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European Union, China and Free Trade Agreements in the Asia Pacific

Final Report Summary - ASIA PACIFIC FTA (European Union, China and Free Trade Agreements in the Asia Pacific)

Topic

Free Trade Agreements in the Asia Pacific Region: Reasons, Perceptions and Strategies

Objectives

• Provide overview of FTA developments in the Asia Pacific.
• Focus on how the strategies of the key economy in the region, China; the world’s largest single market and a key promoter of liberalization, the EU; and a small regional economy, New Zealand, have been influenced by developments in the area and how their chosen strategies have affected each other (especially in the cases of the EU and China) and the general FTA environment.

Methodology

• Survey undertaken to map FTA developments in the Asia Pacific region through the compilation of a database of completed and ongoing FTAs.
• In-depth qualitative comparative case study analysis of the strategies of the EU, China and New Zealand in this scenario.


Research Performed

• Review of literature on FTAs, EU trade policy, New Zealand trade policy, and Chinese trade policy.
• Collation of data from various government websites, WTO, trade websites, news sites to create static database of completed, under negotiation and projected FTAs in Asia Pacific region.
• Fieldwork conducted in Beijing, Canberra, Australia, and Wellington and Auckland in New Zealand, and Brussels consisting of elite interviews with European Commission officials, European External Action Service officials, European Parliamentarians, Trade Ministry officials, foreign commercial representatives, major exporters, business councils, and various experts, for the case studies.

Findings

Elite discourses in all states show ingrained support for free trade agenda, and anxiety over missing out from economic and political ‘action’ if they remain on the side-lines of FTA proliferation.

Larger actors’ strategies show more evidence of balancing against competitors, smaller states’ strategies reveal need to be seen as relevant by larger partners.

Larger actors’ have greater influence in shaping negotiation outcomes, but have different approaches and intentions. China is, for now, in its FTAs is more concerned with rewarding political ties, reassuring its neighbours, and ensuring supplies of raw materials. The EU and USA are more preoccupied with extending their preferred models of trade and investment governance, including behind-the-border issues and issues that have been blocked at the WTO (competition policy, intellectual property provisions, government procurement, services liberalization). The EU’s strategy in choosing FTA partners is largely predicated on USA activities, however the more flexible content of FTAs, alongside a preference for international norms, and norm co-creation, reveals a greater emphasis on creating some form of multilateral governance.

Complex and lengthy negotiations of FTAs between the EU and Asian partners, show increasing resistance to the EU’s (and USA’s) particular understandings of liberalization, which have been favoured by the WTO and other international institutions.

Smaller economies (New Zealand) have used FTA negotiations to feature on their larger partner’s agenda. Economic gains in terms of greater trade have been minimal, but as result of New Zealand-China FTA, New Zealand diplomats and politicians have regular contacts with high ranking Chinese Ministry of Trade and Foreign Affairs officials, and have greater visibility and access to decision-makers than would otherwise be the case. Smaller economies like New Zealand and Chile have facilitated major Asian states’ participation in FTA negotiations, by pioneering negotiations with China and South Korea, and have assisted in the larger states’ learning processes. They have been more influential in shaping an environment conducive to greater FTA proliferation than would be a priori imagined, not least as by sparking the process that has become the negotiation of the TransPacific Partnership.

Ongoing research and findings have been disseminated by means of a dozen published articles, four book chapters, and over twenty conference presentations, guest lectures and seminars. A book based on the project is currently being produced and will be published in 2015 by PalgraveMacmillan under the working title Major Powers, Small Economies and Free Trade Agreements in Asia-Pacific.

Contribution

The study elucidates the complex FTA situation in the Asia Pacific. The results clarify how the agendas and strategies of key players clash or complement each other, and how they affect third parties by affecting the dynamics in the region. It explores the rationale of small economies engaging in this flurry of negotiations and how this interplays with the larger actors.

The project contributes to the theoretical debates on the nature of international relations. Patterns discovered reveal there is a traditional realist power competition taking place to gain economic advantages vis-à-vis competitors, (real or perceived), which varies in degree from actor to actor. The case studies ascertain the presence of more subtle forces such as prevalent ideas and the beliefs of policy-makers and their environment may be guiding these strategies, despite the limited economic benefits of some of these agreements. This falls within constructivist understandings of international relations which acknowledge that the environment in which agents act is social as well as material and that this setting can provide agents with understandings of their own interests, which may not be as straightforward as neorealist views would expect.

Empirically, the project gathers novel material for the literature, and offers a practical contribution to the non-academic community by producing useful information and data on a key economic phenomenon.

It delivers a series of data analyses and reviews of utility to the wider community. Patterns in FTA spread that appear from the analysis of the database have implications for policy choices and business decisions, and the mapping of existing and future FTAs provides useful information for business expansion choices. A better understanding of these processes is important for civil society actors who can subsequently tailor their strategies more efficiently. As such the project through its database and analyses produces policy guidelines and a tool which can be used by policy-makers and other stakeholders to enhance the impact of their strategies.

Benefit to European Area of Completed Project

• Strengthened links with the overseas research centres and networks
• Greater understanding of the Asia Pacific region and the opportunities for European businesses in this part of the world, especially with regards to the layers of FTAs
• Increased awareness of the motivations and strategies of Asia Pacific partners, which can help European policy-makers and stakeholders tailor their own strategies towards the region
• Database and analyses for use of policy-makers and for SME internationalisation strategies