The Collapse of the TPP: Unpacking the Disaster

No deal.  

What happened?  I was so optimistic that they would get things done for the Trans-Pacific Partnership (TPP) negotiations this week in Hawaii.  I ignored the (excellent) advice of my professor and issued predictions of success on a fast-moving target.  We even had a booklet ready to go on the benefits of the agreement for businesses.  My planned blog post for this week had us drinking champagne by now. 

But no champagne (or sparkling wine) is going to be popped open for most people after the collapse of negotiations in Hawaii.  The bottles will go back on ice for a very long time—at least early 2017.

Why?  Because Hawaii really did represent the last, best chance for a deal in the near term.  Ministers have apparently decided to reconvene on the sidelines of APEC in November to try again. 

The cold logic of deadlines, however, shows that a deal reached in November is not going to be helpful.  Recall that once the officials agree on a draft text, this is not the end.  Instead, internal procedures in the United States (and others) means a delay of at least 90 days prior to final signatures on the agreement.  Entry into force is even further off.

Even if ministers solve the current impasse in the TPP in November, then, the deal would be ready (best case) in February or March for presentation to Congress.  Congress has to agree under new TPA rules before the President can sign the agreement.  Congress will also be voting on all the implementing legislation necessary for the agreement to come into force for the United States. 

There is no way that Congress will want to take a politically suicidal vote in favor of trade in March 2016 with an election looming.  Hence, the deal is stuck until after the elections (November 2016) or even until after the new president is installed in January 2017.  Even then, passage cannot be assured.

So what happened on the ground in Hawaii?  There will be much finger pointing and recriminations in the wake of the talks.

If I had to put my own finger on it, the immediate cause of collapse can be traced to Canada’s refusal to discuss dairy in any meaningful way until the final 3 days of negotiations.  This was, as I have previously noted, a high risk strategy. 

I assume officials gambled that, if they waited until the bitter end, everyone else would be so willing to get a deal done that they would take whatever poor offer Canada made on dairy liberalization. 

The gamble could be taken, in part, because negotiations over dairy are infinitely more complex and time-consuming than equivalent difficulties in other sectors.  For instance, another problematic issue for ministers in Hawaii concerned the patent length for biologic medicines.  But the fight over patent length, while serious for participants, could at least be sorted quickly.  The number was gong to be 12, 8, 7 or 5 years of protection.  The choice might be hard, but once made, the final figure could be quickly slotted into the waiting text.

Dairy, by contrast, is not just the tariff concessions or tariff rate quotas (even more complicated) for fresh milk.  The number of lines of dairy products runs into the hundreds or thousands.  It includes all sorts of varieties of milk—fresh, powdered, canned, UHT, etc.  It includes milk products of all sorts.  Plus butter and cheese.  Cheese is, of course, not just one kind of cheese, but cheddar and Swiss and creamed. 

In short, getting an agreement on dairy is not simple and, logistically, cannot be sorted in 3 days or even a week. 

It is not like this was a new or unexpected problem either.  Canada was originally prevented from joining the negotiations in 2010 over concerns by the other TPP members that Canada would not be willing to discuss dairy or anything related to their domestic supply management system.  However, Canadian officials insisted they were prepared to move ahead with meaningful changes. 

In Hawaii, Canada apparently offered a flat quota for liquid milk equivalents—ie, anything that could be made (including fresh milk) with a certain quantity of milk would qualify.  Once the quota was filled, no additional access at TPP tariff rates would be granted.

There is not enough room in this blog post to detail all the reasons this is a horrible plan for anyone hoping to obtain meaningful access the Canadian dairy market.  Perhaps a future post will go into dairy in greater detail.

For now, accept that once the Americans saw the Canadian plan, they promptly withdrew their own offers to partners for additional dairy access into the United States.  After all, American dairy farmers were presumed to be willing to support the TPP if—and only if—any potential losses could be offset by greater sales elsewhere and particularly into Canada.  If Canada was not going to be a new, important market, then it was not worthwhile to offer up concessions to others to access the American market either.

