RCEP and China’s Asia-Pacific FTA Strategy

Due to the impasse in negotiations of the WTO Doha Round,the multilateral trading system is faced with difficulties.Meanwhile, regional and cross-regional, bilateral and plurilateral trade negotiations have gradually become the mainstream of the international economic negotiations and the focus of attention of different countries.According to the Asian Development Bank statistics, as of January 2013, the Free Trade Agreements (FTA) in Asia has increased from 36 in 2002 to 109, additional 148 free trade agreements are in the different stages of development, making them 257 in total, which is far more than in other parts of the world.1Asian Development Bank, Asian Economic Integration Monitor—March 2013, Mandaluyong City, Philippines: Asian Development Bank, 2013, p.49.Traditionally, big country establishes Free Trade Areas of preferential trade arrangements with small and medium-sized countries mainly based on diplomatic and strategic considerations.Since the beginning of the century, the economic and trade negotiations between the major countries are on the upswing, focusing on the rules making and agenda setting.Against this background, two major negotiations coexist in the Asia-Pacific region with the Trans-Pacific Partnership Agreement (TPP) promoted by the United States and the Regional Comprehensive Economic Partnership (RCEP) led by ASEAN and actively participated by China.The Asia-Pacific regional economic cooperation is brewing a new pattern and is full of new variables.

I.Extension and Development of the Regional Cooperation

“Open regionalism” is a distinctive feature in integration and cooperation of the Asia-Pacific region.RCEP is the extension and development of the existing regional cooperation in the Asia-Pacific region.It also benefits from repeated and comprehensive weighing of a variety of regional cooperation initiatives by different countries.RCEP, based on the concept of “10+6” Asia-Pacific regional economic cooperation, includes the 10 ASEAN countries, China, Japan and the ROK in East Asia, as well as India, Australia and New Zealand.FTAs signed by these 16 countries account for nearly 70% of FTAs in Asia.

As early as in the mid-1960s, the famous Japanese economist Kiyoshi Kojima put forth the concept of the Pacific free trade area(PAFTA) composed of five Asia-Pacific countries (the US, Japan,Australia, Canada, New Zealand).2Kiyoshi Kojima, “A Pacific Economic Community and Asian Developing Countries,”Hitotsubashi Journal of Economics, Vol.7, No.1, June 1966, pp.17-37; Kiyoshi Kojima, “Japan’s Interest in the Pacific Trade Expansion: PAFTA Re-Considered,” Hitotsubashi Journal of Economics, Vol.9, No.1, June 1968, pp.1-31.The establishment of the Asia-Pacific Economic Cooperation (APEC) and the initiative of the Asia-Pacific Free Trade Area (FTAAP) were the follow-up development guided by this concept.

In 2002, the East Asia Study Group (EASG) proposed a phased objective in building an East Asian community, in which the establishment of East Asia Free Trade Area (EAFTA, “10+3” mode)composed of ASEAN ,China, Japan and the ROK was set as one of the medium and long term objectives.China became a major supporter of EAFTA.The Japanese government in 2006 proposed the idea of “East Asia Comprehensive Economic Partnership Agreement” (CEPEA,“10+6” mode), and actively promoted the academic research and intergovernmental discussion on this idea.To bridge or to transcend policy differences over EAFTA and CEPEA, China and Japan jointly proposed in “ASEAN+6” Economic Ministers Meeting in August 2011 the establishment of working groups on trade in goods, trade in services and investment liberalization.In November, ASEAN,based on joint proposal of China and Japan, tabled to the East Asia Summit the establishment of the three working groups, and proposed the idea of establishing RCEP.On August 30, 2012, the 1st ASEAN Economic Ministers Meeting with FTA partner countries was held,and the meeting adopted the Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership.3“Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership,” August 30, 2002, http://www.asean.org.In November, the 16 leaders participating in a series of meetings of East Asian Summit issued a joint statement announcing that RCEP negotiations would commence in early 2013, and is scheduled to complete before the end of 2015.By that time, the Free Trade Area will be built with a population of 3.4 billion and a total economic output of $17.23 trillion (2010 figure).4“ASEAN and FTA Partners Launch the World’s Biggest Regional Free Trade Deal,” ASEAN Secretariat News, November 20, 2012, http://www.asean.org/news/asean-secretariat-news/item/asean-and-fta-partners-launch-the-world-s-biggest-regional-free-trade-deal.

