May 28, 2015

Disclaimer: This paper is the product of professional research performed by staff of the U.S.-China Economic and Security Review 

Commission, and was prepared at the request of the Commission to support its deliberations. Posting of the report to the Commission’s 

website is intended to promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of U.S.-

China economic relations and their implications for U.S. security, as mandated by Public Law 106-398 and Public Law 108-7. However, 

the public release of this document does not necessarily imply an endorsement by the Commission, any individual Commissioner, or the 

Commission’s other professional staff, of the views or conclusions expressed in this staff research report.

Nargiza Salidjanova, Senior Policy Analyst, Economics and Trade

Iacob Koch-Weser, former Policy Analyst, Economics and Trade, contributed valuable research to this 

report.

China’s Trade Ambitions: 

Strategy and Objectives behind China’s 

Pursuit of Free Trade Agreements
U.S.-China Economic and Security Review Commission 2 

Table of Contents

Executive Summary....................................................................................................................................................3

Introduction ................................................................................................................................................................5

The Current State of China’s Trade Agreements .......................................................................................................5

Asia Pacific Region ................................................................................................................................................7

Latin America.......................................................................................................................................................11

Europe ..................................................................................................................................................................12

Outlining China’s FTA Strategy ..............................................................................................................................13

No Official Policy.................................................................................................................................................13

Partner Selection...................................................................................................................................................13

Negotiating Strategy.............................................................................................................................................15

Mixing Generosity and Protectionism..............................................................................................................15

A Haphazard Approach to Higher Standards...................................................................................................18

Key Factors Influencing Chinese Policy ..................................................................................................................23

Economic and Institutional Factors......................................................................................................................23

Limited Institutional Capacity..........................................................................................................................23

Navigating the International Trade Regime .....................................................................................................24

Value Chain Dynamics.....................................................................................................................................25

Interest Groups in an Authoritarian State .........................................................................................................28

The Strategic Dimension ......................................................................................................................................29

Regional Security .............................................................................................................................................29

Promoting Alternative Norms ..........................................................................................................................30

Conclusion: The Way Forward for Washington.......................................................................................................32

Acronyms .................................................................................................................................................................35

References................................................................................................................................................................37

Endnotes...................................................................................................................................................................38
U.S.-China Economic and Security Review Commission 3 

Executive Summary

Under the leadership of President Xi Jinping, China is engaging in a multipronged campaign to sign free trade 

agreements (FTAs).

* After concluding several FTAs with mostly small, developing countries, in 2013 China

signed its first FTAs with advanced European economies (Switzerland and Iceland). In 2014, Beijing finalized an 

agreement with Australia, after 11 years of negotiations. Beijing is also eager to conclude long-running talks with 

South Korea and Japan. At the regional level, Beijing is party to the Regional Comprehensive Economic 

Partnership (RCEP), a “mega-regional” agreement that includes the ten members of the Association of Southeast

Asian Nations (ASEAN) and six major economies in the Asia Pacific. RCEP held its seventh round of 

negotiations in February 2015. 

This paper analyzes China’s preferential trade strategy and rationale. It finds that China has signed trade 

agreements primarily with countries that are neither significant in the global economy nor vital to China’s export 

sector. Indeed, several partners enjoy bilateral trade surpluses with China, and have comparative advantages in 

industries that China may want to protect from outside competition. The way in which China negotiates trade 

deals is also confounding. Unlike the United States, China appears to lack a modus operandi, so that the scope, 

strength, and details of its agreements vary widely. Some appear exceedingly generous to the trade partner, while 

others aggressively promote and protect domestic industries. With respect to services, investment, and other 

advanced provisions, China tends to fall well short of U.S. standards; yet it also demonstrates greater ambition 

and flexibility than developing country peers like India and Brazil (see Section 2).

Because China does not publish an official and detailed preferential trade policy, scholars are left to surmise its 

rationales. Prevalent theories are that China:

 Pursues narrow regional security interests. Much of China’s preferential trade partnering revolves around 

the One China policy, countering the “China threat” perception, and assuming regional leadership. China 

signed FTAs with Hong Kong and Macau soon after the handover of these jurisdictions to the Mainland. 

China has also sought to constrain Taiwan’s independence by (a) signing trade agreements with countries 

that recognize the People’s Republic of China; (b) dissuading other countries from signing trade 

agreements with Taiwan; and (c) signing a trade agreement directly with Taipei but on terms designed to 

reinforce the non-sovereign status of the Republic of China on Taiwan. China’s trade agreement with 

ASEAN aimed to counter concerns about China’s entry into the World Trade Organization (WTO), while 

capitalizing on the regional solidarity that followed the 1997–1998 Asian Financial Crisis.

 Promotes an alternative model of trade that differs from the United States. In its negotiations with 

potential FTA partners, China appears to prioritize “cooperation” over narrow economic self-interest. 

This normative approach allows China to justify lower-standard agreements, as well as exploit misgivings 

some countries have about the United States’ more ambitious agreements. 

 Jockeys for a better position in the international trade regime. Unlike small countries, China, as a major 

trading hub, has relied less on trade agreements to avoid trade diversion. It has, however, been 

preoccupied with its status as a “non-market economy” in the WTO. China has therefore made market 

economy recognition a prerequisite for negotiating preferential deals. Engaging with small, 

geographically dispersed partners has also allowed China to access regional trade networks and gain 

negotiating experience at minimal risk.

 Seeks to improve its resource security. Several of China’s FTA partners are significant exporters of 

commodities vital to China’s manufacturing, energy, and agricultural sectors. China has attempted to use 

 

*

 Free trade agreements (FTAs) are a form of preferential trade agreements that involve deeper economic integration, usually through 

elimination of tariffs on some or all goods between the participating countries in addition to measures affecting such issues as intellectual 

property, investment, and financial services. There are other, more advanced forms of trade agreements, such as customs union, but 

FTAs are the most common type according to the World Trade Organization. For more on preferential trade agreements as a feature of 

international trade, see World Trade Organization, World Trade Report 2011: The WTO and Preferential Trade Agreements: From Coexistence to Coherence, July 20, 2011. https://www.wto.org/english/res_e/publications_e/wtr11_e.htm. 
U.S.-China Economic and Security Review Commission 4 

trade agreements to negotiate special clauses that ensure stable and affordable commodity supplies and 

afford wider access for Chinese resource investors.

 Favors protectionist interest groups in negotiations. China is home to powerful interest groups in 

government and industry that operate under the aegis of market-distorting policies. China thus prefers 

trade agreements with smaller countries that either do not have the leverage to exact concessions or are 

unable to inflict substantial damage on Chinese industry.

While all these theories have merit, this paper argues that China’s rationale for pursing FTAs is changing over 

time (see Section 3). On the one hand, China’s new leadership is under pressure to rebalance the economy toward 

services, consumption, and higher-value industries. China is beginning to ship capital, people, and services—

rather than solely manufactured goods—overseas. This appears to have made the government more amenable to 

economically meaningful agreements with large and advanced economies, even to the detriment of some domestic 

interest groups. There is a fluid interplay between China’s trade agreement negotiations, unilateral reforms (e.g., 

the Shanghai Free Trade Zone), bilateral investment treaties, and WTO plurilateral initiatives. At the Asia Pacific 

Economic Cooperation (APEC)

* Ministerial Meeting in 2014, China tabled a proposal to revive talks for a Free 

Trade Agreement of the Asia Pacific (FTAAP).

1

On the other hand, China is clearly using its newfound power to become more assertive. Even as opposition to 

China’s aggressive security posture mounts across Asia, U.S. treaty allies such as Japan, South Korea, and 

Australia increasingly depend on economic relations with China for their own growth. China has used this 

material dependence to its advantage, while resorting increasingly to a “divide and conquer” strategy to pit 

different countries against one another. China’s apparent reformist agenda may also turn out to be a “Trojan 

horse” strategy to enter and then derail U.S.-led trade initiatives in the Asia Pacific.

China’s approach to preferential trade is inconsistent and at times difficult to comprehend. China’s discernible 

objectives—such as achieving recognition as a market economy and exerting political influence over its 

neighbors—are often very different from the objectives of the United States or other emerging economies. While 

China so far has preferred to make generous concessions and negotiate agreements with smaller partners, it is 

becoming more assertive. The new leadership in Beijing could use preferential trade to spur a new round of 

domestic reform, akin to what occurred ahead of China’s WTO accession. Yet there is also a risk that China will 

exploit power asymmetries and loopholes in the international system to achieve its own interests, both in the 

economic and security realms.

The current and future U.S. administrations will have to deal with China’s preferential trade agenda on two levels. 

Bilaterally, the United States will need to gauge China’s commitment to reform based on specific items discussed 

in the U.S.-China Strategic and Economic Dialogue and the negotiations for a bilateral investment treaty. 

Multilaterally, the United States will need to monitor how its own economic integration efforts in Asia

complement or conflict with China-led initiatives.

 

*

 The 21 APEC members are: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand,

Papua New Guinea, Peru, the Philippines, Singapore, South Korea, Taiwan, Thailand, the United States, and Vietnam. Asia-Pacific 

Economic Cooperation, “Member Economies.” http://www.apec.org/About-Us/About-APEC/Member-Economies.aspx. 
U.S.-China Economic and Security Review Commission 5 

Introduction

The world finds itself at an important juncture in international trade policy as the United States and China are 

pursuing a series of large-scale trade agreements. Washington hopes to conclude mega-regional trade agreements 

(“mega-regionals”) with the European Union (the Transatlantic Trade and Investment Partnership, or TTIP)*and 

11 Asia Pacific countries (the Trans-Pacific Partnership, or TPP)†in the next one to two years. Beijing is engaged 

in a wider set of trade agreement talks, including a regional agreement involving the Association of Southeast 

Asian Nations (ASEAN) and a tripartite agreement with Japan and South Korea. In 2013, China signed bilateral 

free trade agreements (FTAs) with Iceland and Switzerland and, most recently, concluded a bilateral agreement 

with Australia.

These initiatives could shape future rules and norms for international trade at a time of impasse in the World 

Trade Organization (WTO) Doha Round. They are also taking place at a time of political and economic 

uncertainty. Many of the world’s economies are looking to liberalize trade in order to stimulate growth in a postrecessionary economy. The United States seeks to use mega-regionals to drive its “rebalance to Asia” and 

strengthen its alliance with western Europe. Meanwhile, China’s new leadership has placed a priority on enacting 

a series of economic reforms, but has also been aggressive in asserting China’s regional interests. 

Is China’s preferential trade strategy distinctive? Do its preferences change over time? Does China’s trade 

strategy run counter to U.S. objectives, or is there room for convergence around common norms and agreements? 

This paper analyzes China’s preferential trade policies and their implications for the United States. Section 1 

begins with a brief overview of China’s FTAs. Section 2 looks at the nature of China’s trade partners and the way 

it negotiates its agreements. Section 3 considers China’s economic and security rationales for pursuing FTAs, and 

how they are changing over time. 

The paper draws on a diverse set of data, including trade statistics from international organizations and U.S. and 

Chinese government sources; academic studies on China’s FTAs (see References); Chinese-language policy 

articles; and trade agreement documents.

The Current State of China’s Trade Agreements

After 15 years as a candidate, China joined the WTO in December 2001. China’s accession was a major turning 

point in the liberalization of its economy. By joining the WTO, China transitioned from a closed-off economy to 

one more integrated with the global community. In turn, accession required China to give preferential treatment to 

all members of the WTO, to give equal treatment to competing suppliers, and not to discriminate between 

domestically produced and imported goods.2 Asia is a relative latecomer to trade agreements, but over the past 

decade, the number of trade agreements involving at least one country from the region has increased 

dramatically—creating the so-called “Asian noodle bowl.” According to the Asian Development Bank, as of July 

2014, there were 278 FTAs in Asia (up from 55 in 2000), including 144 signed, 69 being negotiated, and 65 

proposed.

3

Since its accession to the WTO, China has actively pursued bilateral and regional trade agreements, concluding

FTAs in various regions around the globe, all with varying provisions. The following is an outline of China’s 

trade agreements that have been signed, are currently under negotiation, and are under consideration.

 

*

 TTIP is an FTA being negotiated between the United States and the EU. See Shayerah Ilias Akhtar and Vivian C. Jones, “Proposed 

Transatlantic Trade and Investment Partnership (T-TIP): In Brief,” Congressional Research Service, June 11, 2014.

†

 The TPP is a trade agreement currently being negotiation by the United States and 11 other countries in the Asia Pacific (Australia, 

Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). See Ian F. Ferguson, et al., “The TransPacific Partnership (TPP) Negotiations and Issues for Congress,” Congressional Research Service, March 20, 2015.
U.S.-China Economic and Security Review Commission 6 

According to China’s Ministry of Commerce (MOFCOM), China has signed trade agreements with 12 different 

partners (see Table 1).* Given that ASEAN has 10 members, and that MOFCOM (for political reasons) does not 

categorize its Cross-Strait Economic Cooperation Framework Agreement (ECFA) with Taiwan as an FTA, China 

in fact has agreements with 22 trade partners. In addition to the Regional Comprehensive Economic Partnership 

(RCEP), Beijing is also considering or negotiating six agreements comprising an additional 11 members. That 

brings China’s total trade agreement partners, broadly speaking, to 33 countries.4If the Free Trade Agreement of 

the Asia Pacific (FTAAP) negotiations are started, as China proposed in 2014, the list of trade partners would 

grow even further.

†

Table 1. China’s Free Trade Agreements

Source: China Ministry of Commerce; WTO.

 

* One agreement not listed here is the Asia Pacific Trade Agreement, formerly known as the Bangkok Agreement. It comprises China, 

Bangladesh, India, Laos, South Korea, and Sri Lanka. The agreement has little significance in international trade. China’s Ministry of 

Commerce. http://fta.mofcom.gov.cn/topic/enpacific.shtml.