I can only imagine the reaction in New Zealand.  Their primary interest in the entire agreement has been to receive additional dairy access.  Although the Kiwi market is dynamic and competitive in many areas, more than 30 percent of their economy remains tied to milk and dairy exports.  With these markets effectively shutting before their eyes in Hawaii, officials must have watched in total disbelief. 

In addition, Australia also had troubles with the dairy offer (and American offers on sugar).  With the U.S. dairy deal off the table, the Aussies promptly withdrew any support for changing the patent length protections on biologics (a key deliverable for the Americans). 

Mexico, which has been defending its special access to the NAFTA markets all along in various sectors, suddenly came forward to object to rules of origin (ROOs) around autos.  The current NAFTA provisions call for 65 percent content from NAFTA countries.  These rules have helped make Mexico into an automotive powerhouse and the possibility of lowering the percentage of content required in the TPP led to strong Mexican objections.  

With the unraveling of autos and the contested dairy elements of the agreement, various other complaints from different TPP members must have risen to a crescendo.   Reconciling these interests has always been a heavy lift.  But once officials realized that key outcomes were being pulled off the table by others in the end, the stampede to protect your own markets and not be left exposed must have been unstoppable. 

I thought they would delay the finish for another 24 hours.  Instead, with everything in such flux, officials just called off the whole thing to fight another day.  I would bet that many said—with domestic elections in Canada finished in October—the dairy stuff could be addressed by the next meeting.

The key problem with such a strategy, as I just pointed out, is that this delay is not simply from July to November.  It could be a delay of 18 months or more.  People in the coming days will undoubtedly be pointing to the global trade talks that have dragged on for more than a decade with no agreement (despite their own deadline of July 31) to even get a plan in place to discuss a path forward. 

The TPP now finds itself in very uncertain territory.  The only salvation I can imagine is to finally invite the South Koreans to join the talks.  If you aren’t going to be done for ages, you might as well expand the party.  If Korea comes in, perhaps Taiwan will also make a renewed push for entry. 

At least then officials have new excuse for delays in closing a trade agreement that has been underway for what frankly feels like forever.

***Talking Trade is a blog post written by (a deeply depressed) Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Trans-Pacific Partnership (TPP): Predictions for The Last Round?

A professor of mine once suggested that I never write anything about ongoing events until after I had tenure.  This way, I would never find myself in the embarrassing (and potentially career-ending) position of being completely proven wrong by unfolding events.

I am going to ignore this excellent piece of advice and make a series of predictions about the Trans-Pacific Partnership (TPP), while the 12 trade ministers are currently meeting in Hawaii.   

We, of course, have no idea what will happen in these negotiations, but here are my predictions:

Officials will conclude the negotiations on Saturday.  The round is supposed to end on Friday, but these sort of down-to-the-wire negotiations rarely end on schedule. 

The World Trade Organization (WTO) found this out to its peril in Seattle in 1999.  Given the protests outside the convention center, delegates were unable to get to the meeting venues until a full day had passed.  This compressed the negotiations into an even shorter time period.

A convention of dentists was scheduled to arrive immediately after the WTO ministerial finished.  It was not possible to reschedule the dentists or move the trade meetings anywhere else.  This meant that trade delegates did not have enough time to reach agreement on their agenda and the negotiations ended in collapse.  It took two years before the WTO was able to try again in Doha, Qatar, to launch a new round of trade talks in 2001.

Negotiations will conclude.  This is a controversial prediction, but if I’m going to go out on a limb, I should go all the way.  Talks will end because, after more than 5 years, officials have cleared the path to conclusion.  The remaining issues are sensitive and politically (and potentially economically) hard to resolve, but everyone has been focused on outcomes for some time now.  The last bit requires a leap of faith and a willingness to commit. 