In the early 1990s, Korean scholars Kim Duk-Choong raised five possibilities of Asia-Pacific regional cooperation: the first and second were regional groups led by Japan and China, respectively; the third was known as the “West Pacific Community” including China,Japan, ASEAN countries, Australia and New Zealand; the fourth was called “Pan-Pacific Community”, plus the United States, Canada and Mexico or part of the Central and South American countries on the basis of the former; The fifth was called “mutual cooperation of the Asia-Pacific sub-groups”, in which Northeast Asia, Southeast Asia, South Asia form their respective sub-regional groups, while cooperating with each other through formal or informal ways.5Duk-Choong Kim, “Open Regionalism in the Pacific: A World of Trading Blocs?” The American Economic Review, Vol.82, No.2, May 1992, p.80.It’s easy to see that TPP is close to Pan Pacific Community and RCEP is consistent with West Pacific Community, both are certain variations of “mutual cooperation of the Asia-Pacific sub-groups”.

ASEAN has signed respectively five FTAs with China, Japan, the ROK, India and Australia.RCEP is thus both the new ideas aimed at solving the current problems faced by the Asia-Pacific regional economic cooperation and the product extended from regional cooperation.This is reflected in the following three aspects:

First, RCEP follows the “ASEAN Way” of principles of cooperation and further highlights the centrality of ASEAN in the Asia-Pacific regional cooperation.The main content of the “ASEAN Way” refers to equality of members, non-interference in internal affairs and peaceful co-existence.ASEAN has been playing a dominant role in various regional cooperation mechanisms in Asia, such as the ASEAN Regional Forum (ARF), the East Asia Summit (EAS) and the “10+1”,“10+3” modes of consultation mechanisms, thus forming the “hub and spoke” dialogue and cooperation mechanism with ASEAN as the axis.“ASEAN Way” fully considers and takes into account the comfortability and acceptability of the parties concerned and emphasizes consensus and progressiveness in regional cooperation.

Second, the RCEP adopts the “progressive liberalization”, and implements the policy of special and differential treatment to ASEAN members which are relatively low in their development level.This mainly involves new ASEAN members such as Cambodia, Myanmar,Laos and Viet Nam.

In the internal integration process ASEAN has already taken into account the special requirements of these countries, and different to the other six “old members”, the timetable for these members to realize internal trade liberalization has been postponed until 2015.The RCEP negotiation guiding principles and objectives clearly “recognizes the individual and diverse circumstances of the participating countries”, and stresses in particular that “taking into consideration the different levels of development of the participating countries, the RCEP will include appropriate forms of flexibility including provision for special and differential treatment, plus additional flexibility to the least-developed ASEAN Member States.”“Economic and technical cooperation under the RCEP will aim at narrowing development gaps among the parties and maximizing mutual benefits from the implementation of the RCEP agreement.”

This development pathway is parallel with the Asian Development Bank’s 2020 development strategy for the Asia-Pacific region.The latter, while underscoring the pillar of regional cooperation and integration (RCI), highlights other two development agendas, the“inclusive economic growth” and “environmentally sustainable growth”.At the same time, the growth of welfare and improved quality of life are considered to be the ultimate goals of any integration policy or strategy.In view of this, it can be predicted that the proposed RCEP would probably avoid setting fully unified, open trade standards and a timetable for achieving it.

