Emerging Mega-FTAs: Rationale, - Am MIT spezialisierte KI-Forschung

Emerging Mega-FTAs: Rationale,
Challenges, and Implications

Siow Yue Chia
Singapore Institute of International Affairs
62 Watten View, Singapur 287196
chiasy@singnet.com.sg

Abstrakt
This paper examines the recent emergence of mega–free trade agreements, nämlich, the Asian-centric
Regional Comprehensive Economic Partnership, the Trans-Paciﬁc Partnership, and the Trans-Atlantic
Trade and Investment Partnership. In a comparative context it discusses the rationale for their emer-
gence; their distinctive membership features, objectives, and negotiating agendas; their quantiﬁable
beneﬁts and dissenting voices; issues and challenges; and likely outcomes. Aspirations for “high stan-
dards” are unlikely to be met because their negotiating timelines are repeatedly missed as negotiators
struggle with political, diplomatic, commercial, wirtschaftlich, regulatory, and technical issues. Obwohl
negotiations appear relatively simple at the outset, their complex and daunting hurdles will ultimately
limit their impact on the world trading system.

1. Einführung

In den vergangenen Jahren, the proliferation of plurilateral and bilateral free trade agreements (FTAs)
has been accompanied by the simultaneous negotiation of three mega-trade blocs,
nämlich, the Regional Comprehensive Economic Partnership of East Asia (RCEP), Die
Trans-Paciﬁc Partnership (TPP) and the Trans-Atlantic Trade and Investment Partner-
ship (TTIP). These mega-FTAs are characterized by their large membership and shares
of world GDP and world trade, as well as their declared intention to promote deep eco-
nomic integration. In addition to traditional tariffs, the mega-trade blocs also include
“beyond-the-border” regulatory and non-tariff measures (NTMs) involving agriculture,
services, investment, intellectual property, e-commerce, and labor and environmental
Standards. These complex issues are generally difﬁcult to bring to agreement because they
provoke strident political opposition. Although the holy grail of trade and investment lib-
eralization and deregulation efforts is improved efﬁciency and competitiveness spurring
economic growth, the crucial question for trade policy is how to balance the case for pro-
viding country policies that make countries competitive in an increasingly globalized
world against the concerns and fears raised by anti-globalists and protectionists.

Asian Economic Papers 14:1

C(cid:2) 2015 by the Earth Institute at Columbia University and the Massachusetts

Institute of Technology

doi:10.1162/ASEP_a_00310

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

RCEP, TPP, and TTIP emerged in part, out of frustration with the Doha Round talks. Al-
though the December 2013 agreement reached by WTO members in Bali for a WTO Trade
Facilitation Agreement offered a glimmer of hope for the Doha Round, many more difﬁ-
cult issues remain to be resolved. Daher, in the absence of success in global negotiations,
trade policymakers have focused their negotiation on FTAs.

To describe the importance of recent FTA efforts, the paper is organized as follows.
Abschnitt 2 presents the rationale and motivations for RCEP, TPP, and TTIP. Abschnitt 3 ex-
amines their quantitative beneﬁts. Abschnitt 4 discusses the negotiating design and agenda
and Section 5 examines the various issues and challenges. Abschnitt 6 concludes.

2. Rationale and motivations for the RCEP, TPP, and TTIP

2.1 RCEP

As Table 1 zeigt an, RCEP is Asian-centric and the most populous of the proposed eco-
nomic blocs. It comprises ASEAN10 (Brunei, Indonesien, Malaysia, die Phillipinen, Singa-
pore, Thailand, Kambodscha, Laos, Myanmar, and Vietnam) and the six ASEAN+1 FTA
Partner (China, Japan, Südkorea, Indien, Australia, and New Zealand). In Novem-
ber 2011, the ASEAN Summit announced the RCEP as an ASEAN response to the ear-
lier regionwide EAFTA and CEPEA—rival proposals supported by China and Japan,
respectively.1 A regionwide FTA provides a number of beneﬁts compared with the cur-
rent system of overlapping plurilateral and bilateral FTAs in East Asia. Erste, wirtschaftlich
cooperation and integration helps reduce geopolitical tensions and conﬂicts—an inte-
grated East Asia may increase mutual understanding and enhance awareness of a com-
mon destiny. Zweite, a large region-wide grouping confers larger economic beneﬁts
generated by economies of scale. Dritte, it may further the development and spread of
regional and global production networks by easing the difﬁculty of meeting of the value-
added rules of origin (ROO) requirements by allowing for the cumulation of value-added
from a larger group of countries. It may also reduce the “noodle bowl”2 inefﬁciencies that
are driven by the multiplicity of heterogenous Asian FTAs and promote foreign direct
investment ﬂows and technology transfers.

In preparation for RCEP negotiations, three ASEAN-Plus Working Groups were estab-
lished in February 2012, followed in November 2012 by the launching of the “Guiding
Principles and Objectives for Negotiating the Regional Comprehensive Economic Partner-
ship.” All CEPEA countries agreed to jointly launch RCEP.

1 Earlier proposals for a regionwide FTA in East Asia are the ASEAN+3 or East Asia FTA (EAFTA)

and the ASEAN+6 or Comprehensive Economic Partnership in East Asia (CEPEA).

2 The noodle bowl effect refers to the confusing and different ROO, tariff reduction time lines, Und

so forth, among the overlapping and multiple FTAs. This has signiﬁcant impact on business trans-
action costs and hence utilization of the FTA preferential tariffs.

Asian Economic Papers

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

Tisch 1. Sizes of RCEP, TTP, and TTIP

GNP per capita
US$, 2012 31,590 3,490 9,820 2,500 47,210 5,210 880 1,270 na 1,550 5,720 47,880 22,670 1,580 59,360 30,640 52,340 50,970 9,640 14,310 6,060 47,880 31,590 9,820 47,210 1,550 59,360 30,640 52,340 RCEP 16: 1 Brunei 2 Indonesien 3 Malaysia 4 Philippinen 5 Singapur 6 Thailand 7 Kambodscha 8 Laos 9 Myanmar 10 Vietnam 11 China 12 Japan 13 Südkorea 14 Indien 15 Australia 16 New Zealand TPP 12: 1 Vereinigte Staaten 2 Kanada 3 Mexiko 4 Chile 5 Peru 6 Japan 7 Brunei 8 Malaysia 9 Singapur 10 Vietnam 11 Australia 12 New Zealand TTIP: United States EU27 EU27 (exclu intra-EU) % of world RCEP 16: TPP 12: TTIP: Population million, 2012 US$b, 2012