†

 There is significant overlap in membership between the FTAAP and the RCEP. Since China already has separate FTAs with non-RCEP 

members Hong Kong, Taiwan, Chile, and Peru, the only APEC members who will not be linked to China after RCEP’s conclusion 

through some form of preferential trade agreement are the United States, Canada, Mexico, Russia, and Papua New Guinea. Partner First 

signed

Participants Geography Phasing of agreement WTO reporting

ASEAN 2002 Multi-Partner Proximate Step-by-step:

Framework (2002), goods 

(2004), services (2007), 

investment (2009) 

Enabling Clause 

& GATS Art. V

Hong Kong 2003 Bilateral Proximate Single undertaking GATT Art. XXIV 

& GATS Art. V

Macau 2003 Bilateral Proximate Single undertaking GATT Art. XXIV 

& GATS Art. V

Chile 2005 Bilateral Distant Step-by-step:

goods (2005), services 

(2008)

GATT Art. XXIV 

& GATS Art. V

Pakistan 2006 Bilateral Proximate Step-by-step:

goods (2006), services 

(2009)

GATT Art. XXIV 

& GATS Art. V

New Zealand 2008 Bilateral Distant Single undertaking GATT Art. XXIV 

& GATS Art. V

Singapore 2008 Bilateral Proximate Single undertaking GATT Art. XXIV 

& GATS Art. V

Peru 2009 Bilateral Distant Single undertaking GATT Art. XXIV 

& GATS Art. V

Costa Rica 2010 Bilateral Distant Single undertaking GATT Art. XXIV 

& GATS Art. V

Taiwan 2010 Bilateral Proximate Step-by-step:

framework (2010), goods 

and services (not signed yet)

GATT Art. XXIV 

& GATS Art. V

Switzerland 2013 Bilateral Distant Single undertaking GATT Art. XXIV 

& GATS Art. V

Iceland 2013 Bilateral Distant Single undertaking Unnotified

Australia 2014 Bilateral Distant -- Early notification

Norway -- Bilateral Distant -- Early notification

Gulf Cooperation Council -- Multi-Partner Distant -- Unnotified

South Korea -- Bilateral Proximate -- Unnotified

Japan and Korea -- Multi-Partner Proximate -- Unnotified

Under negotiation

Signed
U.S.-China Economic and Security Review Commission 7 

Although Beijing only signed its first FTA in 2002, it has now caught up with Washington. China has 22 partners 

across 12 agreements; the United States has 20 and 14, respectively (see Table 2).

Table 2. Comparison of U.S. and Chinese FTAs by Time Period

Note: NAFTA = North American Free Trade Agreement; CAFTA = Central American Free Trade Agreement. The table does not include the U.S.-Canada 

FTA (signed in 1988), which was, with the addition of Mexico in 1994, superseded by NAFTA. FTAs under negotiation or consideration are not listed.

Source: China’s Ministry of Commerce; Office of the U.S. Trade Representative.

While committing to the multilateral trade system and its rules as the cornerstone of its foreign economic and 

trade relations, China has also attached importance to promoting bilateral and regional economic and trade 

cooperation. Currently over 150 countries and regions have signed agreements on bilateral trade or economic 

cooperation with China. China has witnessed steady growth in its trade with developed countries and realized 

complementary advantages as well as reciprocity and mutual benefit. China’s trade with developing countries is 

experiencing robust growth, and there is huge potential to be further explored.

China is an active participant in the Asia Pacific Economic Cooperation, the ASEAN meetings with China, Japan 

and South Korea, the East Asia Summit, the Forum on China-Africa Cooperation, the Greater Mekong Sub-region 

Economic Cooperation Committee, the Central Asia Regional Economic Cooperation Committee, the Greater 

Tumen Initiative, and other regional and sub-regional economic cooperation mechanisms. China has also been 

active in pursuing bilateral investment treaties (BITs) with other countries: It has concluded 130 BITs, of which 

108 are in force.

5

Asia Pacific Region

Asia Pacific Trade Agreement (APTA)

The Asia Pacific Trade Agreement, formerly known as the Bangkok Agreement, was led by the United Nations 

Economic and Social Commission for Asia and the Pacific and originally signed by Bangladesh, India, South 

Korea, Sri Lanka, Laos, Philippines, and Thailand in 1975. The name was changed in 2005 to the Asia Pacific 

Trade Agreement during the third round of tariff concessions.6It is the sole operational trade agreement linking 

China with other major markets such as India and South Korea.

7 As the agreement only covers tariff reductions 

and does not include a services or investment agreement, it does not necessarily qualify it as a full FTA. It went 

into force in July 2006.8

Agreement Number Agreement Number

1980s Israel ('85) 1 - - 0

1990s NAFTA ('94) 1 - - 0

2000-2005 Jordan ('04), Australia ('04), 

Chile ('04), Singapore ('04), 

CAFTA ('05)

5 ASEAN ('02), Hong Kong and 

Macau ('03), Pakistan ('05), 

Chile ('05)

4

2006-2010 Bahrain ('06), Morocco ('06), 

Oman ('06), Peru ('07)

4 Costa Rica ('07), New Zealand 

('08), Singapore ('08), Peru ('09)

4

2011-2015 Panama ('11), Colombia ('11), 

South Korea ('11)

3 Taiwan ('10), Switzerland ('13), 

Iceland ('13), Australia ('14)

4

Total 14 12

United States China
U.S.-China Economic and Security Review Commission 8 

ASEAN-China Free Trade Area (ACFTA)

The ASEAN-China Free Trade Area (ACFTA) is a regional FTA between China and the ten members of 

ASEAN. The establishment of the FTA was officially proposed by Chinese Premier Zhu Rongji at the ASEANChina summit in November 2001. It was seen as an initiative to ease ASEAN member countries’ concerns 

regarding China’s accession to the WTO.9

Progress was made when the Framework Agreement on ASEAN-China Comprehensive Economic Cooperation 

was signed by both parties at the sixth ASEAN-China Summit in November 2002, establishing a legal structure to 

govern future economic cooperation. Formal talks for the ACFTA began in 2003 and agreements on trade in 

goods, trade in services, and investment were signed separately over the following four years. In November 2004, 

the first agreement on trade in goods was signed. In January 2007, China and ASEAN signed an agreement on 

trade in services, which entered into force in July of the same year. Finally, in August 2009 the two parties signed 

an agreement on investment.10 The ACFTA, formally established in January 2010, is the biggest trade agreement 

among emerging economies. After the European Union (EU) and NAFTA, the ACFTA is the third largest 

regional trading agreement by value.11

Reflecting China’s “big country morality” strategy (i.e., providing agreements that benefit smaller countries), then

Minister of Commerce Bo Xilai stated that China is to “give a lot” while receiving little in the negotiations with 

ASEAN.12 As a result of the agreement, average tariffs on imports of ASEAN-origin exports to China were 

lowered from 9.8 percent to 0.1 percent. The average tariff on Chinese-origin exports to the original six ASEAN 

members—Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand—was reduced from 12.8 

percent to 0.6 percent. The agreement looks to implement a zero-rate tariff for 90 percent of Chinese goods 

exported to the four new members of ASEAN—Cambodia, Laos, Myanmar, and Vietnam—in 2015.

13 However,

there are shortcomings in the ACFTA as the trade in goods agreement allow each country to register hundreds of 

sensitive goods such as electronic equipment, automotive vehicles and parts, and chemicals that are not subject to 

tariff reductions until 2020.14

Apart from the economic benefits, the ACFTA was also driven by strategic considerations. China wanted to 

reassure its neighbors (especially in the light of tensions over territorial disputes in the South China Sea), and 

increase its influence and counterbalance U.S. influence in the region.15 In August 2013, China’s Premier Li

Keqiang said that China considers its relationship with ASEAN as a priority in its regional diplomacy.16

The agreement did not come without controversy. ASEAN members were suspicious about China’s potential 

political motivations regarding the agreement. Indonesia led opposition to the trade pact, fearing that its industries 

would lose competitiveness in the region.17

A 2012 report by the Asian Development Bank showed that the ACFTA has led to a substantially higher volume 

of bilateral trade between ASEAN and China. Recently, Premier Li set high goals for ASEAN-China trade,

aiming to increase ASEAN-China bilateral trade to $1 trillion and bilateral investment to $150 billion by 2020.

18

Total trade between China and ASEAN was $480.5 billion in 2014, while the total stock of China’s foreign direct 

investment (FDI) in ASEAN in 2013, the latest available, was $35.7 billion.19 Although the ACFTA suggests 

mutually beneficial economic relations, the reality is that since full enactment of the agreement in 2010, 

ASEAN’s goods trade with China has gone from a surplus to a nearly $45 billion deficit in 2013.

*

Hong Kong and Macau Closer Economic Partnership Agreement (CEPA)

The CEPA is an application of the “One Country, Two Systems” framework,†and is a trade agreement signed by 

the Central Government with the Special Administrative Regions (SARs) of Hong Kong and Macau.20The CEPA 

 

*

 For an assessment of China-ASEAN economic relations, see Nargiza Salidjanova, Iacob Koch-Weser, and Jason Klanderman, “China’s 

Economic Ties with ASEAN: A Country-by-Country Analysis,” U.S.-China Economic and Security Review Commission, March 17, 

2015. http://www.uscc.gov/Research/china%E2%80%99s-economic-ties-asean-country-country-analysis. 

†

 The “One Country, Two Systems” framework is a policy measure adopted by China following the establishment of Hong Kong and 

Macau as SARs. The system grants Hong Kong and Macau the right to self govern their economy and political system to a certain extent, 

excluding foreign affairs matters.
U.S.-China Economic and Security Review Commission 9 

with Hong Kong was signed in April 2010 followed by the signing of the Macau CEPA in October of the same 

year. 

Pakistan FTA

China’s FTA with Pakistan—its “all-weather friend” dating back to the Cold War—was signed in November 

2006, and went into force on July 2007.21 The agreement, which extended the 1989 China-Pakistan BIT, included 

most favored nation (MFN) treatment, and is regarded as the first comprehensive FTA signed by China.22The 

agreement is considered comprehensive because it includes tariff and investment provisions, as well as market 

liberalization provisions. Under the agreement, both countries agreed to eliminate tariffs on 35 percent of products 

upon signing of the FTA, and to liberalize further during Phase II on no less than 90 percent of products within a 

“reasonable period of time” to be negotiated by the parties.

23 China and Pakistan started negations on Phase II in 

January 2015.24

China imports mainly textiles from Pakistan, which accounted for over two-thirds of China’s imports from 

Pakistan in the two years prior to signing the agreement. Pakistan imports mainly machinery and chemicals from 

China.25 China’s trade with Pakistan has remained low: In 2012 it only accounted for 0.3 percent of China’s total 

trade.26

As the marginal amounts show, economic interest was not the motivating factor behind this FTA. Rather, the

focus was on China’s close political alliance with Pakistan, as well as its lending and investment there.

27

New Zealand FTA

China’s FTA with New Zealand, signed in 2008, is its first with a developed country (the FTA is an expansion of 

a 1988 BIT).

28 China made it a prerequisite—and was granted—recognition as a market economy to start 

negotiations. 

The goal for New Zealand was not only to provide further investment protection mechanisms, but to include 

greater market access; however, China refused to include such provisions. China did agree to include New 

Zealand’s proposal for a pre-establishment MFN clause “that ensures investors from New Zealand benefit from 

more preferable treatment due to China entering into negotiations with a third country in the future.”

29 Services 

liberalization was likewise quite limited, and relied on a positive list approach (i.e., listing only the sectors that 

will be liberalized), rather than a negative list approach (i.e., listing only the sectors that will not be liberalized), 

much to New Zealand’s disappointment.30

If investment and services liberalization were quite limited, the New Zealand FTA included significant 

liberalization in the goods sector. According to the New Zealand government, the FTA provides for elimination 

over time of tariffs on 96 percent of New Zealand’s exports to China (an annual duty saving of NZ$115.5 million, 

or around $82.4 million), with remaining tariffs to be phased out by 2019. 31 Chinese exports to New Zealand 

would benefit from elimination of all tariffs by 2016.

32

In a 2004 New Zealand-China joint study on the feasibility and impacts of a bilateral FTA, Chinese exports to 

New Zealand were estimated to grow by 10.9 percent in the first year after implementation of the FTA. New 

Zealand exports to China were expected to grow by 39 percent in the same year.33 However, with the onset of the 

global financial crisis, China’s imports from New Zealand grew by 23 percent and China’s exports to New 

Zealand dropped by 22 percent one year after the agreement was implemented.34 Although at the time of signing

of the FTA China was running a $620 million trade surplus with New Zealand, in 2014 China’s trade deficit with 

New Zealand was $4.7 billion.35 China is New Zealand’s biggest export market (in 2013, the latest available, 

China accounted for over 20 percent of New Zealand’s exports), and New Zealand benefits from China’s high 

demand for high-quality, safe consumer products, including infant formula, dairy, meat, seafood, and wine. 

Singapore FTA

The China-Singapore FTA was signed in October 2008 and went into force in January 2009. The agreement was 

modeled after the ACFTA: Preferential policies for investment remained unchanged from the ACFTA, but the 

China-Singapore agreement on trade in goods and services was more comprehensive.36
U.S.-China Economic and Security Review Commission 10 

The FTA with Singapore eliminated all tariffs on Chinese exports immediately, while 95 percent of items 

originating in Singapore became duty-free in January 2010.37 Small and very rich, Singapore consistently appears 

at the top of global rankings for ease of doing business for its openness to trade, strong regulations, and low taxes, 

so it did not need much help from reduced tariffs. The main benefit to both countries lies in the liberalization of 

restrictions on the movement of people and individual income tax benefits.38

Economic Cooperation Framework Agreement (Taiwan)

The ECFA is similar to China’s CEPA with Hong Kong and Macau. The ECFA is a framework agreement 

including only generic language on investment protection and facilitation. 39 It was signed in June 2010 and 

included 800 tariff reductions to take effect in phases over two years following implementation of the ECFA on 

January 1, 2011.40 

Proponents touted the ECFA as a landmark agreement in easing cross-Strait tensions through deeper economic 

integration. Its advocates in Taiwan, including in the ruling Kuomintang party, justified the agreement under a 

strategy known as “China First.” Under this strategy, Taiwan was motivated to sign the agreement with China in 

order to reduce China’s pressure on other countries to avoid signing FTAs with Taiwan, because such agreements

could undermine China’s claim to sovereignty over the island.41 In practice, Taiwan’s integration into the global 

trading system expanded after the EFCA took effect: In 2013 Taiwan signed agreements with Singapore and New 

Zealand (though they are not called “free trade agreements”).

