© Springer-Verlag Berlin Heidelberg 2015Christoph Antons and Reto M. Hilty (eds.)Intellectual Property and Free Trade Agreements in the Asia-Pacific RegionMPI Studies on Intellectual Property and Competition Law2410.1007/978-3-642-30888-8_9
Sinic Trade Agreements and China’s Global Intellectual Property Strategy
Intellectual Property Law Center, Drake University Law School, Des Moines, USA
Peter K. Yu
This chapter closely examines the bilateral and regional trade agreements established by China, which are termed ‘Sinic trade agreements’ (STAs). It discusses China’s growing engagement with the developing world, the underlying goals of STAs and the negotiation strategies behind these agreements. Using the China–New Zealand Free Trade Agreement (CNZFTA) as an illustration, this chapter then points out that the STAs negotiated thus far provide only very limited coverage of intellectual property issues. It further explores why China has kept a low profile in the international intellectual property arena. The chapter concludes by discussing the future ramifications of STAs.
KeywordsBilateral and Regional Trade AgreementsChinaEconomic Partnership AgreementsFree Trade AgreementsIntellectual PropertyTRIPSTRIPS-PlusWTO
P.K. Yu: Kern Family Chair in Intellectual Property Law and Director, Intellectual Property Law Center, Drake University Law School; Wenlan Scholar Chair Professor, Zhongnan University of Economics and Law, China; Visiting Professor of Law, Faculty of Law, University of Hong Kong.
Since the early 2000s, the European Union and the United States have pushed aggressively for the development of bilateral, plurilateral and regional trade agreements. Termed economic partnership agreements (EPAs) and free trade agreements (FTAs) by the European Union and FTAs by the United States, these instruments seek to transplant laws from the more powerful signatories to the less powerful ones.
In the intellectual property area, these agreements have been fairly controversial. By introducing laws that go beyond the multilateral standards required by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), these agreements have ignored the local needs, national interests, technological capabilities, institutional capacities and public health conditions of many developing members of the World Trade Organization (WTO).1
Although the use of non-multilateral trade agreements is not limited to the European Union and the United States,2 the scholarly literature thus far has focused mostly on these agreements. To fill the void, this chapter closely examines the bilateral and regional trade agreements established by China and the strategies used to deploy those agreements. To avoid confusion with the FTAs the United States has initiated and the loaded nature of this specific term, the chapter eschews the term ‘China free trade agreements’, even though the term ‘free trade agreement’ is officially used in the title. Instead, it introduces the term ‘Sinic trade agreements’3 (STAs).
This chapter begins by examining China’s growing engagement with the developing world, the underlying goals of STAs and the negotiation strategies behind those agreements. Using the China–New Zealand Free Trade Agreement4 (CNZFTA) as an illustration, the chapter points out that the STAs negotiated thus far provide only very limited coverage of intellectual property issues. It further explores why China has kept a low profile in the international intellectual property arena. The chapter concludes by discussing the future ramifications of STAs.
2 China and the Developing World
In the past two decades, ‘China has [played] a leading role in speeding up investments in the Southeast Asia region through the [Greater Mekong Sub-regional Economic Strategy] and ASEAN+3 [ASEAN (Association of Southeast Asian Nations), China, Japan and Korea] frameworks’.5 Although the China–Japan–South Korea free trade agreement has yet to be established, China remains interested in such a project.6 In 2000, China announced its interest in developing a free trade area with ASEAN within 10 years.7 To date, China has established with ASEAN a framework agreement as well as agreements on trade in goods, services and investment. Together, they established the ASEAN–China Free Trade Area, which serves important economic, geopolitical and strategic goals.
More recently, China established bilateral trade agreements with Chile, Pakistan, New Zealand, Singapore, Peru, Costa Rica, Iceland and Switzerland.8 Additional agreements with Australia, the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Norway and the Southern African Customs Union (Botswana, Lesotho, Namibia, South Africa and Swaziland) are under negotiation. In November 2012, China, Australia, India, Japan, New Zealand, South Korea and members of ASEAN also launched the negotiation of the Regional Comprehensive Economic Partnership (RCEP) under the ASEAN+6 framework.