Third, the RCEP is an open regional economic partnership agreement.Maintaining a controlled number of members for regional organizations in shared geographical scope and under common regional interests and pursuing “open regionalism” have always been the two important experiences of regional cooperation in Asia.6Asian Development Bank Institute, Asia 2050: Realizing the Asian Century, Manila: Asian Development Bank, 2011, p.111.According to the RCEP negotiation guiding principles and objectives, the ASEAN Free Trade Area partners in RCEP can apply to join in the follow-up phase.This integration process is in fact the combination of “variable geometry” and “concentric circles” in the multilateral trade negotiations and its application at the regional level.The former refers to a different country or group of countries which fulfill the different degree of integration on a variety of issues, while the latter represents some countries which achieve a high degree of institutionalized regional integration on a wide range of issues.The latter becomes the core of the integration process or inner ring; other countries choose the follow-up to join as members of the outer ring.7Asian Development Bank, Institutions for Regional Integration: Toward an Asian Economic Community, Mandaluyong City, Philippines: Asian Development Bank, 2010, p.16.

Theoretically speaking, it usually takes four ways to develop from the bilateral free trade agreement (BTA) to plurilateral free trade agreement (PTA): consolidation, multilateralization, harmonization and dilution.Consolidation is to merge the multiple BTA into a free trade area or trade group covering the entire area.Multilateralization means that when a country fulfills BTAs with most of the major trading partners, it takes the initiative to adjust the BTA preferential tariff, and gives non-BTA partners the most favored nation treatment.Harmonization is to coordinate tariff concessions and harmonize the MFN tariff.Dilution refers to weakening the more stringent rules of origin by linearization.In comparison, the multilateralization is most effective in reducing the trade distortion, and is the shortest in time-consuming.

The consolidation is facing two major drawbacks: on the one hand, it is often prone to the results of the “l(fā)owest common denominator”, leading to the increasing level of trade distortion; on the other hand, it tends to cause new external BTAs while reducing the BTAs within the region.Therefore, the consolidation itself is often regarded as a gradual process leading to multilateralization,rather than the ultimate goal.8Jayant Menon, “Dealing with the Proliferation of Bilateral Free Trade Agreements ,” The World Economy, Vol.32, Issue 10, Oct.2009, pp.1381-1407; Asian Development Bank, Asian Economic Integration Monitor—March 2013, Mandaluyong City, Philippines: Asian Development Bank,2013, pp.56-64.RCEP follows more on the way of integrated cooperation, yet its “open regionalism” leaves policy space for important trading partners such as the United States and the European Union to join in the follow-up, avoiding, to the best of its ability, the strong reactions from the United States and other trading partners outside of the region, and preventing the consequences of regional trade barriers and inter-regional trading confrontation.

While TPP follows more on the way of “expansion”, that is,independent of the established free trade areas and their system of rules by the countries concerned, it establishes its own rules and absorbs new members on this basis.9Shintaro Hamanaka, “Evolutionary Paths toward a Region-wide Economic Agreement in Asia,”Journal of Asian Economics, Vol.23, 2012, pp.383-394.It needs to be emphasized that TPP also contains terms of opening to the follow-up members,but because of its high entry threshold, China, Indonesia and other developing countries of the Asia-Pacific region are in fact prohibited to enter in the short term.10Peter Drysdale, “Asia and the International Trade Regime,” East Asia Forum, January 7, 2013;Jayant Menon, “How to Multilateralise Asian Regionalism,” East Asia Forum, January 6, 2013.

On the other hand, compared with the previous ideas of Asia-Pacific regional economic cooperation, RCEP also has the following new features:

Firstly, RCEP negotiations aim at establishing a “modern, highquality” free trade area.The five “10 +1” free trade areas which have entered into force are different in standards and wide in gaps.For instance, in the FTAs that China, Japan and the ROK established respectively with ASEAN, there are some differences and complementarities in the fields of trade and investment, industrial cooperation, industrial competition, regional development,intellectual property, competition policy and other issues.ASEAN+3 cooperation work plan, the Initiative for ASEAN Integration, the ASEAN-Mekong Basin Development Cooperation and other subregional or cross-regional cooperation mechanisms also involve,to varying degrees, cooperation in trade, investment, tourism,transportation, agriculture, environment, human capital, energy,information and communication technology and other areas.11Joint Expert Group for the EAFTA Phase II Study, Desirable and Feasible Option for an East Asia FTA, 2009, p.20, 26.