42

Both sides felt pressure to complete the ECFA, but for different reasons. The signing of ACFTA put pressure on 

Taiwan to complete the ECFA with China to avoid a loss in competitiveness to ASEAN counties. For example, 

Taiwan’s petrochemical industry feared that delays in signing the ECFA would result in a loss of Chinese market 

share to ASEAN countries that would enjoy reduced Chinese tariffs on petrochemical imports under the ACFTA. 

China viewed the agreement as a move to help it advance towards reunification with Taiwan.43 The ECFA has 

been controversial in Taiwan, and opponents of the agreement sought to pass a referendum to seek the approval of 

Taiwan citizens, though Taiwan’s Kuomintang-led government rejected the proposal.44

In June 2013, Taiwan and China signed the Cross-Strait Service Trade Agreement (CSSTA), a follow-up to the 

ECFA. The CSSTA aimed to eliminate investment restrictions and other barriers across 11 service sectors in both 

countries. Taiwan investors would gain access to 80 service subsectors in China, including those in publishing, 

transportation, tourism, and entertainment. In return, Chinese investors would gain access to 64 service subsectors 

in Taiwan, including transportation, tourism, and traditional Chinese medicine.45 The CSSTA met significant 

opposition in Taiwan: In March 2014, members of the Taiwan public launched massive protests, known as the 

Sunflower Movement, aimed at urging Taiwan’s legislature to delay ratification of the CSSTA.* At the time of 

writing of this report, the CSSTA has not been ratified.

Australia FTA

China’s FTA with Australia was negotiated for more than a decade, and was concluded at the arrival of President 

Xi in Australia in November 2014. Australia granted market economy status to China in 2005 at the start of the 

FTA negotiations (one of China’s key prerequisites for FTA negotiations). Liberalization of the services sector 

appears to have been one stumbling block to a speedy conclusion of negotiations, with Australia keen on greater 

opening but China reluctant to liberalize beyond what it agreed to at WTO accession.46 For Australia, whose 

economy depends on China more than any other developed country, gaining better access for its non-resource 

exports was a key priority (especially for agricultural products, where New Zealand, Australia’s biggest 

competitor, had an edge since reaching its own FTA with China in 2008).47 The FTA also includes an MFN 

clause.

The full text of the final agreement, which will be released in late 2015, is expected to include broad liberalization 

commitments across diverse industries, including financial services, education, healthcare, and tourism. 48

Australia’s dairy farmers and winemakers will receive tariff-free access to China’s market within four years.49

 

*

 For a discussion of public opposition to the CSSTA in Taiwan, including the Sunflower Movement, see U.S.-China Economic and 

Security Review Commission, 2014 Annual Report to Congress, 482–484. 
U.S.-China Economic and Security Review Commission 11 

Both sectors have been growing their market share in China despite tariffs: Food safety concerns among ordinary 

Chinese have been boosting demand for imported dairy, while Australian wines have been gaining market share

as Chinese consumers acquire a taste for imported alcohol. 50 Tariffs on beef, Australia’s most valuable 

agricultural export, will be eliminated within nine years, while tariffs on live animals will be abolished within four 

years.51

On the investment side, China will provide a negative list of those sectors closed to investment, with all others 

open (details of the negative list have not yet been released). China has been experimenting with the negative list 

approach in the Shanghai Free Trade Zone (with mixed results) and is expected to field one in the BIT 

negotiations with the United States. The services sector barriers will remain high, however, with some small 

concessions in banking, legal services, and healthcare.52

Beyond the liberalization of goods (primarily consumable, which account for 93 percent of Australia’s global 

exports by value) and investment, the FTA contains two important, China-specific carve-outs. The first concerns 

Australia’s foreign investment review mechanism; the second, China’s desire to import Chinese workers to work 

on projects it undertakes in Australia. 

China insisted specifically that the Australian Foreign Investment Review Board (FIRB) revise its statutes on the 

treatment of Chinese investors. The FIRB reserved the right to screen any Chinese investment that (a) exceeded

$200 million in value or (b) was made by a Chinese state-owned enterprise (SOE). China wanted SOEs to be 

exempt from an automatic trigger, and its investments to be screened only at the A$1 billion threshold, as is the 

case with U.S. and EU investors in Australia. In the end, Australia agreed to raise the screening threshold to A$1 

billion, but held ground on SOEs, which will continue to face mandatory review. 53

In the case of labor, the Australian government agreed to a “new case-by-case mechanism” for Chinese investors 

to bring workers to Australia “in areas of skills shortages.”54 This decision is politically sensitive, and faced

Australian domestic opposition.55

Latin America

Chile FTA

The China-Chile FTA (China’s first bilateral FTA and first with a Latin American country) was signed in 

November 2005, and entered into force in October 2006.56 Similar to the economic agreements signed with Hong 

Kong and Macau, the China-Chile FTA only includes tariff cuts and provisions on investment promotion and 

facilitation. However, China and Chile are currently negotiating rules on investment.

57

Maintaining competitiveness was a factor behind China’s FTA strategy with Chile. Prior to signing the 

agreement, Chile already had an extensive network of FTAs. One motivation behind China seeking an FTA with 

Chile was to gain access to countries within Chile’s network to avoid trade discrimination in the Americas.58

While Chile’s largest imports from China are machinery and textiles, China’s largest imports from Chile are base 

metals and minerals.59 Under the agreement, China and Chile will eliminate 98 percent of tariffs by 2015 and 

reduce the overall average tariff from 6 percent in 2006 to 0.1 percent by 2015.

60 The two countries will also 

further strengthen exchange and cooperation in such areas as culture, education, science and technology, and 

environmental protection.61

Peru FTA

Signed in 2009, the China-Peru FTA is China’s first comprehensive FTA with a Latin American country

(meaning it includes tariff cuts and investment provisions), and reflects China’s growing investments in Latin 

America’s natural resources sector. 62 Peru is strategically important because it is one of the world’s major 

suppliers of base metals, particularly copper.63

Similar to the New Zealand FTA, China only agreed to grant future MFN status, and Peru was not able compel

China agree to broadened market access rules.64 However, China did agree to accord fair and equitable treatment 
U.S.-China Economic and Security Review Commission 12 

according to “customary international law,” the first such incorporation of a Western standard for China’s 

investment policy.65

Costa Rica FTA

Costa Rica is China’s second-largest trading partner in Central America, while China is the second largest trading 

partner of Costa Rica. The FTA, which covers trade in goods and services, took effect on August 1, 2011, and all 

provisions will be fully implemented by 2025.66 The FTA will gradually eliminate tariffs on over 90 percent of 

goods traded between both countries. Goods that will benefit from the agreement include China’s textiles and 

related products, industrial products, machines, electrical equipment, vegetables, fruits, automobiles, chemical 

products, unprocessed fur products, and leather products. Costa Rica will benefit from tariff reduction on coffee, 

beef, pork, pineapple juice, frozen orange juice, jams, processed fish products, mineral products, and rawhide.67

In services trade, Costa Rica agreed to open an additional 45 sectors to China, including the telecommunications, 

education, and tourism sectors, while China agreed to open only seven additional services sectors to Costa Rica. 68

Europe

Iceland FTA

The China-Iceland FTA, the first between China and a European country, was signed in April 2013. Iceland is one 

of the few European countries able to sign an FTA with China because it is not a member of the EU, which 

refuses to agree to Beijing’s precondition that China be considered a market economy prior to engaging in FTA

negotiations.69 When China failed to make progress in negotiations with the EU, it considered negotiating an FTA 

with the European Free Trade Association (EFTA), but ultimately decided to conduct bilateral negations with 

each EFTA member, starting with Iceland. 70

The volume of trade between the two countries is small. According to Chinese statistics, in 2014 Iceland’s exports 

to China were $59 million (down from $75.8 million in 2013), and imports from China reached $143.7 million

(down from $147 million in 2013). In 2013, China was Iceland’s fourth largest source of imports, but only its 

16th largest export market.71 Through the FTA, Iceland hopes to benefit from a boost in exports to China.72

An agreement with Iceland is not expected to bring significant economic benefits to China, and many believe that 

China’s real goal is better access to shipping routes through the Arctic.73 In March 2013 a Chinese expert on polar 

policy predicted that by 2020 as much as 15 percent of China’s trade would move through the Arctic’s northern 

sea route.74 The changing climate has opened the Arctic route and allowed for more traffic, while competition for 

access to the shipping routes has escalated. In May 2013 China was approved as a permanent observer of the 

Arctic Council, which required the backing of Iceland.75

China is not only interested in gaining access to the Arctic shipping routes, but also Arctic energy resources and 

space-research facilities.76 In particular, China is interested in the geothermal industry in Iceland, as China hopes 

to expand domestic geothermal energy production.77 While seafood exports have accounted for the largest share 

of China’s imports from Iceland, other products such as ferrosilicon—which is used for steelmaking—are 

increasing.78

Switzerland FTA

China and Switzerland signed an FTA in July 2013 amid escalating tensions over the EU’s investigation into 

dumping of Chinese solar panels (and China’s retaliatory investigation into European wine).79 After Iceland, it is 

China’s second FTA with a European country. At entry into force in January 2014, tariffs on 99.7 percent of 

Chinese exports were abolished; in turn, China agreed to abolish tariffs on 84.2 percent of Swiss exports.80

Switzerland is one of few European nations to run a trade surplus with China, driven by sales of luxury items and 

chemicals (according to Chinese statistics, the surplus reached $37 billion in 2014*). Switzerland, like Iceland, is 

 

*

 China’s customs data shows a widening deficit in goods with Switzerland, but this deficit does not show up in the Swiss customs data. 

For example, in 2013, over four-fifths of China’s imports from Switzerland were in an obscure trade category that China’s customs 
U.S.-China Economic and Security Review Commission 13 

not an EU member; it is part of the EFTA and has a bilateral agreement with the EU. For China, the FTA with 

Switzerland is an important step in economic diplomacy in Europe, as FTA negotiations with the EU stalled over

the EU’s unwillingness to recognize China as a market economy.

81

Outlining China’s FTA Strategy

No Official Policy

China does not publish an official FTA policy. It provides scarce information on ongoing negotiations, and does 

not oblige a government entity to inform the legislative branch (i.e., the National People’s Congress) on the 

economic impact of a trade deal. This stands in contrast to the transparency of the U.S. government. U.S. 

objectives were written into law under Trade Promotion Authority until it expired in 2007.

* Even in the absence 

of such legislation, the U.S. Commerce Department spells out its objectives in detail prior to and during 

negotiations, and regularly updates members of Congress through public hearings and private briefings. The U.S. 

International Trade Commission is also obliged to prepare an assessment of a trade agreement’s impact on the 

U.S. economy before Congress decides to ratify it.82

MOFCOM vaguely states that “the Chinese government deems FTAs as a new platform to further opening up to 

the outside and speeding up domestic reforms, an effective approach to integrate into the global economy and 

strengthen economic cooperation with other economies, as well as an important supplement to the multilateral 

trading system.”83 References to domestic growth and job creation are conspicuously absent. The inclusion of the 

words “reform,” “opening up,” and “cooperation” in turn suggest that Beijing primarily seeks to reassure the 

outside world that its FTAs will boost domestic reform, rather than satisfy economic interest groups in its own 

ranks. The statement that FTAs “supplement” the WTO suggests that China is keen on maintaining a good 

reputation in the WTO.

In the absence of an official and detailed FTA policy, analysts are left to surmise China’s true objectives. In terms 

of economic self-interest, it seems plausible that China would use trade agreements to boost exports, which create 

jobs and contribute to economic growth. Although not always successful, the United States—which is less exportoriented than China—has used its FTAs for this purpose. On the import side, one might expect China to maximize 

protection of vulnerable industries, such as agriculture and services, or to make such liberalization contingent 

upon a “quid pro quo” with the partner country. It is tempting to group China in the “defensive” school of 

preferential trading—alongside large and developing economies like Brazil and India†that are reluctant to open 

their borders through preferential trade. They stand opposed to the “offensive-minded” countries that either want 

genuine liberalization (e.g., the United States and EU) or are forced by their small market size to pursue trade 

agreements in order to remain competitive (e.g., Singapore and Chile).

In practice, China does not always conform to these assumptions. The rest of this section outlines the ways in 

which China selects partners and negotiates agreements. Section 3 considers some of its rationales for doing so.

Partner Selection

China’s trade agreement partners account for one-third of China’s total exports. As recently as 2008, China 

recorded a trade deficit with ASEAN of $2.9 billion; yet since the ACFTA came into full force in 2010, the 

balance has reversed, with China recording a trade surplus of $44.7 billion in 2013 (see Table 3). The only 

 

officials call “commodities not classified.” This could be due to over-invoicing of import receipts by Chinese companies and individuals 

looking to evade China’s capital controls and funnel money out of the country.

*

 For more on Trade Promotion Authority, see Ian F. Fergusson, “Trade Promotion Authority (TPA) and the Role of Congress in Trade 

Policy,” Congressional Research Service, April 27, 2015.

†

 India has, however, signed trade agreements with many of its South and Central Asian neighbors, as well as with ASEAN, Japan, and 

South Korea. Like China, it is now pursuing advanced economies. Reports emerged in November 2013, soon after China’s FTAs with 

Iceland and Switzerland, that India, too, was seeking an FTA with the EFTA countries. Indian Ministry of Commerce and Industry. 

http://commerce.nic.in/trade/international_ta.asp; Press Trust of India, “EFTA Nations in Talks with India for Free Trade Agreement,” 

November 11, 2013, via Factiva.
U.S.-China Economic and Security Review Commission 14 

country in the ASEAN bloc with which China has a rising deficit is Malaysia, presumably because it supplies 

China with manufacturing components. An export-oriented mindset would also explain China’s interest in a trade 

agreement with India, with which it had a $36 billion trade surplus in 2014. Signing trade agreements with 

resource-exporting countries cements a “resources-for-manufactures” pattern of trade at little cost and much 

benefit to China’s domestic industry.

Table 3. China’s Goods Trade with ASEAN

Source: China’s General Administration of Customs, via CEIC.

