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

2. Overview  Part I: Asia and the ASEAN track  Part II: Asia and the TPP track  Part III: Case study on Impacts

3. Asia and the ASEAN Track Part I ：

4. Regional Strategy in the 21 st Century  Actively involved in the Asian economic integration  Implementing FTA strategy  Deepening economic reforms  Maintaining stable regional environment

5. China’s FTA Map RegionImplemented FTAs Asia-PacificAsia-Pacific Trade Agreement East AsiaCEPA (Hong Kong, Macao) China-ASEAN (CAPTA) China-Singapore South AsiaChina-Pakistan Latin AmericaChina-Chile China-Peru China-Costa Rica OceaniaChina-New Zealand Source: Ministry of Commerce of the People’s Republic of China

6. 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

7. Rapid development: trade between China and ASEAN 20072008200920102011 Import & Export 1 billion USD202.508231.117213.011292.776362.854 Year-over- year growth rate (%) 25.9%14.0%-7.8%37.5%23.9% Export1 billion USD94.139114.142106.297138.207170.083 Year-over- year growth rate (%) 32.0%20.9%-6.9%30.1%23.1% Import1 billion USD108.369116.974106.714154.569192.771 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

8. Future of the ASEAN Track  ASEAN+1  ASEAN+3  ASEAN+6  ASEAN+6+2 （ Russia, U.S. ）  ……  FTAAP

9. Asia and the TPP Track Part II ：

10. TPP ： 21 st 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

11. 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

12. 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

13. Gains for Major Players Petri (2011)Kim (2011)Wan Lu (2011)Kawai & Wignaraja (2007) NationTPP9TPP13CJKASEAN +3 TPP9FTAAPASEAN +3 ASEAN +6 TPP(1)TPP(2)TPP(3)ASEAN +3 ASEAN +6 USA0.030.060.01 0.670.030.00-0.010.05-0.030.06-0.03-0.06 China-0.03-0.080.110.420.012.241.811.83-0.06-0.15-0.311.261.33 Japan-0.010.540.440.640.000.740.590.60-0.050.170.341.541.59 Korea-0.020.711.161.52-0.012.992.702.76-0.05-0.16-0.356.196.43 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

14. 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

15. 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

16. 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

17. 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)

18. Thank You!