Enhancing the Economic Integration Agenda – Pathways to FTAAP Australian APEC Study Centre at RMIT University ASSN Conference 2015 Boracay

The Challenge 1. Using existing regional FTAs as foundation stones 2. Providing for the varying patterns of growth and liberalization among Asian Pacific economies 3. Maintaining the integrity and authority of the WTO system.

Regional FTAs There are several large agreements - ASEAN and the ASEAN plus agreements - NAFTA - The Trans Pacific Partnership - The Regional Comprehensive Economic Partnership And a number of smaller ones – Pacific Alliance, P4. Commitments vary significantly in the Agreements

The Global Trade Policy Setting The Asian Pacific regional agreements generally presume WTO Agreements lay down reference points for most aspects of regulations to open global trade markets; - it is traditional APEC policy to support WTO. Regional agreements have differed by - covering investment (WTO does not); - extending IP commitments; - changing some elements – e.g. services, rules of origin, government procurement; - creating some new rights to regulate trade - adding new elements – e.g. provisions on SOEs, competition WTO agreements create a unique system of global rules, the authority and relevance of which must be protected and preserved.

Foundation stones for FTAAP 1. - TPP which covers 12 APEC economies (AU,BRN,CAN,CHL,JAP,MAL,MEX,NZ,PER,SIN,US,VN) 2. - RCEP which covers 16 economies (ASEAN -10, AU, CHIN, IND, JAP, NZ, ROK) 3. - Remaining APEC economies (HK China, Chinese Taipei, Russia, PNG)

Negotiating an FTAAP - the Challenges Addressing: Different treatment in existing commitments to liberalize Different scope of liberalization in other agreements Different coverage of measures Different timing for negotiations and implementation

The Challenges –Content Different treatment in existing commitments - ASEAN provides slower phase-in rates to reduce barriers to trade in goods & services for the Mekong economies, and in particular for agriculture. Expect similar measures in RCEP. - TPP does not recognize “Special & Differential Treatment” for developing countries Differences in scope of liberalization - ASEAN has made few commitments to liberalize services and investment controls (although frameworks are in place). RCEP might advance this, but unlikely.

The Challenges - Modalities Different spread of coverage of measures - Coverage of some issues in RCEP (e.g. IPR and other and other economically-related matters, such as SOE’s is likely to be narrower. Different timing for negotiations and implementation -If TPP does not complete this year, it will be deferred a year (US election timetable) -Very difficult to see RCEP concluding this year given the pace of work

Prospective impacts of liberalized outcomes in TPP & RCEP – Primary Issues AREATPPRCEPSignificance Trade in Goods Markets for goods are open Agriculture++Remains heavily protected Textiles??Significant restraints in US trade Rules of Origin??Bureaucratically complex – regional cumulation & simpler administration the key Least Developed+ASEAN LDC’s liberalizing Trade in Services++++*Large prospective gains Investment++++*Large prospective gains + (economically beneficial) – (illiberal/negative impact) * ASEANS behind targets in ASEAN Economic Blueprint

Prospective impacts of liberalized outcomes in TPP & RCEP – Other Subjects AREATPPRCEPSignificance Intellectual property+++ASEAN focussed on copyright Competition++/?ASEAN blue print mostly unimplemented SOE’s+?Greater clarity on competitive impact + (more comprehensive measures) – (illiberal/negative impact)

Two strategies I. Building Blocks - Advanced RCEP members join TPP - LLDC ASEAN (Mekong) members graduate to full ASEAN commitments, then RCEP commitments and, when ready, then to TPP. II. Clean sheet -A fresh agreement (FTAAP) is negotiated Pros Cons Logical Easier passage in US Congress Politically unacceptable to key parties Common starting point for all parties, particularly China Apparent duplication for TPP & RCEP parties

Maintaining the integrity of the WTO system IMPACT OF FTAAP - Would set a new global standard for liberalizing trade and investment - It will have authority – two thirds of global GDP; covers the fastest growing sector of the world economy. - Will set liberalizing framework for future the drivers of global economic growth - investment & services. - Risks making the WTO system redundant unless conscious action is taken to design measures which respect and maintain WTO legitimacy and authority. Parallel action which will preserve WTO legitimacy and authority  Preserve authority of WTO Disputes Settlement system.  Eliminate the multiplicity of rules of origin in FTAs.  Adopt services schedules which are negative list (supporting a parallel strategy in the WTO).  Open agricultural markets.  Phase out constraints in textile trade (yarn forward rule).  Align WTO schedules with FTAAP commitments

Timing the key – maybe delay is positive On TPP side, - US Congress divided, common view if Congressional trade authority is not agreed within 3 months, conclusion of TPP will be delayed until early 2016 On RCEP side, - Additional time will provide opportunity to advance RCEP commitments and create opportunity for ASEAN to craft measures for RCEP which are set out in the ASEAN Economic Blueprint For Remaining APEC economies (HK China, Chinese Taipei, Russia, PNG) - Additional time will enable them to contemplate positions to advance in FTAAP In WTO, - APEC parties could collaborate to develop measures in the Doha Round negotiations which will align WTO Agreements with major policy changes considered for FTAAP.