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China's Asia - Pacific regional integration and Its options.

The Asia-Pacific region is playing a huge role in the economic growth of not only regionally but also globally. Currently, the region is also leading the movement of FTAs in the world. The FTAs is leading to regional-wide FTA convergence initiatives for the first time in history such as CPTPP, RCEP and FTAAP. However, the approach of these trade initiatives is quite different in terms of contents, size and members. In addition, the idea of forming FTAAP is given in the context of two major trade agreements in the region including CPTPP and RCEP.

As a result, the outcome of these two agreements will inevitably have a significant impact on the FTAAP process, either or both of which could lay the foundation for the creation of a trade agreement itself.The US did not initiate TPP, but it has pushed TPP as a trade agreement between the Pacific Rim to form, providing the principles for regional trade in the 21st century. After seven years of hard negotiations, 12 members signed the agreement in October 2015. Although the agreement was troubled when Donald Trump's government announced its withdrawal, the remaining 11 countries, under the lead of Japan and Canada, resumed negotiations in May 2017.

They concluded on reshaping the CPTPP, which icing some articles of TPP with the hope of the return of the US, in November 2017.In recent years, China has been one of the countries that has actively promoted regional economic integration in East Asia. By 2016, China has signed and implemented 14 FTAs involving 22 countries and territories. China's active international economic integration caused from many factors. First, FTAs movement meet the growing demand of China's market for materials, equipment and technology. In order to meet the demand for domestic economic development, especially in the context of oil price, raw materials and fuels, which contain many fluctuating factors, China intends to continue opening up the outward-looking strategy.

Thus, expanding the FTA gives China greater access to resources. Second, signing the FTA plays an important role in China's foreign policy. The FTA is a factor that ensures stability in developing and maintaining peaceful relations with neighboring countries, facilitating China's ability to more effectively target such as the BRI initiative. On the other hand, for nearly 40 years of high economic growth, China has taken its power to a new level. China needs to affirm its wealth, power and status to win a better position in regional and international order. Through FTAs, China's economic and institutional strengths can help China achieve this goal. Third, geopolitical issues are also a factor driving China to more trade talks.

The RCEP is considered a "retaliatory" strategy when the US did not invite China to join the TPP. Therefore, active regional economic integration is one of the strategies that Beijing can use to cope with the rapid development of the TPP. China also has more opportunities to play a leading role in economic integration in the Asia-Pacific region while the US is gradually reducing its role in the region. First, many countries in the Asia-Pacific region pursues an export-oriented industrialization model. Most of these countries are medium size, so they need both input and output markets to serve their economic growth. China is supplying both. For more than a decade, China has clearly been creating prosperity for its neighbors as not only a exported commodity destination and but also a supplier of essential materials, especially raw materials and equipment.

Second, China's economic model makes many countries want to learn. In the past, many countries have criticized China's political institutions, even warned that it could not grow with the tight state-controlled China model. China's success in overcoming major economies has made these statements obsolete. More and more experts and researcher agrees that democracy and growth are not two attached categories, or that the concept of democracy should be interpreted as pertinent principles to each country with different in cultural, social, philosophies. Therefore, even when taking the large power influences or economic interests out of China's FTA strategy, signing the FTA with China also contains the dynamics of reform not only in economically but also in the social management that aspected by China's neighbors will.

However, China is also facing challenges that need to be addressed to successfully achieve its goal of becoming a regional economic integration hub.First, China does not shape RCEP with high standards such as TPP. Thus, China has diluted the RCEP concept, considering RCEP as a purely "comprehensive" FTA, aimed at adding partners to increase its geopolitics objectives rather than a comprehensive content. If it come true, RCEP would be the same as the relatively limited FTAs already in place in East Asia, that reduces the attractiveness of the RCEP initiative.

Second, China's trade with FTA partners accounts for a very modest proportion. Although China's trade volume and partners have grown sharply over the past 5 year, but it counts only 22% trade in total. Furthermore, with these trading partners, China is always the surplus exporter. This has caused a lot of fears among countries and can make Chinese FTA initiatives difficult to convince them.Third, the level of liberalization in China's FTAs has not yet been considered as comprehensive. China remains one of the world's highest levels of protectionist economies. According to the WTO, the average tariff imposed by China on imported goods is about 9.6%, much higher than the 5.3% in the European Union (EU) and 3.5% in the US. In addition to tariffs, China is also proficient in using non-tariff barriers to protect its domestic businesses, especially large ones.

