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Abstract
This CEPS book comprises a first-ever economic and regulatory analysis of a possible Free Trade Area (FTA) between China and the EU, whose design is supposed to be 'deep and comprehensive'. It provides an overview of the global economic environment in which EU-Chinese economic relations have developed in recent years, including global value chains linking the two economies. The substance of the FTA design is then elaborated in nine, largely empirical and technical chapters ranging from tariff analysis (at the 6- and 8-digit level) and technical barriers to trade, to services, government procurement and investment. A third part comprises a CGE-model-based empirical simulation of the economic effects on GDP per member state (and on China), bilateral trade in goods and services, wages for workers with three distinct skill-levels and a series of goods and services sectors.
The year-long study was led by Jacques Pelkmans of CEPS, and the research was carried out by a team of trade specialists at CEPS in partnership with another team of researchers led by Prof. Joseph Francois of the World Trade Institute (WTI) in Bern.
Jacques Pelkmans is Senior Fellow at CEPS (www.ceps.eu) in Brussels and visiting professor at the College of Europe in Bruges. Between 2001 and August 2012, he was Jan Tinbergen Chair and Director of the Economics Department at the College. A Ph.D. in economics from Tilburg University, he has been associate professor of economics at the European University Institute in Florence, professor of economics at the European Institute of Public Administration (Maastricht) and professor for European Economic Integration at Maastricht University. He was a Council member at the WRR (think-tank of the Dutch Prime minister) 2001-07.
Joseph Francois is Managing Director and professor of economics at the World Trade Institute. He also serves as deputy director of the NCCR Trade Regulation. Previously he was professor of economics (with a chair in economic theory) at the Johannes Kepler Universität Linz. He is a fellow of the Centre for Economic Policy Research (London), director of the European Trade Study Group and the Institute for International and Development Economics, senior research fellow with the Vienna Institute for International Economic Studies, and a board member of the Global Trade Analysis Project. He serves on the editorial board of the Review of Development Economics, and the World Trade Review.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Tomorrow's Silk Road | Cover | ||
| TABLE OF CONTENTS | v | ||
| List of Figures | viii | ||
| List of Tables | x | ||
| List of Abbreviations | xii | ||
| Preface | xvii | ||
| Executive Summary | 1 | ||
| Introduction | 33 | ||
| Part I. The Global and Bilateral Context | 35 | ||
| 1. Why an EU-China free trade area? | 35 | ||
| 1.1 The context for a free trade area study | 35 | ||
| 1.2 Is there a case for an EU-China FTA? | 37 | ||
| 2. China and the EU in a rapidly changing world economy | 44 | ||
| 2.1 Chinese weight as an EU trade partner: Anticipate 2030 | 44 | ||
| 2.2 Competitiveness and reforms in the EU and China | 46 | ||
| 2.3 Comparing China and the EU’s trade strategies: Multilateral, plurilateral and bilateral | 48 | ||
| 3. Bilateral economic relations: Trade and investments | 53 | ||
| 4. Global value chains: Significance for the EU and China | 61 | ||
| Part II. Design and Substance of an EU-China FTA | 65 | ||
| 5. What would an EU-China FTA look like? | 65 | ||
| 6. Market access in industrial goods: An analysis of tariffs | 69 | ||
| 6.1 Analysing bilateral trade and its sectoral composition | 69 | ||
| 6.2 Industrial tariff profiles of the EU and China | 75 | ||
| 6.3 Where China and the EU differ: Tariff peaks | 76 | ||
| 7. Market access in goods: Trade defence remedies | 81 | ||
| 7.1 Relevance of trade defence for an FTA | 81 | ||
| 7.2 Recent bilateral application of trade defence | 83 | ||