Nonetheless, the aggregate benefits of current trade agreement deals for Chinese exporters seem limited. While 

Hong Kong and ASEAN account for the bulk of China’s exports, China has trade deficits with most of its 

partners. When Hong Kong is subtracted from the equation, trade agreement partners in force accounted for 27.8

percent of China’s imports but only 17 percent of its exports in 2014 (see Table 4). The trade agreement partners 

under negotiation likewise comprise a larger share of China’s imports than its exports. Most striking are South 

Korea, Japan, and Taiwan: China’s cumulative trade deficit with these countries increased from $78 billion in 

2003 to $209.5 billion in 2014. That is a mirror image of China’s positive trade balance with the EU and the 

United States, its top trading partners. (One caveat is that China’s customs data—particularly with Taiwan—

inflates the actual value of China’s imports.*)

Aside from the fact that China has trade deficits with many of its partners, it is also targeting countries that have 

comparative advantages in industries that could hurt Chinese producers. Singapore, Taiwan, Hong Kong, and 

Switzerland are very strong in services trade. China also has or is negotiating trade agreements with 11 of the 21 

members of the Cairns Group, a coalition of agricultural exporting countries with a commitment to reforming 

agricultural trade. The United States, which has a much more open agriculture sector, only has six FTAs in force 

with Cairns Group members (with three FTAs under negotiation). 

 

*

 The actual deficits with these countries are disputable, since China’s customs data tends not to match up with that of its trade partners. 

For example, China’s customs officials recorded a deficit with Taiwan of $116 billion in 2013, whereas Taiwan’s customs officials 

recorded a trade surplus with China of only $39 billion.

US$ millions 2003 2008 2013 2003 2008 2013 2003-08 2008-13

ASEAN Total (16,415) (2,873) 44,731 78,285 231,151 292,760 24.2% 4.8%

Brunei (277) 47 1,617 345 212 1,007 -9.2% 36.5%

Cambodia 268 1,056 3,050 321 1,134 1,442 28.7% 4.9%

Indonesia (1,272) 2,823 5,469 10,236 31,597 42,738 25.3% 6.2%

Laos 87 119 701 109 418 1,044 30.7% 20.1%

Malaysia (7,856) (10,748) (14,128) 20,141 53,514 74,216 21.6% 6.8%

Myanmar 738 1,335 4,540 1,077 2,624 4,444 19.5% 11.1%

Philippines (3,215) (10,420) 1,631 9,404 28,596 27,764 24.9% -0.6%

Singapore (1,613) 12,233 15,918 19,360 52,417 57,053 22.0% 1.7%

Thailand (5,000) (10,116) (5,780) 12,658 41,157 52,960 26.6% 5.2%

Vietnam 1,725 10,797 31,714 4,635 19,482 30,092 33.3% 9.1%

US$ millions

Compound annual 

growth (%)

Total trade

Trade balance (US$ millions)
U.S.-China Economic and Security Review Commission 15 

Table 4. China’s Goods Trade with Select Partners, 2003–2014

Source: China’s General Administration of Customs, via CEIC.

Negotiating Strategy

Mixing Generosity and Protectionism

Basic economic self-interest—boosting exports and protecting domestic industries—is not the only motive behind 

China’s selection of preferential trade partners. The same can be said for the way it negotiates agreements. More 

so than the United States, China has been willing to make concessions in certain agreements, sometimes for overt

political reasons. For example, it opened its market unilaterally to Hong Kong and Macau, since those territories 

were already duty-free zones at the time the CEPAs were signed.84 More striking is that, under the ECFA “early 

harvest” agreement, China cut tariffs on twice as many import items as Taiwan, amounting to five times the 

monetary value of Taiwan’s concessions (see Table 5). 

2003 2008 2014 2003 2008 2014 2003 2008 2014

World (US$ bn) $413 $1,132 $1,963 $438 $1,429 $2,343 $852 $2,561 $4,306

FTA Partners in force 29.83% 26.37% 28.45% 29.44% 26.43% 32.67% 29.63% 26.40% 30.75%

ASEAN 11.46% 10.34% 10.62% 7.06% 7.99% 11.60% 9.19% 9.03% 11.16%

Australia 1.77% 3.21% 5.00% 1.43% 1.56% 1.67% 1.59% 2.29% 3.19%

Chile 0.54% 1.00% 1.08% 0.29% 0.43% 0.56% 0.41% 0.68% 0.79%

Costa Rica 0.14% 0.20% 0.21% 0.02% 0.04% 0.05% 0.08% 0.11% 0.12%

Hong Kong 2.70% 1.14% 0.66% 17.41% 13.35% 15.50% 10.27% 7.95% 8.73%

Iceland 0.01% 0.00% 0.00% 0.01% 0.01% 0.01% 0.01% 0.01% 0.00%

Macau 0.04% 0.03% 0.01% 0.29% 0.18% 0.15% 0.17% 0.11% 0.09%

New Zealand 0.25% 0.17% 0.48% 0.18% 0.18% 0.20% 0.21% 0.17% 0.33%

Pakistan 0.14% 0.09% 0.14% 0.42% 0.42% 0.57% 0.29% 0.27% 0.37%

Peru 0.18% 0.41% 0.42% 0.08% 0.19% 0.26% 0.13% 0.29% 0.33%

Switzerland 0.65% 0.65% 2.06% 0.19% 0.27% 0.13% 0.41% 0.44% 1.01%

Taiwan 11.95% 9.13% 7.76% 2.06% 1.81% 1.98% 6.86% 5.05% 4.61%

FTA Partners under negotiation 30.76% 28.18% 23.68% 20.19% 16.18% 13.72% 25.32% 21.48% 18.26%

Korea 10.45% 9.91% 9.70% 4.59% 5.17% 4.29% 7.43% 7.27% 6.75%

Japan 17.96% 13.32% 8.31% 13.56% 8.13% 6.39% 15.70% 10.42% 7.26%

Norway 0.21% 0.19% 0.23% 0.21% 0.18% 0.12% 0.21% 0.18% 0.17%

GCC 2.14% 4.76% 5.44% 1.85% 2.70% 2.93% 1.99% 3.61% 4.07%

China's Largest Trade Partners 21.06% 18.94% 20.56% 37.54% 38.15% 32.74% 29.54% 29.66% 27.19%

United States 8.20% 7.20% 8.11% 21.10% 17.66% 16.91% 14.84% 13.03% 12.90%

EU 12.86% 11.74% 12.45% 16.44% 20.50% 15.83% 14.70% 16.63% 14.29%

Rest of World 18.36% 26.51% 27.31% 12.83% 19.24% 20.87% 15.51% 22.45% 23.81%

Imports Exports Total
U.S.-China Economic and Security Review Commission 16 

Table 5. Bilateral Concessions on Goods in the China-Taiwan ECFA “Early Harvest”

Source: Adapted from Pasha Hsieh, “China-Taiwan ECFA, Geopolitical Dimensions and WTO Law,” Journal of International Economic 

Law 14:1 (2011): 143.

The scholar Hidetaka Yoshimatsu notes that China and Japan took inverse approaches to negotiating trade 

agreements with ASEAN. China was willing to sit down with all ten ASEAN members from the outset. Its one 

bilateral FTA with an ASEAN member, Singapore, occurred after the ACFTA was completed. China also allowed 

ASEAN countries to establish individual tariff schedules within the free trade area, signed a special agriculture 

deal with Thailand, and permitted an eight-year early harvest period. During ASEAN-Japan Comprehensive 

Economic Partnership (AJCEP) negotiations, Japan took a “divide and conquer” approach instead. It signed 

bilateral FTAs with seven out of ten ASEAN members before completing the AJCEP to counteract the collective 

bargaining leverage of ASEAN. China used the “number of imported items” measure as the base for calculating 

its reduction of import tariffs; Japan used only the “value of imports” as the base, allowing it to exclude several 

agricultural products.85

Agriculture is a prime candidate for protection—for example, the United States, Japan, and Europe have avoided

giving ground on certain agricultural imports in the TPP and TTIP talks.86 China has not only signed agreements 

with several agriculture exporters but has also taken steps to liberalize farm goods trade in the face of domestic 

opposition. Implementation of the ASEAN early harvest agreement led to a substantial increase in ASEAN 

countries’ exports of fruits and vegetables to the Chinese market, hurting tropical fruit producers in China’s 

southern and southwestern provinces. China also increased its farm goods imports from Taiwan under the ECFA. 

In negotiations with New Zealand, Chinese negotiators were less amenable to agricultural trade liberalization than 

in the ASEAN talks, arguing that New Zealand’s meat and dairy exports could adversely affect Chinese farmers 

already struggling to cope with WTO demands. Nonetheless, China eventually lowered duties on several farm 

goods, which have increased significantly as a share of Chinese imports from New Zealand.87

One might expect China to apply measures “at the border,” such as strict rules of origin (ROO)*and long tariff 

phase-ins. Yet, China’s tariff reductions frequently exceed the 90 percent level that is common for FTAs

worldwide.88 In the ASEAN agreement, which accounts for the largest share of China’s preferential imports, 92 

percent of tariff lines in 2011 were duty-free. Under ROO, which determine what percentage of content must be 

sourced from the trade agreement partner to qualify for preferential tariffs, China has also been fairly generous. 

Products with a minimum of 40 percent “regional value content” generally qualify for preferential tariffs. Where 

China adopts stricter ROO standards (e.g., a combination of change in tariff classification, value-added, and 

processing), it is at the behest of advanced economies such as Switzerland and New Zealand. A clause in the 

China-Switzerland agreement also provides for negotiation every two years to improve market access.89

The inclination to lower tariffs is remarkable considering the trenchant cuts China committed to in the WTO. 

Fifty-four percent of China’s goods imports were MFN duty-free in 2011, compared to 30 percent in Brazil and 

14 percent in India. (The U.S. level was also lower, at 50.5 percent.) China’s final bound tariff rate—the 

 

*

 ROO are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and 

restrictions in several cases depend upon the source of imports. Generous ROO confer preferential tariffs when only a small percentage 

of an imported good is produced in the exporting country (or other countries within a common trading bloc). Narrow ROO require most 

or all of the content to originate in the exporting country (or other countries within a common trading bloc). According to the WTO: 

“There is wide variation in the practice of governments with regard to the ROO. While the requirement of substantial transformation is 

universally recognized, some governments apply the criterion of change of tariff classification, others the ad valorem percentage 

criterion and yet others the criterion of manufacturing or processing operation. In a globalizing world it has become even more important 

that a degree of harmonization is achieved in these practices of Members in implementing such a requirement.” World Trade 

Organization, “Technical Information on Rules of Origin.” http://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm.

China Taiwan

Items 539 267

Value (US$ billion) $138.4 $ 28.6

Share (%) of bilateral imports 16.1% 10.5%
U.S.-China Economic and Security Review Commission 17 

maximum rate it is permitted to apply—is 10 percent for all goods and 15.8 percent for agricultural goods—well 

below Brazil, India, and Mexico. Its “binding overhang”—the difference between applied and bound tariff rates—

is less than one percent, giving it minimal leeway to raise tariffs without violating WTO commitments. Other 

developing countries have binding overhangs in the double digits (e.g., India’s is 79.6 percent for agriculture 

tariffs).

90

There are limits to China’s free trade stance, however. U.S. agreements tend to cover more product categories and 

are negotiated from the start with as comprehensive a list as possible. China prefers to start with a much narrower

list, and expands it if necessary. In individual industries, China allows only limited access. In the agriculture 

sector, for example, Beijing’s selective market opening is offset by its extreme protection of grain and meat 

products. Rising incomes and urbanization are increasing demand in China for high-quality protein, but the 

Chinese government uses unscientific sanitary and phytosanitary (SPS) standards *to slow imports of meat 

products, in violation of its WTO commitments. A self-sufficiency mandate preempts imports of wheat, rice, and 

corn beyond a certain level. † Not surprisingly, the ASEAN goods agreement excludes rice and corn. The 

exception to China’s grain mandate is soybeans, which are an indispensable feedstock for China’s outsized pork, 

poultry, and farm-raised fish industries. 

China has taken steps to protect manufacturing industries as well. Swiss exporters were disappointed with the 

China-Switzerland FTA, for instance. Forty-four percent of the volume of Swiss machine tools did not benefit 

from any tariff exemption.

91 China agreed to lower tariffs on 99 percent of textile imports from Switzerland, but 

these only account for 1.3 percent of the Swiss goods entering China. For the goods that comprise three-quarters 

of Swiss exports to China—mechanical and electrical industries (30 percent of exports), chemical and 

pharmaceutical industries (24 percent), and precision instruments, watch making and jewelry (21 percent)—the 

share of products benefiting from tariff exemptions range from just 64 to 78 percent.92 The watch maker Swatch 

was touted as the prime benefactor of the bilateral deal; yet the impact on the company’s bottom line is likely to 

be minimal. The 60-percent cut on luxury watch duties is subject to a ten-year phase-in period, and China imposes 

steep import and luxury taxes on watches beyond the import duty itself. According to one calculation, even by the 

time all the cuts are factored in, total taxation on high-end Swiss watches will be 24.4 percent.93

China’s stiffest test is yet to come, as it pursues deals with Northeast Asian countries that are strong in 

manufacturing. An FTA with South Korea and Japan could force China to lower its hefty tariff and non-tariff 

barriers in the automotive sector.‡ China has been reluctant to liberalize information technology products under 

the WTO Information Technology Agreement (ITA). Eleven of China’s current and prospective trade agreement

partners—including Taiwan, South Korea, and Japan—are part of the plurilateral ITA, which implies that China 

is not offering these countries much better deals on a preferential basis. Although China made generous 

concessions in its early harvest deal with Taiwan, some domestic industries pushed back—for example, the 88 

petrochemical products included in the early harvest account for only 10 percent of the petrochemical items that 

Taiwan initially requested. According to one scholar, Chinese state-owned petrochemical enterprises opposed

 

*

 For the purposes of the WTO SPS Agreement, sanitary and phytosanitary measures are defined as any measures applied to protect human 

or animal life from risks arising from additives, contaminants, toxins, or disease-causing organisms in their food. According to the WTO: 

“The SPS Agreement, while permitting governments to maintain appropriate sanitary and phytosanitary protection, reduces possible 

arbitrariness of decisions and encourages consistent decision-making. It requires that sanitary and phytosanitary measures be applied for 

no other purpose than that of ensuring food safety and animal and plant health. In particular, the agreement clarifies which factors should 

be taken into account in the assessment of the risk involved. Measures to ensure food safety and to protect the health of animals and 

plants should be based as far as possible on the analysis and assessment of objective and accurate scientific data.” World Trade 

Organization, “Understanding the WTO Agreement on Sanitary and Phytosanitary Measures.”

http://www.wto.org/english/tratop_e/sps_e/spsund_e.htm.