In addition, China is exploring greater economic cooperation with India, with the hope of eventually developing a regional trade agreement (RTA).9 Between the two countries, ‘trade volume increased from a paltry $260 million per year in 1990 to $18.6 billion in 2005’.10 By February 2012, trade between the two nations had already climbed to an estimated $74 billion.11 In July 2001, China also established the Shanghai Cooperation Organization with Kazakhstan, the Kyrgyz Republic, Tajikistan, Russia and Uzbekistan, bringing the country closer to its Central Asian neighbours.12
Over the years, China has strengthened its diplomatic and economic ties with Africa through the China–Africa Cooperation Forum and the China–Africa Summit.13 As one commentator observed in 2008:
China has signed trade agreements with 41 African countries, and has set up bilateral economic and trade mechanisms with 37 more. China has also signed bilateral accords for the promotion and protection of investment with 29 African countries as well as bilateral double-tax avoidance agreements and tax evasion prevention agreements with nine countries.14
In 2007, ‘just over 30 percent of China’s total imports [were] derived from African sources, and that will only increase with the recent purchase of oil stakes in West Africa’.15
Within Greater China, the mainland has established Closer Economic Partnership Arrangements (CEPAs) with Hong Kong and then Macao. Although Hong Kong and Macao are special administrative regions within China, they are separate customs territories within the WTO and have been members of the organization since its inception. The CEPAs are particularly beneficial to the two regions. The arrangement with Hong Kong, for example, has provided this special administrative region with preferred access to the mainland for selected services and reduced tariffs on a wide variety of goods.16
In the past decade, there has also been growing economic cooperation between Taiwan and the Yangzi River Delta. A significant number of China-based factories now involve investment from Taiwan, as well as from Hong Kong and the Chinese diaspora.17 Since the first election of Taiwanese President Ma Ying-jeou in 2008, the cooperation between the two regions has greatly accelerated. In fact, as Richard Bush observes: ‘Like it or not, Taiwan has been pulled into the [People’s Republic of China’s] economic orbit, and its companies have long since accepted the centrality of the mainland for their future.’18 Two years later, China and Taiwan concluded the Cross-Straits Economic Cooperation Framework Agreement, which further promotes economic cooperation and integration between Taiwan and the mainland.
In sum, China’s active and energetic engagement with the developing world has been one of the most fascinating international developments in recent years. As Eric Heginbotham summarizes:
Chinese diplomacy appears to be taking the developing world by storm. Its leaders seem to be everywhere: signing investment agreements, building roads, forming ‘strategic partnerships,’ and gaining membership in new or expanded regional organizations. It has burnished its image by dispatching blue-helmeted Chinese soldiers and policemen on United Nations … peacekeeping missions, donating money and equipment for disaster relief efforts, settling most of its border disputes, and engaging actively in a host of multilateral organizations around the world. It has also overhauled its foreign policymaking machinery, enabling political, bureaucratic, business, and academic experts to function as part of a more seamless whole.19
3 Sinic Trade Agreements
3.1 Are STAs Different?
In an effort to engage the outside world, China has directed its energies and resources at many different levels—bilateral, regional and multilateral. While China, like the European Union and the United States, has deployed various forms of trade and investment agreements, its STAs are of a different kind. Unlike EPAs or FTAs, STAs do not seek to transplant laws from the home country to its less powerful trading partners.
To be certain, agreements that a middle-income country, like China, establishes are likely to be different. In previous works, I have explained the important distinction between North–South agreements (those established between developed and developing countries) and South–South agreements (those established between developing countries).20 While the former agreements are a direct result of power asymmetry in the international trading system, the latter better promote the mutual interests of developing countries.
However, STAs are technically not South–South agreements, either. They do not attempt to promote South–South or Third World solidarity, nor do they constitute altruistic or humanitarian gestures. At best, they are East–South agreements (an intermediate category that falls between North–South and South–South agreements). This section outlines six of STAs’ non-exhaustive goals. The first three focus on economic considerations, while the rest involve either non-economic considerations or a combination of both economic and non-economic considerations.