GDP current Goods trade Goods trade
US$b, 2012 % Welt 2012 3,400.5 0.4 246.9 29.2 96.7 5.3 66.8 14.9 6.6 52.8 88.8 1,350.7 127.6 50.0 1,236.7 22.7 4.4 795.4 313.9 34.9 120.8 17.5 30.0 127.6 0.4 29.2 5.3 88.8 22.6 4.4 814.9 313.9 501.0 48.6 11.4 11.6 10,336 na 378 424 117 788 478 na na na 229 3,867 1,685 1,068 784 518 na 9,364 3,882 930 751 157 na 1,685 na 424 788 229 518 na 15,623 3,882 11,741 4,468 21,127.9 17.0 878.0 305.0 250.2 274.7 366.0 14.0 9.4 na 155.8 8,227.1 5,959.7 1,129.6 1,841.7 1,532.4 167.3 28,129.7 16,244.6 1,821.4 1,178.1 269.9 203.8 5,959.7 17.0 305.0 274.7 155.8 1,532.4 167.3 32,844.6 16,244.6 16,600.0 29.2 38.8 45.3 27.9 na 1.0 1.1 0.3 2.1 1.3 na na na 0.6 10.5 4.6 2.9 2.1 1.4 na 25.3 10.5 2.5 2.0 0.4 na 4.6 na 1.1 2.1 0.6 1.4 na 42.2 10.5 31.7 27.9 25.3 42.2 Quelle: Compiled by the author from World Development Indicators 2012, World Trade Statistics 2012. 2.2 TPP The Trans-Paciﬁc Partnership (TPP) is composed of 12 APEC economies, namely three NAFTA members (Kanada, Mexiko, Vereinigte Staaten), and four ASEAN members (Brunei, Malaysia, Singapur, Vietnam) as well as Chile, Peru, Japan, Australia, and New Zealand. TPP morphed from the Trans-Paciﬁc Strategic Economic Partnership (or P4 agreement),3 which included an open accession clause for other APEC countries. Earlier overtures by the outgoing Bush Administration were resumed by the incoming Obama Administration in November 2009. The U.S. announcement to resume TPP negotiations had the domino effect of persuading Australia, Peru, and Vietnam to sign on in 2009, Malaysia in 2010, 3 Concluded in 2006 by four small and open APEC economies of Brunei, Chile, Neuseeland, and Singapore. It has strong provisions eliminating tariffs and includes government procurement and cooperation on customs procedures, labor practices, and intellectual property and competition policies. Service sector and investment agreements were to be negotiated at a later date. 3 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / Direkte . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 1 4 1 1 1 6 8 3 5 5 1 a s e p _ a _ 0 0 3 1 0 p d . f by gu e s t o n 0 8 S e p e m b e r 2 0 2 3 Emerging Mega-FTAs: Rationale, Challenges, and Implications Canada and Mexico in 2012, and Japan in July 2013.4 While the expanded membership increased the economic size and signiﬁcance of TPP, it also made the negotiations more difﬁcult. Aus diesem Grund, further membership extensions have been halted until the nego- tiations are completed. Country motivations for TPP participation vary. For the original P4 countries, TPP pro- vided economic integration that met their aspiration to expand to other APEC economies. For the United States, the TPP supports the Obama administration’s pivot to Asia. The policy elements included in the TPP are held up as a model for 21st century trade agree- gen. For Canada, Mexiko, and Peru, motivations include increased economic engage- ment with East Asia. Malaysia, Vietnam, and Australia are attracted by the potential opportunities in the U.S. market.5 For Japan, participation in TPP has strategic and eco- nomic objectives: It strengthens the U.S.–Japan security alliance vis-a-vis China, and may spur domestic economic reforms in Japan. Im Gegenzug, Japan’s entry greatly enlarged TPPs economic potential, which provides further impetus for countries sitting on the sidelines. Daher, TPP deepens trade and investment ties among its participants and has implications for the emerging trade architecture in the Asia-Paciﬁc region and for the WTO multilat- eral trade regime. 2.3 TTIP TTIP is a trans-Atlantic partnership between the United States and EU28 countries. At a bilateral summit in November 2011, the United States and the EU agreed to create a High Level Working Group on Jobs and Growth (HLWG) to explore a trans-Atlantic agree- ment. The HLWG Report (Februar 2013) recommends the launch of talks toward a com- prehensive and high standard trade and investment agreement. The prime motivation for TTIP is to strengthen the U.S.–EU strategic and economic partnership. Insbesondere, by reducing costly tariffs and non-tariff barriers (NTBs) the United States and the EU may improve their competiveness while providing a template of rules and approaches that can be used in future multilateral trade negotiations of the WTO. 4 Japan’s entry was delayed by strong opposition from its agricultural lobby as well as concerns that the TPP would undermine Japan’s national health care system, the safety of the food sup- ply, and would lead to massive immigration of unskilled foreign workers. The carefully worded Obama–Abe statement of the February 2013 summit (that all goods are subject to negotiation, but the results of tariff elimination are not pre-ordained, and that both Japan and United States have sensitive sectors) enabled the new Japanese Prime Minister Abe to make the case that TPP par- ticipation will not break his party’s promise to give utmost priority to protect the ﬁve sensitive products (rice, wheat, beef and pork, dairy, and sugar) as well as the universal health insurance system. 5 Malaysia and Vietnam do not have bilateral FTAs with the United States, and Australia hopes for better access to the United States than that achieved under the U.S.–Australia FTA. 4 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / Direkte . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 1 4 1 1 1 6 8 3 5 5 1 a s e p _ a _ 0 0 3 1 0 p d . f by gu e s t o n 0 8 S e p e m b e r 2 0 2 3 Emerging Mega-FTAs: Rationale, Challenges, and Implications 3. Quantifying the beneﬁts Quantitative work of Petri, Plummer, and Zhai (2011) for RCEP and TPP and by the CEPR (Marsch 2013) for TTIP provide insights into the magnitude of the gains to be achieved through the conclusion of new FTAs. Before reviewing the quantitative results, some cautionary notes are in order, to explain why the estimated beneﬁts of FTAs are often challenged by advocates and skeptics. Whal- ley (2006) notes that FTA effects depend on a number of factors: (1) intra-regional trade orientation, as measured by the ratio of a country’s trade with its FTA partner(S) to the country’s total global trade; (2) the utilization rate of the FTA preferential tariffs; Und (3) the signiﬁcance of NTBs and WTO-plus provisions. Zum Beispiel, in the case of RCEP, ASEAN countries rely heavily on FTA trade as they generally have higher trade shares of FTAs than the larger northeast Asian economies; tariff utilization rates are generally low,6 which means that computable general equilibrium (CGE) modeling results of tariff reduc- tion/elimination could be overstated. And as tariffs have fallen over the years, NTBs such as customs valuations and procedures have become more prominent as trade barriers but are less quantiﬁable. Weiter, trade in goods is only part of the FTA—of growing impor- tance are the liberalization of services and investments and these are also more difﬁcult to quantify. Chia (2013) also cautions that in interpreting the results of various CGE studies the following issues have to be kept in mind: (1) the inability to capture fully the dynamic investment effects, trade facilitation effects, and other behind-the-border effects; Und (2) when estimating the effects of mega-trade blocs such as the RCEP and TPP, the necessity to net off the effects from existing bilateral and plurilateral FTAs among RCEP and among TPP countries to determine the value added effects. CEPR (Marsch 2013) also notes that es- timating economic effects of trade agreements can be highly complex and challenging as economic analyses can be constrained by a lack of data and other theoretical and practical issues associated with econometric analyses; estimates of economic effects of FTAs are of- ten imprecise and highly sensitive to the assumptions that are used; and a range of factors beyond trade policy can affect economic performance, including global economic growth and exchange rates. The Petri, Plummer, and Zhai (2012) simulations for RCEP and TPP7 are shown in Table 2. 6 See Kawai and Wignaraja (2011). 7 The model has the following characteristics: Erste, it uses a new trade model based on the empirical observation that productivity differences among ﬁrms explain a substantial part of trade ﬂows. This speciﬁcation predicts changes in productivity due to liberalization accelerates the growth of productive ﬁrms and the exit of unproductive ones, and predicts larger overall beneﬁts than conventional approaches. Zweite, it also attempts to model agreements more accurately than was possible in earlier studies. Zum Beispiel, it does not assume that the new agreement will eliminate all bilateral barriers, but estimates partial reductions similar to those achieved in past FTAs. Dritte, 5 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / Direkte . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 1 4 1 1 1 6 8 3 5 5 1 a s e p _ a _ 0 0 3 1 0 p d . f by gu e s t o n 0 8 S e p e m b e r 2 0 2 3 Emerging Mega-FTAs: Rationale, Challenges, and Implications Table 2. Income gains under alternative scenarios of TPP and RCEP GDP 2025 ($Milliarde)

Americas
Kanada
Chile
Mexiko
Peru
UNS.

Asien

Brunei
China
Hongkong
Indien
Indonesien
Japan
Korea
Malaysia
Philippinen
Singapur
Taiwan
Thailand
Vietnam
Other ASEAN

Oceania

Australia
Neuseeland

Others

Europa
Russland
ROW
WORLD
Memorandum
TPP-11
TPP-16
RCEP
APEC

24,867
1,978
292
2,004
320
20,273
34,901
20
17,249
406
5,233
1,549
5,338
2,117
431
322
415
840
558
340
83
1,634
1,433
201
41,820
22,714
2,865
16,241
103,223

