China-New Zealand

Source: Ministry of Commerce of the People’s Republic of China

ASEAN+N Partnership

Rapid development over past decades Wide-ranged and multi-faceted

Goods, Service, 2-way investment, Energy, Transport, Culture…

Multi-level cooperation mechanism China-ASEAN summit, Foreign Ministers Meeting, Senior Officials Consultations,

Joint Cooperation Committee…

Open and inclusive partnership

Rapid development: trade between China and ASEAN

2007 2008 2009 2010 2011

Import &Export

1 billion USD 202.508 231.117 213.011 292.776 362.854

Year-over-year growth rate (%)

25.9% 14.0% -7.8% 37.5% 23.9%

Export 1 billion USD 94.139 114.142 106.297 138.207 170.083

Year-over-year growth rate (%)

32.0% 20.9% -6.9% 30.1% 23.1%

Import 1 billion USD 108.369 116.974 106.714 154.569 192.771

Year-over-year growth rate (%)

21.0% 7.9% -8.8% 44.8% 24.7%

Source: Ministry of Commerce of the People’s Republic of China

Future of the ASEAN Track

ASEAN+1 ASEAN+3 ASEAN+6 ASEAN+6+2 （ Russia, U.S.） …… FTAAP

Asia and the TPP TrackPart II：

TPP ： 21st Century and High-Standard Agreement

Covering a wider range of topics than established FTAs Open to newcomer: including accession clause (which is very unusual

for a FTA) Geographically, a real trans-pacific FTA Binding agreements With U.S. engaged

Potential Benefits for Major Players

Increasing market access, competiveness and profitability Increasing market size Easier capital/investment flows Uniform rules and standards Rule-making Stimulating reform

TPP Negotiation is still UP IN THE AIR

Too ambitious may not be feasible No clear guideline for how to integrate the various

established regional and bilateral agreements into TPP framework

Bargaining costs roar as more countries join in the negotiation

Gains for Major Players

Petri (2011) Kim (2011) Wan Lu (2011) Kawai & Wignaraja(2007)

Nation TPP9 TPP13 CJK ASEAN+3

TPP9 FTAAP ASEAN+3

ASEAN+6

TPP(1) TPP(2) TPP(3) ASEAN+3

ASEAN+6

USA 0.03 0.06 0.01 0.01 0.67 0.03 0.00 -0.01 0.05 -0.03 0.06 -0.03 -0.06

China -0.03 -0.08 0.11 0.42 0.01 2.24 1.81 1.83 -0.06 -0.15 -0.31 1.26 1.33

Japan -0.01 0.54 0.44 0.64 0.00 0.74 0.59 0.60 -0.05 0.17 0.34 1.54 1.59

Korea -0.02 0.71 1.16 1.52 -0.01 2.99 2.70 2.76 -0.05 -0.16 -0.35 6.19 6.43

Source: Shen Mingshui, “A cost benefits analysis of the Trans-Pacific Partnership Agreement (TPP): a Chinese perspective”, Journal of Contemporary Asia-Pacific Studies, 2012.

Income Effect under Different Scenarios

Negotiation covering sensitive areas and issues

Environmental protection, Intellectual property rights, Labor, Financial service, Institutions, Telecommunication, …

Reforms of State-Owned Enterprise (SOE) Convertibility of the capital account

Will the TPP Negotiation Prevail?

Japan and Korea have strong interest, but both hesitate China would NOT Join the Negotiation in the Short and

Medium Term TPP and ASEAN will coexist, with U.S. leading the

former, China actively engaging in the latter

Part III: Potential Impacts on China

Trade diversion Weakening China’s influence around Asia-Pacific “Spaghetti bowl phenomenon” increases trade costs (complex rules

of origin) Impeding structural reform

Possible Policy Responses of China

Expanding domestic demand Product differentiation Concluding bilateral or multilateral FTAs

China-Japan-Korea FTA China-Korea FTA …

Consolidating China-ASEAN “Greater China FTA” Increasing overseas direct investment (ODI)

Thank You!