Free Trade Agreements and the US-China-Australia Relationship in the Asia-Pacific Region
He, Ling Ling, Sappideen, Razeen, Asia Pacific Law Review
Trade theories articulate the benefits that flow from free trade between nations. By and large the World Trade Organization (WTO) agreements (GATT, GATS, and TRIPS) seek to capture the benefits that flow from free trade. GATT and GATS also permit WTO member countries to enter into bilateral and multilateral Free Trade agreements (FTAs) in parallel with and outside the ambit of the WTO agreement requirements.1 Such agreements may confer special benefits and concessions on its member trading partners without violating the WTO agreements. There has been a healthy debate on whether the entering into of such bilateral agreements outside of the WTO agreements distorts the free flow of trade and the multilateral trading system.2 Nonetheless, the general principle that such agreements encourage the free flow of trade, at least as between the parties to the agreement, holds. More recently, however, these groupings have tended to be more exclusive, and selective, tending to keep out some countries seeking to join into these agreements. This suggests that there is much more at stake in the formation of these agreements and admission to membership into these groups than the mere fostering of free trade.
This paper examines some of these other factors at play in the formation of these trade agreements through a study of recent agreements entered into by the United States (US), China, and Australia with other countries in the Asia-Pacific region. The discussion below is structured as follows. Part I examines some key FTAs to which each of these countries is party to; Part II examines factors other than trade at play in the negotiations of these agreements; Part III explains the geopolitical consequences of these groupings in light of international relations theory, and Part IV concludes.
I. US, China, Australia Free Trade Agreements
With the economic slowdown in the US and Europe, and the emergence of China as the world's second largest economy, the Asia-Pacific has become increasingly important both economically and politically - a point noted in the recently released Australian White Paper, Australia in the Asian Century.3 This has prompted the US to 'refocus' on the region, suggesting that the US has begun to realise that the Asia-Pacific region is no longer its exclusive playground. A major vehicle for the pursuance of such strategic policies has been through free trade agreements. This Part examines some recent trade agreements entered into or are under negotiation by these three countries. Agreements examined are the Trans-Pacific Partnership Agreement (TPP) led by the US, the recently initiated Regional Comprehensive Economic Partnership (RCEP) of which China is a foundation member, and the Trilateral FTA between China, Japan and South Korea.
The TPP Agreement, led by the US, is a multilateral deal originally signed between Brunei, Chile, New Zealand and Singapore in 2005, later expanded to include Mexico and Canada in June 2012, with Thailand considering joining it4 and Japan's recent announcement to join.5 The TPP is regarded as being a new generation FTA, more focused on competition policy, labour rights and environmental protection than on traditional trade liberalisation issues such as tariffand non-tariffbarriers, and the like. While the TPP seems to be an attractive option for countries to streamline their trading relationships inlight of the Doha Round deadlock on US subsidies to its cotton farmers, it is more likely an instrument to shore up US engagement in the Asia-Pacific in line with the renewed focus of the US on the Asia-Pacific region. The TPP provides the US with a much needed medium other than a defence treaty to tie itself into the transformation of the Asia-Pacific region of which it is not geographically part of. Unlike China which has formed FTAs with almost all the major players in the region (discussed below), the US has entered into FTAs only with Australia, South Korea and Singapore in the Asia-Pacific. …