Topic 2-2 Mega FTAs (TPP & RCEP), Regional FTAs (ASEAN+) and Some Bilateral FTAs in - PowerPoint Presentation

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Topic 2-2Mega FTAs (TPP & RCEP), Regional FTAs (ASEAN+) and Some Bilateral FTAs in Asia

Professor Chang-fa Lo

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Plurilateral FTAs

Mega-FTA: high percentage in the total world trade; wide geographic coverage

Regional FTA: FTA with more than 2 contracting parties

Bilateral FTA: FTA

with two contracting parties

Slide3

Mega-FTAs (bigger plurilateral FTAs) examples

Trans-Pacific Partnership (TPP)

TPP: 12 countries - Australia, Brunei

Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, Viet

Nam

Concluded on

October 4,

2015

The

result is a high-standard, ambitious, comprehensive, and balanced agreement

TPP % of world GDP:

36.2%; world

population: 11.2

%; world

trade: 25.6%

Regional

Comprehensive Economic Partnership 

(RCEP; ASEAN + 6): 10

ASEAN countries + 6 six ASEAN’s FTA Partners (Australia, China, India, Japan, Korea, and New Zealand

)

almost half of the world’s population, almost 30 per cent of global GDP and over a quarter of world exports.

The

Trans-Pacific Partnership (TPP

): between

the United States and the European

Union

33

percent of the world GDP, with 11.2 percent of the population.

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Regional-FTAs (plurilateral FTAs) example

North American Free Trade

Agreement – NAFTA: Canada, U.S., Mexico

ASEAN FTA – among Brunei

, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet

Nam

ASEAN + China

ASEAN + JapanASEAN + Korea

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FTAs between Asian countries/economies - examples

China-Hong Kong Closer Economic Partnership Arrangement

China-Singapore Free Trade Agreement 

China-Taiwan Economic Cooperation Framework Agreement (ECFA)

Korea-Singapore

Free Trade

Agreement

Japan-India Comprehensive Economic Partnership Agreement  Japan-Indonesia Economic Partnership Agreement  Japan-Malaysia Economic Partnership Agreement  

Asian countries have more FTAs with countries outside the region.

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Some statistics about Asia and Pacific FTAs (signed or under negotiation)

https://

aric.adb.org/fta-country

Afghanistan

  (2 FTAs)

Armenia

  (10 FTAs)

Australia

  (19 FTAs)

Azerbaijan

  (10 FTAs)

Bangladesh  (6 FTAs)Bhutan  (3 FTAs)Brunei Darussalam  (11 FTAs)Cambodia  (8 FTAs)China, People's Republic of  (23 FTAs)Cook Islands  (4 FTAs)Fiji  (5 FTAs)Georgia  (12 FTAs)

Hong Kong, China  (5 FTAs)India  (28 FTAs)Indonesia  (17 FTAs)Japan  (24 FTAs)Kazakhstan  (14 FTAs)Kiribati  (4 FTAs)Korea, Republic of  (24 FTAs)Kyrgyz Republic  (10 FTAs)Lao PDR  (10 FTAs)Malaysia  (22 FTAs)Maldives  (2 FTAs)Marshall Islands  (5 FTAs)

Micronesia, Federated States of  (5 FTAs)Mongolia  (1 FTA)Myanmar  (10 FTAs)Nauru  (4 FTAs)Nepal  (3 FTAs)New Zealand  (17 FTAs)Pakistan  (18 FTAs)Palau  (4 FTAs)Papua New Guinea  (6 FTAs)Philippines  (11 FTAs)Samoa  (4 FTAs)

Singapore

  (32 FTAs)

Solomon Islands

  (5 FTAs)

Sri Lanka

  (7 FTAs)

Taiwan

  (9 FTAs)

Tajikistan

  (8 FTAs)

Thailand

  (22 FTAs)

Timor-Leste

  (0 FTAs)

Tonga

  (4 FTAs)

Turkmenistan

  (6 FTAs)

Tuvalu

  (4 FTAs)

Uzbekistan

  (10 FTAs)

Vanuatu

  (5 FTAs)

Viet Nam

  (16 FTAs)

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FTAs used/negotiated for strategic purposes – example: ChAFTA’s

Implication for the Strategic Goal of the U.S. in the TPP

There are different views about whether the TPP is a containment and isolation of China created by the U.S. to counter China’s increasingly greater dominance in Asia.

No matter whether agreeing to the containment argument or not, the facts are

That some people do have this containment idea in mind,

That U.S. had “return to Asia Pacific” policy,

That U.S. has played the leading role in the whole process of negotiation,

T

hat China is not within the TPP and has not expressed its intention to participate, neither is China warmly welcome to participate, and

That the TPP countries have formed a trade bloc with a wide geographic coverage, mostly in Asia-Pacific region where China is located.