At this point, most of these compromises are not time consuming to resolve either.  They require a decision.  For example, how many tons (exactly) is Japan willing to grant in new market access for polished rice?  The text on issues like this is otherwise done and officials are just waiting for the final numbers to be inserted by political leaders.

The agreement will finish with all 12 parties—but entry into force may not include all 12.  As we head into the finish line, two countries (especially) are facing domestic political challenges that make closure particularly difficult:  Canada and Malaysia. 

Canada has been pursuing a high risk, hardball tactic of refusing to discuss dairy concessions of any kind.  As we get to the end, the government has to decide if it is willing to pull out of an agreement that should dramatically increase market opportunities for Canadian companies on behalf of roughly 13,000 dairy farmers.  These farmers—mind you—will not be facing the complete elimination of a system of protection that has been in place for decades, but likely a much more modest opening over very long time horizons.  I would like to think that cooler heads will prevail and Canada will be a partner in the closure announcement and enter the agreement with the rest.

Malaysia faces more difficult challenges.  The Prime Minister just fired key cabinet officials yesterday as part of a plan to contain a growing domestic scandal.  Some of the provisions in the TPP (such as opening central government procurement markets more transparently and allowing some state owned enterprises to be subject to market forces) may be difficult.  Hence, it is possible that Malaysia will be present for the photos this weekend, but may delay entry into force for the agreement.  (The economic consequences for Malaysia of delay will be important, but that is the subject of another blog in the future.)

More time would not have fixed all problems.  There is an argument making the rounds that officials should take “as long as it takes” to reach the perfect agreement.  This is false.  With 12 diverse countries negotiating in the TPP, timing will never be ideal for sorting out the myriad issues under discussion.  And, looking ahead at the political calendar in participating countries, more time is likely to lead to more problems maintaining momentum in negotiations rather than fewer hassles. 

The agreement will not be perfect.  This prediction is a painful admission for someone who helped write a book (literally) on what a high-quality, 21st century agreement ought to contain.  For example, I wish officials had the guts (or suicidal tendencies) to drop all tariffs on all goods to 0 as they originally seemed to promise. 

This will not happen in the TPP.  Nearly all goods will drop to 0.  The coverage will be far, far better than any other free trade agreement.  But the final result will not be perfect.  Instead of 100%, the deal is likely to land at something like 97-98% of what perfection might have required.  But even in tariffs, the last few percent are dropping (even if not quite to zero). 

Much of the 21st century rhetoric of regulatory coherence, for instance, has also been dropped from the final agreement.  Turns out, it is very hard to get regulators to cohere.  Regulators are protectors—of the public, of health, of the environment, and of various types of policies.  They are not overly keen on matching other people’s views of their appropriate roles. 

And, as I have highlighted in the past, without the right institutional arrangements, implementation and expansion will be especially challenging.  If a “virtual” Secretariat remains in the final document and is not replaced with an actual physical group of people in one place dedicated to the long-run management of the agreement, problems will ensue. 

Lots of businesses will breathe a sigh of relief.  After more than a decade of stumbling in global trade negotiations, businesses have been reluctant to believe that big, important trade agreements can still be concluded.  This has kept many firms from paying as much attention to the TPP as they should, since the benefits can be substantial.  But with the closure of the agreement, TPP businesses ought to be working out the best opportunities for themselves.  For firms in formerly protected sectors, especially, the benefits of the agreement could be substantial. 

Some people will not be happy.  We met an NGO at one of the TPP negotiating rounds who was bitterly complaining about TPP outcomes.  I asked, “Is there anything in this agreement that would make you happy?”  Without a moment of hesitation, the answer came back, “No.” 

I think this is likely to be true for many groups.  Some will never be satisfied.  Others are going to be unhappy that this agreement does not deliver sufficiently on issues like the environment or labor.  But I would argue that this is somewhat unfair—a regional trade agreement is not the best place for managing climate change, for example.  Hence anyone with expectations that the TPP will somehow fix climate change is bound to be disappointed.