27,851
38,016
36,535
58,951

Income gain (US$ 2007 bill) % baseline GDP TPP11 TPP16 RCEP TPP11 TPP16 RCEP 48.8 7 2 13.1 2.8 23.9 26.5 0.1 −20.2 −0.3 −1.2 −1.1 −1.2 −0.4 20.8 −0.5 5.1 0.2 −0.7 26.2 −0.3 5.7 2.8 2.9 −6.6 −1.1 −0.5 −4.9 74.5 100.9 97.9 32.2 81.9 160.8 12.4 3.5 31.2 5.4 108.2 299.8 0.4 −82.4 −1.3 −6.9 62.2 128.8 50.2 30.1 22.1 12.3 −6.4 42.5 48.7 −0.5 14.6 9.8 4.7 −24.2 −4.9 −3 −16.3 450.9 297 553.9 314.4 479.5 2.5 −0.1 0 2.8 0 −0.1 627 1.2 249.7 46.8 91.3 17.7 95.8 82 14.2 7.6 2.4 −16.1 15.5 17.3 1.6 21.7 19.8 1.9 −6.8 5.1 −5.3 −6.6 644.4 72.5 259.4 648.6 553 0.2 0.35 0.7 0.65 0.87 0.12 0.08 0.55 −0.12 −0.08 −0.02 −0.07 −0.02 −0.02 4.81 −0.14 1.23 0.02 −0.12 7.72 −0.3 0.35 0.2 1.43 −0.02 0 −0.02 −0.03 0.07 0.36 0.26 0.09 0.14 0.65 0.63 1.2 1.56 1.69 0.53 0.86 1.84 −0.48 −0.32 −0.13 4.02 2.41 2.37 6.98 6.88 2.97 −0.76 7.61 14.34 −0.58 0.89 0.68 2.36 −0.06 −0.02 −0.1 −0.1 0.44 1.07 1.46 0.86 0.81 0.01 0 0 0.14 −0.02 0 1.8 5.85 1.45 11.54 1.74 1.14 1.79 3.87 3.29 2.35 0.58 −1.92 2.79 5.1 1.88 1.33 1.38 0.92 −0.02 0.02 −0.18 −0.04 0.62 0.26 0.68 1.78 0.94 Quelle: Petri, Plummer, and Zhai (2011). Broad conclusions are: Erste, RCEP and TPP promise substantial beneﬁts, with TPP16 offering lower beneﬁts than RCEP16. Although TPP16 covers more trade than RCEP16, much of this trade is already subject to low barriers (especially in the advanced countries) and to prior FTAs among TPP members. Initial barriers are on average higher in RCEP countries, and the trade among the largest economies (China, Japan, Korea, and India) is not yet covered by FTAs. Zweite, beneﬁts increase with the scale of the integration, with gains expanding from TPP11 to TPP16. Dritte, TPP is likely to favor relatively small and initially protected economies without an FTA with the United States (ASEAN economies of Indonesia, Malaysia, die Phillipinen, Thailand, Vietnam). Im Gegensatz, RCEP is likely to it accounts for existing agreements and calculates beneﬁts from new agreements such as TPP as incremental over previous agreements that already cover a trade relationship. The differences in results are due to different assumptions about the membership of the tracks and the templates adopted in them. The templates used to represent RCEP and TPP reﬂect recent ASEAN and U.S. FTAs. For the TPP track, the authors have considered TPP11, das ist, without Japan, as well as TPP16, das ist, anticipating the additional membership of South Korea, Indonesien, die Phillipinen, and Thailand. 6 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / Direkte . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 1 4 1 1 1 6 8 3 5 5 1 a s e p _ a _ 0 0 3 1 0 p d . f by gu e s t o n 0 8 S e p e m b e r 2 0 2 3 Emerging Mega-FTAs: Rationale, Challenges, and Implications Table 3. Macroeconomic effects of TTIP Limited agreement Tariffs only Services only Procurement only Comprehensive agreement Less ambitious More ambitious (Million euros) Change in GDP: EU U.S. Bilateral exports, fob EU to U.S. UNS. to EU Total exports fob Extra-EU U.S. Quelle: CEPR 2013. 23,753 9,447 43,840 53,777 43,740 57,330 5,298 7,356 4,591 2,859 5,777 5,488 6,367 1,875 6,997 3,411 7,136 5,942 68,274 49,543 107,811 100,909 125,232 142,071 119,212 94,904 186,965 159,098 219,970 239,543 Notiz: Estimates to be interpreted as changes relative to a projected 2027 global economy. favor China, Japan, Südkorea, and India (as they have no FTAs among them). ASEAN economies would gain from RCEP only to the extent that the agreement is an improve- ment over current ASEAN+1 FTAs and bilateral FTAs, and RCEP cumulation rules lead to its greater utilization. Vierte, most members of both TPP16 and RCEP16 are likely to ﬁnd the TPP more beneﬁcial. RCEP would generate larger beneﬁts for Korea and Aus- tralia, Jedoch, because both already have FTAs with the United States. CEPR (Marsch 2013)8 provides CGE estimates of TTIP, showing positive and signiﬁcant gains for both the EU and U.S. (Tisch 3). Erste, under a comprehensive agreement, GDP is estimated to increase by €68.2 billion for the EU and €49.5 billion for the United States under the less ambitious scenario, and by €119.2 billion for the EU and €94.9 billion for the United States under the more ambitious scenario. Zweite, estimated gains would be signiﬁcantly lower when TTIP is limited to tariff reduction. Andererseits, a compre- hensive agreement would bring signiﬁcantly greater beneﬁts, with up to 80 percent of the total potential gains from cutting costs imposed by bureaucracy and regulations, as well as from liberalizing trade in services and public procurement. 8 CEPR Report on Reducing Barriers to Transatlantic Trade and Investment, Marsch 2013. The analy- sis uses the GTAP8 database (projected to 2027), in conjunction with NTB estimates. The study in- vestigates different policy options for the deepening of the EU–U.S. bilateral trade and investment relationship. These range from partial agreements that are limited in the scope of barriers they would address (tariffs only, or services only, or procurement only) to full-ﬂedged FTA with a com- prehensive liberalization agenda covering simultaneously tariffs, procurement, NTBs for goods, and NTBs for services, with TWO scenarios: a less ambitious agreement that includes a 10 percent reduction in trade costs from NTBs and 98 percent tariff removal, and an ambitious scenario that includes the elimination of 25 percent of NTB-related costs and 100 percent tariff removal. In both scenarios more ambition is imposed on the lowering of procurement-related NTBs than for other NTBs affecting goods and services, with NTBs linked to procurement reduced by 25 percent in the less ambitious scenario and 50 percent in the ambitious scenario. The impact of partial alignment of global rules and standards with a new set of EU–U.S. standards and cross-recognition agree- ments is also included in the assessment. 7 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / Direkte . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 1 4 1 1 1 6 8 3 5 5 1 a s e p _ a _ 0 0 3 1 0 p d . f by gu e s t o n 0 8 S e p e m b e r 2 0 2 3 Emerging Mega-FTAs: Rationale, Challenges, and Implications The U.S.–EU economic relationship is the largest and most complex in the world.9 Transatlantic goods and services trade reached US$ 2.7 billion a day in 2012; and transat-
lantic investment is estimated to be directly responsible for roughly 6.8 million jobs in
2010. TTIP will further open EU markets, increasing the US$ 458 billion in goods and pri- vate services the United States exported in 2012 to the EU and strengthen rules-based investment to grow the world’s largest investment relationship (nearly US$ 3.7 trillion in
bilateral investments). The biggest potential beneﬁt of TTIP is in the area of regulation, als
aligning and rationalizing transatlantic NTMs would bring tremendous gains. Auch, TTIP
could become a template for the stalled global trade talks in several difﬁcult areas, aus
agriculture to cross-border rules on services, investment, and regulations.

4. Negotiating design and agenda10

Tisch 4 summarizes the coverage and scope of RCEP, TPP, and TTIP. At this highly ag-
gregated level, there does not seem to be very much difference among the three mega-
trade blocs because they all cover traditional tariffs on goods, services, and investment as
well as various new “behind the border” issues of regulation and NTMs. Trotzdem,
there are signiﬁcant differences in details and in focus, as the following discussion will
attempt to highlight.

4.1 RCEP

Although the details of RCEP negotiations are not made public, the current AEC and
ASEAN+1 FTAs, and the RCEP “Guiding Principles and Objectives for Negotiating the
Regional Comprehensive Economic Partnership” provide some insight into RCEP’s ne-
gotiating agenda. At the launch of negotiations on 20 November 2012, leaders of RCEP
countries endorsed the Guiding Principles, which call for parallel negotiation of individ-
ual chapters. Although they list eight negotiation areas, the details of each chapter, solch
as level of tariff elimination, are left to be determined through the negotiations. On trade
in goods, negotiations build on the existing levels of trade liberalization among participat-
ing countries and aim to achieve a high level of tariff liberalization. On trade in services,
negotiations cover all areas of services trade, aiming at achieving a comprehensive and
high-quality agreement compatible with WTO rules. On investment, negotiations cover
the four pillars of promotion, protection, facilitation, and liberalization. Negotiations com-
menced in early 2013 and hope to be completed by the end of 2015.

9 This section draws heavily on U.S. Congressional Research Services Report from February 2014.

10 The negotiating agenda and progress of RCEP, TPP, and TTIP are generally not made public, Also
they have to be deduced from various piecemeal documents released by the ASEAN Secretariat,
USTR Ofﬁce, US Congressional Research Service (CRS), European Commission, the European
Centre for Economic Policy Research (CEPR), and the Economic Research Institute for ASEAN and
Ostasien (ERIA), press releases at the end of negotiating meetings, and various media reports.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

Tisch 4. Issues coverage of TPP, RCEP, ASEAN+1 FTA, and AEC

TPP

RCEP

ASEAN+1 AEC TTIP

Trade in Goods

Market access to goods
Textiles and apparel
Rules of origin
Customs
Trade facilitation
TBT
SPS
Trade remedies
Trade in Services

Cross-border services
Financial services
Telecommunications
Temporary entry

Investment
Protection
Liberalization
Facilitation
Promotion
Economic&tech cooperation
Intellectual property
Competition
Dispute settlement

Others

e-commerce
Umfeld
Government procurement
Labor
Cross-cutting trade issue

X
Ö
X
X
X
Ö
Ö
Ö

X
Ö
Ö
Ö

X
X
X
X
X
X
X
X

X
X
X
X

X
X
X

xx
X
X
xxx

X
X
X
X
X

X
X
X
X
X
X
X

X
X
X
X

X
X
X
X
X
X
X
X

X
X
X
X
X
X
X

X
X
X
X

X
X
X
X
X
X
X
X

X
X
X
X
X
X

X
X

X
X
X

X
X
X
X
X

Quelle: ERIA (2014).
Notiz: For ASEAN+1 “x” means covered in at least one ASEAN+1; “o” for RCEP means issue is
likely to be covered, judging from ASEAN+1 FTAs and AEC; “xx” means cooperation and capacity

building; “xxx” means legal issues for administration of Agreement including dispute settlement.