† For more on China’s agriculture policy, see U.S.-China Economic and Security Review Commission, 2013 Annual Report to Congress, 

November 2013, 153–193.

‡

 China maintains a tariff duty of 25 percent on auto imports, compared to 5 percent in the United States. Taking into account the 17 

percent value-added tax and other levies, imported cars are more expensive than the same cars in the United States. Duties and related 

levies have served as an effective means for China to compel foreign car makers to relocate production to China. Baizhu Chen, “Tear 

Down This Wall – The Chinese Tariff Wall,” Forbes, July 12, 2012. http://www.forbes.com/sites/baizhuchen/2012/07/12/tear-down-thiswall-the-chinese-tariff-wall/. For more information, see also Iacob Koch-Weser, “China’s Hunger for U.S. Planes and Cars: Assessing 

the Risks,” U.S.-China Economic and Security Review Commission, March 2014.

http://origin.www.uscc.gov/sites/default/files/Research/USCC%20Economic%20Issue%20Brief_ChinasHunger_03.27.14.pdf. 
U.S.-China Economic and Security Review Commission 18 

opening this segment to competition from Taiwan competition, particularly to Taiwan’s competitive polyvinyl 

chloride producers.94

A Haphazard Approach to Higher Standards

Compared to U.S. FTAs, China’s contain few advanced provisions. China generally opts either to (a) repeat the 

same commitments it has already made in its WTO accession agreement; (b) completely exclude certain advanced 

provisions; or (c) restrict advanced provisions to certain sectors, by avoiding detailed legal language or placing

them in a separate document, such as a memorandum of understanding.95 It is even rarer for China to pursue

“WTO-plus” and “WTO-extra” provisions that would advance global trade rules beyond the WTO Uruguay 

Round. Areas where China’s agreements fall short include:

 Ownership restrictions. China publishes a Foreign Investment Catalogue that restricts foreign investors to 

joint ventures in many industries. These restrictions are written into China’s General Agreement on Trade 

and Services (GATS) commitments in the WTO. China has only made piecemeal concessions in its FTAs 

to raise levels of foreign ownership. For example, Swiss companies in environmental services and certain 

insurance companies are now permitted to set up wholly foreign-owned enterprises where GATS only 

allows joint ventures.96

 Positive lists and exception clauses. China does not consistently use a negative list to clarify which 

sectors of its economy are off limits or restricted to foreign trade and investment. It prefers “positive lists” 

that spell out the permitted sectors, creating uncertainty about the status of sectors not on the list. China 

also dilutes foreign companies’ rights by insisting on vague exception clauses, such as the protection of 

“essential security interests.” 97 China is also reluctant to open its domestic resources to outsiders.

Investment in mining and farming, for example, is practically off limits, which is of particular concern to 

Australia and the United States.*

 Limited market access and non-discrimination. China agrees to accord all foreign investors equal market 

access (MFN status) but not the same market access as domestic investors (“national treatment”). China 

has agreed to treat foreign investors the same as domestic investors in like circumstances, but only after 

they set up their operation in China. This “post-establishment national treatment” provision is also subject 

to a grandfather clause†for non-conforming measures. China has only granted Pakistan and ASEAN full 

national treatment—all other partners are only treated in accordance with “customary international law.”

 Government procurement. China has the world’s largest government procurement market but has done 

little to open it to private Chinese and foreign companies. Washington demands non-discrimination, 

transparency, and predictability, and a commitment to opening up procurement with “comparable levels” 

of coverage by all TPP countries. China has failed to meet its 2001 pledge to join the WTO Agreement on 

Government Procurement (GPA) “as soon as possible”—its latest offer was rejected in 2014, largely 

because China was unwilling to include the lucrative procurement contracts given out by subnational 

governments.

 Performance requirements. Clauses exempting investors from performance requirements—such as 

sourcing local labor and inputs—are only included in the New Zealand FTA and China’s investment 

treaty with Canada.98

 

*

 Australia has tried to gain access to China’s mining industry, which according to the Minerals Council of Australia presents numerous 

restrictions in terms of ownership, access to geological data, as well as lack of transparency of regulations and legal processes. Mining is 

not listed as a sector for which China has liberalized investment; foreign companies only have the right to explore resources in China but 

not claim or own them because they are regarded by the Chinese government as “national assets.” Behind this apparent national security 

imperative lies the fact that the profits accruing from the mining industry in China have been too lucrative for the Chinese authorities to 

subject it to foreign competition. Yang Jiang, “China’s Pursuit of Free Trade Agreements: Is China Exceptional?” Review of 

International Political Economy 17:2 (May 2010): 246.

†

 A grandfather clause is a provision in which an old rule continues to apply to some existing situations while a new rule will apply to all 

future cases. Those exempt from the new rule are said to have grandfather rights or acquired rights.
U.S.-China Economic and Security Review Commission 19 

 Restricted transfers of capital, personnel, and data. China’s agreements do not permit the free transfer of 

investment capital in and out of the country. These restrictions abuse the internationally prevalent 

“transfer clause,” under which a government is permitted to restrict investment flows in the event of 

serious balance-of-payments or other macroeconomic difficulties. China has not signed on to provisions 

on the free transfer of data across borders, instead requiring foreign companies to maintain data servers in 

China.99 China has also made little effort to liberalize work permits for foreigners beyond the basic 

conventions spelled out in GATS. The China-Switzerland FTA takes a piecemeal approach, granting 

contractual service suppliers, such as installers and maintainers, architects and engineers, a stay permit of 

up to six months or one year according to the FTA schedule100

 Intellectual property. China’s FTAs contain virtually no commitments beyond what China agreed to 

under WTO’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS)* on issues such as 

data exclusivity, digital copyright laws, and special provisions for counterfeit food and drug products that 

harm public health. The China-Switzerland FTA makes minor progress on enforcement.†

 Labor and the environment. Labor and environmental standards get little attention in China’s FTAs. Most 

often, the parties reaffirm commitments made in multilateral agreements. Of all China’s FTAs, only the 

agreement with Switzerland has an independent environmental issues chapter.101 China has not adopted 

any of the International Labor Organization (ILO) standards, some of which conflict directly with China’s 

restrictions on unionization of labor. The “May 10 agreement,” which forms the basis of the U.S. template 

on labor and environment issues, stipulates that lack of institutional capacity is no defense against 

implementation of labor and environment standards in disputes.102

China’s agreements are not only narrow in scope, but also lack the strength that comes with detailed language on 

dispute settlement. FTAs handle disputes at a high level, since national governments may be involved in bringing 

forward complaints. This makes adequate dispute settlement mechanisms vital. A comparison of the fine print in 

Chinese and U.S. FTAs with Peru and Chile illustrates important discrepancies in the two countries’ approaches. 

While China adheres to some of the same basic standardized clauses,‡it departs from the terms in other key 

clauses:

 Under the U.S. rules of procedures, panel hearings are to be open to the public, as are the written 

submissions of each party to the panel. This is not the case for China, where there is no obligation to go 

public prior to the final report of the panel.103

 The U.S. version strongly encourages consultation with civil society, and panelists may seek outside 

advice from private actors, “including information concerning environmental, labor, health, safety, or 

other technical matters.” No such explicit references are made in the Chinese FTAs.104

 

*

 The Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) is a WTO-administered agreement which sets down the 

minimum standards for different forms of intellectual property protection and regulation. Protections that go beyond TRIPS standards are 

called “TRIPS-plus.” For a primer on TRIPS, see WTO, “Intellectual Property: Protection and Enforcement.” 

https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm. 

†

 Regarding enforcement, the China-Switzerland FTA provides that the amount of damages caused by a violation of intellectual property 

(IP) rights shall be determined in consideration of actual damages or a fair license fee. The possibility of using fair license fees for the 

calculation of damages is mentioned in China’s patent and trademark laws, but not in China’s Copyright Law. FTA wording is strong on 

provisional measures and injunctions: The parties to the FTA must ensure that their judicial authorities may order prompt and effective 

provisional measures to prevent infringement to IP rights from occurring, including ex parte measures, where any delay is likely to cause 

irreparable damage to the right holder. The FTA is also detailed compared to general rules of property preservation of China’s Civil 

Procedure Law. Wenfei Law, “A Practical Guide to the New Free-Trade Agreement between Switzerland and China,” December 2013, 

10–11. http://www.wenfei.com/fileadmin/pdfs/China_Publications/Wenfei_FTA_Publication_December_2013.pdf.

‡

 Both the U.S. and Chinese FTAs with Peru and Chile contain the same basic guidelines as to how to resolve disputes when they arise. 

Either party can bring a complaint, which they try to address through consultations. If that fails, a three-member panel adjudicates the 

dispute, with each country picking one panel member and agreeing on a third. The panel publishes an initial report that can then be read 

and commented on for revisions. A final report is published—and made available to the public after a given period—issuing 

recommendations for how to resolve the dispute. Those recommendations can then become binding, so that the defendant party must 

implement the recommendations.
U.S.-China Economic and Security Review Commission 20 

 The U.S. version requires the panel to make the final report open to the public within 15 days of its 

release. The Chinese version has an extra clause that relaxes the time constraint on when the panel needs 

to release the initial report.105

 The U.S. version codifies tough rules for material compensation if the defendant does not follow through

on the panel’s recommendations. * The Chinese FTA merely refers to “mutually acceptable 

compensation.”106

In signing lower-standard agreements, China has also made use of loopholes in the WTO system. In the 1990s, 

FTAs were not yet the norm, especially in Asia. If China had pursued preferential trade during its WTO accession 

talks in the 1990s, it would have cast doubt on its commitment to multilateral trade. Other WTO members also 

could have used the more generous offers China tabled in a preferential agreement as a benchmark to measure its 

WTO commitments. On paper, the WTO obligates all of its members to report their FTAs to the WTO Committee 

on Regional Trade Agreements (CRTA). FTAs are permitted under Article XXIV of the General Agreement on 

Tariffs and Trade (GATT) (for goods) and Article V of GATS (for services). The precondition is that the 

signatories commit to liberalizing “substantially all trade” in goods and “substantially all sectors” of services. 

Some WTO members—like the EU and Japan—have written lengthy justifications for why their FTAs promote 

free trade, but increasingly, other countries (particularly in Asia) have refrained from doing so. The CRTA, 

however, has lacked the resources and member support to oversee and enforce the relevant provisions properly. 

Just as China has found ways to circumvent other WTO obligations, it made use of this loophole to sign lowstandard FTAs that do not qualify under GATT XXIV and GATS V. For example, it opened far fewer services 

sectors to ASEAN members than it did under GATS (see Figure 1).

Figure 1. Services Sectors Liberalized to ASEAN Members by Select Countries

Source: WTO; He Ping and Shen Chen, “RCEP and China’s Asia Pacific FTA Strategy,” International Issues Research 3 (2013): 51 [Staff translation].

Although China has been content with lower-standard trade agreements, calling its strategy “defensive” is too 

simple. China has done considerably more to pursue advanced provisions than other large developing countries. 

For instance, while India consistently uses the WTO’s “enabling clause”†to make lower-standard FTAs with 

 

*

 The U.S. FTAs with Chile and Peru both state: “The disputing Parties shall consult, beginning no later than 10 days after the Party 

complained against provides notice, with a view to reaching agreement on the amount of the assessment. If the Parties are unable to 

reach an agreement within 30 days after consultations begin, the amount of the assessment shall be set at a level, in U.S. dollars, equal to 

50% of the level of the benefits the panel has determined under paragraph 3 to be of equivalent effect or, if the panel has not determined 

the level, 50% of the level that the complaining Party has proposed to suspend under paragraph 2.” Office of the United States Trade 

Representative, “The United States - Peru Trade Promotion Agreement: Chapter Twenty-One: Dispute Settlement”, 10.

https://ustr.gov/sites/default/files/uploads/agreements/fta/peru/asset_upload_file144_9539.pdf. 

†

 The enabling clause, adopted during the WTO Tokyo Round, permits trading preferences targeted at developing and least developed 

countries which would otherwise violate Article I of the GATT. It allows developed countries to give preferential treatment to poorer 

-100

-50

0

50

100

150

200

Korea Japan China New

Zealand

Australia

GATS

ASEAN

Discrepancy
U.S.-China Economic and Security Review Commission 21 

developing countries WTO-consistent, China has used this clause only once (with ASEAN). 107 As Figure 2

shows, the world’s large developing countries tend to sign far more preferential agreements on goods than 

services. India has reported 15 goods and four services agreements to WTO; for Russia, the ratio is 16 to 0. 

China’s ratio is a respectable 10-to-9: At least on paper, China is seeking commitments beyond goods. Already in 

its WTO accession protocol, China committed 93 of its services sectors to GATS, not far behind the United 

States, and about three times India’s level (see Figure 3). 

Figure 2. Goods and Services FTAs among Select Developing Countries

Source: WTO country profiles.

Figure 3. Services Sectors Covered by WTO GATS in Major Advanced and Developing Economies

Source: WTO country profiles.

Other aspects of China’s FTAs also indicate greater ambition. The CEPA opened many service sectors earlier or 

more widely to Hong Kong companies and individuals than to WTO members. In the services agreement being 

 

countries, particularly to least developed countries. It allows developing countries to enter into agreements which may be non-reciprocal, 

or cover a very limited range of products (which would otherwise contravene the GATT).

24

17 16 15

13

10

8

5

4 4

18

13

0

4

8

9

4

1 1

0

0

5

10

15

20

25

30

Goods

Services

115 115 112 110 105 103 98 90

67

122

105

93 91

77 73

63

43 42 37

0

20

40

60

80

100

120

140

EU27

Switzerland

Japan

United States

Canada

Australia

Korea

New Zealand

Singapore

Russia

Vietnam

China

South Africa

Mexico

Malaysia

Argentina

Brazil

Chile

India

Advanced Developing
U.S.-China Economic and Security Review Commission 22 

negotiated with Taiwan, for example, China would liberalize 80 services industries to Taiwan’s 64.* Furthermore, 

although China has watered down dispute settlement mechanisms, its more recent investment treaties provide for 

full investor-state dispute settlement that allows foreign courts to adjudicate disputes. 108 Many developing 

countries are uncomfortable with investor-state dispute settlement provisions, arguing that they impinge on 

national sovereignty.