We will be glad the deal is done.  After 6 years of following these talks, we are delighted to be moving to discussing content of the agreement with reference to actual commitments and texts and to getting on with the business of implementation.  The TPP contains substantial benefits and we are looking forward to the future of trade in Asia.

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Getting to Yes—Negotiating Final Compromises

Any negotiator will tell you that reaching the last few points of an agreement are always the hardest part.  No matter how long talks have been underway, the last few days and hours usually devolve into intense, marathon sessions where people may have little sleep and barely eat. 

To appreciate the challenges of getting to yes in a complex, multiparty negotiation, think about trying to order pizza with a dozen people.  The rules of this particular meal require the purchase of only one kind of pizza.  Everyone must eat the final result. 

To make it more complicated (and a little closer to reality), imagine that the pizza is supposed to have 10 different toppings to be chosen from wide menu with different prices for each.  Finally, the dozen people planning to eat pizza have varying abilities to pay for the check.  

Some negotiations are likely to devolve rapidly.  The pizza might end up just having dough, tomato sauce and cheese (by, potentially, ordering “extra” servings of sauce and/or cheese to reach 10 items). 

The Regional Comprehensive Economic Partnership (RCEP) officials are at risk of eating a lot of cheese (or a mountain of dough) on their hypothetical pizza. 

The recent ministerial meeting in Malaysia appears to have resulted in a determination that the negotiations will not conclude this year as planned.  This is actually very good news, since it provides more time for officials to reach consensus and create higher quality final results.  

But the rest of the discussions with RCEP ministers were ominous.  For example, officials are trying to figure out how to order one pizza with different toppings on each side.  India, in particular, is trying to create market access commitments that vary across the 16 parties of the agreement.  South Korea or Singapore might get more liberalization (or pizza toppings) from India than China will receive. 

The discussions in RCEP remain largely stuck on goods, with limited discussions of how this pizza will be delivered to the table.  Unless services (like food and beverage operations) are included in RCEP, the end result will not satisfy.  Investment discussions remain shallow. 

Even an area like e-commerce where Asian economies should be looking for future growth has been relegated in RCEP to a “discussion group” with apparently no concrete outcomes expected.  Yet, in the real world, more and more people are using e-commerce to order and pay for their pizzas.  Having some consistent regulations in place to help reduce uncertainty for local and foreign firms would be extremely helpful in boosting growth prospects for companies.

Another trade “pizza” that has been in discussion for years is the World Trade Organization’s Information Technology Agreement (ITA).  Last week’s blogpost noted delays in reaching an agreement.  This week, however, officials appear to have (almost) gotten to yes.

A draft text is now under discussion in national capitols.  Final work is to be wrapped up on the agreement by the Nairobi ministerial at the end of the year.  (With the added benefit of giving the potentially beleaguered WTO something to talk about in their meetings.)  Implementation is tentatively scheduled for July 2016.

The final deal highlights the challenges of deciding on the last few items.  To get the ITA2 finished with more than 200 tariff lines included, officials had to jettison their aspirations of including some items.  For example, analogue car radios were dropped from the list at the last moment.  In exchange, a specific type of measuring instrument was also taken off the table.  A similar bargain was struck over optical lenses and some types of medical devices.  LCD displays remained off the list, leaving at least one party so deeply dissatisfied with the final result that it may leave the table entirely.

Arguing over analogue car radios is surely the equivalent of fighting over whether the pizza should contain a sprinkling of cinnamon.

Nevertheless, the final list of products to be covered in ITA2 represents an important step forward in updating this trade agreement.  In rapidly evolving industries like information technology, maintaining and updating the list is critically important.

The biggest “pizza” negotiation in the region is about to get underway in Maui.  Chief negotiators for the Trans-Pacific Partnership (TPP) are flying in and preparing for what most want to be their last meeting.  Officials will likely be engaged in furious negotiations over the last few items to be added (or subtracted) from the pizza in the hopes of presenting a completed product to their trade ministers at the end of the month.  Fingers crossed that everyone around the table will be satisfied with the final result.