Fukunaga and Isono (2013) of ERIA11 recommend the following for the RCEP architec-
tur: (1) To bring real additional gains for participating countries, the RCEP should nego-
tiate changes in tariffs, rules of origin, trade facilitation, services, investment, intellectual
property protection, competition policy, and economic cooperation that improve on the
standards provided by the ASEAN+1 FTAs. (2) RCEP should introduce as many con-
vergent rules as possible to counter the “noodle-bowl” effect through common conces-
sions in tariff structure, clear deﬁnition and approach in NTBs, a general rule of origin, A
region-wide approach in trade facilitation and economic cooperation, and fewer types of
limitations in services regulation. (3) ASEAN should take the lead in making the RCEP
framework and speed of negotiations more attractive than TPP, so that it can maintain
“ASEAN Centrality” and make RCEP an attractive proposition. (4) Resolve divergences
of tariff commitments among countries and among ASEAN+1 FTAs: RCEP should set a
target of 95 percent tariff elimination, signifying additional tariff liberalization beyond the

11 Fukunaga and Isono (2013). ERIA (Economic Research Institute for ASEAN and East Asia) War
established to work closely with the ASEAN Secretariat to achieve the objectives of facilitating
AEC building, support ASEAN’s role as the driver of the wide economic integration, nurture a
greater sense of community in East Asia, and contribute to narrowing development gaps.

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ASEAN+1 FTAs; for the remaining 5 Prozent, RCEP should provide certain principles for
sensitive products as in the AEC and the ASEAN+1 FTA approaches. RCEP should adopt
a “common concession” approach.12 Also, allow co-equal rules in the ROOs as much as
possible to facilitate production networks—RCEP should utilize RVC(40) or CTH (Re-
gional value content of 40 percent or change in tariff heading) as the general rule, supple-
mented by alternative rules; seek an easing of restrictiveness in ROO administration; Und
an ROO template should use a liberal cumulation rule. (5) Core NTMs include quantity
control measures, such as import quotas, de facto quantity control mechanisms through
state trading systems, and non-automatic licensing schemes. To avoid the AEC implemen-
tation problem with NTBs, RCEP should introduce the Core NTMs concept and remove
these as much as possible. (6) RCEP should introduce concrete and tangible trade facilita-
tion programs to maximize the economic impacts of RCEP. (7) Commit to liberalize trade
in services at a high level: RCEP members should seek tangible commitments that exceed
their commitments in GATS and ASEAN+1 FTAs. They should prioritize services sectors,
such as transportation and logistics services, telecommunications, distribution services,
e-commerce, and ﬁnancial services, which strengthen regional production networks.

4.2 TPP
An 12 November 2012, leaders of TPP announced the broad framework13 for an ambitious
21st century agreement that will enhance trade and investment among TPP countries,
promote innovation, economic growth, und Entwicklung, and support the creation and
retention of jobs.

TPP has ﬁve deﬁning features. Erste, it provides comprehensive market access by elim-
inating tariffs and other barriers to goods and services trade and investment. Zweite, Es
seeks to facilitate the development of production and supply chains among TPP members.
Dritte, it contains cross-cutting trade issues: regulatory coherence to make trade more
seamless and efﬁcient; competitiveness and business facilitation; addressing small and
medium-sized enterprise (SME) concerns about the difﬁculty in understanding and using
trade agreements; addressing development issues to advance TPP countries’ respective
economic priorities. Vierte, it addresses new trade challenges arising from new innova-
tive products and services, such as the digital economy and green technologies, to ensure
a competitive business environment across the TPP region. Fünfte, to provide the ﬂexibil-
ity to respond to emerging trade issues and future membership expansions, it is a living
agreement which can be updated as issues arise.

12 And not have a bundle of schedules or exclusion lists for every possible bilateral combination

among the member countries An advantage of a “common concession” approach is in cumulation:
If tariff schedules are different among RCEP members, regional cumulation rules will become
highly complicated and may produce unpredictable impacts.

13 USTR (2013).

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TPP is being negotiated as a single undertaking. It has 29 Kapitel, based largely on the
template of issues covered in U.S. FTAs. CRS (2013) reports on the following:

A) Market access for goods and services: Tariffs on many products phased-
out immediately, and tariffs on more sensitive products phased out over time.
Of particular sensitivity in the negotiations are agriculture; sanitary and phy-
tosanitary measures (SPSs); Textilien, apparel, and footwear; trade in services; Und
government procurement.

∗Agriculture: Japan has a highly defensive position, but the United States is also defensive
over dairy imports from New Zealand, sugar imports from Australia, and new market
access for other TPP participants.

∗SPS: It aims to exceed the WTO SPS Agreement.

∗Textiles, apparel, and footwear: There are differences between the United States and
developing countries: UNS. has a practice of long tariff phase-out periods, special safe-
guards, and restrictive rules of origin to protect domestic producers, whereas de-
veloping countries (particularly Vietnam) argue for more liberal rules of origin in
die USA. Markt.

∗Trade in services: The United States seeks to improve market access, especially for ﬁnan-
cial services, professional services, telecommunication services, express delivery, Und
e-commerce. Developing countries are concerned about competition in sectors which are
major sources of domestic employment.

∗Government procurement: The divide is between countries who are parties to the WTO
Agreement on Government Procurement or have bilateral FTAs with the United States
that include government procurement provisions, and the set of developing countries
that are concerned about opening government procurement to foreign competition.
The United States itself is divided on the issue, with supporters arguing it will open
market access in TPP partner countries and critics worring about undermining the Buy
American policy.

B) Rules: TPP contains several provisions that build upon WTO disciplines.

∗International property rights (IPR): The divide is between the stringent provisions on phar-
maceuticals wanted by some developed countries and the access to medicines needed by
developing countries. Insbesondere, die USA. objectives include the application of existing
IPR protection to digital media and a level of protection surpassing that provided in the
WTO TRIPS Agreement.

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∗ROO: Negotiators seek a single ROO to the extent possible and which is “objective, trans-
parent, and predictable”; and cumulation that enables a product produced with compo-
nents made in multiple TPP countries to be eligible for preferential treatment. ROO are
contentious due to the U.S. “yarn forward rule” on textiles and apparel.

∗Technical barriers to trade (TBT): The WTO TBT Agreement covers voluntary standards
that industries apply, technical regulations that governments impose for health and safety
Zwecke, and assessment procedures that governments employ to determine that a prod-
uct meets required standards. The U.S. objective is to expand on the TBT Agreement by
providing opportunities for partner countries to comment on proposed standards and
regulations and the implementation of regulations.

∗Transparency in health care technology and pharmaceuticals: The United States has ex-
pressed concern that the practices of Australia, Kanada, and New Zealand’s national
formularies for medicines dispensed by their national health services disadvantage
American suppliers.

∗Trade remedies: Negotiators have discussed the possibility of using WTO remedies for
antidumping, countervailing duty, and safeguard actions in the TPP.

∗Labor and environment: The United States requires countries to commit to the enforcement
of the ﬁve principles in the ILO 1998 Declaration on Fundamental Principles and Rights
At Work.14 The U.S. environment proposal reportedly contains three main components
for conservation, core commitments, and public participation. Subjecting the environmen-
tal provisions to binding dispute settlement has proven controversial.

∗Foreign investment: A contentious issue is the investor-state dispute settlement (ISDS) Profi-
vision, which allows private foreign investors to seek international arbitration in claims
against host governments. Critics argue that ISDS provides stronger protections to foreign
investors than are given to domestic investors and that ISDS may infringe host govern-
ment sovereignty to protecting the health and safety of its citizens.

C) New and cross-cutting issues: TPP also seeks disciplines and activities not addressed
by earlier FTAs including the following horizontal or cross-cutting issues.

∗Regulatory coherence: The objective is to reduce the costs of trade, which arise from the
proliferation of regulatory and non-tariff barriers, while afﬁrming the rights of countries

14 These are freedom of association, the effective recognition of the right to collective bargaining,
the elimination of all forms of compulsory or forced labor, the effective abolition of child labor,
and the elimination of discrimination with respect to employment and occupation, and that the
commitment be enforceable under the FTA.

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to regulate their economies to promote legitimate policy objectives. Countries are encour-
aged to “endeavor” to establish domestic regulatory structures to vet proposed regula-
tionen, their compliance with domestic law and policy, as well as with trade agreements
and other international obligations.

∗E-commerce: Provisions would establish rules and procedures for trade in goods and ser-
vices conveyed by the Internet and other electronic means. UNS. proposals reportedly con-
tain language that would prohibit countries from blocking cross-border ﬂows of data over
the Internet and some countries have expressed concern that this would infringe on their
national privacy and censorship laws.

∗State-owned enterprises (SOEs): to achieve competitive neutrality, SOEs should not receive
any preferential competitive advantages over those enjoyed by private sector ﬁrms. Some
reports suggest that TPP countries may be pressing the United States to extend the cover-
age of its SOE proposal to include sub-federal U.S. entities.

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∗SMEs: TPP has a stand-alone chapter on this issue.

