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Article: Rethinking the (CP)TPP As A Model for Regulation of Chinese State-Owned Enterprises

16 June 2021

By Dr Xue BAI

 

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is widely regarded as a landmark achievement in the development of international rules on state-owned enterprises (SOEs). However, CIBEL Centre member Associate Professor Weihuan Zhou does not share this view. His latest article, titled “Rethinking the (CP)TPP As A Model for Regulation of Chinese State-Owned Enterprises”, critically evaluates whether the CPTPP SOE rules provide an ideal model for regulating Chinese SOEs and argues that CPTPP does not provide such a model if the goal is to strengthen discipline over Chinese SOEs. He pointed out that:

 

“... compared to China’s existing WTO obligations, particularly those specifically tailored to it, the CPTPP SOE chapter does not provide more rigorous or workable rules but rather has narrower application and more carve-outs.”

 

Through a brief review of some major post-CPTPP FTAs of the US and the EU (e.g. USMCA, EU – Japan FTA, EU – Vietnam FTA), the article also shows that these FTAs are largely based on the CPTPP SOE chapter. In particular, it is observed that:

 

“… other than the inclusion of services subsidies and the additional types of prohibited subsidies, they do not extend beyond China’s WTO-plus obligations. To the extent that they leave some deficiencies in the CPTPP SOE chapter unaddressed and maintain the extensive exceptions, they are not as rigorous as the existing WTO rules tailored to China.”

 

This article suggests that the CPTPP and the post-CPTPP US/EU FTAs offer a more incremental and balanced approach that may facilitate multilateral negotiations. To adopt this approach, however, WTO Members will need to be prepared to negotiate with China on replacing the potentially very broad and rigid China-specific rules with more balanced new rules that are applicable to all Members. The consequence is that we will have softer rather than stronger disciplines on Chinese SOEs.

 

This paper is the third in a series of papers that Associate Professor Weihuan Zhou explores the ways to apply/develop multilateral discipline on Chinese SOEs. Read the first paper of this series here. Read the second paper of this series here. A digital copy of the latest paper is available on SSRN.