***Talking Trade is a blog written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Making 2015 a “Year to Remember” at the WTO?

At the last General Council meeting of the year in December, the World Trade Organization (WTO)’s Director General reminded ambassadors that the institution had many deliverables to achieve in 2015.  Roberto Azevedo said, “We have important work to do and real deadlines to meet.  So let’s make sure it’s a year to remember.”

With six months remaining, it is a good time to take stock of how far the WTO has come in meeting its own objectives for 2015.  Although miracles can happen, it is already looking increasingly likely that the multilateral trading system will stumble badly on its way to the finish line this year. 

One deadline to be met was the ratification of the Trade Facilitation Agreement (TFA) signed with such fanfare in Bali, Indonesia, in December 2013.  Originally, countries agreed on a deadline of July 31, 2015. 

But members recognized the difficulties in meeting this objective and moved the goalposts even before Azevedo gave his speech in December.  In fact, WTO members ensured that they would never miss the deadline for TFA ratification by removing the finish line entirely.   Now there is no date by which members must submit necessary paperwork to proceed with implementation.

This may have been a good way to deal with a deeply troubling situation.  For the agreement to come into force, 2/3 of the WTO membership must agree.  However, as the original deadline approaches, only 8 countries (Hong Kong, Singapore, United States, Mauritius, Malaysia, Japan, Australia and Botswana) of the necessary 108 have actually submitted their paperwork. 

But now the WTO remains on track for ratification of TFA—whenever sufficient members opt to participate, the agreement will move forward.  No more irritating deadlines to meet or miss.

A second deadline is looming for the organization at the end of this month.  By the end of July, a work plan is due.  This plan is meant to lay out the path forward for the institution to address elements of the Doha Agenda.  It will not get done on time.

This is, quite frankly, almost hard to write.  Members are going to miss a deadline to create a work plan to discuss a path forward on an agenda that was first proposed more than 15 years ago and was formally launched in 2001. 

Officials began discussions again on this workplan more than six months ago.  The comments of Ambassador John Adank are instructive.  At the beginning of the process, he said, “I think that for those who had forgotten the issues, and the positions of each other on those issues, that the meeting served a useful purpose, at least to bring us back to where we were, although I don’t think it’s really given us a clear indication of where we will go—that will need significant change from where we are now.”

Some members are likely to argue that the workplan deadline is quite fungible.  In the past, the WTO routinely missed its own targets for completing workplans and agendas needed for big meetings or ministerials.  Officials will likely argue now that they can keep adjusting the workplan “deadline” until right up to late November for the upcoming ministerial in December.

But anyone who works in a large company will recognize the problems with this argument—big meetings with staff flying in from around the world usually require more than just an agenda.  For a meaningful outcome, everyone needs to start early on preparing background materials, figuring out the context for discussions, matching up likely outcomes with their specific regional needs and requirements, identifying gaps that must be addressed, and so forth. 

The groundwork must also be laid for compromises and for agreements across the myriad groups with issues of concern.   This takes time and, in spite of more than a decade now spent on negotiations, if the agenda is going to be significantly revised, reaching consensus on a new or altered set of outcomes will need more than a few days or weeks.

Another “deadline” of sorts that will be missed are the revisions of the Information Technology Agreement (ITA2).  Unlike most WTO commitments, the ITA applies to only a subset of members.  The original ITA entered into force in 1997.  It lowered tariffs on listed technologies and telecommunications products. 

But this agreement also contained a fatal flaw.  The list of covered products was fixed and has not been changed in the years since it was first negotiated.  Particularly given the rapid pace of change in IT, a frozen list means that record players are included but not new items like mobile phones. 

Repeated attempts to negotiate an ITA2 have foundered.  Officials thought they had reached an acceptable compromise late last year when the United States and China finally worked out their differences.  However, the deal jammed again when South Korea, Taiwan and China were unable to agree on coverage for flat screen panels. 