This is also a negative point for China's pursuit of the FTAs movement.With the withdrawal from the TPP of the US , China is taking a great opportunity to lead the region's integration trend. China also simultaneously raised two trade liberalization initiatives, including the RCEP and FTAAP. But, there is much works need to be done in the RCEP process as well as the promotion of the FTAAP initiative. A key question for the RCEP process is whether Beijing will easily convince major partner such as Japan into its orbit. China ' s economic powerhouse and security rival, Japan, is present in both TPP and RCEP. With its vital interests, Japan hardly participate in an initiative only to benefit China. So it is not easy for China to launch its self - public in East Asia.In addition, both the TPP and the RCEP can set the rules for the formation of FTAAP.

However, the possibility of RCEP being extended to become FTAAP is considered to be lower than that of TPP. First, RCEP is said to be limited to market access and other common problems without mentioning its issues "within the borders" like TPP. Under the leadership of China, the RCEP does not intend to discuss on labor standards, environmental protection and government procurement issues. It is difficult to attract the participation of developed countries due to the inability to deliver high standards and binding on "WTO plus" issues, while this is a prerequisite requirement of developed countries. Second, nowadays, the countries participating in the RCEP negotiations are limited to ASEAN countries and Its FTA partners.

Therefore, in order for RCEP to become a fundamental agreement for the establishment of FTAAP, memberships need to be changed and open to other countries in the region. Third, because CPTPP concluded before RCEP formation, so CPTPP has the advantage of becoming as a major fundamental in shaping FTAAP. In addition, some other economies are also considering CPTPP that make more advantage for its. Another scenario is that if FTAAP is not established on an RCEP basis, could it be based on CPTPP If the formula of formation of the FTAAP is equal to CPTPP + model, then the answer is definitely not by at least two things. First, trade history has shown that the US never returned to a trade agreement that it had given up; Second, the provisions of CPTPP are not expected to be as comprehensive as the original TPP, but it is still higher than China's view.

It is clear that China will not support CPTPP as it did with the original TPP in the past .If China chooses not to participate in the CPTPP, FTAAP may be formed based on the third approach. In that case, APEC economies may choose to form an entirely new FTAAP agreement based on a combination of both CPTPP and RCEP. An agreement incorporating the elements of the CPTPP and the RCEP, while meeting the high requirements of developed countries but also flexible enough for developing countries in the region. In this way, economies that engage in RCEP negotiations with less ambitious terms will have to accept more stringent requirements in FTAAP. At the same time, economies that are currently participating in CPTPP with more comprehensive and rigorous terms will have to yield and accept more less ambitious terms in FTAAP.

Thus, if FTAAP is built in this way, trade relations between major economies in APEC, especially the US and China, will continue to expand, while the economies that are members of the CPTPP do not have to worry about cutting their commitments under the agreement so that China and other countries can directly participate in the TPP. This is a likely scenario even for China.

It can be said that what any ever the process of integration of the Asia-Pacific region takes place, countries must take into account the role of China in the process. China has its own mindset, however, the context of the area is complex and China is not sufficient to create a playground with rules set by China. Many countries in the Asia-Pacific region which economic depend on China that might make it possible for China to confidently promote its own thought and mechanism for economic cooperation in East Asia. However, given the growing concern about territorial disputes in the region, China needs to build the trust of its neighbors by its more peaceful policy The most important strategy of the Chinese government at the moment is to actively promote its FTA strategies to deal with the return of the United States.

The unchanging policy of the Chinese government is to accelerate the development of the free trade area with China's major trading partners in Asia. The geographical proximity of Asian countries is an important guarantee for each other's stability and economic development and cooperation with distant countries may not be conducive to economic development of these countries themselves. China needs to prove to its neighbors that China will continue to be a reliable bilateral economic partner.
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Publication:The Diplomatic Insight
Geographic Code:90ASI
Date:Jun 30, 2019
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