Rather than offensive or defensive, China’s approach to higher standards is best described as haphazard. 

According to political scientists John Ravenhill and Yang Jiang, China sometimes takes the initiative in launching 

FTA talks, but in other cases responds to the request of other countries (see Table 6).109 Beijing does not appear 

overly concerned with efficiency either: A 2008 study showed that it had engaged in FTA talks with dozens of 

counterparts—including Brazil and the Shanghai Cooperation Organization—most of which never materialized.110

(In the case of Australia, bilateral talks concluded only recently, having dragged on for over a decade.) 

Furthermore, where the United States exercises leadership by tabling a standard template, China prefers to work 

off the draft provisions of the other party, even if it is a marginal country like Peru or Pakistan.111 That may 

explain why the quality of China’s agreements runs the gamut from a very low standard with Pakistan and 

ASEAN to a fairly high standard with New Zealand and Switzerland. 

China also varies the sequencing of agreements. Four of its FTAs use the “step-by-step” model based on the 

“ASEAN framework,” where agreements on goods precede investment and services, and the first step is an “early 

harvest” that liberalizes a subset of products. Eight of China’s FTAs, on the other hand, adhere to the “single 

undertaking” approach preferred by the United States, by which all provisions are merged into one agreement. 

Table 6. Who Initiated China’s FTA Talks?

Source: Adapted from John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” 

Journal of Contemporary China 18:58 (January 2009): 29.

China’s approach to investment provisions is also unorthodox. According to the United Nations, China has signed 

over 130 BITs (with nearly as many countries), ranking second worldwide behind Germany. Few developing 

countries come close to that number. The United States has signed only 46 BITs, and just three over the past 

decade. 112 One cause of this disparity is that the United States prefers to incorporate provisions into the 

investment chapters of FTAs, and resorts to a standalone investment treaty only when it is absolutely necessary 

and high standards are met. China, on the other hand, signed a flurry of low-standard BITs beginning in the 1980s 

and 1990s—decades ahead of its preferential trade deals—to deepen economic cooperation and reassure foreign 

investors. Only six of China’s FTAs also include comprehensive rules on investment. How China incorporates 

 

*

 Affected industries include business services, communication services, construction and related engineering services, distribution 

services, environmental services, health-related and social services, tourism and travel-related services, recreational, cultural, and 

sporting services, transport services, and financial services.

Partner

Did 

China 

initiate? Partner

Did 

China 

initiate?

ASEAN Y GCC Y

Australia N Norway N

Chile Y South Korea Y

Costa Rica na Japan and Korea Y

Hong Kong N

Iceland N

Macau N

New Zealand N

Pakistan na

Singapore N

Switzerland N

Completed Under negotiation
U.S.-China Economic and Security Review Commission 23 

BIT provisions into its FTAs seems to vary. In the cases of Costa Rica and Switzerland, China signed investment 

treaties just prior to the FTA, so that the relevant provisions were effectively reiterated in the trade deal.* China 

might do the same in the future with South Korea, Mexico, Canada, and India, with whom it signed BITs fairly 

recently. However, for those BITs predating the 2000s, China’s negotiating partners are likely to seek the 

renegotiation of investment conditions, either in a BIT or in the FTA itself. As alluded to earlier, China has also 

been inconsistent across its investment agreements, offering different partners different benefits. 

Unusual as well is China’s approach to WTO plurilateral agreements on services and procurement. Rather than 

refuse participation in these agreements outright, as most developing countries have done, China has made 

ambivalent efforts to join them. In its WTO accession agreement, it pledged to accede to the GPA “as soon as 

possible,” but has since submitted one unsatisfactory offer after another. China is also one of the few emerging 

markets that has expressed interest in joining the Trade in Services Agreement (TISA) talks launched in 2013. It 

has not been granted permission to do so by the other negotiating parties, who worry that China’s cosseted 

services sector and unproductive approach to WTO negotiations will slow down progress on the agreement.†

Key Factors Influencing Chinese Policy

Diverse factors inform China’s approach to preferential trade. This section covers economic, strategic, and 

institutional variables. It also considers whether and how China’s preferences are shifting due to internal and 

external forces. 

Economic and Institutional Factors

Limited Institutional Capacity

Before discussing China’s objectives, it is important to distinguish willingness from capacity. China may be the 

world’s second-largest economy, with a vast government and Party apparatus, but the quality of its bureaucracy 

does not match that of the United States or other advanced economies. Owing to reforms in the 1990s, China’s 

administrative structure is decentralized, resulting in small agencies at the central level and uneven 

implementation of central directives by the larger bureaucracies at the provincial and municipal level. MOFCOM, 

the agency that represents China in trade negotiations, is understaffed and lacks authority over Party organs and 

other government agencies. According to one scholar, MOFCOM also maintains separate departments for 

preferential trade and WTO matters that scarcely coordinate with each other.113 In addition, China’s relatively 

short history of international trade and WTO membership has given its trade negotiators limited time to gain 

experience. 

Limited institutional capacity impacts China’s preferential trade in several ways. First, in the years before and 

immediately after WTO accession, China’s trade officials were preoccupied with negotiating and enforcing the 

accession protocol, which left little time for other trade initiatives. Second, China has targeted smaller countries 

because its negotiators can use their leverage to compensate for inexperience, exert pressure where needed, and 

contain the damage of mistakes. Dozens of negotiating rounds—with countries well-versed in trade bargaining—

have allowed Chinese officials to hone their skills for future engagement with larger countries.114 Third, getting 

China to agree to higher-standard commitments does not guarantee that those commitments will be properly 

 

*

 The provisions relating to investment promotion supplement the Switzerland-China BIT, which came into force in April 2010. As the 

BIT remains in force unchanged, the provisions of the FTA are confined to investment promotion. Article 9.1 of the FTA holds that the 

two countries are committed to “promoting mutual cross-border investment and technology flows”, but stops short of setting any clear 

and binding guidelines. Wenfei Law, “A Practical Guide to the New Free-Trade Agreement between Switzerland and China,” December 

2013, 13–14. http://www.wenfei.com/fileadmin/pdfs/China_Publications/Wenfei_FTA_Publication_December_2013.pdf.

†

 For more information, see Iacob Koch-Weser, “Should China Join the WTO Services Agreement?” U.S.-China Economic and Security 

Review Commission, March 2014. http://www.uscc.gov/Research/should-china-join-wto%E2%80%99s-services-agreement. 
U.S.-China Economic and Security Review Commission 24 

enforced. Issues like intellectual property theft* or faulty customs procedures are exacerbated by corruption and 

bribery among local officials, and the balkanized structure of the country’s regulatory bodies. 

Lastly, for all the talk of FTAs facilitating regional trade networks, surveys show that exporters in China make 

little use of the preferences the government negotiates on their behalf. 115 The companies that stand to benefit, 

typically small and medium-sized enterprises in China’s manufacturing hubs, are not even cognizant of the 

agreements. If they are, they may find it too time consuming and costly to file the paperwork necessary to prove 

rules of origin. For the most part, they have been content to use WTO MFN tariff rates, which are already quite 

low in many industries. Comparative advantages—such as cheap energy inputs, an undervalued currency, and free 

trade zones for components—further reduce the incentive to seek preferential tariffs.116 The use of preferences by 

China’s preferential partners is very modest as well, especially in ASEAN.†

Navigating the International Trade Regime

It is difficult at first to see why China needs preferential trade to improve its balance and terms of trade. Smaller 

countries are susceptible to what the economist Richard Baldwin calls the “domino theory” of competitive 

liberalization: Country A grants preferential tariffs and ROO to country B, so country C hurries to sign an FTA 

with country A to avoid “trade diversion.”117 China, the world’s manufacturing hub and top exporter, has less 

reason to fear trade diversion. WTO accession cemented its status as a global trade power, and at the same time 

did not deter China from adopting policies that give an unfair advantage to its exporters. In its lengthy annual 

report on China’s WTO compliance, the Office of the U.S. Trade Representative (USTR) shows that China has 

failed to meet many of its commitments, particularly with respect to barriers “behind the border.”118

What has hurt China, though, are antidumping and countervailing duty cases. China has become a top target of 

these trade remedies, which create uncertainty for its exporters and subject MOFCOM to litigation. Under Article 

15 of China’s WTO accession protocol, China agreed to be classified as a nonmarket economy for a period of up 

to 15 years after accession. This status has allowed WTO members to select surrogate markets for calculating the 

normal value of Chinese exports, which frequently results in high dumping margins on Chinese goods.

‡ To 

eliminate this use of third-party proxy rates, China has made market recognition a prerequisite for launching FTA 

talks. New Zealand, eager to sign an FTA with China, became the first advanced economy to do so in 2008. By 

2011, 81 countries recognized China as a market economy.119 The efficacy of this approach is limited, since the 

United States and other major economies continue to use surrogate markets in their antidumping claims against 

China as agreed to in the accession protocol and backed up by U.S. statutory provisions. India’s refusal to accord 

China market economy status has apparently been a major impediment to advancing bilateral FTA negotiations.120

A more relevant question is what will happen after 2016. WTO members still have to confer market economy 

recognition to China on an individual basis. As such, FTAs could continue to be a useful tool for China to achieve 

market economy status in certain export markets.121

Aside from market economy recognition, preferential trade can help China’s exporters in more subtle ways.

China’s partners are geographically dispersed and have numerous FTAs of their own. As such, they can integrate 

China into regional trading blocs: Switzerland and Iceland are members of the EFTA, which has an FTA with the 

EU; Chile is a member of Mercosur and the Andean Community; and Singapore has FTAs with most of the 

world’s major economies. China can also use one agreement as leverage to negotiate another. The successful FTA

with New Zealand, for instance, incentivized Australia to accelerate talks with China, in order to extract the same 

market access preferences as its neighbor. The 2010 ECFA with Taiwan appeared to revive China’s teetering 

 

*

 According to the U.S. Customs and Border Protection, China is the number-one source of counterfeit goods. U.S. Customs and Border 

Protection, “IPR Annual Seizure Statistics,” various years. http://www.cbp.gov/trade/priority-issues/ipr/statistics.

†

 A 2013 WTO study shows that only two of China’s partners—Pakistan and New Zealand—have preference utilization rates of between 

20 percent and 30 percent of their exports to China. China’s partners under ASEAN have utilization rates of just 12 percent, while those 

of all other partners are below 8 percent, including Hong Kong and Macau. The only two partners that make significant use of 

preferences—Pakistan and New Zealand—have the least beneficial tariff arrangements with China. ASEAN and Chile, on the other 

hand, benefit from 92 percent and 75 percent of China’s tariff being duty-free in 2011 (compared to 9 percent of the lines for mostfavored-nation imports), but have very low use of preferences. Maria Donner Abreu, “Preferential Rules of Origin in Regional Trade 

Agreements,” World Trade Organization, March 2013. http://www.wto.org/english/res_e/reser_e/ersd201305_e.pdf.

‡

 For more on China’s non-market economy status and its implications for penalty tariffs on China for dumping, see U.S.-China Economic 

and Security Review Commission, 2014 Annual Report to Congress, November 2014, 108–110. 
U.S.-China Economic and Security Review Commission 25 

trade talks with South Korea and Japan—countries that compete with Taiwan in high-tech exports to the Chinese 

market. 

Furthermore, China can use preferential trade to forge useful alliances in the international trade regime. In the 

WTO, aligning with FTA partners can help China avoid trade remedies and amplify its voice in the Doha talks

and in the WTO overall.

122 China’s FTAs with Iceland and Switzerland in 2013 also came amid escalating trade 

disputes between China and the EU. Premier Li Keqiang emphasized during the Switzerland signing that the deal 

was sending “a strong signal against protectionism.”123

Value Chain Dynamics

The structure of China’s value chain influences the government’s trade policy as well, sometimes in 

counterintuitive ways. On one end of the spectrum, China is a significant exporter of farm goods. Although the 

country lacks arable land and clean water, it is the world’s largest producer of food, and its farmers depend on 

foreign markets to buy their horticulture and aquaculture products. Owing to the failure of the Doha Round, MFN

tariffs on agriculture remain very high. China has thus sought to widen access to foreign agricultural markets in 

several of its preferential trade talks. These demands constituted a major source of tension in the ASEAN 

negotiations. The concern among Japanese and South Korean farmers about the potential influx of Chinese food 

imports has been a major barrier to completing those FTAs. In the China-Switzerland FTA, Bern overcame 

domestic opposition to place zero tariffs on more than three-quarters of China’s agricultural exports to

Switzerland.124

In parallel to its food exports, China wants to move up the manufacturing value chain. Indeed, machinery has 

been growing as a share of China’s exports (see Figure 4). That helps explain why it would negotiate FTAs with 

Japan, South Korea, and Taiwan, countries with which it has large trade deficits. Northeast Asia supplies Chinese 

industry with high-technology goods, such as premium steel, machinery, and IT components, usually for 

assembly and re-export. The companies shipping components to China are also directly investing there. The 

Taiwan contract manufacturer Foxconn—which assembles products in China for Apple and other IT firms—is the 

largest foreign employer of Chinese workers.125 The rising value-added of China’s exports reflects its ability to 

appropriate and indigenously reproduce—legitimately and illegitimately—imported technologies from Northeast 

Asia. It bears noting that China is becoming much less dependent on Northeast Asia than the reverse (see Figure 

5).

Figure 4. Machinery in China’s Manufactures Exports

(US$ millions; share %)

Source: China’s General Administration of Customs, via CEIC.

0%

10%

20%

30%

40%

50%

60%

 -

 500

 1,000

 1,500

 2,000

 2,500

1980 1985 1990 1995 2000 2005 2010 2013

Total Machinery and Transport Equipment
U.S.-China Economic and Security Review Commission 26 

Figure 5. China and Japan Trade Interdependence

(monthly, share %)

Source: Japan’s Ministry of Finance, via CEIC data; China General Administration of Customs, via CEIC data.

