Chun-Chien Kuo: The previous unsatisfactory Doha Development Round negotiation had been facilitating free trade agreement talks and negotiations worldwide in the past decade, especially with the latest emergency of the three merging mega-FTAs: Asian-centric Regional Comprehensive Economic Partnership (RCEP), the Trans-Pacific Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP).
Although FTA-related research has flourished in recent decades in regional studies, this paper takes the pioneering explorations on the emerging three mega-FTAs altogether. I personally enjoyed reading this interesting and well-written paper. It did a good job explaining the factors in the emergencies, evolution, and development of the three emerging mega-FTAs in great detail. It clearly outlines their distinctive features on memberships, objectives, and negotiating agenda; their quantifiable benefits and dissenting voices; their issues and challenges; and likely outcomes.
In Section 2, this paper not only shows the current membership feature differences, but also provides thorough explanations of the rationale and motivations of these three mega-FTAs. Table 1 shows the important status and economic significances of these three mega-FTAs in terms of their relative world ratios of population, GDP, and trade respectively. It is summarized as the following: The Asian-centric RECP is the most populous economic bloc, with 49 percent of world population, 29 percent of world GDP, and 28 percent of world trade in goods. The trans-Pacific TPP comprises 11 percent of world population, 39 percent of world GDP, and 25 percent of world goods trade. The trans-Atlantic TTIP between the United States and EU28 countries is the world's largest economic bloc, comprising 45 percent of world GDP, 42 percent of world goods trade, and 12 percent of world population.
Section 3 explores and compares the possible economics benefits of RECP, TPP, and TTIPs based on Prei's 2012 CGE and CEPR's 2013 empirical results. Before interpreting these empirical results, the author prudently reminds the reader of some common deficiencies in estimating the impacts of FTAs and the inherent weakness of CGE studies, which is quite useful. The empirical conclusions drawn from Tables 2 and 3 are: 1) RECP and TPP promises substantial benefits, with TPP 16 offering lower benefits than RECP16; 2) Benefits increase with the scale of integration, with gains expanding from TPP11 to TPP16; 3) TPP is likely to favor relatively small and initially protected economies without an FTA with the United States (ASEAN economies of Indonesia, Malaysia, Philippines, Thailand, and Vietnam). In contrast, RCEP is likely to favor China, Japan, South Korea and India (as they have no FTAs among them); 4) The United States and the EU will both enjoy GDP increases under different degree of comprehensive agreement under TTIP; and 5) Estimated gains would be significantly lower when TTIP is limited to tariff liberalization only.
Section 4 summarizes the corresponding negotiating design and possible agenda for these three mega-FTAs in detail.
Section 5 discusses the issues and challenges of these three mega-FTAs, which I think is the most interesting and contributive part of this paper. It covers many important issues such as issues of membership accession and eventual FTA consolidation, depth and comprehensiveness of economic integration, and transparency and opposition from various stakeholders. It also points out the specific issues and challenges to RCEP, TPP, and TTIP. For RCEP, it includes the flexibility and special and differential treatment for less developed members, maintaining ASEAN centrality in RCEP, and pressure on negotiating resources. For TTIP, can it play the building or stumbling blocks of the multilateral trading system because of its largest scale and likely impact on the world trading system? Can TTIP provide momentum and serve as a template for resolving difficult issues in the WTO?
Some fundamental questions remain for further discussion:
Why and how do these three mega-FTAs evolve and what are their effects on the world economy in compared with WTO? In the conclusion, the author adds one paragraph on mega-blocs versus the WTO. It implies the inability of current the WTO to provide predictability and stability in international trade, and therefore the emerging mega-FTAs may provide for the second-best options of FTAs. The author also quotes Pascal Lamy's warning of the limitations of the mega-trade bloc negotiations and perilous retreat from global trade rules. It emphasizes again the great need for stable and predictable global trade rules.
What are the motivations for countries to join theses mega-trade blocs? The economic gains (trade creation / trade diversion), or something else beyond the economic gains? Different rationales exist for developed countries versus developing countries that join these mega-FTAs. This is especially true for less-developed countries as they try to adjust to the weight of the three existing trade giants—the United States, Europe, and China—in terms of trade and possible international relations. This is a more complex issue to explore and beyond this paper's scope. There are plenty of other complicated issues for countries and policymakers to consider in joining the mega-FTAs. The issues include differences of countries’ market access in their relative comparative advantage areas, the speed of the phase-out scheme of those sensitive goods, and the confrontation and pressures of domestic politics, and others.