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Analysis and Comparison of Existing International Regional Free Trade Models

In recent years, global trade protectionism has been prevalent. The WTO Doha Round negotiations have been stalled for a long time and there have been numerous “black swan” events that have had a major impact on globalization. The US-China trade frictions in 2018, the outbreak of the new crown in 2020 and the Russia-Ukraine conflict in February 2022 have all had a major adverse impact on global trade, investment and production. Against the backdrop of the setback to globalization, the importance of regional economic integration and regional trade liberalization has become even more important. At present, three models have been formed in the field of international economic and trade rules: the Asia-Pacific model, the European model and the East Asian model, corresponding to the three major representative agreements: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Japan Economic Partnership Agreement (EPA) and Regional Comprehensive Economic Partnership (RCEP). The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade area formed by Asia-Pacific countries, is the new name for the agreement after the US withdrew from the Trans-Pacific Partnership (TPP). The CPTPP has 2,300 provisions covering trade in goods, trade in services, investment, e-commerce, government procurement, competition policy, state-owned enterprises and designated monopolies, intellectual property rights, labor and environment. As one of the highest standards of international economic and trade rules today, the basic framework and core elements of high-level economic and trade rules have been established through the CPTPP, which is therefore a milestone in the evolution of international economic and trade rules.

The EU-Japan Economic Partnership Agreement (EPA) came into force on 1 February. Covering 635 million people worldwide and accounting for 1/3 of global GDP, the EU-Japan EPA will be the world’s largest free trade area for developed countries. The EU-Japan EPA contains 23 chapters and 424 articles, plus 7 annexes, and establishes new topics such as subsidies, corporate governance and cooperation in the agricultural sector. The EPA is a perfect inheritance and development of the high standards of the developed countries in promoting trade liberalization and domestic complementary measures, but also a compromise and balance between the two sides in accordance with their specific conditions. The main elements include the reduction of tariffs, the promotion of the free movement of services, the establishment of uniform standards for imports and exports, the reduction of non-trade barriers, etc.

Similarly, Europe has signed the Comprehensive Economic and Trade Agreement (CETA) with Canada, which is similar to the EPA in that it facilitates temporary tourism, short-term business travel and intra-company transfers by removing certification requirements, entry barriers and investment restrictions.

The Regional Comprehensive Economic Partnership (RCEP), initiated by ASEAN in 2012, took eight years to conclude and was formulated by 15 members including China, Japan, Korea, Australia, New Zealand and ten ASEAN countries. It is also a successful example of developing countries’ participation in the formulation of national economic and trade rules. To a certain extent, the RCEP combines some of the advanced provisions of the CPTPP with an overall flexibility and openness, and

has a strong growth potential. The chapters on customs administration and trade facilitation, intellectual property rights, and e-commerce all show a progressive character and tangible marginal contributions.

The differentiated focus of the negotiations is mainly related to the domestic interests of the economies represented in the US and Europe. The US and Europe generally prefer post-border rules because of the larger rule dividends and the significant marginal contribution of the agreement. In contrast, Asia Pacific is currently focused on border rules such as trade liberalization, and many post-border rules, such as intellectual property rights and environmental issues, are more challenging to domestic systems and can also infringe on established domestic interests, and are therefore not the issues they focus on expanding. The RCEP is a shallow trade arrangement, as it is difficult to coordinate the issues due to the wide gap between the development levels of the parties, and therefore the issues are mainly focused on border rules.

The RCEP focuses on traditional tariffs for trade in goods, and the RCEP focuses on the interests of developing countries and the trade-off between “flexibility” and “high standards”; the CPTPP is an all-round strict trade agreement, with a strong focus on labor and environmental rules, competition policy, state-owned enterprises, and intellectual property rights. The CPTPP is a comprehensive and rigorous trade agreement that sets high standards in areas such as labor and environmental rules, competition policy, state-owned enterprises, intellectual property regulation, internet rules and the digital economy. In contrast, the EU-Japan EPA agreement focuses on harmonized production standards between developed countries and the free flow of international technical services.

The different approaches to development issues are related to the level of national economic development. The parties to the US and European template representative agreements are mostly developed countries and naturally pay less attention to development issues. The Asia-Pacific template, on the other hand, has an overwhelming majority of developing countries as parties and therefore focuses on development issues and on addressing common development problems. The difference in influence is mainly related to the degree of sophistication of the rules themselves and the position of the lead country in the field of international trade and economic rule-making. The EU’s efforts in specific issue areas and the degree of refinement of specific issues determine the degree of influence it has in specific areas. The Asia-Pacific template, on the other hand, focuses on Asia-Pacific issues, and the parties are mostly learners and followers of international economic and trade rules, so they currently have only regional influence.

On the whole, there is a certain order of development of the three existing regional economic cooperation agreement templates in the world. The East Asian template represented by the RCEP is suitable for regions and countries with a low level of regional economic integration and large differences between them. the Asia-Pacific model represented by the CPTPP focuses on the pursuit of higher and stricter standards within the scope of the contracting parties. The European model

represented by the Euro-Japan EPA, on the other hand, differs from the Asia-Pacific and East Asian models by focusing on structural and implementation standards, with a focus on further facilitating the movement of people and goods between developed countries.

By Ovidiu Stanica

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