4.3 TTIP

The HLWG (2013) recommends the following: The United States and EU launch a com-
prehensive agreement that addresses a broad range of bilateral trade and investment
issues and contribute to the development of global rules. The negotiations should aim
to achieve “ambitious” outcomes in three broad areas: (1) elimination or reduction of
market access barriers, including tariffs and NTBs that impede trade in goods, services,
and investment; (2) enhanced compatibility of regulations and standards; Und (3) co-
operation in developing rules on global issues such as IPR, the environment and labor,
SOEs, localization barriers to trade, trade facilitation, raw materials and energy, SMEs,
and transparency.

According to the CRS Report,15 regulatory issues, such as regulations on genetically modi-
ﬁed organisms (GMOs), geographical indicators (GIs) and rules for cultural exceptions for
the audiovisual sector, will represent a primary focus of TTIP negotiations. These issues
may be among the most difﬁcult to address.

A) Tariffs for goods: TTIP aims to eliminate tariffs on bilateral trade in goods, with a goal
of substantial tariff elimination upon entry into force of TTIP and a phase-out of all but
the most sensitive tariffs in the short term. Difﬁculties arise mainly in certain industries
and products where EU tariffs are substantially higher than those of the United States.

15 UNS. Forschungsdienst des Kongresses, Transatlantic Trade and Investment Partnership (TTIP) Ne-

gotiations, 4 Feb 2014.

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B) Landwirtschaft: The main issues relate to: (1) SPS measures: longstanding bilateral disputes
concern EU bans on U.S. hormone-treated meat and on U.S. chlorine-washed poultry; Und
(2) GMOs: the EU has been cautious in allowing GMO products to enter the EU market.

C) Dienstleistungen: HLWG (2013) recommends that U.S.–EU negotiations in services seek to
achieve new market access “on a comprehensive basis” by dealing with longstanding
barriers between the two; improve regulatory cooperation “where appropriate”; und in-
clude binding commitments to provide transparency, impartiality, and due process with
regard to licensing and qualiﬁcation requirements and procedures.

∗Financial services: There are differences on inclusion of ﬁnancial services under regula-
tory issues, given the reforms to U.S. and EU ﬁnancial systems in response to the 2008–09
global ﬁnancial crisis. The U.S. Trade Representative has stated that only market access
issues should be included in the TTIP negotiations in ﬁnancial services.

∗Audiovisual services: Led by France, some EU member states have called for the exclusion
of the audiovisual services sector under the cultural exceptions argument. The EU has
agreed not to include audiovisual services in the negotiations but could make additional
recommendations that it be included at a later time.

∗Treatment of service providers: In the EU, the licensing and certiﬁcation of professional ser-
vice providers is regulated by member states, and in the United States at the state level.
Daher, there is no assurance that licensing and certiﬁcation will be recognized across all
UNS. and EU states. Another contentious issue is the delivery of certain services through
Mode 4 (movement of natural persons), which in the United States is subject to congres-
sional jurisdiction only.

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∗Digital trade, data ﬂows and privacy, and e-commerce: Speciﬁc objectives in TTIP include
“the development of appropriate provisions to facilitate the use of electronic commerce to
support goods and services trade,” and to “facilitate the movement of cross-border data
ﬂows.” National governments sometimes seek to regulate the ﬂow of data across borders.
Rule of law issues such as dispute settlement and contract enforcement have also become
reasons for government concern as the Internet expands as a business platform. Viele
Europeans have concerns about the adequacy of U.S. privacy laws and the volume of
data the United States collects under its various counterterrorism programs. EU ofﬁcials
have asserted that any potential measures agreed upon in the TTIP must not undermine
EU data protection standards. The European Commission also reportedly is consider-
ing limiting or revoking the U.S.–EU Safe Harbor Framework.16 Another concern to U.S.

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16 The framework allows U.S. businesses with operations in the EU to transfer data to the United
Zustände. Many U.S. businesses favor the Safe Harbor framework as a way of making compliance

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

technology ﬁrms is a 2012 European Commission legislative proposal seeking to mod-
ernize the EU’s data protection laws to better account for the widespread use of the
Internet.17

D) Government procurement: UNS. negotiators are seeking to expand market access op-
portunities in the EU and to ensure “fair, transparent, and predictable” rules and nondis-
criminatory treatment for U.S. Lieferanten. EU ﬁrms seek better access to U.S. sub-federal
government entities and the reduction or elimination of preferences for American goods
in government procurement under the Buy American Act.

e) Industrial regulations and standards: Many stakeholders are skeptical whether a
comprehensive agreement on regulatory issues can be reached, due to longstanding dif-
ferences in regulatory approaches, reﬂecting in part divergent public preferences and
Werte. The main issues are: (1) TBT: In the WTO Agreement on TBT, the right of WTO
members to set standards is acknowledged, but members also agree to ensure that
standards-related measures serve legitimate objectives, are transparent, and do not cre-
ate unnecessary obstacles to trade approaches and requirements and related standards-
development processes, as well as reductions in burdensome testing and certiﬁcation
requirements. (2) Standards development: The EU promotes its standards internation-
ally through its relationships with international standards bodies and the requirement
that other countries adopt EU standards as a pre-condition for receiving assistance. Der
United States regards this as a challenge for U.S. exporters due to the costs and uncer-
tainty stemming from the need to demonstrate that alternative standards fulﬁll EU re-
quirements, or to use relevant EU standards for exports to the EU.

F) Approaches to transatlantic regulatory cooperation: Traditional forms of transat-
lantic regulatory cooperation have included “horizontal” information exchanges between
regulators, mutual recognition agreements (MRAs) and harmonization of regulatory
Standards.

∗Information exchanges: Although U.S. and EU regulators have engaged in information
exchanges for many years, many U.S. businesses believe that more intense cooperation
efforts are needed to remove the regulatory barriers.

requirements more streamlined while ensuring EU-compliant data privacy protection. Negotia-
tions on a U.S.–EU Data Privacy and Protection Agreement began in March 2011. It is possible that
these negotiations could re-emerge in the context of TTIP.

17 This essentially requires U.S.-based Internet and social media companies to obtain the approval of
European ofﬁcials before complying with any U.S. warrants for the personal data of EU citizens.
Signiﬁcant monetary ﬁnes would be imposed should companies fail to comply. UNS. ﬁrms assert
that the changes would block many types of on-line Web tracking and targeted advertising and the
privacy controls could injure the U.S. technology industry in Europe. UNS. negotiators have raised
concerns about these issues with the EU.

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∗MRAs: In 1998, a transatlantic MRA was completed on testing and certiﬁcation require-
ments for sectors such as telecommunications equipment, recreational craft, and medical
devices, und in 2011, another MRA was concluded on safety certiﬁcation for civil aircraft.
Trotzdem, MRA negotiations are extremely time-consuming, and leadership and guid-
ance from policymakers are essential.

∗Harmonization of regulatory standards: Because U.S. and EU negotiators appear most inter-
ested in seeking greater compatibility of standards for new and future technologies, Sie
have agreed to seek a long-term regulatory mechanism.

G) Bilateral investment treaties (BITs): There is no BIT covering the United States and the
EU as a whole. Investment issues in TTIP include:

∗Non-discriminatory treatment: The United States has foreign ownership restrictions in sec-
tors including aviation, communications, government contracting, maritime, mining,
and natural resources. Likewise, the EU has foreign ownership restrictions in a num-
ber of sectors, with some member states having more stringent policies. And whereas
UNS. BITs provide non-discriminatory treatment from pre-establishment as well as post-
establishment, the BITS of a majority of EU member states omit non-discriminatory treat-
ment for entry conditions.

∗Expropriation: UNS. and EU BITs generally provide foreign investors with prompt, ade-
quate, and effective compensation for expropriation. The deﬁnition of indirect expropria-
tion, extent of compensation, and coverage under ISDS are under discussion.

∗Free capital transfers: Although both the United States and EU seek free ﬂow of pay-
ments and investment-related capital movements, there is the potential for disagree-
ment over the extent to which investment rules should include safeguard provisions for
capital controls.

∗ISDS: Given the already strong overall levels of U.S. and EU investor protections,
some question the need for strengthening investor rights to bring claims against a for-
eign government in TTIP. Others argue inclusion of ISDS in TTIP would signal the im-
portance of strong investor protections to third countries with weak, unterentwickelt
judicial systems.

H) IPR: A key trade negotiating objective for the United States and EU is the strength-
ening of IPR beyond the levels contained in the WTO Agreement on TRIPs. International-
ally, there is disagreement about the appropriate balance between IPR protection and
other public policy goals that are of concern to developing countries. Some argue that
IPR commitments secured in TTIP will provide the United States and the EU leverage

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in their work on IPR issues in third countries and in the WTO. IPR issues in the TTIP
negotiations include:

∗GIs:18 Under the WTO TRIPS Agreement, the United States and the EU have committed
to providing a minimum standard of protection for GIs and an “enhanced level of pro-
tection” to wines and spirits that carry a GI, subject to certain exceptions. UNS. and EU ap-
proaches to protecting GIs differ, with the U.S. IPR system tending to protect GIs through
trademark law, whereas EU tends to offer more speciﬁc protections for GIs. Obwohl
there is disagreement about including GIs in TTIP, the EU may not be willing to negotiate
a comprehensive FTA that does not include GIs.

