Cavassing China: China’s FTA rush

Oct 02 2013, 03:05 IST
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SummaryThe new leadership is anxious to avoid the possibility of being left out of important regional agreements.

China’s external engagement policies are showing marked changes under the new leadership. This is evident from the proactive moves being taken for getting involved in various important regional economic agreements.

The foremost example is the Trans Pacific Partnership (TPP). The US-led TPP is in the final stages of negotiations with hopes of being substantially concluded by the end of the year. The agreement includes APEC members from both sides of the Pacific with some important exceptions like China and Indonesia. China has traditionally been hostile to the agreement. Influential views within China have viewed the agreement as a strategic manifestation of the US’s renewed interest in Asia and an attempt to marginalise China by stitching an alliance of American allies and partners from the region. During the Hu-Wen leadership, China was considerably wary of the TPP. Now, however, there are distinct signs of change in perceptions. China is actively considering the possibility of joining the TPP negotiations and studying the pros and cons for doing so.

A strong signal that can be taken as a precursor to China’s formal announcement of its wishes to join the TPP is resumption of negotiations on the China-US bilateral investment treaty. Investment talks had begun between the two countries when President Bush was in office. They were subsequently called off over China’s reluctance to include all sectors of the economy within the ambit of discussions, particularly services, which it was keen on protecting. During the latest Strategic Economic Dialogue with the US in July, China dropped its earlier objections paving the way for recommencement of negotiations.

The radical change in the Chinese attitude took many by surprise. China could well be taking investment negotiations with the US as the first step towards moving to the TPP, which covers trade in goods and services, investment, competition policy, non-tariff measures and a host of ambitious trade policy issues like labour, environment and government procurement. Knowing well that the US is the main driver of the TPP, and that most critical issues in the TPP are being settled through bilateral negotiations between the US and TPP members with whom the US does not have FTAs, (e.g. Malaysia, Vietnam, Japan), China is taking the investment treaty as the stepping stone to more such bilateral negotiations with the US in the TPP.

In addition to following the TPP closely, China is engaging actively in two other regional negotiations. These are the

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