There is a potential/actual effect to weaken China’s economic influence (and possibly other influences) in the Asia-Pacific region by the TPP.

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ChAFTA’s Implications for the Strategic Goals of the U.S. in the TPP

There have already been other breaks of the U.S.

“containment”,

such as China – Korea and China – Japan FTAs.

But

the

ChAFTA

is of even higher importance to China in that Australia and the U.S. have long been close allies and that it is the first major western developed country to sign an FTA with China.

So there are actual and symbolic positive effects for China to counter the TPP through

ChAFTA

TPP –

Brunei

Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, Viet Nam,

Japan - China ASEAN - China Australia - China 8

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Overlaps

Two

main reasons causing

increasing

overlaps of geographical coverages of

FTA:

Rapidly

increasingly more FTAs being concluded. More and more FTAs established among three or more parties. Overlapping situation

more noteworthy:

Many

FTAs (the “inner FTAs”)

geographically

fully covered by another mega-FTA (the “outer FTA”).2015/3/29

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2015/3/2

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ASEAN FTA (AFTA)

Brunei Darussalam, Cambodia, Indonesia,

Lao

,

Malaysia

,

Myanmar

, Philippines, Singapore, Thailand,

Viet

Nam

China

AustraliaKoreaAustralia & NZ

Japan RCEP (including India)Inner FTAsOuter FTA

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US-Peru

US-Korea

US-Canada-Mexico

US-Singapore

Inner FTAs

Outer FTA

US-Chile

US-Australia

Australia-NZ

Canada-Peru

Canada-Chile

Japan-Singapore

TPP

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IssuesSubstantive conflicts

The

applicable extent of

liberalization under which FTA

The applicable trade rules (TBT, SPS, AD, SG, others)

Applicable IP rules

Applicable non-trade issues (investment, environment, labor, competition, others)

2015/3/2

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IssuesProcedural conflicts

Different DSMs

Even similar or identical DSM, the results could be different because of their substantive rules

2015/3/2

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IssuesProblem generally in the context of FTA vs. FTA

Forum shopping

Problems specific for outer-FTA vs. inner-FTA

Possible fragmentation

Impact to the operation of the outer FTA (mega-FTA)

2015/3/2

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Multilateral/Regional vs. Regional/Regional

Between WTO and FTA

WTO governs FTAs’ establishment

FTA more liberalized

FTA wider in scope of subject matter

FTA parties can decide which forum to rely on if a dispute is both WTO-dispute and FTA-dispute

FTA could have DS rules dealing with this: ex.

discretion + exclusion when selected forum

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Multilateral/Regional vs. Regional/Regional

Between outer-FTA (mega-FTA) and inner-FTA

A little similar to WTO and FTA

One is geographically fully covered by another

But still different

Outer-FTA does not govern the establishment of inner-FTAs. They operate in parallel

Inner-FTA and outer FTA have higher possibility of “subject matter overlaps”: They cover investment, competition, labor, environment issues.

WTO vs. FTA = multilateral vs. regional

Outer-FTA vs. Inner-FTA = regional vs. regional

2015/3/2

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Substantive approaches to address overlaps issues

Reaffirm parties

’ rights and obligations under

other

bilateral

agreements

;

Or Not to derogate from any right or obligation of a Party under other agreements to which the Parties are party.Results could be different under different FTAs

Parties still need to know which result should be prioritized

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Substantive approaches to address overlaps issues

Australia-Japan FTA:

Nothing

in this Agreement shall be construed to derogate from any right or obligation of a Party vis-à-vis another Party under agreements to which these Parties are parties,

if such an obligation entitles the latter Party to treatment more

favourable

than that accorded by this Agreement

. (Emphasis added)What is more favorable treatment in a dispute when some related provisions in another FTA is more favorable, some others are less favorable?

2015/3/2

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Substantive approaches to address overlaps issues

To have one set of rules superseding another. Ex. NAFTA:

In the event of any inconsistency between this Agreement and such other agreements, this Agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement

.

It is understandable to supersede previous FTAs.

Problem: What if other FTA is concluded later in time and more liberalized?

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Procedural approaches to address overlaps issues

To require consultation. Ex:

In the event of any inconsistency between this Agreement and any other agreement to which two or more Parties are party, such Parties shall immediately consult with a view to finding a mutually satisfactory solution

.

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Procedural approaches to address overlaps issues

To require consultation and take into consideration of international law rules. Ex.