The first goal of STAs is to bring to China its much-needed energy resources, metals, minerals, raw materials and foodstuffs. Although China is a large country with phenomenal economic growth, it unfortunately has a very limited quantity of natural resources. As Nicholas Lardy points out:
On a per capita basis, China is poorly endowed with most natural resources. Per capita availability of arable land, for example, is only 0.095 hectares, 60 percent below the world average; per capita availability of water is 75 percent below the world average; and per capita availability of most key mineral resources is well under half the world average. The only important natural resource of which China’s per capita availability is relatively high is coal.21
In the past two decades, China’s rapid economic growth has further exacerbated this lack of natural resources. As Lardy continues:
Between 1995 and 2005, China’s energy consumption rose 80 percent, even as domestic oil production growth slowed. Consequently, China now relies on imports to meet almost half its petroleum demand. According to the International Energy Agency, while China accounted for under a tenth of global petroleum demand, it accounted for slightly more than a third of incremental world oil consumption over 2002 through 2004, contributing materially to upward price pressure in global markets.22
Although most of the media reports thus far focus on petroleum, natural gas and other energy resources, China also has a very heavy demand for other commodities. As Joshua Eisenman observes: ‘In 2005, China consumed roughly one-third of total global output of steel, 40 percent of cement, 26 percent of copper.’23 By 2007, China is already ‘the biggest consumer of copper, tin, zinc, platinum, steel, and iron ore; the second biggest consumer of aluminum and lead; and the third biggest consumer of nickel’.24 China is also ‘the world’s top consumer of grain and meat … . In 2004, Chinese consumed 382 million tons of grain and 64 million tons of meat,’25 and the country remains a major importer of foodstuffs and other agricultural produce from Latin America.26 These growing demands have created a need for China to better manage its diplomatic relations with key suppliers.27
The second goal of STAs is to facilitate trade between China and signatory countries, increasing its export volume and foreign reserves while providing diversity through access to multiple markets.28 Since China’s reopening to trade with the outside world in the late 1970s, trade has supported its continuous growth. According to Beijing’s figures:
Between 1979 and 2005 … China’s GDP increased from less than $150 billion to $1.65 trillion; its foreign trade climbed from $20.6 billion to $1.15 trillion; per capita income rose from $190 to more than $1200; and its share of the global economy grew from about 1 percent to nearly 4 percent.29
Today, China is the world’s second largest economy, exporter and trading nation,30 up from the 32nd largest trading nation when the country was first reopened to Western trade.31 Its factories ‘make 70 percent of the world’s toys, 60 percent of its bicycles, half its shoes, and one-third of its luggage … . [China also] builds half of the world’s microwave ovens, one-third of its television sets and air conditioners, a quarter of its washers, and one-fifth of its refrigerators’.32 Exports have increasingly driven the Chinese economy, and China ‘accounted for about 12 percent of the growth of global trade’ in 2005.33
Like most countries, China ‘encourages exports because export sales contribute to a favourable trade balance and can earn United States dollars or other forms of hard currency’.34 While Chinese companies were content to serve as original equipment manufacturers for foreign firms a decade ago, they have now moved into high-end technology markets, such as those for cars and regional jets.35 In 2005, China was one of the world’s five largest vehicle manufacturers, producing 5.71 million cars and trucks.36 Meanwhile, China also tries hard to maintain its competitive edge in low-cost products.37 It is therefore no surprise that some commentators have suggested that China’s export-driven economic growth will likely lead to greater confrontations with the United States.38
To be certain, Chinese products may be ‘of higher quality and cost than local products’ from some of its developing trading partners.39 However, these products ‘are still much cheaper than Korean, Japanese, Russian, or US items, and thus represent a reasonable purchase for [their] consumers’.40 Moreover, ‘as a developing country, China can offer products and technical advice that are well suited to the needs of other developing countries. China’s growing demand for agricultural and mineral products is [now] boosting the prices of commodities on the world market, and the growth rates in exporting countries.’41
STAs are important from the standpoint of trade facilitation. As Henry Gao points out: ‘[W]ith the exception of ASEAN and Australia, none of China’s existing RTA partners are [its] major trade partners.’42 Many of these agreements will therefore provide the needed building blocks for greater trade relationships with other countries or regions. As Professor Gao continues:
So far, China has concluded FTAs, or entered into negotiations, with almost every major region in the world, including Europe, America, Middle East, Africa, East and South East Asia, South Asia and Oceania. In each region, China usually selects one trade partner to start the negotiations … . One thing all these RTA partners share in common is that they are either RTA themselves, such as the ASEAN and Gulf Cooperation Council, or are members of another RTA deal. For example, Iceland is a member of the European Free Trade Association (EFTA), which has free trade relationship with EU via the European Economic Area (EEA); Chile is an associate Member of both the MERCOSUR and the Andean Community; while India and Pakistan are both Members of South Asian Association for Regional Cooperation (SAARC).43
By taking advantage of preexisting regional or plurilateral arrangements and using them as entry points, STAs, like EPAs and FTAs, effectively and efficiently enable China to tap into new markets.
The third goal of STAs is to attract foreign direct investment (FDI) from signatory countries. As Peter Navarro wrote in 2007, ‘since 1983, FDI [in China] has grown from less than $1 billion a year to more than $60 billion, and it is projected to soon reach $100 billion annually’.44 Today, China is already one of the world’s largest recipients of FDI with capital inflows of about $50 billion, behind the United States and the United Kingdom (as well as Germany according to some studies).45 As Robert Sutter observes in the ASEAN context:
By the end of 1991, the ASEAN states had committed $1.41 billion in 1,042 projects approved by Beijing. Singapore led the ASEAN states in trade and investment in China. By mid-1994, Singapore became China’s fifth-largest overseas investor after Hong Kong, Taiwan, the United States, and Japan.46
The influx of FDI not only provides China with the foreign capital needed for economic modernization, but also results in technology transfer, job creation, development of human capital and generation of tax revenues.47 Although economists have pleaded for caution in considering the benefits of FDI to recipient countries,48 there is no denying that the influx of foreign capital has contributed to China’s recent rise to emerging superpower status.