Granting Taiwan access to mainland services could reinforce cross-Strait economic linkages that spur exports and 

job growth in China’s manufacturing centers. In this sense, the ECFA is a continuation of the CEPA, which 

reaffirmed Hong Kong’s position as a gateway for foreign businesses to enter the mainland market, and helped 

integrated manufacturing operations in China’s Pearl River Delta with Hong Kong consultancy, logistics and 

banking institutions.126 Mainland Chinese companies indirectly benefited from Hong Kong as platform to evade 

the Mainland’s strict capital controls, invest in real estate, and list on the Hong Kong stock exchange.

In tandem with export-oriented manufacturing, China is the world’s top importer of commodities, which serve as 

inputs for its manufacturing, energy, and agriculture sectors. Commodity imports have come at a significant cost 

to China’s economy. The appreciation of global commodity prices, particularly in the mid-2000s, led to a decline 

in China’s terms of trade and increased the cost of production in downstream industries. The concentration of 

certain resources among few countries and producers, coupled with the fragmentation of Chinese industries, also 

placed China at a disadvantage in setting prices.

China has attempted to use FTAs to mitigate these trends. Its current and prospective partners are key commodity 

suppliers: Australia and New Zealand produce mineral and farm goods; Chile and Peru supply iron ore and 

copper; Iceland and Norway host valuable oil and gas assets, as do Indonesia (part of ASEAN), Australia, and the 

Arab states of the Persian Gulf (see Table 7). 

Table 7. China’s Imports from Select Trade Partners and the Share of Resources

Source: China’s General Administration of Customs, via CEIC.

China has attempted to use preferential trade to improve its commodity supplier relationships in numerous ways:

0%

5%

10%

15%

20%

25%

China share of Japanese trade Japan share of China trade

2003 2008 2013

Total imports (US$ m) 5,754 14,387 31,479

Mineral products share (%) 22% 37% 59%

Total imports (US$ m) 2,245 11,362 20,800

Mineral products share (%) na 35% 36%

Total imports (US$ m) 7,303 36,284 98,468

Mineral products share (%) 39% 75% 75%

Total imports (US$ m) 1,023 1,891 8,252

Animal products share (%) 27% 26% 54%

Indonesia

Chile

Australia

New Zealand
U.S.-China Economic and Security Review Commission 27 

 Prohibiting export restrictions. WTO rules on export restrictions are comparatively weak in resource 

sectors. The goal is therefore to include preferential clauses that commit the supplier not to apply resource 

export restrictions, or at a minimum limit the circumstances under which they can be used. This policy 

has been difficult to implement—unlike the exchange of tariff offers typical for manufactured goods, 

resource trade commitments are an asymmetric concession made by the resource exporter.127

 Securing lower and more stable prices. China prefers long-term agreements under which the resource 

supplier agrees to sell at a pre-negotiated price that insulates China from market uncertainty. The logic is 

that a government in FTA partner countries may be more inclined to weigh in on domestic resource 

producers who want to raise the price of commodities shipped to China. China has apparently insisted on 

a related clause in its FTA with Australia, though experts speculate that Australia has refused to include 

it.128

 Ending any discrimination against Chinese investments in mines, oil and gas fields, and farmland. FTAs 

could include provisions to establish intergovernmental programs to promote bilateral resource 

investment, or more tangibly, reform FDI regimes through supplier commitments to extend legal 

protections to the foreign investor. In Australia, China has insisted specifically that the FIRB revise its 

statutes on the treatment of Chinese investors, though provisions for mandatory screening of SOEs 

remained in force after the conclusion of the FTA. 

 Increasing China’s competitiveness in resource bidding. Although not explicitly spelled out in FTAs, the 

diplomatic goodwill engendered by bilateral accords can ease access for China to exploration sites that 

are subject to bidding procedures. In this respect, China has had some success. In November 2013, for 

example, just months after the bilateral FTA between China and Iceland was signed, the National Energy 

Authority of Iceland (Orkustofnun) approved the Chinese state oil company CNOOC International Ltd. as 

a partner and co-applicant with Eykon Energy for exploration and production of a hydrocarbons license—

the third to be issued—in waters off northeast Iceland. Norway is authorized to seek licenses awarded by 

the Icelandic government as part of a 1981 treaty between the two, and seek outside partners. China is 

also negotiating an FTA with Norway.129

 Seeking membership in regional bodies that impact resource shipping. China joined the Arctic Council in 

May 2013, roughly coinciding with its FTA with Iceland. China has a keen interest in shipping goods 

through the Arctic, being among the first countries to send a large cargo ship through the Arctic in the 

summer months. This route would drastically cut transport time and cost for both exports and imports.130

 Political signaling. FTAs can help build trust between the parties and lessen the prospects of a supplier 

engaging in adverse policy decisions. A variety of devices to achieve these goals could be included, such 

as institutionalized policy dialogues, joint investment promotion efforts and diplomatic commitments for 

parties to work together to achieve common resource policy goals. Although strictly noneconomic, 

suppliers can indicate their intention to be reliable partners.131

According to the political scientist Jeffrey Wilson, China took a page from South Korea and Japan, who 

incorporated resource security into their FTA objectives in the early 2000s.*Indeed, China may be competing 

with these countries to get equal preferences from the Australian government. Citing interviews with Japanese 

 

*

 According to Jeffrey Wilson, Japan was the first country to make resource security a priority objective in its FTAs. Japan published a 

new FTA strategy in 2004 that included in its partner selection criteria whether an FTA could “contribute to stable imports of resources.” 

This was subsequently reinforced in its 2006 “Global Economic Strategy.” This strategy was put into practice in FTA initiatives with 

Indonesia, Chile, Brunei, India, Peru, the Gulf Cooperation Council (GCC), Australia, and Canada. Natural resources were prioritized in 

all of the negotiations, with the stated aim of securing investment clauses to protect Japanese investors. By the end of the decade FTAs 

had been completed with six resource suppliers. South Korea’s case was almost identical. Using FTAs for resource security purposes 

was first suggested in 2006, when Seoul included resource security as a rationale for an FTA proposal to Mercosur. By late 2010, 

initiatives with nine resource suppliers had been launched, all of which prioritized investment protections and resource cooperation 

clauses. South Korea’s Ministry of Foreign Affairs and Trade indicated that its 2011 goals were to conclude negotiations with Australia 

and open new talks with “resource-rich countries in Africa, the Middle East and other regions.” Jeffrey D. Wilson, “Resource Security: A 

New Motivation for Free Trade Agreements in the Asia-Pacific Region,” The Pacific Review 25:4 (2012): 438–439.
U.S.-China Economic and Security Review Commission 28 

officials, Wilson claims that Japan’s decision to open FTA negotiations with Australia in 2005 was in reaction to 

the increase in Chinese investment in the Australian mining industry. Japanese firms worried that they might be 

locked out of a critical market. An FTA with resource and investment commitments could help neutralize this 

disadvantage. After Australia gave Japan an in-principle agreement to include a resource clause in August 2007, 

China responded by requesting resource investment commitments in the next round of negotiations in June 2008. 

South Korea commenced FTA negotiations with Australia in early 2009 and also requested a resource clause.132

Interest Groups in an Authoritarian State

China’s authoritarian regime and state-dominated economy often conflict with the advanced provisions in trade 

agreements. While China has revised its labor law several times, it still restricts freedom of association and 

collective bargaining. That effectively preempts implementation of several ILO standards captured in the U.S. 

FTAs. China’s broad definition of national security interests also impedes liberalization in strategic industries. 

Allowing in more foreign banks or loosening up capital transfer restrictions impinges on China’s monetary policy, 

which is premised on capital and currency controls and direct influence over credit growth. China’s politically 

motivated censorship of the Internet, as well as state-directed commercial cyber theft of critical technologies, 

make it difficult for China to commit to U.S.-model rules on digital trade and data transfers. 

Over 40 percent of China’s corporate assets remain in state hands today.133 The commanding heights of China’s 

economy—sectors like telecommunications, banking, and energy—are controlled by SOE oligopolies. The status 

of the largest SOEs is equivalent to a government ministry, and there is a revolving door between SOE executives 

and positions in the Party apparatus. SOEs also persist in less concentrated industries, from services like mining, 

transport, and hospitality to heavy industries such as steel making and machinery.134 China would have to make 

substantial changes to comply with U.S. standards on competition policy (e.g., creating a level playing field, 

limiting SOEs to public services, transparent ownership). Non-discrimination in government procurement is also a 

tall order, since China’s procurement policy favors SOE goods and services. 

Nonetheless, interest groups in China can shape trade policy, sometimes with less predictable outcomes. 

Agriculture is a good example. In the WTO accession protocol, MOFCOM agreed to trenchant cuts in China’s 

agriculture tariffs. In the ensuing years, China’s Ministry of Agriculture (MOA) complained that a post-WTO 

surge in imports hurt the country’s farmers. 135 Like China’s industrial workers, Chinese farmers have no 

institutional mechanism to organize collectively. But the MOA is concerned that rural instability can threaten the 

Communist regime and its efforts to manage the country’s “floating population” of rural-urban migrants.

If the MOA has a protectionist outlook, why has China signed FTAs with agricultural exporters and cut tariffs on 

agricultural goods? Part of the answer is that preferential trade can promote China’s agricultural exports, giving 

the MOA an incentive to accept tradeoffs on the import side. More importantly, the Party leadership has trumped 

MOA interests in select cases. China’s decision to lower tariffs on dairy imports from New Zealand, for instance, 

was politically opportune. Around the time that Beijing and Auckland concluded their FTA in 2008, a litany of 

food and drug safety scandals damaged consumer confidence. One of these concerned melamine-tainted milk that 

caused the poisoning of thousands of infants. Under those circumstances, lowering tariffs on premium dairy 

imports was an expedient means to defuse public anger. Since the tariffs were lowered on a preferential basis 

only, the damage to domestic producers could also be contained. A similar logic applies to China’s imports of 

premium beef: China has responded to domestic demand by permitting beef shipments from New Zealand and the 

then prospective FTA partner Australia, but not from the United States, even though U.S. products are of the same 

quality.136

Produce imports from ASEAN are another example. China opened its market to tropical fruit imports from 

ASEAN members, knowing that this would harm farmers in Guangxi and Yunnan provinces in the southwest. To 

offset this, the central government offered de facto “trade adjustment assistance” by designating Guangxi as the 

host of the annual China-ASEAN expo and by providing Yunnan with additional funding for infrastructure 

development.137

In the ECFA early harvest agreement, China opened its market to farm imports from Taiwan. As with ASEAN, 

support likely came from political higher-ups—in this case, the Party Central Committee Leading Small Group on 

Taiwan Work and the Chinese People’s Political Consultative Conference. Unlike in the ASEAN case, though, 
U.S.-China Economic and Security Review Commission 29 

Taiwan’s farmers are not very price-competitive in the Chinese market. Rather, Beijing subsidizes wholesale 

buyers to procure the expensive food items from Taiwan as a token of goodwill. Wholesalers frequently pocket 

the subsidies and then cast the Taiwan-grown fruits into the sea.138

Whether in agriculture or other industries, the preferences of China’s leadership can determine the balance of 

power among government agencies. In the 1990s, the administration of President Jiang Zemin and Premier Zhu 

Rongji (1993–2002) established a special leading group to coordinate China’s WTO accession. The leadership 

strongly supported MOFCOM in the WTO negotiations and was willing to institute market reform and industry 

restructuring to satisfy WTO demands. The succeeding administration of President Hu Jintao and Premier Wen 

Jiabao (2003–2012), however, sought primarily to protect domestic industries from the consequences of WTOinduced liberalization. Declining support from the leadership weakened MOFCOM’s ability to push through a 

reform agenda. 

As a result, other government agencies have gained in influence—not only the MOA, but also the National 

Development and Reform Commission (NDRC), a “super-ministry” in charge of economic planning, price

setting, and administrative approvals. The NDRC does not participate in trade negotiations but can be decisive in 

blocking market opening.139 Given that the ascent of the NDRC is fairly recent, though, future leaders could 

decide to reverse the trend and endow MOFCOM with the type of power it enjoyed in the 1990s.

The Strategic Dimension

Regional Security

It is not uncommon for countries to pursue preferential trade for noneconomic reasons. A trade surplus contributes 

to the economic prosperity that underpins a strong military. Increasing economic interdependence can 

disincentivize conflict and strengthen a country’s diplomatic leverage. The United States certainly pursues 

preferential trade for strategic reasons: Washington has signed FTAs with less significant economies in 

strategically vital regions (e.g., the Middle East) and in its immediate periphery (e.g., NAFTA and CAFTA), 

while TPP is part of a “rebalance” to Asia that also includes a military component.

In China’s case, however, noneconomic motives occupy an outsized and distinctive place in trade policy. At the 

top of Beijing’s list is the imperative to protect China’s territorial integrity. The CEPA agreements were signed 

soon after the semiautonomous jurisdictions Hong Kong and Macau were handed over by the United Kingdom 

and Portugal in 1997 and 1999, respectively. China maintains a “One Country, Two Systems” policy in these 

territories. Moreover, the ECFA with Taiwan is designed to reinforce the non-sovereign status of the Republic of 

China on Taiwan. China classifies CEPA and ECFA as “arrangements” instead of FTAs between sovereign 

governments—making use of a loophole in the WTO system that allows for trade agreements with “customs 

territories.” Taipei in fact objected to the term CEPA, which would have placed its sovereignty status on par with 

Hong Kong and Macau, but consented to the term “economic cooperation framework agreement.” Moreover, the 

China-Taiwan ECFA was signed not by national governments but by semi-official organizations: China’s 

Association for Relations across the Taiwan Straits and Taiwan’s Straits Exchange Foundation. 