Even in the single areas such as trade facilitation, there are differences in customs procedures and cooperation, technical regulations and standards and animal and plant inspection and quarantine measures, non-tariff barriers, transparency of laws and regulations and administrative rulings, the use of information and communications technology and e-commerce in the FTAs which five countries signed with ASEAN.12The Economic Research Institute for ASEAN and East Asia, ASEAN+1 FTAS and Global Value Chains in East Asia, ERIA Research Project Report 2010, No.29, 2011, p.73.

As a new FTA based on five “10+1” FTAs, RCEP must take into account two requirements, the high level objectives and the progressive implementation.In other words, the RCEP will perpetuate the characteristics of the Asia-Pacific regional cooperation,such as protocol transparency, economic and technical cooperation,trade and investment facilitation, economic integration, special and differential treatment, agreement in line with the World Trade Organization (WTO) and ensured joint participation.On the other hand, it will try to be innovative and make breakthrough in other issues such as protection of intellectual property, competition policy and dispute settlement mechanism.Secondly, RCEP does not simply unify all the FTAs, that is to say the RCEP negotiations does not mean to use RCEP to cover or even replace the existing FTAs in a short period of time.

In fact, when 16 countries declared negotiation on RCEP, they did not stop their bilateral and plurilateral FTA negotiations, such as the bilateral FTA negotiations between ASEAN members and ASEAN partners, China-Korea FTA negotiations, China-Japan-Korea FTA negotiations.RCEP also goes hand in hand with the construction of the ASEAN integration within ASEAN.The expectation that RCEP negotiations will be completed in 2015 is consistent with the idea that the Economic Community will be established within ASEAN in 2015.Therefore, the RCEP construction and the implementation of FTAs/EPAs which have been signed or entered into force in Asia-Pacific region will be mutually reinforcing and complementary; one party’s progress in negotiations will produce significant “domino effect” to other parties.

II.A Clear Understanding of the Difficulties in RCEP Negotiations

Judging from the current situation, it is a great challenge to successfully conclude the RCEP negotiations by the end of 2015, the expected deadline.The main focuses and difficulties of the RCEP negotiations lie in the following aspects:

1.How to reconcile the huge difference between the RCEP and the FTA / EPA signed already by the negotiating parties

RCEP will cover trade in goods, trade in services, investment,economic and technical cooperation, intellectual property,competition, dispute resolution and other issues.In view of the huge gaps in the level of economic development of countries and their different positions on relevant issues, whether RCEP can eventually reach a certain “high quality” as planners designed will become one of the difficulties of the negotiations.The degree of trade liberalization in RCEP agreement will be higher than the one in FTA already concluded by ASEAN, which implies that countries are facing pressure to deepen their openness in different areas.

Take the trade in goods for example, in accordance with the free trade agreements already concluded, China and ASEAN’s old and new members would achieve zero tariffs for all normal goods in 2012 and 2018 respectively, and ASEAN and the ROK, Japan, India,Australia and New Zealand will achieve zero tariffs for all normal goods in 2018, 2026, 2022 and 2025 respectively.In addition to the high proportion of zero tariff, China-ASEAN Free Trade Area will produce tariff reduction in advance for agricultural products as an “early harvest”.However, Japan and the ROK list agricultural products as “sensitive products” which fall into the categories of delayed or non tax cuts.The opening up of service is one of the most sensitive and complex areas in China’s accession to the WTO and in China-Japan-ROK FTA negotiations.In the RCEP talks, China will face even greater pressure.

Judging from the number of opened sectors, the opening of the service sector in China is still lower than the level of Japan, the ROK,Australia and New Zealand.If RCEP aims at “highest bidder”, China will face mounting pressure in opening its service industry: in the field of trade in services, China opened 33 sub-sectors so far to ASEAN;while the ROK, Japan, Australia, New Zealand are committed to opening 85, 164, 85 and 116 sub-sectors respectively.