The fourth goal of STAs is to strengthen China’s diplomatic ties with signatory countries. These strengthened ties are particularly important in light of the dispute over China’s territorial and historical claims to Taiwan and questions concerning the autonomy of Tibet. Through the negotiation of these agreements, China ensures that signatory countries adhere to a ‘One China Policy’ that was designed to isolate Taiwan and promote Taiwan’s unification with the mainland. The closer cooperation also helps ward off attempts to provide external support to separatists in Tibet and Xinjiang.49
Moreover, strong diplomatic ties with STA partners will become readily available when China is criticized for its disturbing human rights records, low environmental standards or inhumane treatment of ethnic minorities. Within the increasingly complex and fragmentary international regulatory environment, strengthened diplomatic ties will also bring China more bargaining power, a louder voice and a greater number of allies in the relevant fora. Such ties, in turn, would help alleviate China’s ‘peculiar siege mentality and … persisting sense of insecurity’.50
The fifth goal of STAs is to cultivate goodwill among China’s neighbours and to respond to concerns about the security and economic threats that emerged as a result of its rise in power. In the late 1990s, Chinese leaders and policymakers developed the concept of a ‘peaceful rise’ (héping juéqĭ) to ‘reassure the world that [China] will pursue a different development path than did Germany and Japan in the late 19th and early 20th centuries — a path based not on aggressive changes to the international order, but instead on benevolent principles of mutual benefit’.51 Further reinforcing this concept are the country’s strategy of ‘peace and development’ in the early 1980s,52 its emphasis on the development of a multipolar world in the early 1990s following the disintegration of the Soviet Union,53 the introduction of a ‘new security concept’ in the late 1990s,54 and the use of slogans like ‘becoming friends and partners with neighbors’ or an ‘amicable, tranquil, and prosperous neighborhood’.55
To some extent, the active development of the ‘benevolent power’ image by the present Chinese leadership reminds one of Deng Xiaoping’s plea for practising self-restraint. As he reportedly said after the 1989 protests in Tiananmen Square: ‘Watch and analyze developments calmly; secure our own positions; deal with change with confidence; conceal our capacities; be good at keeping a low profile; never become the leader.’56 Like Deng, Chinese leaders have stated explicitly and frequently that China is not interested in achieving ‘regional hegemony or international leadership (except perhaps in the context of promoting the interests of the developing world)’.57 According to Wen Jiabao, the former Chinese premier, China is more correctly seen as ‘a friendly elephant’58 (yŏuhăo de dàxiàng)—a well-crafted image that is appropriate for a ‘status quo power’ that poses no threat to its neighbours despite its enormous size.59 It is therefore no surprise that some commentators have questioned whether China could eventually become a vocal leader of the developing world, as Brazil and India have been.60
In addition to these new concepts, phrases, images and policy formulations, China has taken proactive measures to reach out to its neighbours to assuage their fears. For example, in 2000 Premier Zhu Rongji offered to establish a free trade area between China and ASEAN, to the surprise of Southeast Asian leaders. As one Southeast Asian diplomat recalled: ‘We were shocked that the Chinese would come up with a deal.’61 During the Asian financial crisis, China also helped Thailand, Indonesia and other Asian neighbours—countries that have been largely ignored by the United States.62 Today, many Asian leaders still express their appreciation for China’s assistance at this critical point in time and its decision not to exacerbate the crisis by devaluing the renminbi.63 Such devaluation would have harmed the affected Asian countries by creating fiercer competition from cheaper Chinese products.
