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TPP, American National Security and Chinese SOEs

Published online by Cambridge University Press:  13 October 2017

RAJ BHALA
RAJ BHALA*
Affiliation:
The University of Kansas, School of Law
*
*Email: bhala@ku.edu
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Abstract

Free trade agreements (FTAs) are about far more than free trade. They are about national security. A trade deal may be ambitious in liberalizing or managing cross-border flows in goods, services, intellectual property (IP), and people, but to argue for or against an FTA solely along the axis of free versus managed trade is to miss another vital purpose – the deal can, and indeed should, advance national security. This article makes two points. First, the Trans-Pacific Partnership (TPP) exemplifies the possibility of enhancing the national security the United States, through containment of China and its ruling Chinese Communist Party (CCP). Second, the debate over the definition of state owned enterprise (SOE) is one among many illustrations in the TPP of the link between national security, trade, and containment. The 12 nations negotiating the TPP were aware of this link, and deliberated the definition of ‘SOE’. The TPP excluded the Middle Kingdom from the founding members, while the founders wrote the TPP rules to bind China if it subsequently joined the deal. Chinese SOEs were of concern to them, for bona fide national security reasons, and so also were legitimate sovereign interests in providing goods and services through their own SOEs. The evaluation by America and its 11 TPP partners, as to which entities should be included in the scope of SOE disciplines led to a set of clear rules.

Type
Review Article
Information
World Trade Review , Volume 16 , Issue 4: Symposium on State-Owned Enterprises in China , October 2017 , pp. 655 - 671
Copyright
Copyright © Raj Bhala 2017 

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Footnotes

The author presented a draft of this article at Columbia Law School in October 2016, and an earlier version appeared as Robert Schuman Centre for Advanced Studies (SCAS) Research Paper Series, Number RSCAS 2017/03, European University Institute. The author is indebted to Merit E. Janow, Petros C. Mavroidis, Matt Waxman and the participants in that seminar for their helpful suggestions. The author also thanks his Research Assistant, Eric Witmer.

References

1 See Shakespeare's Macbeth (1606), Act IV, Scene 3, and Commentary, 133–143 (Sidney Lamb, (ed.), commentary by Christopher L. Morrow (2005)).

2 The estimate of 6,000 pages is from ‘Free Exchange: A Serviceable Deal’, The Economist, 14 November 2015, at 76, and also L. Bracken, ‘House Vote on TPP Possible in May, June’, 32 International Trade Reporter (BNA) 2097 (3 December 2015).

3 A September 2014 Pew Research Center study of 44 countries showed the voice of anger is the loudest one, especially in developed countries such as France, Italy, Japan, and the United States. See Faith and Skepticism about Trade, Foreign Investment, 16 September http://www.pewglobal.org/2014/09/16/faith-and-skepticism-about-trade-foreign-investment/. In the United States, only 20% and 17% think trade generates jobs and boosts wages, respectively. Across the world, just 31% of people think trade is ‘very good’ for their country. The figures are higher in developing countries: 66% and 55% say it increases jobs and wages, respectively, and in Vietnam, 53% say it is very good for their country. Yet, even among emerging markets, support for free trade (in terms of agreement with the proposition that trade is good for one's country) dropped between 2010 and 2014 from 84% to 77% (see ibid.). In general, it seems that the more experience a country has with trade and investment liberalization, the more developed it is, and/or the larger it is in size, the more skeptical it is of the effects of openness on employment and income.

4 In April 2014, the USTR published a single-page document of changes to federal law necessary for TPP compliance It listed just six minor changes, involving matters such as CBP fees and penalties, and Certificates of Origin. See United States Trade Representative, Changes to Existing Law Required to Bring the United States into Compliance with Obligations Under the Trans-Pacific Partnership Agreement, https://ustr.gov/sites/default/files/TPP-Changes-to-Existing-Law-Report-FINAL.PDF (1 April 2016). Critics charged the USTR with understating the effects of the TPP. See B. Flood, ‘White House Releases Proposed Changes to US Law for TPP’, 33 International Trade Reporter (BNA) (7 April 2016).

5 New Zealand Ministry of Foreign Affairs and Trade, the official TPP depositary, published the legally verified text on 26 January 2016. This version superseded the November version.

6 See The Trans-Pacific Partnership Implementation Act, Draft Statement of Administrative Action (12 August 2016), https://ustr.gov/sites/default/files/DRAFT-Statement-of-Administrative-Action.pdf.

7 See Bolen, C., ‘Obama Wins TPP Support from Former Top Officials’, 32 International Trade Reporter (BNA) 1999 (19 November 2015)Google Scholar.

8 J. F. Kerry, Secretary of State, Remarks on the Trans-Pacific Partnership, The Wilson Center, Washington, DC, 28 September 2016, http://www.state.gov/secretary/remarks/2016/09/262551.htm (emphasis added).