∗Copyright protection: UNS. and EU differences could emerge on the liability of Internet ser-
vice providers for infringing content over their networks. Arguments concern the balance
of IPR enforcement in a digital environment versus the free ﬂow of information.

∗Patents: UNS. and EU approaches to patent protection are broadly similar, though with
some differences in the areas of patent term extensions, protection of “test” data, patent
linkage, and trade secrets.

ich) Trade facilitation: Although the EU has a single trade policy, the United States has
concerns because the EU customs administration is handled by national customs agencies,
which might lead to inconsistent administration across EU member states. Gleichzeitig
Zeit, the EU is concerned about U.S. laws requiring “100 percent scanning” of maritime
cargo containers (to reduce potential terrorist threats) as possibly injurious to EU exports.

J) Labor and environment: Recent U.S. FTAs include labor and environment commit-
ments that are enforceable under FTA dispute settlement procedures. Im Gegensatz, the EU
tends to take a more consultative approach to resolve differences. HLWG (2013) recom-
mends that discussions of these issues should account for work done in the Sustainable
Development Chapter of EU trade agreements and the Environmental and Labor Chap-
ters of U.S. trade agreements.

k) Localization barriers to trade:19 UNS. companies are concerned that the disclo-
sure of NSA surveillance activity could lead to European demands for restrictions on

18 GIs are geographical names that act to protect the quality and reputation of a distinctive product
originating from a certain geographic region, such as Parmesan cheese and Parma ham from the
Parma region of Italy, Champagne from the Champagne region France, and Irish whiskey.

19 Localization barriers to trade generally refer to those designed to protect, favor, or stimulate do-
mestic industries, service providers, or intellectual property at the expense of imported goods,
services, or foreign-owned or foreign-developed intellectual property., These barriers include re-
quirements for businesses to transfer technology or intellectual property or to utilize local content.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

cross-border data ﬂows. Zum Beispiel, the EU could require that servers be located in the
EU for data privacy reasons. HLWG recommends that the two partners seek to reach bi-
lateral agreement on globally relevant rules, principles, or modes of cooperation related to
localization barriers to trade.

l) SOEs and SMEs: The United States and EU seek to address competitive challenges as-
sociated with the rise of SOEs in the global economy, particularly in emerging markets
such as Brazil, China, Indien, and Russia. The HLWG recommends that the United States
and EU cooperate to agree on globally relevant rules, principles, and modes of coopera-
tion on SMEs.

M) Dispute settlement: Divisions arise on whether regulatory and SPS issues in TTIP
would be subject to dispute settlement and whether TTIP commitments would be subject
to binding resolution or consultative mechanisms for resolution.

5. Issues and challenges

RCEP encompasses economies with vastly diverse levels of development, which gives
rise to differing interests and sensitivities. Zusätzlich, historical conﬂicts and unsettled
territorial disputes complicate the negotiations.

TPP, until the late entry of Japan in July 2013, was dominated by the U.S. negotiating
Vorlage, as the other negotiating economies are all small and medium-sized. Disagree-
ments arise over the “high standards” advocated by the United States, Japanese agri-
cultural protectionism, and the ability and willingness of other members to accept the
stringent provisions on IPR, SOEs, government procurement, and labor and environmen-
tal standards.

The TTIP is also facing tremendous negotiating difﬁculties, given the sheer breadth of
issues, differences in regulatory approaches, and evolving political dynamics in U.S.–EU
Beziehungen. Zusätzlich, the EU must consider the interests of individual member states,
whereas for the United States the lack of Presidential trade promotion authority will make
an agreement difﬁcult to conclude.

5.1 Membership accession and eventual FTA consolidation

RCEP is an attempt to establish an alternative trade forum to TPP in East Asia (einschließlich
China, Japan, and India but excluding the United States), one that emphasizes ﬂexibility
for developing countries. The RCEP Guiding Principles have an open accession clause to
enable participation of any ASEAN FTA partner and any other “external economic part-
ners” after the completion of the RCEP negotiations. It is known that Taiwan and Hong
Kong have applied for membership. It is unclear, Jedoch, whether “external economic

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

partner” requires a prospective member to sign an ASEAN+1 FTA prior to becoming el-
igible for RCEP. And it is unclear whether a new member can “reopen” any closed chap-
ters or provisions that have been previously decided by the existing membership.

Following the admission of Vietnam, new TPP accession procedures were introduced,
requiring the applicant to ﬁrst undergo bilateral consultations with existing negotiating
members, prior to the TPP group’s collective approval of the new member for admis-
sion. Zusätzlich, the prospective member has to wait for ﬁnal domestic procedures to
be completed before it is allowed to see the negotiating texts and formally join in the ne-
gotiations. Als solche, TPP is likely to become a bundle of bilateral deals, with tariff con-
cessions and schedules determined on a bilateral basis rather than providing a common
tariff schedule.20 A further provision introduced when Canada and Mexico joined in late
2012 prevents new members from “reopening” any closed chapters or provisions that
have been agreed upon by the existing members. Daher, new TPP members can engage in
bargaining over their own market access and commitments but cannot reopen already-
concluded TPP agreements. It is highly likely that new TPP applicants will include South
Korea, die Phillipinen, and Taiwan.

The TPP has the ambition of including more APEC members and eventually morphing
into the Free Trade Area of Asia and Paciﬁc (FTAAP). Because many APEC members
are deeply enmeshed in Asia-Paciﬁc value chains, membership in TPP would provide
signiﬁcant economic beneﬁts. To date, TPP negotiations have noticeably excluded
China. In der Tat, it would be politically difﬁcult if China were to join the TPP without the
opportunity to negotiate on any of the existing provisions. The emergence of FTAAP
through a merger of RCEP and TPP is strongly advocated by some American scholars and
by Chinese President Xi at the APEC Summit in Beijing.21 The completion of this merger
will face complications, Jedoch, due to differences in the negotiating templates of the
two groups.

5.2 Depth and comprehensiveness of economic integration

The RCEP will not be as “high standard” as TPP and TTIP because its membership in-
cludes some low-income developing economies and because it builds on the templates of
the AEC and the ASEAN+1 FTAs. Bedauerlicherweise, consolidation will be difﬁcult because
the ﬁve existing ASEAN+1 FTAs do not have a common template. Zum Beispiel, the vari-
ety of ROO across these FTAs gives rise to the “noodle bowl” effect. RCEP is expected to
streamline these rules and to enable cumulation and outward processing. To add value,
RCEP should work to meet the high standards of the best ASEAN+1 FTA. Because most

20 The United States does not want to reopen issues already settled in existing FTAs and it wants to

maintain different tariff schedules with different TPP partners.

21 Vor allem, those at the East-West Center in Honolulu and the Peterson Institute in Washington, Gleichstrom.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

production network trade already enjoys zero or very low tariffs, RCEP needs to focus
on reducing the beyond-the-border barriers that constrain production networks and sup-
ply chains. RCEP needs to improve on existing ASEAN+1 FTAs’ commitment levels. In
particular it also needs to improve on existing ASEAN+1 FTAs’ commitment levels in
services, and to improve its coverage of new trade issues such as competition policy and
labor and environment standards.

For the TPP, the question is whether the U.S. objective of a cutting edge, 21st-century
trade agreement is achievable. In all likelihood there will be compromises and carve-
outs on sensitive issues which will dilute the “high standards”. The contentious issues
include IPR and SOE issues, as well as protection for Japanese rice, Australian sugar, Neu
Zealand butter, and labor-intensive industries such as Vietnamese garments. TPP crit-
ics decried the role of U.S. corporate and political interests in calling for more stringent
IP rules, due to the potential effect of IP rules on developing countries’ access to afford-
able drugs as well as the effects on New Zealand’s low-cost generic drugs-buying agency,
PHARMAC. Andererseits, TPP advocates hail the TPP’s potential to strengthen eco-
nomic reforms in Asia, particularly reducing the dominance of SOEs and lowering ser-
vices protectionism. Malaysia’s Ministry of International Trade and Industry noted that
21 out of 29 chapters remain under negotiation and that it has problems in 7 key nego-
tiating areas.22 In addition, Japan and the United States remain in conﬂict over Japanese
protectionism in agriculture and U.S. protectionism in automobiles.

TTIP also faces the challenge of achieving a comprehensive and high-standard agree-
ment. Several factors could inﬂuence the negotiating outcome. Erste, the complexity of
the issues combined with difference in opinion on the criteria for “comprehensive” and
“high-standard” agreements. Konkret, should TTIP include the audiovisual sector, ﬁ-
nancial services regulation, and geographical indications? Zweite, although both sides
have outlined their speciﬁc negotiating objectives, external factors could inﬂuence the
outcome. Zum Beispiel, how would the completion of TPP affect TTIP negotiations, oder
how will the diplomatic fallout from the disclosure of NSA surveillance affect TTIP ne-
gotiations on treatment of digital trade and data privacy? Dritte, timing may play a role
in the outcome of the TTIP negotiations. Both sides have set a two-year time frame for
concluding the negotiations, before European Parliament elections and changes in the
European Commission in 2015. Will the “hurry to conclude” harm the quality of the
negotiated agreements?