Despite hopes that ITA2 would be finally completed in early 2015, no breakthrough has been announced.

Any institution with more than 160 members and a widely diverse membership will struggle to meet its objectives.  But the pattern of missed deadlines should be of increasing concern. 

One deadline that cannot be missed is the commitment to hold a ministerial in Nairobi, in December 2015.   The absence of a workplan to guide negotiations and a series of missed deadlines do not inspire confidence in a successful outcome.  

Let us hope that ministers do not gather in Kenya and pledge to make “2016 a year to remember.”

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

China’s Unfolding FTA Strategy

The Chinese currently have 12 free trade agreements (FTAs) in place (listed below).  Many of these agreements are with relatively minor players (with all due respect to countries like Costa Rica, Iceland, Chile and New Zealand).  More recent agreements, between China and Australia and China and South Korea, are more substantial.

The South Korea-China deal was signed on June 1 and will enter into force once parliaments on both sides ratify the agreement.  The Australian agreement was initialed in November 2014 and is also waiting for the completion of domestic procedures to start implementation.

China was hesitant to join the Asian rush to FTAs.  This was, I would argue, partly because it was a late entrant to the World Trade Organization (WTO).  As a newcomer, China's terms of accession to the WTO were quite challenging.  China was required, for example, to drop tariffs on nearly all products entering China. 

Further, it was required to create a legal ceiling on the amount of tariffs it can ever charge that is very low relative to many other developing economies.  This has given China less room for maneuver between the ceiling and the amount of tariffs actually charged at the border (in other words, the difference between bound and applied tariffs is very small).  This is certainly true relative to developing economies that joined the GATT/WTO decades ago. 

China also had to quickly get in place the conditions to protect intellectual property rights at the level required by WTO membership.  This included not just establishing and expanding offices to grant patents, but also training patent examiners and setting up a legal system to enforce IP rights.  

Given the size and importance of China's market, other WTO members watched implementation very carefully.  This is not always the case--many smaller developing countries (especially) have uneven implementation of existing commitments, but since the stakes are often not very high for others, these deviations are not of great concern.  Few legal battles will take place over non-implementation of specific rules with smaller countries over limited markets.  But China is a different story entirely--given its size and growing importance to the global economy, non-implementation is a big deal for other members.  Hence China has faced many challenges in the dispute system at the WTO.

Given this recent history, China was reluctant to take on board any additional trade commitments in an FTA. 

However, as more of the global economy is increasingly connected through FTAs, a stance of staying outside these bilateral and regional arrangements became harder to defend.  Even for China, the competitive disadvantage of not getting benefits available to FTA partners in some markets started to look significant.  

Thus, the Chinese government started negotiations with more significant trading partners, like South Korea.  Sixteen percent of Korea's imports were from China and South Korea exported nearly a quarter of their total exports to China.  This meant that a bilateral deal could be a useful foray into this world of more significant trade arrangements.

The headline figures on the China-Korea FTA sound relatively impressive.  For example, the deal contains 17 chapters.  It covers e-commerce (where China and Korea are both extremely strong) and includes some commitments on government procurement.  It lets production out of Kaesong count as covered South Korean products.

The deal promises tariff reductions on 91% of goods trade.  This is not too bad at all.  Except for the details.  It takes 10 years before China will reach tariff reductions on 71% of goods trade.  Once the deal comes into force, it will be a decade before South Korea is supposed to cover 79% of goods trade.  The agreement gives both sides 20 years to reach full implementation of tariff cuts.

Even then, this is actually less impressive than it appears.  It turns out that China and Korea trade quite a bit with one another, but only in very few sectors like autos and auto parts or certain types of agricultural products.  The Chinese import 852 tariff lines worth of products from Korea and Korea, in turn, imports just 637 tariff lines of items from China.  Even after 20 years, it is very likely (and hard to confirm in the absence of the actual text) that many of these tariff lines will be in the 9% of trade excluded from the agreement.

