How to Assess Regional Trade Agreements? Deep FTAs v. China's Trade Agreements

• Author: Heng Wang
• Pages: 247-279

How to Assess Regional Trade Agreements?

Deep FTAs v. China’s Trade Agreements

H

ENG

W

ANG

*

I. Introduction

Regional trade agreements come in various forms, including free trade

agreements (FTAs) and agreements like the 2020 U.S.-China Phase One

agreement (Phase One agreement).

1

These agreements have now played an

increasingly important role due to the stagnation of the World Trade

Organization (WTO), in part due to the dysfunction of its Appellate Body.

2

The assessment of regional trade agreements is crucial due to the major

impacts they have on the parties, and the spillover effects they may have on

non-parties (e.g., trade diversion).

3

This is important for better

understanding the trade approaches of different states because they cover

crucial issues ranging from investment to intellectual property (IP).

4

Such

an assessment is also particularly timely as trade agreements are in flux and

fast changing. To illustrate, the Phase One agreement is unprecedented

* Professor, School of Private and Commercial Law, and Co-Director of Herbert Smith

Freehills CIBEL (China International Business and Economic Law) Centre, Faculty of Law and

Justice, the University of New South Wales. Email: heng.wang1@unsw.edu.au. Part of this

paper was presented at the Workshop on “The New Plurilateralism: The Emerging Standard

for Global Economic Governance?” held by Warwick Law School and Monash Law School in

2017. Many thanks to Markus Wagner, Caroline Henckels, David A. Gantz, Pasha L. Hsieh,

Simon Lester, Francine Hug, Heloisa Pereira Chikusa, and the participants of the workshop for

the insightful comments. The author is grateful to the UNSW Law & Justice’s Herbert Smith

Freehills CIBEL Centre for the support, to the European University Institute for the Fernand

Braudel Senior Fellowship during which he worked on this paper, and to J¨urgen Kurtz as the

host. Special thanks go to Melissa Vogt and Hamish Collings-Begg for their valuable research

assistance and comments.

1. See generally Economic and Trade Agreement, China-U.S., Jan. 15, 2020, https://ustr.gov/

sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_

Agreement_Between_The_United_States_And_China_Text.pdf [https://perma.cc/EZ85-P8X8]

[hereinafter U.S.-China Phase One Agreement].

2. Vineet Hegde, As WTO’s Dispute Settlement Body Dies a Dysfunctional Death, What Comes

Next?,

G

LOBE

(Dec. 16, 2019), https://www.globe-project.eu/en/as-wto-s-dispute-settlement-

body-dies-a-dysfunctional-death-what-comes-next_7281 [https://perma.cc/68H6-R9G7].

3. See generally Naomi Powell, ‘Canada Should Be Worried’: Canadian Exporters May Become

Collateral Damage of U.S-China Trade Deal,

F

IN

. P

OST

(Jan. 14, 2020), https://

business.financialpost.com/news/economy/canada-should-be-worried-canadian-exporters-may-

become-collateral-damage-of-u-s-china-trade-deal [https://perma.cc/9LT9-RAQV].

4. See generally Trade Agreements,

I

NT

’

L

T

RADE

A

DMIN

.

, ttps://www.trade.gov/trade-

agreements#:~:text=the%20World%20Trade%20Organization%20(WTO,impact%20the

%20flow%20of%20trade [https://perma.cc/KAZ4-WNMA] (last visited Jan. 3, 2021).

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248 THE INTERNATIONAL LAWYER [VOL. 54, NO. 2

among the trade agreements signed by the United States and China.

5

The

United States Trade Representative (USTR) Robert Lighthizer described

the Phase One agreement as “the first agreement like this of its kind.”

6

The

Phase One agreement, regardless of questions as to its future operation, is

also crucial to understanding the approaches of the United States and China.

All these factors add urgency to assessing trade agreements based on an in-

depth comparative study, which has to date received insufficient attention.

Trade agreements can be separated into two major categories: deep and

shallow.

7

This paper focuses on deep FTAs and China’s trade agreements as

the representatives of these two categories of trade agreements. Deep FTAs

predominantly set out rules and tackle wide-ranging, behind-the-border

issues (e.g., the harmonization of national regulations concerning services,

labor, and the environment).

8

They range from the Trans-Pacific

Partnership (TPP)

9

that has developed into the Comprehensive and

Progressive Agreement for Trans-Pacific Partnership (CPTPP),

10

to the

EU-Canada Comprehensive Economic and Trade Agreement (CETA),

11

and

the United States–Mexico–Canada Agreement (USMCA).

12

Shallow trade agreements mainly address border measures, particularly

tariff barriers and quotas.

13

China’s trade agreements, consisting of FTAs

5. Kevin Freking & Paul Wiseman, Read the Full U.S.-China ‘Phase 1’ Trade Agreement,

PBS

(Jan. 16, 2020, 7:52 AM), https://www.pbs.org/newshour/economy/read-the-full-u-s-china-

phase-1-trade-agreement [https://perma.cc/TGV2-45KK].

6. Id.

7. Alasdair Young, The Politics of Deep Integration, 30

C

AMBRIDGE

R

EV

. I

NT

’

L

A

FFS

.