Because of the great challenges of the market opening, ASEAN members are still in varying degrees cautious of RCEP, and at the same time they are full of expectation to expand exports of their dominant industries of textiles, automobiles and auto parts.And in the other six countries, India’s position is particularly interesting.Traditionally India has been negative on the issue of free trade, especially on high alert for China’s influence in the region and potential risks of China’s entry into the Indian market.Therefore, whether the different sectors could be convinced about the potential benefits of increasing foreign investment, reactivating domestic manufacturing and expanding exports is the key to India’s participation in RCEP negotiations.In December 2012, the long-delayed India-ASEAN service trade and investment agreement was eventually reached, which is regarded as India’s strong pledge to participate in RCEP negotiations.To what extent India will eventually participate in the RCEP negotiations is something people are eager to know.

Furthermore, how to realize mutually open markets between the RCEP members who have not yet established FTAs will also test these countries’ political decision and the ability to coordinate domestic interests.These arrangements are: China-Japan, China-Korea, China-India, China-Australia, Australia-Japan, Australia-Korea, Australia-India, Japan-Korea, Korea-New Zealand, India-New Zealand, Japan-New Zealand.The relations between RCEP and ASEAN Free Trade Area (AFTA) have also become the focus of attention.

2.How to overcome the difficulties faced by the construction of AFTA

The successful building of ASEAN Economic Community holds the key to RCEP.At present, ASEAN’s top priority is to eliminate barriers to service industries such as finance, law, engineering, tourism and telecommunications, and to speed up the reform and coordination of relevant laws and regulations.At the same time, ASEAN has achieved limited progress in the development of commercial and visa regulations for single investment.While accepting Community’s arrangements, some countries are worried about negative effects following the establishment of the Community, and are formulating regulations such as the import growth protection measures act or special protection law.They face difficulties in providing to the investors of ASEAN members the national treatment.

They also encounter great challenges in reducing tariff barriers,unifying ASEAN product quality standards and simplifying customs procedures.Within ASEAN, countries differ greatly in their level of development.The ADB statistics showed that in 2010, the per capita GDP of Singapore was $43,897.6, Myanmar $714.8, and the figures of Laos and Cambodia were slightly higher than that of Myanmar.13Asian Development Bank Institute, Asia 2050: Realizing the Asian Century, Manila: Asian Development Bank, 2011, p.111.In the foreseeable future, this huge gap is difficult to be narrowed.

It is obvious that if ASEAN lacks overall political and legal coordination and coherence, the Economic Community will not be able to carry out cooperation.According to the analysis of above development, even if RCEP negotiations could be completed in 2015,it seems likely that it’s just an enhanced version of the traditional FTA.That is to say, on the basis of tariff reductions, RCEP will realize low-level free movement in trade in goods, trade in services,investment and skilled workers.It has a long way to go to unify gradually the laws and regulations of countries and ultimately create a single market and production base.

3.How to respond effectively to the “rules competition”brought about by TPP

TPP was evolved from the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) signed in July 2005 by Chile, New Zealand, Singapore and Brunei.With the participation of the United States, Peru, Viet Nam, Australia, Canada, Mexico and Japan, it has drawn world-wide attention.TPP has become an important carrier for the United States to “return to Asia” and to achieve its strategic rebalancing.By analyzing TPSEP text of the agreement and its annexes, the US-led TPP Agreement Outline (Outlines of the Trans-Pacific Partnership Agreement), the various proposals of the 9 countries negotiating text and the United States Congress report which have been made public, it can be seen that TPP is higher than RCEP so far as its range of topics, barriers to entry and liberalization requirements are concerned.TPP has extensive coverage, embodying almost all trade and trade-related areas.14“Enhancing Trade and Investment, Supporting Jobs, Economic Growth and Development:Outlines of the Trans-Pacific Partnership Agreement,” November 12, 2011, Office of the United States Trade Representative, http://www.ustr.gov/about-us/press-office/fact-sheets/2011/november/outlines-trans-pacific-partnership-agreement.