Aus

-Jap FTA

In the event of any inconsistency between this Agreement and any agreement other than the WTO Agreement to which more than one (1) Party are parties, these Parties shall immediately consult with each other with a view to finding a mutually satisfactory solution,

taking into consideration general principles of international law

.

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Procedural approaches to address overlaps issues

Shortages

:

It

is possible that after having considered general principles of international law, the result is to apply the provisions of an inner FTA.

It

is also possible that focusing on the rights and obligations between the parties under the inner FTA could undermine the integrity of the outer FTA and lead to fragmentation of its operation. The outer FTA parties’ interest could also be affected if issues are handled under the inner FTAs.

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VCLT provisions to address overlap issues and their problems

VCLT

Article 30.3 basically says that if all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended, the later treaty will apply; for the earlier treaty, it applies only to the extent that its provisions are compatible with those of the later treaty.

Inner first, outer second = apply the outer

VCLT Article 30.4 basically says that if not all of the parties to the earlier treaty are parties to the later treaty, as between parties to both treaties, the same rule applies as in para 3.

Outer first, inner second = apply the inner

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Problems of current practicesThe FTA provision to

address the overlap issues (to require coexisting, concurrent and parallel obligations) does not solve the overlap issues between a two FTAs,

Because

it is still possible that the result under a dispute resolution procedure of one FTA could be different from the result under the dispute resolution procedure of another FTA due to their different substantive requirements.

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Problems of current practicesThe

approach in the Australia-Japan FTA adding a requirement of “more favorable treatment” for the parallel obligations is useful.

But

the decision of favorableness sometimes could be difficult when a complaint involves many provisions in relevant FTAs.

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Problems of current practicesThe

type of substantive provision in FTAs to address the overlap issues by having one set of rules superseding another is also problematic.

If

a prior FTA is superseding the later FTAs, it will prevent the improvement of regional trade liberalization.

If

the later FTAs always supersede a previous outer FTA, the operation of the outer FTA could be hampered or fragmented

.

2015/3/2

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Problems of current practicesSo

we need another set of approach to address the overlap/conflict issue between the mega-FTA and its inner FTAs so as

to maintain

the integrity and proper operation of the outer FTA and, at the same time,

not

to prevent parties from having more intensive trade liberalization or higher quality rules through their inner FTAs.

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Contents of possible coordination schemes

Procedurally

,

a

scheme to prevent forum shopping

between

an inner FTA and an outer FTA.

Important for operation of the outer FTA. An outer FTA is supposed to be more liberalized than previous FTAs established by

and is expected

to

be in operation for the relationship among

parties

. If the outer FTA can be easily avoided by a party through resorting to its inner FTA, the operation of the outer FTA would be seriously hampered. 2015/3/228

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Contents of possible coordination schemes

To

achieve this purpose, there could be a procedural priority provision included in the outer FTA to

prioritize the use of its DSM even

though there might be a DSM available in an inner

FTA.

If

there is such provision to prevent forum shopping and to prioritize the use of the DSM of the outer FTA, the outer FTA’s integrity and its proper operation could be maintained, because resorting to the DSM of an inner FTA by a party could be considered as not acting in good faith.

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Contents of possible coordination schemes

Some

exceptions to this forum shopping prevention provision in the outer FTA.

inner

FTA requires higher degree of liberalization,

the

standard of

IP protection in the inner FTA is higher, or the relevant subject matter is covered by the inner FTA but not covered by the outer FTA

,

This

is to maintain an overall higher standard of liberalization and

IP

protection. 2015/3/230

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Contents of possible coordination schemes

Such

scheme is mutually supportive to both the inner FTA and the outer FTA in the sense

that

the inner FTA will not affect the operation of the outer FTA, and in turn,

the

outer FTA will not prevent the possible enhancement of liberalization and

IP protection under an inner FTA. It is

coordination; interactive arrangement

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Contents of possible coordination schemes

Under

such exceptional circumstances,

DSP

conducted under the inner FTAs should allow other parties to the outer FTA to join in as third parties.

This is more desirable to

ensure that the results will not undermine the integrity of the outer FTA.

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Contents of possible coordination schemes

The

third party participation should be allowed in the consultation stage and the further dispute settlement stages.

And

the third parties should be able to make statements concerning whether conducting a dispute settlement procedure under the inner FTA is justified and is in good faith based on the conditions mentioned above and whether such procedure would hamper the operation of the outer FTA

.

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Contents of possible coordination schemes

Concerning

standards/rules

setting:

The

outer FTA should provide a platform for discussing coordination or harmonization of such standards/rules between

the

outer and inner FTAs. This is to ensure high quality standards/rules. If the standards/rules are harmonized, the problem of whether to apply one FTA or another becomes of no importance.

2015/3/2

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