, 353, 354

(2017).

8. Aaditya Mattoo & Michele Ruta, Regional Trade Agreements,

W

ORLD

B

ANK

(Apr. 5, 2018),

https://www.worldbank.org/en/topic/regional-integration/brief/regional-trade-agreements

[https://perma.cc/KCL5-5VFT];

M

ARC

B

ACCHETTA ET AL

.,

W

ORLD

T

RADE

R

EPORT

2011:

T

HE

WTO & P

REFERENTIAL

T

RADE

A

GREEMENTS

: F

ROM

C

O

-E

XISTENCE TO

C

OHERENCE

11, 47, 112 (2011), https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_

report11_e.pdf [https://perma.cc/3HX5-WGRU].

9. Trans-Pacific Partnership, ch.18, sec. I, Feb. 4, 2016, https://ustr.gov/sites/default/files/

TPP-Final-Text-Intellectual-Property.pdf [https://perma.cc/SPK2-88E6] [hereinafter TPP].

10. See generally Comprehensive and Progressive Agreement for Trans-Pacific Partnership art.

25.5, Mar. 8, 2018, https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-

agreements-in-force/cptpp/comprehensive-and-progressive-agreement-for-trans-pacific-

partnership-text-and-resources/ [https://perma.cc/6KV8-2YB5] [hereinafter CPTPP].

11. See generally Comprehensive Economic and Trade Agreement Between Canada, of the

One Part, and the European Union and Its Member States, of the Other Part, Can.-Eur., Oct.

30, 2016 [hereinafter CETA].

12. See generally Agreement Between the United States of America, the United Mexican

States, and Canada, ch. 7, Dec. 10, 2019 [hereinafter USMCA].

13. Josh Ederington & Michele Ruta, Non-Tariff Measures and the World Trading System 2, 38

(Policy Research Working Paper No. 7661, 2016), https://openknowledge.worldbank.org/bit

stream/handle/10986/24499/Non0tariff0mea0world0trading0system.pdf?sequence=1&is

Allowed=Y [https://perma.cc/7UAM-VJVU]; see also

B

ACCHETTA ET AL

.

, supra note 8, at 9.

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2021] HOW TO ASSESS REGIONAL TRADE AGREEMENTS 249

and the Phase One agreement, are largely shallow, and differ markedly from

those concluded by major developed economies.

14

The fast-changing trade agreements, including their differences,

complexity, and rationale, have not been fully explored in the literature. In

particular, an analytical framework for regional trade agreements is lacking,

and such a framework is crucial for at least three reasons. First, there is a

critical need for a theoretical framework to measure trade agreements,

including new kinds of agreements like the Phase One agreement that

focuses on measurable market access outcomes and unilateral enforcement.

15

Such a framework provides key insights into the significant heterogeneity

and real differences that lie beneath the substantial textual differences

between trade agreements. It focuses our attention on what really matters

when looking at trade agreements, and support analysis of the effects of

these agreements. This is crucial for the public and private stakeholders to

clearly understand trade agreements.

16

Second, an analytical framework is

critical for the preparation of negotiations in respect of new trade

agreements, such as by enhancing understanding of potential partners’

commitments in their trade agreements, awareness of best practices and

areas where practices diverge or converge across different actors, and

identification of gaps between domestic law and trade agreements.

17

Third,

an analytical framework can support various states in designing and adjusting

their trade agreement models and approaches.

18

This paper will analyze the following two crucial questions: What are the

approaches behind China’s trade agreements and deep FTAs? How can we

assess trade agreements (particularly China’s trade agreements and deep

FTAs)? The paper proposes a tripartite theoretical framework with various

indicators to assess trade agreements in terms of their impact on domestic

regulation and applies this framework to China’s trade agreements and deep

FTAs. The analytical framework would allow for the categorisation of

different types of trade agreements and a clear understanding of the

rationale behind the differences. This would then lay a solid foundation for

future research on the actual merits of the different types of agreements.

This article argues that China’s trade agreements reflect an early harvest

approach, while deep FTAs are concerned with regulatory plowing (Part II).

The following crucial differences are further explained under a theoretical

framework, which explores three crucial variables and six indicators of trade

14. Michael Sampson, The Evolution of China’s Regional Trade Agreements: Power Dynamics and

the Future of the Asia-Pacific,

P

AC

. R

EV

.

1, 7 (2019).

15. Heng Wang, Selective Engagement? Future Path for US-China Economic Relations and Its

Implications, 55

J. W

ORLD

T

RADE

(forthcoming Apr. 2021) (manuscript at 2), https://ssrn.com/

abstract=3620758.

16. See Engaging and Consulting on Trade Agreements,

OECD

1 (Oct. 27, 2019), https://

issuu.com/oecd.publishing/docs/engaging_and_consulting_on_trade_agreements [https://

perma.cc/5LVZ-YPMV].

17. Overview: The Evolution of Deep Trade Agreements, in

H

ANDBOOK OF

D

EEP

T

RADE

A

GREEMENTS

24, (Aaditya Mattoo, et al. eds., July 8, 2020), http://hdl.handle.net/10986/34055.

18. Id. at 4.

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