The Australians appear to have received a more ambitious set of outcomes for their key sectors.  For example, important agricultural markets like dairy, beef, sheep, horticulture products, and many processed foods are to be opened with the removal or reduction of tariffs over periods as relatively short as 4 years.  For many manufactured goods and pharmaceutical products, some of the tariffs are reduced on entry into force.  Some of the services market opening into China is quite helpful, including openings for Australian financial, telecommunications, and construction services. 

The China-Australia FTA also includes a framework for e-commerce, and put into place plans for future negotiations on government procurement. 

Note however, that some of these pledges with both parties could also be revisited in the ongoing Regional Comprehensive Economic Partnership (RCEP) talks that include both South Korea and Australia.  The level of commitments in areas like e-commerce could potentially be more significant in this megaregional trade agreement than in the bilateral deals.

If you want to see whether China is serious about opening up its market to greater competition, I think there are two things to watch.  First, are the continuing developments in the Shanghai Free Trade Zone.  This was deliberately set up as a test bed for further liberalization.  But businesses have, generally, been very disappointed with the results.  The restrictions on coverage and small geographical size has meant that companies get relatively few benefits from being in the zone compared with being elsewhere in China (or even in Hong Kong).  Slowly, slowly, the rules around Shanghai are being loosened.  However, if this is intended to be a laboratory, much more will be needed before we can say with confidence that China is prepared to sign on to higher quality, higher standard agreements.

The second development worth watching is the ongoing negotiations with the Americans over the bilateral investment treaty (BIT).  This has lots of potential, as the two sides have agreed to a radical shift in the way China handles inward investment.  Under the BIT, all sectors are meant to be opened for American investment except for those explicitly listed.  The two sides are swapped initial offers in mid-June in Beijing and followed up during the regular US-China Strategic and Economic Dialogue (S&ED) meeting later in the month in Washington.  The next exchange of offers is scheduled for September.

Generally when a country switches to using a negative list, the inclination of government officials is to list every sector and subsector as closed to future investment.  Future negotiations consist of a (probably tedious) process of peeling back and pruning the list to a much more manageable set of highly sensitive sectors that will remain closed.  This suggests that the first exchange of offers is likely to look poor.  Indeed, both sides appear to have emerged from the original meetings expressing disappointment.  But what matters is how rapidly and how extensively future negotiations unfold.  

In any case, for China's market to continue to grow, I would argue that it increasingly needs to make changes in domestic rules and regulations and allow greater competition.  For example, as China's firms are investing heavily in research and development and are trying to make the leap from copying things to inventing things, they will increasingly demand protection of these new ideas.  This will, I would suggest, mean that it is in China's interest to ratchet up its own IP protections.  Doing so in the context of a good trade agreement with other benefits might be easier to get done than a unilateral approach. 

Hence, the signs suggest that more ambitious, higher quality agreements around trade are likely to be coming to China in the near term.  This includes offers in ongoing bilateral and regional agreements, such as RCEP. 

China's Free Trade Agreements

·      China-ASEAN FTA

·      China-Pakistan FTA

·      China-Chile FTA

·      China-New Zealand FTA

·      China-Singapore FTA

·      China-Peru FTA

·      Mainland and Hong Kong Closer Economic and Partnership Arrangement

·      Mainland and Macau Closer Economic and Partnership Arrangement

·      China-Costa Rica FTA

·      China-Iceland FTA

·      China-Switzerland FTA

·      China-Korea FTA

  Free Trade Agreements under Negotiation

·      China-GCC(Gulf Cooperation Council) FTA

·      China-Australia FTA

·      China-Norway FTA

·      China-Japan-Korea FTA

·      Regional Comprehensive Economic Partnership, RCEP

·      China-ASEAN FTA Upgrade Negotiations

·      China-Sri Lanka FTA

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***