Since November 2011, TPP’s negotiating text expanded from the original 20 chapters to 29 chapters, involving agriculture,business flow, capacity-building, competition policy, state-owned enterprises, customs, e-commerce, the environment, financial services, government procurement, industrial products, intellectual property, investment, labor, legal system, rules of origin, trade in services, health inspection and quarantine, technical barriers to trade,telecommunications, textiles, trade remedies, cross-cutting issues(competitiveness, development, regulatory consistency, small and medium enterprises), etc.Among them, the state-owned enterprises,regulatory consistency and supply chain competitiveness are issues unprecedented in the previous FTA negotiation practices.

Big progress has been made in the fields of customs, cross-border services, government procurement, telecommunications, competition policy, small and medium-sized enterprises, competitiveness, business facilitation, cooperation and capacity-building.Several US proposal texts revealed during the TPP negotiation mainly involved five aspects of intellectual property, investment, regulatory consistency,technical trade barriers and transparency.These proposals reflect the US intention to lead the TPP negotiations, and particularly to protect and develop its own areas of strength, such as the digital economy and intellectual property.For example, the draft text of intellectual property rights which the United States has tabled was completely different from the intellectual property rights in the P4 Agreement, including new drug patents, copyright covering new digital economy, copyright limitations and exceptions.

In contrast, although the degree of openness in the RCEP members will be higher than five FTAs signed with ASEAN, it is still a traditional free trade area.According to the guiding principles and objectives of the RCEP negotiations, the RCEP will “include provisions to facilitate trade and investment and to enhance transparency in trade and investment relations between the participating countries, as well as to facilitate the participating countries’ engagement in global and regional supply chains”, seeking to “ensure a comprehensive and balanced results” in the negotiations on trade in goods, trade in services, investment and other areas.Since Singapore, Malaysia,Vietnam, Japan and other participating countries will put more attention on TPP, TPP’s rapid progress has dispersed enthusiasm or urgency of some countries to push forward the RCEP negotiations.

Furthermore, TPP has in fact shelved multilateral trade negotiations, and put the “Singapore agenda” which most of the developing countries find it hard to accept into the cross-regional FTA negotiations mechanism.By doing so, it is trying to rebuild TPP-led international trade system and the “rules of the game”,changing traditional “reciprocal exchange of market access” to “nonreciprocal exchange of domestic reform,” and creating a real “rules competition” and even “rules impact” on RCEP.

III.Strategic Thinking on China’s Participation in RCEP Negotiations

RCEP reflects the leading role played by ASEAN in East Asia economic cooperation and the deepening of East Asia economic cooperation.It is fully in line with China’s foreign policy that “China will continue to promote friendship and partnership with our neighbors, consolidate friendly relations and deepen mutually beneficial cooperation with them, and ensure that China’s development will bring more benefits to our neighbors.” TPP should occupy an important position in China’s FTA negotiations.Therefore, China should fully respect the central position and pioneering spirit of ASEAN in regional and inter-regional cooperation, actively promote negotiations and make creative contributions to its substantial progress.

Since China has decided to join the RCEP negotiations, it is imperative to have an overall strategic thinking on how to participate,and an accurate grasp of RCEP negotiations in China’s foreign trade strategy.In the new era, global and regional economic and trade negotiations increasingly involve the balance between economic and trade interests and non-economic benefits, coordination of international and domestic policies and interests, the roles of the government and enterprises, and domestic “territorial dispute”between different regions and sectors, etc.

All these issues transcend the scope of the narrow economic and trade negotiations, and are more and more related to “big diplomacy”or “three-dimensional diplomacy”.Meanwhile, China-Japan-Korea FTA negotiations, China-Korea FTA negotiations, RCEP, TPP and other regional cooperation initiatives present a multi-track, multispeed parallel state, and any negotiation process will profoundly affect the directions of other negotiations.China needs a coordinated and overall plan instead of working on offensive and defensive trade-offs of a particular industry or product.

We should know clearly that RCEP is just one of a plurality of FTA negotiations taking place simultaneously in the Asia-Pacific region, it could not replace other FTA negotiations in progress or under consideration, such as China-Korea FTA, China-Australia FTA, China-Japan-Korea FTA, China-India FTA, or even the highly overlapped “10+3” FTA.This is determined by the East Asian cooperation and the status of China’s foreign economic and trade relations.Any attempt to integrate once for all the existing free trade areas in East Asia through a package deal, or to solve the complex problems of the existing free trade areas, does not tally with the usual practice which calls for progressiveness in the East Asian cooperation and comfortability to all.

