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INB 319 US-China-India Relations Regional Trade Relations Dr. Lairson 10/23/14 GATT/WTO based on multilateralism, non-discrimination/MFN Regional trade agreements (RTAs) and Free Trade Agreements (FTAs) are based on bilateral or restricted multilateralism and preferential terms that discriminate against non-members. Two-thirds of global trade in G&S is conducted under RTA/PTAs rules Three mega groups of negotiations: Trans-Pacific Partnership (TPP), US, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam Transatlantic Trade and Investment Partnership (TTIP) US and EU Regional Comprehensive Economic Partnership Agreement (RCEP). (Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, Korea and New Zealand). India does not participate in the former two, and participates only in the ASEAN+6 grouping which is negotiating the RCEP. Manger, Mark (05/01/2014). "The Economic Logic of Asian Preferential Trade Agreements: The Role of Intra-Industry Trade," Journal of East Asian Studies (1598-2408), 14 (2), p. 151-184 Manger, “The Economic Logic of Asian PTAs” Do PTAs reflect and reinforce an economic logic, a political logic, a strategic logic or all of these? Explain this thesis: What is a PTA? EU and NAFTA as big examples Economies of scale Differentiated products If PTAs are based in an economic logic, what are the political and strategic dimensions of these agreements? What is APEC and its role in creating rules for regional trade? How did China, Japan, and Korea respond to the failure of APEC? PTAs in Asia: FTAs that reduce barriers (Tariffs) among members only and leave tariffs levels with rest of the world unaffected Asian trade has become defined by a dense network of PTAs Characteristics of PTA nations – general versus Asia More democratic are more liberal in trade Few transitions to democracy in Asia Authoritarian nations are major partners in PTAs in Asia Allied nations have more PTAs In Asia, PTAs substitute for defense alliances Failure of multilateral forums for trade negotiation lead to more PTAs May be true in Asia Domino effects – one agreement generates incentives for more PTAs as strategy to convince foreign and local investors of commitment to free trade to win more investment Best explanation for PTAs in Asia is the credibility of government commitment to free trade and the effort to provide expanded markets for firms with large economies of scale and/or economies of scope Two firms A B Fixed costs $1.2 billion $200 million Variable costs $1000 per unit $1000per/unit Sales in Units T1 2 million 2 million 10 million 10 million $7000 $1200 $1120 $1020 84% 15% T2 Cost per unit T1 T2 % Decline Trans-Pacific Partnership “state-of-the-art” trade agreement that would go further than existing arrangements. The idea is for the TPP to be a structure on to which other nations, including possibly South Korea, and eventually even China, could be bolted. develop a new model for US trade negotiations and a new regional approach that focuses more on jobs, enhances US competitiveness and ensures that the benefits of our trade agreements are shared by all Americans”. This is not, in other words, intended to be just another deal that is good for multinational companies but of uncertain benefit to US workers. the agreement is intended to deal with what he calls “behind the border” issues. These include areas of what could be deemed domestic policy, such as government procurement, which go beyond the normal scope of trade agreements. Other areas likely to be covered include rules governing the conduct of state-owned enterprises, which sometimes benefit from cheap financing or government protection. China, in particular, is often criticised for seeking to ensure the success of national champions. The TPP would also include labour, environmental and intellectual property standards. Finally, it is supposed to help bring benefits to small and medium-sized companies from trade integration. In general, regulations would need to be the same in all of the members thereby reducing the ability to use regulations to gain benefits for citizens of one nation at the expense of non-citizens. This would include environmental regulations, which could move up to the most strict or down to the least strict. Opposition comes from farmers in Japan, governments with SOEs, IP issues designed to protect large pharma firms, advocates of government regulation, those hostile to neoliberal ideas regarding trade, those who see regulations to benefit nations at the expense of foreigners as good It has become increasingly apparent that what free trade agreements do best is restrict governments from regulating the economy for public interest policy reasons, such as public health and the protection of the environment and local industry. Has the US been trying to squeeze China out of TPP India PTAs India – Mercosur Japan Korea Maldives Mongolia Nepal Sri Lanka Thailand Pakistan ASEAN (Malaysia, Thailand, Singapore – rest of ASEAN in 2015) Goods agreement in 2011; services agreement 9/8/14 Surplus for ASEAN Negotiations with EU have stalled awaiting the new government in India EIU, "Prospects for India-EU FTA," 1/21/2013 Indiaeufta.docx India and the EU have been in discussion for creation of a strategic partnership since 2004. To date, this has not produced significant progress in achieving this goal. Broad-based Trade and Investment Agreement (BTIA) is official name of proposed agreement India’s responsibility for the breakdown of the Doha WTO agreement in 2014 has damaged the credibility of India as a negotiating partner India – EU Trade 2011 2012 80 billion euro 75 billion euro India 2013 GDP $1.9 trillion EU GDP 2013 $ 17 trillion EU is India’s largest trading partner EU is largest source of FDI to India (25% of total) Average tariffs India EU 17% 2% India has large non-tariff barriers to trade that would need to be addressed in any agreement A major issue in an EU-India PTA is just how preferential these nations will want to be in relation to each other Major areas of negotiation: India wants EU to provide greater market access in the services and pharmaceutical sectors, data security status for its IT sector and liberalised visa norms for its professionals. EU is pressing India hard for "reforms" in the banking & insurance, wines & spirits, intellectual property regime, automobile and public procurement sectors. Major focus is on India’s high tariffs (60% - 100%) on autos What is structural power and how does it affect strategic interactions among nations?