Furthermore, STAs and the preferential tariff schemes under the ‘Early Harvest Programs’ (zăoqī shōuhuò) in these agreements offer to China’s neighbours more generous terms than the country is required to provide in an arm’s-length negotiation between an emerging power and its less powerful neighbours. Such terms not only help China alleviate concerns about its dramatic rise, but also help spread the country’s goodwill while improving its global image.64 Together with the ‘government-sponsored infrastructure development, language schools, educational exchanges, and other forms of aid and assistance’, these strategies have greatly increased China’s ‘soft power’ at a time when the United States’ ‘soft power’ was in dramatic decline during the Bush administration following the wars in Afghanistan and Iraq.65 Joshua Kurlantzick therefore describes these strategies as China’s ‘charm offensive’.66 Meanwhile, Chinese commentators consider them a mere reflection of the country’s emerging great power mentality (dàguó xīntài).67
To some extent, China’s recent encounter with the developing world reminds one of its imperial tributary system,68 which, in essence, was a ‘hierarchical system of “international relations” … [that was] based on an extension of the Confucian idea of proper relations between individuals’.69 Under this system, China, or the ‘Middle Kingdom’, occupied the position of leadership, while its neighbours—Korea, the Ryukyus, Annam (Vietnam), Siam (Thailand), Burma, Laos and a host of other peripheral states in Southeast and Central Asia—accepted the status of junior members. These junior members were expected to honour China ‘as the superior state by sending periodic tribute, by requesting the investiture of their kings, and by adopting the Chinese calendar, i.e. recording events of their countries by the day, month, and year of the reign of the Chinese emperor’.70 In return, China offered aid in times of foreign invasion, sent relief missions and commiserative messages in times of disaster, and generally provided more gifts to its less powerful neighbours than it received from them during tributary missions.71
Although China is very unlikely to resurrect this tributary system,72 or have the intention to do so, Chinese leaders are unlikely to forget this piece of imperial history when contemplating relations with other Asian countries. Moreover, as Chan Heng Chee, Singapore’s former ambassador to the United States, reminded us: ‘Dynastic China’s relations with Southeast Asia were to a large extent based on “soft power”. … It was China’s economic power and cultural superiority that drew these countries into its orbit and was the magnet for their cultivation of relations.’73 The goodwill and soft power China has earned in recent years undoubtedly have made the country attractive to its neighbours for greater and closer trade relationships.
The final goal of STAs is to improve China’s position within the WTO. When China joined the WTO, it made significant concessions. To the Chinese, joining the WTO is not only an economic issue, but one that affects national pride; it concerns China’s rightful place in the world after ‘a century of humiliation’—the time at which the country was subject to imperialist attacks and foreign domination. As Zhang Yunling and Tang Shiping acknowledge: ‘Chinese leaders since Sun [Yat-sen]’s time have always believed that China rightly belongs to the “greater power” (dàguó) club by virtue of its size, population, civilization, history, and, more recently, its growing wealth.’74 Thus, China is willing to make significant sacrifices to join the WTO—or, as Samuel Kim puts it, ‘to gain WTO entry at almost any price’.75 Now that China has become a member of this exclusive club and has greatly improved its international standing, it is understandable why it wants to use its bargaining leverage and emerging power status to ‘renegotiate’ some of these WTO-related concessions.
Just as developed countries are eager to develop EPAs or FTAs to achieve political or other non-economic goals,76 China is eager to develop STAs with those who are willing to recognize its status as a market economy, which is important to China for both economic and non-economic reasons. Economically, such a status ‘will enable [the country] to better resist anti-dumping actions in [the] WTO’.77 For example, in recognizing China as a market economy, New Zealand has agreed to ‘waive discriminatory [anti-dumping] measures under … China’s WTO accession protocol’.78 As Henry Gao points out, China’s strategy is quite clear: ‘As more and more economies recognize China’s market economy status, there would be mounting pressures on those who still deem China as a non-market economy to do just the same.’79
Outside the economic realm, it is also important for China to acquire market economy status. Such a status will help China develop its emerging identity while providing the country with the much-needed recognition of its economic progress. In particular, the status would acknowledge the rapid, enormous and continuous economic reforms China has undertaken in the past two decades. By elevating China to full WTO membership, the market economy status would eliminate the impression that China remains a second-class citizen in the international trading order. Such an elevated status would directly address the humiliation Chinese leaders and the populace feel, especially when viewed against the background of semi-colonial rule in the nineteenth and early twentieth centuries.
New Zealand was the first developed country to sign an STA, because it is ‘the first industrialized country to grant China market economy status’.80 Likewise, China signed the first STA in Latin America and Europe with Chile and Iceland, respectively, because both countries were the first to grant China market economy status in their respective continents.81 To date, virtually all of China’s STA partners are countries that have recognized China’s market economy status.82 It is therefore logical to consider awarding China such a status and accepting China’s claims to Taiwan as implicit preconditions for beginning STA negotiations.83
In sum, STAs serve a number of different goals. Yet, they do not seem to reflect the existence of any grand unified theory. Rather, as Kurt Campbell points out, ‘China’s strategy toward the developing world remains largely a work in progress’.84 The six different goals outlined in this chapter are by no means exhaustive, and new goals are likely to be added as China continues to grow and as countries pay more attention to bilateral, plurilateral and regional agreements.