22 Posted 20 Februar 2014 on the Ministry of International Trade and Industry Web site (www.miti

.gov.my/cms). Areas of difﬁculty include pharmaceutical IP protection; SOE policies, Wo
Malaysia seeks carve-outs in ISDS agreements; Malaysia’s interest in maintaining preferential
policies for ethnic Malays and small businesses in government procurement; and environmental
protection, labor rights, and a carve-out for tobacco regulations.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

5.3 Issues of transparency and opposition from various stakeholders

Trade and investment beneﬁts stemming from the successful completion of FTAs tend
to be diffused over a wide range of businesses, consumers, and other stakeholders. In
Kontrast, the costs of FTAs tend to be highly concentrated on certain sectors, ﬁrms, Und
workers. Weiter, to allow negotiators some ﬂexibility to state and restate their negotiat-
ing positions, FTA negotiations are never conducted openly.

With the exception of Malaysia, where the government was pressed to release some de-
tails of its negotiating positions, most countries involved in RCEP negotiations have faced
more limited demands for transparency or public opposition. Trotzdem, the businesses
in some RCEP countries complain about lack of consultation and lack of information and
business surveys indicate that FTA preferential tariff utilization rates are low.

The TPP has sparked vigorous debate from all sides. TPP advocates argue that successful
negotiation of the TPP would provide a template for future WTO negotiations. It might
also incentivize other economies to move forward with the domestic reforms that are req-
uisite for entry into the TPP, as they enter out of fear of being left out. The TPP supports
die USA. pivot to Asia and the adoption of a negotiating template which is based primarily
on U.S. FTAs. Although the United States was noted for its efforts to persuade Malaysia
and Japan to join the TPP negotiations, no such overture was made towards China, al-
though it would be open to Chinese participation if China agrees to the necessary policy
requirements. Critics counter that the TPP diverts resources away from multilateral WTO
efforts. They also argue that the spread of FTAs may make international commerce more
difﬁcult as companies seek to navigate varying and overlapping rules and standards of
the different FTAs. Because the TPP encompasses countries with numerous existing FTAs,
it would potentially add another layer of complexity.

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American scholars are also divided on the value of the TPP. Although supporters note
that TPP countries constitute about 40 percent of world economic activity, trade among
these countries is already fairly free. Opponents portray the TPP as a huge conspiracy
to destroy national sovereignty and transfer power to corporations.23 U.S. and EC trade
negotiators are conﬁdent of the beneﬁts of TTIP, but both face public and legislative oppo-
sition. Although negotiating secrecy could facilitate the discussion the U.S. Trade Repre-
sentative Ofﬁce and the European Commission both conduct stakeholder meetings at the
end of each negotiating round to inform and persuade stakeholders.

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23 Paul Krugman in the New York Times on 24 Februar 2014, http://www.nytimes.com/2014/02/

28/opinion/krugman-no-big-deal.html.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

On the legislative front, the Obama Administration needs the Trade Promotion Authority
from U.S. Congress to enable fast track approval of TPP and TTIP by Congress.24 Because
of political divisions, die USA. Congress is not expected to pass a TPA bill until after the
November 2014 elections, and a delay until 2015 is most likely. Folglich, other coun-
tries involved in the TPP and TTIP negotiations will be reluctant to reach an in-principle
deal with the United States until the Trade Promotion Authority is passed. Ähnlich, In
the EU, ratiﬁcation of the TTIP (and other trade agreements) requires the consent of the
European Parliament. Following the EU Parliamentary Elections of May 2014, EU leaders
will ﬁrst have to decide on the formation of new European Commission and the EU’s lead
negotiator at the TTIP talks. A pro–free trade Commission would likely favor the contin-
uation of TTIP negotiations along existing lines. There is no certainty that conclusion of
negotiations will win consent from the new and increasingly anti-integrationist European
Parliament, Jedoch.

5.4 Issues and challenges speciﬁc to RCEP
Flexibility and special and differential treatment for the less developed members.

This objective of RCEP is not explicitly stated in the TPP and TTIP. Although the RCEP
Guiding Principles allow for special and differential of developing countries, Jedoch,
this ﬂexibility is a mixed blessing. It helps to attract the less-developed countries to join
RCEP and helps break negotiating deadlocks, but it may also limit the liberalization
achievable by RCEP.

Maintaining ASEAN centrality in RCEP. The Guiding Principles and Objectives ex-
plicitly recognize “ASEAN Centrality” in the RCEP. Fukunaga and Isono (2013) Punkt
to two possible interpretations. It can refer to ASEAN as a facilitator of process. Alterna-
aktiv, it may refer to ASEAN as driver of substance—ASEAN proposed the RCEP concept
and Guiding Principles and Objectives. It remains to be seen, Jedoch, to what extent the
large economies of China, Japan, Südkorea, and India are prepared to accept ASEAN
norms in the RCEP negotiations.

Pressure on negotiating resources. RCEP member countries are participating not only
in RCEP negotiations but are also busily involved in completing the AEC by the end of
2015 and negotiations on agreements among China, Japan, und Südkorea, sowie
various other plurilateral and bilateral agreements. This puts tremendous pressure on the
limited negotiating and implementation resources of low-income and small economies.

24 Under Trade Promotion Authority, Congress is limited to an up-or-down vote on trade agree-

ments negotiated by the U.S. Administration. TPA avoids the possibility of Congressional amend-
gen, which trigger the need for renegotiation with FTA partners.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

5.5 Issues and challenges speciﬁc to TPP and/or TTIP
Stumbling or building block to the multilateral trading system? Because TTIP encom-
passes a larger share of world GDP and world trade than the TPP or RCEP, and has the
avowed objective of inﬂuencing global rule setting in trade and investment issues, it may
have the largest effect on the future of the world trading system. If the U.S. and the EU
continue to drive trade liberalization efforts as they have done in the past in GATT/WTO
negotiations, a successful TTIP could provide momentum and serve as a template for re-
solving difﬁcult issues that have prevented the WTO from making continued progress.
Alternativ, FTA efforts may undermine the multilateral trading system, as its partici-
pants focus on FTA negotiation efforts rather than the WTO, and if developing countries
feel threatened by TTIP and TPP efforts and seek to form counter trade blocs of their own.

The TTIP is more important to EU than to the United States given the U.S.’s pivot to Asia
and ongoing TPP discussions. Als solche, die USA. would appear to have stronger bargaining
power. The European Commission’s Explaining TTIP (Mai 2014) document highlights its
ongoing concerns with negotiations in the areas of standards and regulations, services,
and ISDS.

6. Abschluss

It is difﬁcult to speculate about outcomes while negotiations are ongoing and ﬁnal out-
comes are uncertain. The contest is between RCEP and TPP for membership and template,
because TTIP is essentially about U.S.–EU relations, albeit with repercussions on TPP and
the world trading system.

6.1 RCEP and/or TPP and TTIP

RCEP negotiations involve 16 Asian economies, TPP negotiations currently involve 12
Asia Paciﬁc economies with several waiting in the wings, and TTIP encompasses the
world’s two largest economies, nämlich, the EU and the United States. There is need to ne-
gotiate consistent rules and high standards across the trade agreements capable of global
dissemination. Sealing the trans-Paciﬁc and trans-Atlantic deals would make the United
States the world’s most powerful FTA player, secure its role in the dynamic Asian region,
and consolidate its trans-Atlantic partnership.

Countries in Asia Paciﬁc may join RCEP and/or TPP.25 There are some advantages in
RCEP membership.26 First, there is the declining economic prominence of the United
States and the rising economic prominence of China. Each country’s bilateral trade and

25 Although countries outside of APEC, such as Cambodia, Laos, Myanmar and India, may not enter

TPP.

26 Sehen, Zum Beispiel, Gupta (2013) and Menon (2013).

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

investment ﬂows with China have seen remarkable growth in the past two decades and
the growth is likely to continue, albeit at a slower pace. Zweite, RCEP appears to be more
ﬂexible, less demanding on stringent regulatory standards than TPP, and places a greater
emphasis on the economic development and economic and technical assistance for low-
income countries. Dritte, RCEP will help consolidate ASEAN centrality in the regional in-
tegration architecture. It will also enable China to play a leading role in regional economic
integration and signiﬁcantly contribute to the future of regional trade rules and standards.
The TPP’s high standard would yield greater gains but would make it more difﬁcult for
low-income Asia Paciﬁc countries to qualify for membership.

Zusätzlich, the contest of templates between RCEP and TPP could lead to hardened
positions that preclude later enlargement and convergence. Negotiators should seek stan-
dards and provisions with the goal of enlargement and eventual consolidation in mind.
Asia Paciﬁc should avoid allowing itself to be carved up into two overlapping and com-
peting trade blocs. The competition between RCEP and TPP can be most constructively
interpreted as a contest over the ultimate template of regional integration. China and the
United States will therefore champion regional agreements that reﬂect their future bar-
gaining positions on regional trade. Business leaders across the region continue to sup-
port engagement and liberalization in both the RCEP and TPP.