9 http://csis.org/files/publication/160428_Trans_Pacific_Partnership.pdf (writing to house speaker (Paul Ryan, Republican – Wisconsin), minority leader (Nancy Pelosi, Democrat – California), and Senate Majority and Minority Leaders (Mitch McConnell, Republican – Kentucky and Harry Reid, Democrat – Nevada, respectively).

10 See Bhala, Raj, TPP Objectively (Durham, NC: Carolina Academic Press: 2016), 6–11 Google Scholar.

11 See Bracken, L., TPP Seeks to Lower Tariff Barriers Faced by US Exports, Froman Says, 32 International Trade Reporter (BNA) 417 (26 February 2015)Google Scholar.

12 P. Kowalski, M. Büge, M. Sztajerowska, and M. Egeland, ‘State-Owned Enterprises: Trade Effects and Policy Implications’, OECD Trade Policy Paper Number 147, TAD/TC/WP(2012)10/FINAL, 6 (22 March 2013), http://www.oecd.org/trade (emphasis added).

13 Quoted in L. Bracken, ‘Hill Panel Pushes for Limits on Chinese Investments in US’, International Trade Daily (BNA) (16 November 2016).

14 United States – China Economic Security Review Commission, 2016 Annual Report to Congress, Executive Summary and Recommendations, at 5, http://origin.www.uscc.gov/sites/default/files/annual_reports/Executive%20Summary%202016.pdf (hereinafter, China Commission).

15 China Commission, at 507, http://origin.www.uscc.gov/sites/default/files/annual_reports/Comprehensive%20List%20of%20Recommendations_1.pdf.

16 See Bracken, L., ‘Ryan Reaffirms Goal of Reaching Agreement on TPP in Meetings with Singapore Officials’, 32 International Trade Reporter (BNA) 375 (19 February 2015)Google Scholar; Bracken, L., ‘Good TPP Market Access Deal Needed to Resolve Rules Issues, Brilliant Says’, 31 International Trade Reporter (BNA) 1975 (6 November 2014)Google Scholar.

17 See Bracken, L., ‘TPP Customs, Trade Facilitation Text is “Particularly Far Advanced”, Froman Says’, 31 International Trade Reporter (BNA) 502 (13 March 2014)Google Scholar.

18 See Bracken, L., ‘TPP Members Grapple with Japan's Entry, Ways to Speed Talks Ahead of 17th Round’, 30 International Trade Reporter (BNA) 495 (4 April 2013)Google Scholar.

19 See Griffin, M., ‘TPP Should Set Benchmark for Rules on State-Owned Enterprises, Forum Told’, 29 International Trade Law Reporter (BNA) 370 (8 March 2012)Google Scholar.

20 See Bracken, L., ‘TPP Talks in Bali Focus on Environment, Intellectual Property, State-Owned Enterprises’, 30 International Trade Reporter (BNA) 1563 (10 October 2013)Google Scholar.

21 See Bracken, L., ‘US Seeking to Limit Exceptions to Rules on SOEs’, 32 International Trade Reporter (BNA) 1350 (30 July 2015)Google Scholar (citing statistics from the Organization of Economic Cooperation and Development (OECD) report, Policy Brief on Corporate Governance of State-Owned Enterprises in Asia: Recommendations for Reform).

22 See, e.g., Pruzin, D., ‘TPP Ministers Wrap Up Meeting with No Deal or New Deadline’, 30 International Trade Reporter (BNA) 1916 (12 December 2013)Google Scholar (reporting on Malaysian resistance to SOE commitments).

23 See Baschuk, B., ‘High-Level Interventions Required to Resolve TPP Disagreements on Market Access Issues’, 32 International Trade Reporter (BNA) 708 (16 April 2015)Google Scholar.

24 D. Pilling and S. Donnan, ‘Ocean's Twelve’, Financial Times, 23 September 2013, at 9. See also M. E. Martin, US – Vietnam Trade Relations: Issues for the 113th Congress, Congressional Research Service 7-5700, R41550 (13 August 2014) (stating Vietnam ‘remains a mixed economy with considerable government intervention’); Brevetti, R., ‘CRS Says Vietnam's TPP Participation Could Complicate US Negotiating Position’, 31 International Trade Reporter (BNA) 1575 (4 September 2014)Google Scholar (discussing the CRS Report).

25 See Bracken, ‘TPP Members Grapple with Japan's Entry’.

26 See Bracken, L., ‘TPP Ministers Plan December Meeting In Singapore as Negotiations Continue’, 30 International Trade Reporter (BNA) 1663 (31 October 2013)Google Scholar.

27 Butcher, J., ‘Vested Interests Block Reform in China, Analysts Say’, 33 International Trade Reporter (BNA) 1146 (11 August 2016)Google Scholar.