3.2 What Are Their Characteristics?
While there are both similarities and differences between the underlying goals of STAs and those of EPAs and FTAs, the strategies China has deployed thus far to develop these agreements are rather different. The nature and content of the agreements and China’s different negotiating approaches undoubtedly have dictated some of these differences. However, a key factor seems to be China’s vehement rejection of the United States’ aggressive demands for drastic internal reforms and China’s intention to place these demands in a negative light.
China’s reluctance to condition bilateral and regional agreements on reform demands is understandable. Being a middle-income country, China is sandwiched between the European Union and the United States on the one hand and other developing countries on the other. While its dramatic rise has created both economic and security-related concerns among its neighbours, it continues to face significant pressure from the European Union and the United States. As a result, the characteristics of STAs are very different from those of EPAs and FTAs.
In general, STAs have five distinct characteristics. First, STAs tend to be governed by the principles of national sovereignty, self-determination and non-interference in the internal matters of others. China’s policy of non-intervention grew partly out of its past history as a semi-colonial state and partly out of concerns about the foreign powers’ intervention in its internal matters. As a Chinese diplomat chortled: ‘Non-intervention is our brand, like intervention is the Americans’ brand.’85 The policy of non-interference indeed may explain why STAs and aid and assistance packages from China often come without any condition of internal reforms.
The terms in STAs contrast significantly with those in other agreements or aid packages from the United States, the European Union, the World Bank, the International Monetary Fund and other traditional donors or lenders. Those donors or lenders would require the recipient countries to introduce political and economic reforms, such as ‘restrictions on macroeconomic policy, reductions in public spending and commitments to transparency as well as, in some cases, the holding of democratic elections’.86 As Shalmali Guttal points out: ‘What China argues for is the sovereign rights of governments to shape their own development strategies and to make decisions about projects and policies regardless of social, environmental and governance implications.’87 Such an approach is particularly appealing considering the fact that many of the reforms advocated by traditional donors or lenders have not greatly alleviated poverty in the developing world.88
This strategy, however, has backfired on China’s interests—sometimes coming at a high cost to China’s international standing. For example, during the attacks on shops owned by ethnic Chinese in Indonesia toward the end of the Suharto administration, Chinese leaders were put into a Catch-22 situation in which they had a difficult time developing a response. If they did not intervene, they would not have been able to protect the interests of Chinese nationals abroad. If they did, however, their intervention would lead to the erosion of the principle of non-interference. In the end, China stayed put, and its reaction to the attacks contrasted significantly with the approach it took during the Mao era. As Joshua Kurlantzick recounts:
During the Maoist period in the mid-1960s, when some Indonesian rioters had targeted Chinese Indonesians, Beijing had stepped in, offering refuge for ethnic Chinese fleeing the archipelago … . The callous approach [China took in response to the recent attacks therefore had] alienated some diaspora Chinese, but, as interviews with Chinese officials suggest, it was part of a strategy by Beijing to assure its neighbors that it would not intervene in their affairs.89
Similarly, China has to make difficult choices concerning how to address charges of genocide in the western region of Darfur, Sudan. The atrocities in the region have ‘claimed the lives of more than 300,000 Sudanese, with two million others driven from their homes and forced into refugee camps, all at the hands of government soldiers and allied Arab militias — the Janjaweed, in particular’.90 Although China ‘supported the idea of a UN peacekeeping mission … [and] pressured the Sudanese government to negotiate with rebel forces … , [it] refused to accept sanctions against the regime … and insisted that forces should only be deployed with the Sudanese government’s consent’.91 By rejecting unilateral action and insisting that peacekeeping operations be approved by the UN Security Council, China successfully used multilateral rules and its veto in the Council to promote its self-interest.92
Nevertheless, human rights activists and the larger international community have heavily criticized China’s support of the Sudanese and other similarly-situated governments.93 As they claimed with respect to Sudan, Zimbabwe and other problematic regimes, China’s support of these regimes has diluted the Western pressure on those governments to address problems within their countries.94 Its failure to embrace higher social and environmental standards has also led to growing resistance among African civil society groups.95 Unfortunately, China is unlikely to abandon its approach quickly. After all, it embraced the principle of non-interference, due in part to concerns about foreign intervention in its own domestic matters.