Moreover, the characteristic of the parallel development of diverse regional governance mechanisms does not exist only in the economic and trade fields - it is also an overall feature of East Asian cooperation.This is of course difficult to avoid the drawbacks caused by overlapping mechanisms, but it is a reasonable reaction to East Asia’s history and current situation.Countries could achieve different objectives from different mechanisms at various levels, enhancing the flexibility of regional and inter-regional cooperation and contributing to a healthy “competition of mechanisms”.

Based on the above analysis, the author would like to put forward the following policy recommendations on China’s participation in RCEP negotiations:

1.Select the prioritized open areas and heighten consensus and confidence of the RCEP participating countries

RCEP should not be achieved by signing a package agreement, on the contrary, its negotiations should be advanced through a step-by-step manner, by seeking common ground while reserving differences and by building consensus.Specifically, RCEP can refer to the“Early Harvest Program” created by China and ASEAN, select some easy-to-agree sectors as prioritized open areas, so that the countries concerned can benefit as soon as possible from the reduction of tariff and non-tariff barriers, thus contributing to furthering the follow-up agreement.

In view of the huge difference of the countries concerned and the difficulty in integrating existing free trade areas, the RCEP negotiation process will not be plain sailing.Even if a compromise can be reached, it will be most likely an ultimate goal with step-bystep and differentiated approaches.Therefore, the parties should be fully aware of the difficulty of the negotiation process.In order to avoid long-term stalemate of the negotiation, RCEP could maintain the momentum of the negotiation by endorsing initial results of integrated functional areas of trade facilitation and rules of origin.For example, the Asia-Pacific countries are faced with serious “spaghetti bowl” phenomenon in the development and management of the rules of origin, it becomes a common aspirations and policy consensus to coordinate and integrate the rules of origin within the region and to promote facilitation of customs clearance.15The Economic Research Institute for ASEAN and East Asia, ASEAN+1 FTAS and Global Value Chains in East Asia, ERIA Research Project Report 2010, No.29, 2011, p.73; Asian Development Bank Institute, The Asian “Noodle Bowl”: Is It Serious for Business, Manila: Asian Development Bank, 2009, p.9.

In addition, the enterprises in the Asia-Pacific region have not made good use of existing FTA Special Policy, some due to lack of information access and communication and some due to high cost of the application of customs clearance.For example, in a survey of 226 export enterprises in China, 29.6% and 14.6% of respondents said they had made use of China-ASEAN Free Trade Agreement and China-Chile Free Trade Agreement respectively, and only 22.1% and 16.4% of respondents said they would consider the use of the two agreements respectively.Therefore, if RCEP could proceed from the basic functional cooperation and create more favorable conditions for trade and economic development in the region, then it will raise regional trade liberalization and facilitation to a new level even though there is no major breakthrough in open markets for agricultural products, trade in services and other sensitive areas in the short term.

2.Mutual reinforcing between RCEP negotiations and China-Japan-Korea FTA negotiations

China-Japan-Korea(CJK) FTA negotiation is the core of China’s East Asian economic and trade strategy.In November 2012,China, Japan and the ROK announced they were about to begin negotiations on FTA following the ministerial meeting.The three countries clearly realize the huge economic benefits that the East Asia FTA can bring about and far-reaching significance of the regional integration process, and the investment agreement was signed in May 2012.However, due to territorial disputes, historical issues,sensitive industries and other thorny issues long existing between the three countries, there has been no substantive progress in the building of CJK FTA.Therefore, if the RCEP negotiations can make leap forward progress, it will exert strong external impetus to CJK FTA negotiations.