There is a signiﬁcant difference between the launch and conclusion of negotiations; Die
latter is distinctly harder. RCEP negotiations began in May 2013 with conclusion targeted
for the end of 2015. Although the fourth and latest round took place in April 2014, the sta-
tus of the negotiations is hard to gauge because little information is made public. In light
of the difﬁculties of gaining agreement among countries that have diverse backgrounds,
and given the large size of the group, it is reasonable to expect that consensus may only
be achieved at the expense of some depth and comprehensiveness in the agreement. Fi-
schließlich, given the recent political developments27 in some RCEP countries, the negotiating
deadline appears over-optimistic.

TPP negotiations started in 2010. In the process, negotiation deadlines have been repeat-
edly delayed as countries attempt to make difﬁcult concessions on unresolved issues and
as new countries joined the negotiations. Über 20 negotiating rounds have taken place.
At the end of 19 rounds in August 2013, the TPP Trade Ministers Report28 showed that
signiﬁcant progress had been made in realizing each of the ﬁve deﬁning features of TPP:
(1) Comprehensive market access: agreement remains outstanding on treatment of the most

27 There is escalation of conﬂict between Japan on the one hand and China and South Korea on the
andere; as well as territorial conﬂict between China and some ASEAN countries over the South
China Sea. ASEAN members are preoccupied with realizing the AEC by the end of 2015. Addition-
ally, political developments in Thailand and Indonesia are also diverting attention and resources.

28 USTR (2013).

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

sensitive products; access to services markets and government procurement. (2) Regional
Vereinbarung: negotiations are nearing agreement on issues such as customs, express deliv-
ery, e-commerce, and standards. (3) Cross-cutting trade issues: negotiations are in the ﬁ-
nal stages on four cross-cutting issues on regulatory and other NTBs; competitiveness
and business facilitation; SMEs; and capacity building, Zusammenarbeit, und Entwicklung.
(4) New trade issues (include promoting the new digital economy, green growth and new
technologies, a transparent and pro-competitive business environment, and coordinating
to advance common policy goals): negotiation has focused on bridging differences and
reaching high-standard disciplines. (5) Living agreement: countries are nearing accord on
Struktur, institutions, and processes that will make the TPP a living agreement.

Following the latest TPP round in Ottawa in July 2014, the media reported29 that difﬁ-
cult aspects remain on issues such as IP, SOEs, Umfeld, and Japanese agriculture.
Vor allem, more talks are called for and no timeline for conclusion has been announced.

On the TTIP, the Obama Administration notiﬁed Congress on 20 Marsch 2013 of its intent
to start negotiations with the EU, and likewise on 4 Juni 2013 EU Trade Ministers gave
the European Commission a broad mandate to negotiate with the United States. Der Erste
round of negotiations took place on 8 Juli 2013 and the ﬁfth and latest round took place
in May 2014. The initial deadline of late 2014 is no longer feasible, Jedoch, although both
sides report good progress on market access, regulatory aspects, and rules. Issues that
will require more effort include market access improvements and setting rules to relax
cross-border paperwork and reduce regulatory barriers. The two sides are also seeking
to bridge differences on issues including ﬁnancial regulation, agriculture subsidies, Und
country-of-origin labeling. The ﬁfth round highlights continuing differences regarding
the inclusion of ﬁnancial services. It has also been reported30 that Germany, once a strong
advocate of TTIP, has become a vocal opponent, due to concerns about threats to food and
die Umgebung, and anger over reports of U.S. spying.

For each set of negotiations a series of deadlines will pass in relatively rapid succession.
For TPP and TTIP, the question is whether the Obama Administration will manage to se-
cure Trade Promotion Authority. For TTIP, there is the additional question whether the
negotiations will maintain momentum through a changeover in European governance. Es
is hoped that in the ﬁnal push to conclude the RCEP, TPP, and TTIP, ofﬁcials and lead-
ers do not dilute the ambitions of the agreements and do not choose to skip over some
of the long-term decisions that are critical to the formation of lasting agreements. Trade
negotiations may provide additional value when they generate external pressure that sup-
ports reform agenda advances. Such beneﬁts may emerge if Japan’s participation in the

29 The Straits Times, 14 Juli 2014, http://www.straitstimes.com/.

30 The Business Times, 15 Juli 2014, www.businesstimes.com.sg/.

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

TPP provides the impetus for tackling long-standing reforms in Japanese agriculture, oder wenn
completion of TTIP helps Europe wean itself from reliance on Russian energy supplies.31
TPP and TTIP supporters also see these two mega-blocs as setting the future rules for
the international trading system. Because these groups exclude China, Indien, and Russia,
Jedoch, it is not clear that they will have a strong effect on the formation and implemen-
tation of “new international rules” on the world trading system.

Optimists regard RCEP and TPP as possible pathways to a FTAAP, and a contribution
to building momentum for global trade reform, although such a consolidation faces dif-
ﬁculties because it would involve the merger of two templates: one that aims for a 21st
century standard and the other that involves lower standards.

6.2 Mega-blocs versus the WTO

Region-wide FTAs could lead to greater general liberalization, or could end up creat-
ing large protectionist blocs. Although the recent proliferation of mega-trade blocs may
spell good news for the parties involved, it is important that they do not become substi-
tutes for a global solution in world trade. There is a great need for global rules to provide
predictability and stability in international trade. The drift in global negotiations has led
to a frenzied pace of bilateral and regional talks involving the major trading countries, Re-
gional groupings, and cross-regional arrangements. Althoug we pursue the second-best
option of FTAs, it is critical that the attention of policymakers be focused on global risks
and global solutions.

Pascal Lamy32 warns of the limitations of the mega-trade bloc negotiations and the per-
ilous retreat from global trade rules. Erste, because they focus more on regulatory issues
rather than tariffs, it is important to remember that some non-tariff measures serve legit-
imate public policy objectives, such as consumer safety and environmental protection. In
addition, if agreements lock various groups into different regulatory approaches, this may
raise transaction costs for domestic traders and may make it difﬁcult for external goods
and services to penetrate the bloc. Such market segmentation could disrupt supply chains
and lead to efﬁciency-damaging trade diversion. Zweite, the ability of mega-FTAs to set
norms that beneﬁt non-participants might prove to be limited. Dritte, if regionalism is per-
ceived as coercive and unfriendly by outsiders, economic fragmentation and heightened
security tension may result as they may respond by forming defensive trade blocs of their
eigen. To prevent such an outcome, mega-blocs should be relatively open to newcomers
and amenable to the possibility of multilateralization. Endlich, Lamy argues that a func-
tional multilateral trade system remains vital and WTO member governments must work

31 Russia has cut natural gas supplies to Europe a number of times in the past decade during dis-

putes with Ukraine and other trans-shipment countries, prompting severe shortages in parts of the
EU.

32 Lamy (2014).

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Emerging Mega-FTAs: Rationale, Challenges, and Implications

together to address unresolved issues from the Doha agenda. For the WTO to remain rel-
evant, it will be necessary for it to reform to meet the requirements and aspirations of its
much wider membership and to support the operation of a world trading system that
facilitates the activities of global value chains.

Verweise

Centre for Economic Policy Research (CEPR). 2013. Reducing Transatlantic Barriers to Trade and Invest-
ment, An Economic Assessment. London: CEPR.

Chia, Siow Yue. 2013. The Emerging Regional Economic Integration Architecture in East Asia. Asian
Economic Papers 12(1):1–37.

Fukunaga, Y., and I. Isono. 2013. Taking ASEAN+1 FTAs towards the RCEP: A Mapping Study.
Economic Research Institute for East Asia and ASEAN (ERIA) Diskussionspapier. Jakarta: ERIA.

High Level Working Group on Jobs and Growth (HLWG). 2013. Final Report. www.trade.ec.europa
.eu/doclib/docs/2013/feb. Zugriff 30 Mai 2014.

Kawai, Masahiro, and Ganeshan Wignaraja, Hrsg. 2011. Asia’s Free Trade Agreements: How is Business
Responding. London: Edward Elgar.

Lamy, Pascal. 2014. Perilous Retreat from Global Trade Rules. 13 Januar. http://www.chinadaily
.com.cn/opinion/2014-01/13/content_17231505.htm. Zugriff 27 Oktober 2014.

Ofﬁce of the U.S. Trade Representative. 2013. Trans-Paciﬁc Partnership, Trade Ministers’ Report to
Leaders. www.ustr.gov/tpp.

Petri, Peter, Michael Plummer, and Fan Zhai. 2011. The TransPaciﬁc Partnership and Asia Paciﬁc
Integration: A Quantitative Assessment. East-West Center Working Paper Economic Series No.119.
Honolulu, HALLO: East-West Center.

Transatlantic Trade and Investment Partnership (TTIP) Verhandlungen. Washington D.C. Verfügbar um
www.fas.org/sgp/crs/row/R43387.

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