The second characteristic is that STAs evolve gradually. Although China’s economy has been growing at a breakneck pace, there are few dramatic internal reforms. Indeed, the development in the country, as rapidly as it has taken place, contrasts significantly with the arguably failed ‘shock therapy’ approach that Russia and other former Soviet republics took following the collapse of the Soviet Union. With a development strategy that de-emphasizes change in dramatic steps and a highly patient attitude toward negotiation, China developed STAs in a way that added obligations slowly in small increments. Instead of trying to make a great shock-therapy leap, China takes the pragmatic path of ‘groping for stones to cross the river’ (mōzhe shítóu guòhé), a path endorsed by Deng Xiaoping.96
Consider China’s incremental approach in its development of the ASEAN–China Free Trade Area (ACFTA).97 The development began in November 2000 when Premier Zhu Rongji announced China’s intention to develop a free trade area that would foster greater economic integration and closer regional cooperation in East and Southeast Asia. In the ASEAN–China summit in Phnom Penh in November 2002, China and members of ASEAN signed the Framework Agreement on Comprehensive Economic Cooperation, stating that a free trade area between China and ASEAN would be fully implemented in 2010 for the original ASEAN-6 members (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) and by 2015 for its newest members (Vietnam, Laos, Myanmar and Cambodia).98 As the largest regional agreement in Asia and the largest agreement among developing countries, ACFTA is expected to cover ‘a market of 1.85 billion consumers and a combined gross domestic product of almost US$2.5 trillion’.99 The Agreement was slightly revised through an amendment protocol adopted in Bali less than a year later.
In November 2004, China and ASEAN signed the Agreement on Dispute Settlement Mechanism as well as the Agreement on Trade in Goods in Vientiane, Laos. They also agreed to implement an Early Harvest Program to provide for the early opening of markets for specific goods and services. The Program ‘granted three-year duty-free entry for ASEAN goods into the Chinese markets’ and subsequent tariff-free access of selected Chinese manufactured goods to Southeast Asian markets.100 This arrangement provides a win–win outcome for all signatory parties: while China opens up its market to ASEAN members and allows them to pool scarce resources and aggregate markets,101 ACFTA secures China’s access to the region’s raw materials while removing barriers to its exports.102
In 2007, China and ASEAN signed an Agreement on Trade in Services, covering such issues as tourism. They also adopted memoranda of understanding on agricultural, sanitary and phytosanitary cooperation. In August 2009, China and ASEAN signed the ASEAN–China Investment Agreement, completing the negotiation process as set forth in the Framework Agreement. The two trading partners also signed memoranda of understanding on cooperation in the fields of intellectual property and of standards, technical regulations and conformity assessment.
While this incremental approach reflects the Chinese leadership’s preferred pace of reform (as well as ASEAN’s preference for gradual harmonization), it also promotes the focus on moderation and flexibility in China’s recent foreign policy. As Robert Sutter explains:
According to senior party strategists and other officials, Chinese leaders reviewed the negative experiences of China’s past confrontations with neighbors and other powers, and the negative experiences of earlier rising powers, such as Germany and Japan in the twentieth century, to conclude that China cannot reach its goals of economic modernization and development through confrontation and conflict. As a result, they incorporated the moderate features of China’s recent approach to Asia and the world into their boarder definition of China’s peaceful rise.103
To some extent, the incremental approach China has taken reflects its sensitivity to the peculiar needs of its Asian neighbors, in large part to avoid confrontation.
The third characteristic is that STAs tend to be flexible. Such flexibility is common in the area of private law. To many Chinese, contracts—or, in this case, international agreements—are the beginning of a working relationship.104 Rather than serving as a rigid, legalistic document that parties rely on in courts, they memorialize the stages of negotiations between the parties105 and lay down the key principles governing future relationships.106 Taking note of the role contracts usually play in negotiations in China, it is therefore no surprise that many of the terms in STAs are vague, flexible and laden with notions of friendship, cooperation and mutual recognition.107 Indeed, some Chinese commentators have used the Early Harvest Programs and the phased-in tariff reductions to illustrate China’s flexible approach to STA negotiations.108
The fourth characteristic is that STAs do not seek to transplant Chinese laws onto the soil of other countries. In fact, China did not develop a greater respect for the rule of law until recently. Although laws were denounced during the Mao era, ‘today, more and more things are being done in the name of a rights discourse, as opposed to political privileges, moral duties and class status’.109 Notwithstanding these recent developments, China—unlike the United States—has yet to see laws as a major export. Thus, instead of transplanting laws abroad, STAs seek to ensure that Chinese laws and the Chinese ways of life are compatible with those found in the other signatory countries. Put differently, STAs focus more on accommodation than conversion.