On the other hand, the key to the RCEP negotiations’ ultimate success lies in the genuine economic integration of the three East Asian countries.Of which, the bilateral FTA is the key to CJK FTA negotiations.China and the ROK have common positions on maintaining peace in the Korean Peninsula and promoting prosperity and stability in the region.In recent years, China has become the ROK’s largest trading partner and the largest investor, the ROK has also become China’s important trading partner and source of direct investment.In the five “10+1” agreements China-ASEAN FTA and Korea-ASEAN FTA could be integrated easily.In the field of trade in goods, the texts of the two agreements are highly identical in the tariff reduction time arrangements, trade liberalization level, sensitive products division and safeguards measures.

In the field of trade in services, the two agreements have almost the same categories, with the Korea-ASEAN FTA having additional financial services.In the field of investment, the two are basically the same in the scope of application, conditions on levying, investment treatment, most-favored-nation treatment and transparency.In addition, the two agreements have no provisions on intellectual property rights, animal and plant quarantine measures, technical barriers to trade, competition and government procurement.

3.Abandon the thinking that RCEP and TPP are opposed to each other

Quite a few of comments view RCEP as a tool used by the East Asian countries against TPP, at least it is a “buffer” to reduce the risk and impact caused by TPP.In view of the minimum possibility of China’s participation in TPP in short term, some observers even regard TPP as “encirclement against China” on economic and trade issues, and RCEP will not consider absorbing the United States and others as members.Therefore, the relationship between RCEP and TPP was once played up as a showdown between the United States and China, or a rivalry between the two countries in making trade and investment rules.While this judgment is somewhat exaggerated and distorted, the prospect of RCEP is undoubtedly affected by the strategic pattern in the Asia-Pacific region and especially the United States’ substantive attitude.

China should not simply wait and see the development of TPP.It should actively carry out researches, contemplate how to response and analyze in an objective and cool-minded way the pros and cons of TPP.It should add some rational parts advocated by TPP into RCEP negotiations, so as to achieve the strategic interaction between RCEP and TPP.According to the Asian Integration Index prepared by the Asian Development Bank, the Asian regional integration level rose to 233.27 in 2010 from 100 in 2001.The tariff is no longer a major obstacle to trade in the region, but non-tariff measures such as border control remain serious obstacles hindering deep regional integration of Asia.

At the same time, regional cooperation in financial integration,labor mobility, trade in services and other areas is still seriously lagging behind.Some issues contained in TPP such as government procurement, intellectual property, labor and environmental standards are inevitable topics in multilateral and regional trade negotiations in the future.They are also consistent with the strategic orientation of further reform and opening up in China and could serve as opportunities to “push the reform with the opening up”.

To some extent, RCEP negotiations could jump out of the inherent modality in which agreement on trade in goods comes first,then followed by service trade agreement, and finally closed with investment agreement.RCEP may consider inclusions of some TPP’s high-standard content into the initial stage of RCEP negotiations.It’s true that any trade negotiations must comply with national interests,have sufficient coordination of domestic interests, and refrain from“opening up for the sake of opening up”.However, if one proceeds from the ground on which to strive for the right to speak and the initiative in making international economic cooperation and trade regulations in the new era, RCEP negotiations may even weaken the traditional offensive- and- defensive negotiating mode.

In short, against the backdrop of stalled multilateral trade negotiations, how to promote and deepen the bilateral and regional integration has become the paramount task in China’s future foreign economic cooperation.As President Xi Jinping pointed out in the keynote speech at the Boao Forum for Asia 2013 Annual Conference that “Asian cooperation should adhere to openness and inclusiveness,and provide a broad space for promoting common development[...]Asian cooperation is open, and the cooperation within the region should go hand in hand with the cooperation in other regions.”

At present, China should continue to support ASEAN-led openended regional cooperation in Asia-Pacific, push RCEP to open in some areas of priority and try to avoid the unfavorable situation in which TPP prospers while RCEP dwindles.In addition, China should face up to the positive side of the TPP negotiations.Even if China would not join TPP in the short term, China could not avoid such issue in the RCEP and other FTA negotiations in the future.It requires China to do a good job in research on the development trend of TPP and other new regional and inter-regional cooperation mechanisms and to complete as soon as possible the institutional accumulation for the deepened reform and further opening up.