28 See ‘Australian Health Groups Concerned TPP Talks Will Impact State-Owned Hospitals’, 30 International Trade Reporter (BNA) 1325 (22 August 2013). Those organizations were the Australian Fair Trade and Investment Network, Public Health Association of Australia, Australian Healthcare and Hospitals Association, Australian Federation of AIDS Organizations, and People's Health Movement Australia. See ibid. They sent a letter, dated 12 August 2013, to Richard Marles, Minister of Trade, Australia, detailing their concerns.

29 See Brevetti, R., ‘Michaud Calls for Strong Measures in TPP To Address Power of State-Owned Enterprises’, 30 International Trade Reporter (BNA) 1529 (3 October 2013)Google Scholar (discussing the views of Representative Mike Michaud (Democrat-Maine)).

30 See Bracken, ‘Ryan Reaffirms Goal of Reaching Agreement on TPP in Meetings with Singapore Officials’.

31 See Bracken, L., ‘Market Access, IPR, SOEs Head Up List of Agenda Items for Upcoming TPP Talks’, 32 International Trade Reporter (BNA) 706 (16 April 2015)Google Scholar.

32 See ‘Unions Rally in Minneapolis to Protest Trans-Pacific Partnership Negotiations’, 30 International Trade Reporter (BNA) 1326 (22 August 2013)Google Scholar.

33 See Bracken, L., ‘Labour Cites Exchange Rate Manipulation at ITC Hearing on Japan Joining TPP Talks’, 30 International Trade Reporter (BNA) 899 (13 June 2013)Google Scholar.

34 Ibid.

35 See Bracken, ‘US Seeking to Limit Exceptions to Rules on SOEs’.

36 See Bracken, L., ‘Hatch Outlines Five Key Components for TPP’, 32 International Trade Reporter (BNA) 1357 (30 July 2015)Google Scholar.

37 See Bracken, ‘US Seeking to Limit Exceptions to Rules on SOEs’.

38 Ibid.

39 The qualification that not all state-owned media qualify as cultivating an open-minded, enlightened approach to pertinent topics is obvious, when state-controlled news agencies in countries such as China or North Korea are considered.

40 See ‘Canada's CBC Could Be Threatened by TPP, Journalists Warn’, TeleSur, 29 September 2015, http://www.telesurtv.net/english/news/Canadas-CBC-Could-be-Threatened-by-TPP-Journalists-Warn-20150929-0003.html.

41 Quoted in ‘Canada's CBC Could Be Threatened by TPP’. Professor Kelsey's concerns were based on her study, performed at the request of WikiLeaks, which in July 2015 published classified documents concerning TPP.

42 See E. Powell, ‘What Trump's Vow to Quit TPP Trade Deal Means for Human Rights’, The Christian Science Monitor, 22 November 2016, http://www.csmonitor.com/USA/Politics/2016/1122/What-Trump-s-vow-to-quit-TPP-trade-deal-means-for-human-rights?cmpid=pushEP.

43 See ‘A Message from President-Elect Donald J. Trump’, YouTube (21 November 2016), https:// www.youtube.com/watch?v=7xX_KaStFT8.

44 Quoted in M. Jamrisko and R. Woods, ‘Trump Talks of Higher Tariffs Bargaining Chip, Scaramucci Says’, International Trade Daily (BNA) (2 December 2016) (emphasis added).

45 Baschuk, B., ‘US Trade Chief Urges Trump to Reconsider TPP Withdrawal’, 33 International Trade Reporter (BNA) 1772 (15 December 2016)Google Scholar (quoting Ambassador Michael Froman) (emphasis added).

46 Quoted in M. Griffin, ‘Australian Politicians Reach Bipartisan Consensus on TPP’, International Trade Daily (BNA) (30 November 2016).

47 See Griffin, M., ‘Australian Panel Backs Pacific Trade Pact, Flags Concerns’, 33 International Trade Reporter (BNA) 1742 (8 December 2016)Google Scholar.

48 M. Griffin, ‘Australian Panel Backs Pacific Trade Pact, Flags Concerns’ (emphasis added).

49 Griffin, ‘Australian Panel Backs Pacific Trade Pact, Flags Concerns’,

50 See Ibid.

51 Giang, Ngyuen Kieu, ‘TPP Changing Vietnam's Economy, No Matter What Trump Does’, 33 International Trade Reporter (BNA) 1698 (1 December 2016)Google Scholar.

52 See House of Councillors, The National Diet of Japan, http://www.sangiin.go.jp/eng/index.htm; Bracken, L., ‘Japan Ratifies Trans-Pacific Trade Pact’, 33 International Trade Reporter (BNA) 1787 (15 December 2016)Google Scholar.

53 See enotes, The Be All and The End All, https:// www.enotes.com/shakespeare-quotes/all-end-all.