| 7.3 The 2017 revision of EU trade defence measures and the status of China | 85 | ||
| 8. Market access in agriculture: Tariffs and tariff-rate quotas | 92 | ||
| 8.1 Bilateral agro-food trade and its composition | 92 | ||
| 8.2 Tariff and TRQ barriers in bilateral agro-food trade | 94 | ||
| 8.3 Tariffs peaks in agro-food | 97 | ||
| 8.4 Tough barriers: Tariff rate quotas | 102 | ||
| 9. Technical barriers to trade | 106 | ||
| 9.1 Mapping bilateral TBTs and their scope | 106 | ||
| 9.2 TBTs between China and the EU: Empirical evidence at sector and product levels | 109 | ||
| 9.3 Transforming China’s technical regulation, standards and conformity assessment | 118 | ||
| 9.4 Some inferences about lowering TBTs in an EU-China FTA | 124 | ||
| 10. Reducing SPS barriers in an EU-China FTA | 126 | ||
| 10.1 Market access barriers of the Chinese SPS regime | 126 | ||
| 10.2 Concerns from China and WTO partners about EU SPS barriers | 133 | ||
| 10.3 Lowering SPS barriers in an EU-China FTA | 135 | ||
| 11. Market access in services: China and the EU | 136 | ||
| 11.1 Introduction | 136 | ||
| 11.2 Measuring the extent of market access in services: China and the EU | 137 | ||
| 11.3 Sectoral services market access: China and the EU | 140 | ||
| 11.4 Potential value added of an EU-China FTA, based on prior experiences | 157 | ||
| 12. Public procurement | 161 | ||
| 12.1 China’s offers to accede to the WTO GPA | 163 | ||
| 12.2 Barriers to EU public procurement as seen by Chinese investors in Europe | 169 | ||
| 12.3 Possible directions for EU-China negotiations on public procurement | 171 | ||
| 13. Intellectual property rights and geographical indications | 173 | ||
| 13.1 Introduction | 173 | ||
| 13.2 EU-China IP Dialogue | 174 | ||
| 13.3 China’s IPR legislation and enforcement | 176 | ||
| 13.4 IPR protection and enforcement measures in China’s FTAs | 180 | ||
| 13.5 IPR protection and enforcement measures in EU FTAs | 182 | ||
| 13.6 Geographical Indications | 182 | ||
| 14. State-owned enterprises (SOEs) and competition policy | 192 | ||
| 14.1 The SOE problem in China and early reforms | 192 | ||
| 14.2 Reformed SOEs and barriers to market access | 195 | ||
| 14.3 Can the EU and China reach an agreement on SOEs? | 202 | ||
| 14.4 Competition policy | 206 | ||
| 15. Investment and the Comprehensive Agreement on Investment | 218 | ||
| 15.1 Why a CAI? | 218 | ||
| 15.2 Why are the existing BITs insufficient? | 223 | ||
| 15.3 Investment issues an EU-China CAI should address | 225 | ||
| 15.4 EU approach to CAI | 231 | ||
| 15.5 China’s approach to CAI | 235 | ||
| 15.6 What’s next? | 237 | ||
| 15.7 Policy options for an EU-China CAI: A review | 238 | ||
| 15.8 Integrate CAI in FTA | 240 | ||
| Part III. Potential Economic Impact: A CGE-based simulation of effects of the FTA | 243 | ||
| 16. Introduction | 243 | ||
| 17. Trade and production linkages | 245 | ||
| 17.1 Value added and trade linkages between China and EU | 245 | ||
| 17.2 Trade in mass consumer goods | 248 | ||
| 18. Removing tariffs and reducing NTM costs in a China-EU FTA | 251 | ||
| 19. Modelling the FTA between China and the EU | 257 | ||
| 19.1 A non-technical introduction of the model simulations | 257 | ||
| 19.2 Simulating economic impacts of ambitious and modest FTAs | 260 | ||
| 19.3 Results of the FTA simulation: Changes in GDP (in % and $) | 260 | ||
| 19.4 Results of the FTA simulation: Changes in real wages for three skill groups | 263 | ||
| 19.5 Results of the FTA simulation: Effects on trade | 267 | ||
| 19.6 Strategies for adjustment to a China/EU FTA | 273 | ||
| Part IV. Conclusions and Policy Implications | 282 | ||
| 20. Policy implications of an EU-China free trade agreement | 282 | ||
| References | 288 | ||
| Annex I. European TRQs | 297 | ||
| Annex II. Public Procurement in China and the EU | 303 | ||
| Annex III. Estimated Impacts of an FTA | 311 | ||
| Annex IV. Total AVEs for NTBs for Goods and Services | 313 | ||
| Annex V. Technical Overview for CGE Modelling | 315 |