The final characteristic is that China is less interested in using STAs as a template for developing a web of bilateral and regional treaties that will be later consolidated into a more comprehensive multilateral agreement.110 In the intellectual property area, there are significant variations among the different STAs. The CNZFTA includes a lengthy chapter on intellectual property protection (Chapter )12. By contrast, the China–Singapore Free Trade Agreement (CSFTA), which was signed less than 6 months after the CNZFTA, does not mention intellectual property protection at all. Although the China–Chile Free Trade Agreement (CCFTA), the China–Peru Free Trade Agreement (CPFTA), the China–Costa Rica Free Trade Agreement (CCRFTA) and the China–Switzerland Free Trade Agreement (CSWFTA) have all mentioned the Doha Declaration on the TRIPS Agreement and Public Health and identified as an important goal the prevention of abuse of intellectual property rights and restraints on competition, the CNZFTA omits both issues.
If these differences are not enough, provisions on the protection of geographical indications did not emerge until the arrival of the CPFTA (Article 146). For the first time, an STA includes an annex listing the relevant geographical indications—22 for China and 4 for Peru (annex 10). That agreement also includes a new provision on border measures. Those measures are interesting, considering the growing worldwide attention to cross-border enforcement, generated in large part by the negotiation of the Anti-Counterfeiting Trade Agreement (ACTA). Although the CPFTA includes provisions on technology transfer and health-related issues, those issues did not receive their separate articles until the establishment of the CCRFTA: ‘Intellectual Property and Public Health’ (Article 112) and ‘Technical Innovation and Transfer of Technology’ (Article 113).
Finally, the CSWFTA has an intellectual property chapter that is far longer and more detailed than the intellectual property chapter in any prior STA. This chapter includes specific provisions on copyright and related rights, trademarks, patents, genetic resources and traditional knowledge, plant variety protection, undisclosed information, industrial designs and geographical indications. Given Switzerland’s active participation in the ACTA negotiations and that this STA was signed more than 2 years after the adoption of ACTA, the inclusion of additional provisions is understandable. Nevertheless, it is worth noting that most of these provisions correspond to the protection levels already required by the TRIPS Agreement.
To a great extent, all of these variations and the accompanying flexibility illustrate a key difference between STAs and the more template-oriented US FTAs, which often include standardized terms to maximize the effectiveness and efficiency of the negotiations. As Peter Drahos describes the US approach:
The BIT [bilateral investment treaty] which the United States signed with Nicaragua in 1995 was based on the prototype that the United States had developed for such treaties in 1994. Similarly, the Free Trade Agreement … that the United States has negotiated with Jordan will serve as a model for the other FTAs being negotiated with Chile and Singapore.111
The United States uses FTA templates for at least three reasons. First, the US Trade Act of 2002, based on which these FTAs were negotiated, calls on negotiators to develop provisions that ‘reflect a standard of protection similar to that found in United States law’. Although FTA provisions are similar, they were not based on their predecessors, but rather the ultimate template: US laws. Second, such an approach would encourage standardization of protections. In doing so, FTAs would help foster an environment where countries can consolidate negotiation gains through FTAs at the multilateral level. Third, as Andrew Christie, Sophie Waller and Kimberlee Weatherall have noted in the intellectual property context:
An FTA will have a more realistic chance of obtaining the necessary approval if it follows an already established model. This is because part of the Congressional approval process involves the review of the text by certain Industry Advisory Committees. At least in relation to [intellectual property], the relevant committee has a history of drawing very explicit comparisons with prior FTAs. Provisions that are seen to be less [intellectual property]–protective than provisions in past FTAs attract negative comment.112
The use of templates therefore has practical significance: it enhances the possibility of Congressional approval.
By contrast, STAs, with their different formats and coverage, seem to be better tailored to the specific conditions of each signatory country. Although these agreements sacrifice the benefits of efficiency and raise negotiation and political costs, they benefit from the inherent features of bilateral, plurilateral or regional agreements. By directly addressing the individual concerns and circumstances of each contracting party, the agreements more successfully ‘take into consideration the particular phases of development confronting each country, and provide for the gradual inclusion of a developing country into the global economy’.113 If the underlying goals are both substantive and diplomatic, the Chinese approach is likely to be more effective.
Moreover, the rejection of the template-based approach enables China to make adjustments as its ability to negotiate non-multilateral trade agreements improves. To some extent, the negotiation of STAs reflects a process of ‘learning by doing’, similar to China’s participation in the WTO dispute settlement process.114 It is therefore no surprise that the intellectual property chapters in STAs continue to increase in size, content, sophistication and complexity. While neither the STA with Singapore nor the one with Pakistan has a single intellectual property provision, the intellectual property chapter in the CNZFTA has close to 800 words. That number has quickly doubled to more than 1,500 words in the CCRFTA and again doubled to more than 3,000 words in the CSWFTA.