China’s One Country policy has taken on global dimensions. Among the countries that give diplomatic 

recognition to the People’s Republic of China, Beijing has sought to ensure that Taiwan signs only a minimal 

number of trade agreements, and not do so as a sovereign state. Under WTO rules, Taiwan is legally permitted to 

sign FTAs, but prospective partners have refrained from engaging with Taipei for fear of upsetting Beijing. This 

chilling effect has thawed since the ECFA, as evidenced by Taiwan’s commercial agreements with Singapore and 

New Zealand. Still, these agreements are not called “free trade agreements” and recognize Taiwan only as a 

customs territory, thereby diminishing Taiwan’s sovereignty claims in the international community. Although the 

Kuomintang, the current party in power in Taiwan, is optimistic that more agreements are possible, opponents 

argue that Beijing would not allow Taipei to sign agreements with trade partners with whom China does not 

already have agreements—such as Japan, the United States, and the EU.140

China has also signed other FTAs on the basis of its Taiwan policy. Chile was the first South American country to 

establish a diplomatic relationship with China (December 1970), and incidentally became China’s first FTA
U.S.-China Economic and Security Review Commission 30 

partner in that region. India, Pakistan, Norway, and Switzerland already recognized China in the 1950s, decades 

before China had a seat at the United Nations. China has held FTA negotiations with all four. Singapore took until 

1990 to switch diplomatic recognition from Taiwan to China, but did so at a crucial moment when China faced 

diplomatic isolation over the 1989 Tiananmen Square Massacre. The most obvious case of Taiwan containment is 

China’s FTA with Costa Rica. Bilateral FTA talks began just one year after San Jose switched diplomatic 

recognition from Taipei to Beijing. Switching recognition was a difficult decision for Costa Rica, since Taiwan 

had provided generous aid support for decades, and neighboring countries in Central America still recognized the 

Republic of China on Taiwan.

141 In the four years before Costa Rica’s switch, Taiwan signed a flurry of FTAs, all 

with Central American countries: Panama (August 2003), Guatemala (September 2005), Nicaragua (June 2006), 

and El Salvador and Honduras (November 2006).

Besides territorial integrity, China has tried to reassure its neighbors that it will not threaten economic or 

geopolitical stability. The FTA with ASEAN is a centerpiece of this diplomatic effort. China began ACFTA 

negotiations at a time when its trade negotiators had signed no other FTA and were in the midst of WTO 

accession talks. The timing was not coincidental: The ACFTA proposal was originally mooted at the first 

ASEAN-China Summit in 1997, at a time when ASEAN members were struggling to cope with the effects of the 

1997–1998 Asian Financial Crisis. ASEAN’s founding members opposed Communist China during the Cold 

War; by the 1990s, their “China threat” perception turned from national security to trade, as the bloc’s members 

worried that China would out-compete local manufacturers in home and third markets once it joined the WTO. 

At the time the ACFTA talks were launched, Japan was the world’s second-largest economy and the primary 

external actor in Southeast Asia. Today, Japan’s influence has eroded, but Tokyo still competes with Beijing as a 

prolific signatory of trade agreements, a competitor for resource imports, and an important provider of capital and 

technology to countries throughout the region. Compounding the Sino-Japanese economic rivalry are strategic 

tensions that date back to the late 19th century.*

Promoting Alternative Norms

Although poorly defined, there is also a normative dimension to China’s trade policy. For one, China officially 

claims it prioritizes mutual benefit and flexibility over self-interest and absolute norms. Chinese officials and 

scholars refer frequently to the official mantra of “do good to our neighbors, treat our neighbors as partners” and 

“maintain friendly relations with our neighbors, make them feel secure, and help to make them rich.”142 To build 

its relationship with ASEAN, for example, China agreed to confidence-building measures that supplemented the 

ACFTA, notably the Chiang Mai Initiative launched in 2000 to pool reserve currencies as a buffer against capital 

outflows. China also prides itself on making agreements accessible to developing countries. In this respect, the 

shortage of legalistic language, limited opening of sensitive industries, and slow tariff phase-outs (especially for 

the low-income countries in ASEAN) are viewed by Beijing as a sign of strength rather than weakness.143

Some Chinese scholars also claim that China’s willingness to grant asymmetric concessions is a sign of 

benevolent hegemony—or “big country generosity”—that has historical roots in China’s tributary system. At the 

same time, China’s occupies a very different role in Asian regional integration than the United States does in the 

Americas. NAFTA and CAFTA signatories had few prior FTA groupings, so the United States served as the glue 

binding others together. ACFTA, on the other hand, is a “one-to-many” or “hybrid bilateral” arrangement, since 

the ASEAN members have a preexisting FTA amongst themselves.144 China has not objected to ASEAN’s FTAs 

with other Asian economies, since its official policy is to defer to ASEAN as the leader in regional integration.145

The wording in U.S. and Chinese FTAs suggests that China is pursuing a distinctive paradigm for its trade deals, 

even if the details are poorly defined. Since China and the United States signed respective FTAs with Chile and 

Peru in the 2000s, these documents are a good point of reference. In the Cooperation Framework section of 

China’s FTA with Chile, the two sides agree to pursue “cooperation” across many fields, ranging from the 

economy to scientific research and even culture. It places a unique emphasis on small businesses, which are to be 

promoted in both countries. While it does contain sections on labor, social security, and environmental 

 

*

 Japan played an important role as an investor in China during the 1980s. But that did not alleviate the strategic rivalry between the two 

countries. The adversarial relationship has its roots in the Sino-Japanese War of 1895, Japan’s colonization of Manchuria in the interwar 

period, wartime atrocities, and Cold War divisions. Rivalry aside, China sought to translate its economic rise into diplomatic influence.
U.S.-China Economic and Security Review Commission 31 

cooperation, the legal clauses behind them are not spelled out in the FTA; rather, reference is made to a 

Memorandum of Understanding for Labor and Social Security Cooperation, and an Environmental Cooperation 

Agreement. Needless to say, those agreements are not legally binding. The China-Peru agreement is even less 

forthcoming, where the Cooperation Framework makes no mention at all of labor or environmental standards.146

In the U.S. FTAs with Chile and Peru, little ink is spilled on how the two countries can strengthen “cooperation” 

of any sort. Rather, the Cooperation Framework is divided into three parts, each of which tackles head-on the 

issues not dealt with in the Chinese FTAs. The first refers to labor issues: the United States and its counterparty 

agree to enforce labor laws set forth in the ILO Declaration on Fundamental Principles and Rights at Work; to 

raise public awareness about labor rights; and to jointly set up a labor affairs council that can adjudicate any labor 

disputes that may arise, along with a labor roster that lists experts who could be summoned to participate in the 

council. The second part of the Framework, which deals with the environment, is quite similar: the two sides 

agree to enforce environmental laws with reference to WTO agreements; to encourage participation by and 

consultation with the public; and to set up an environmental affairs council and accompanying roster. More 

impressively, the environment section also comprises a painstaking list of definitions for specific types of 

environmental issues, and an annex on environmental cooperation that addresses specific areas of cooperation, 

such as projects to reduce carbon emissions and pioneer cleaner fuels. Finally, the U.S.-style Cooperation 

Framework contains a whole section on “transparency,” setting out rules for publication, provision of information, 

and administrative proceedings.147

Similar differences emerge in the preamble of the agreements. The U.S. version is notable for the many lofty 

goals it aims to achieve. On the business side, the two parties aim to “enhance the competitiveness of [...] firms in 

global markets” and “foster creativity and innovation, and promote trade in goods and services that are the subject 

of intellectual property rights.” Beyond business, the U.S.-Chile FTA again places a heavy emphasis on labor 

rights: the two countries are to help generate employment, strengthen cooperation on labor matters, and “protect, 

enhance, and enforce basic workers’ rights.” On the environment, the two sides agree to implement the FTA “in a 

manner consistent with environmental protection and conservation”; to “promote sustainable development”; and 

to “conserve, protect, and improve the environment, including through managing natural resources in their 

respective territories and through multilateral environmental agreements to which they are both parties.” There is 

also a line highlighting the need to “safeguard the public welfare.”

148 The preamble to the U.S. FTA with Peru 

includes not only these items, but also refers to combating corruption and “generating opportunities for 

sustainable economic alternatives to drug-crop production.”

149

The preambles of China’s agreements with Chile and Peru are terser. In line with the “win-win” and “SouthSouth” cooperation rhetoric that China often uses when engaging with developing countries, the parties agree to 

“promote reciprocal trade through the establishment of clear and mutually advantageous trade rules.” No mention 

is made of helping private firms or protecting intellectual property rights. The broad issues of labor, sustainability, 

and the environment are covered in one brief statement:

RECOGNIZING that this Agreement should be implemented with a view toward raising the standard of 

living, creating new job opportunities, and promoting sustainable development in a manner consistent 

with environmental protection and conservation; and

COMMITTED to promoting the public welfare within each of their countries.150

China’s lack of attention to labor and environmental issues in its FTAs reflects the broader preferences of its 

authoritarian system of government. In the case of Norway, which like Iceland and Switzerland is a member of 

the EFTA, China went so far as to suspend FTA negotiations in response to criticism of its human rights record. 

China and Norway launched a joint feasibility study for an FTA in 2007, and negotiations officially began in 

September 2008.151 However, Beijing suddenly cancelled trade talks after the eighth round in September 2010 in 

protest of Chinese dissident Liu Xiaobo’s impending receipt of the Nobel Peace Prize in October of that year.152

The Norwegian government explained the Nobel decision was not under its control, since the Nobel Committee is 

independent of the government. China nonetheless took measures to express its dissatisfaction. In addition to 

suspending FTA talks, China also denied entry of Norwegian salmon shipments into China and excluded Norway 
U.S.-China Economic and Security Review Commission 32 

from its visa reform, which allows foreigners to enter China for 72 hours without a visa.153 Trade talks have yet to 

resume, though China still lists the China-Norway FTA as “under negotiation” on its website.

Conclusion: The Way Forward for Washington

On issues of economics and trade, the United States interacts with China in two ways. One is through its direct 

negotiations with Beijing, including at the WTO and at the annual U.S.-China Strategic and Economic Dialogue 

(S&ED). For example, at the July 2013 S&ED, the two countries committed to continuing negotiation toward a 

BIT.

154 The United States must also determine whether to include China in WTO plurilateral agreements, and how 

to more effectively address China’s non-compliance with WTO rules.

Aside from direct engagement with China, the U.S. government interacts with China indirectly through U.S. trade 

policy. The United States is dealing with countries in the TPP negotiations that could serve as a litmus test for 

future negotiations with China. For example, Vietnam, like China, is an authoritarian state with weak labor rights. 

Vietnam, Malaysia, and Singapore are also good gauges for how U.S. trade rules will address prospective 

challenges posed by SOEs. Japan, in turn, is a test case for how the United States can promote widening of access 

to agriculture, investment, and services—all sectors where China resists market opening as well. 

At the same time, as Chinese trade initiatives proliferate, China’s current and prospective preferential trade 

partners are beginning to overlap with the United States, which has important implications for standard setting in 

the international economic arena. In regions outside Asia, the following patterns are apparent:

 Americas. China has signed FTAs with three U.S. FTA partners in this region: Chile, Costa Rica, and 

Peru. Costa Rica is noteworthy not only because the United States has many FTA partners in Central 

America, but also because several countries in that sub-region still maintain diplomatic relations with

Taiwan (and are Taiwan’s only sovereign trade agreement partners). Further, China has signed fairly 

advanced BITs with NAFTA members Canada (2012) and Mexico (2008), which can provide the basis 

for negotiating investment chapters in FTAs. Given that Canada and Mexico joined the TPP talks in 2012, 

these countries may serve as an important link between China and the evolving TPP chapter on 

investment.155

 Europe. China is engaging with Switzerland and Iceland, small countries that constitute half of EFTA

members, whereas the United States is now negotiating the TTIP mega-regional with the EU. A top EU 

trade official stated in September 2012 that “we don’t think the time is right for an EU-China FTA, but 

we think we can move ahead in areas like an investment agreement. The problem is that China’s interests 

are too narrow. China isn’t interested in market access.”156 In the meantime, the EFTA’s trade partnership 

with the EU (both are part of the PanEuroMed system*) means that China has taken the first step toward 

integrating preferential trade with the EU. China wanted to sign an agreement with Norway until the 

awarding of the Nobel Peace Prize to Chinese dissident Liu Xiaobo in 2010 derailed the talks.

 Middle East and Africa. In the summer of 2004, China launched negotiations with both the South African 

Customs Union (SACU)—a union that comprises South Africa, Botswana, Namibia, Lesotho, and 

Swaziland—and the Gulf Cooperation Council in the Middle East.157 This coincided with a more active 

engagement in the region by the United States, which began negotiations with SACU in 2003, and signed 

an FTA with Bahrain in September 2004 that set the stage for its Greater Middle East Initiative.158 In SubSaharan Africa, however, both China and the United States have suspended their talks with SACU. Yet 

China’s current talks with the GCC create potential for some overlap—the United Arab Emirates 

ambassador to China stated in April 2013 that the China-GCC agreement is close to being finalized.159

 

*

In the context of the PanEuroMed system, products which have obtained originating status in one of the 42 countries may be added to 

products originating in any other one of the 42 without losing their originating status within the PanEuroMed zone. That makes it easier 

for producers in these countries to qualify for preferential tariffs. The system operates between the 28 member states of the EU, the 

EFTA states (Iceland, Liechtenstein, Norway, and Switzerland), the countries that signed the Barcelona Declaration (Algeria, Egypt, 

Israel, Jordan, Lebanon, Morocco, Syria, Tunisia, and the Palestinian Authority of the West Bank and Gaza Strip), and Turkey and the 

Faroe Islands.
U.S.-China Economic and Security Review Commission 33 

The United States signed a Framework Agreement for Trade, Economic, Investment and Technical 

Cooperation with the GCC in May 2012, which sets general terms for a future FTA.

*

In Asia, U.S. and Chinese agreements have less overlap. Singapore is the only country that has an FTA with both 

Beijing and Washington. Chinese negotiations with South Korea and Japan are still in early stages. Other FTAs 

present interesting case studies:

 Australia and New Zealand. Australia constitutes an important bridge between U.S. and Chinese trade 

interests. Australia is a principal U.S. ally in the Asia Pacific. At the same time, China is now Australia’s 

number one trade partner. Australia is part of both the RCEP and TPP negotiations, and at the bilateral 

level, has an FTA with the United States and has just concluded a deal with China. For China, New 

Zealand is also key, having been the first country to grant China accession to the WTO and the first 

advanced economy to sign an FTA with China. 

 Emerging economies in Asia. Thanks to the ACFTA, which came into full force in 2010, China has an

FTA in place with nine developing economies in the East Asia region. Of these, only Malaysia and 

Vietnam are participating in the TPP negotiations. In South Asia, Beijing has an FTA in place with its 

long-time ally Pakistan, which has a complex diplomatic relationship with Washington. As for India, 

Beijing and New Delhi completed a joint feasibility study for an FTA back in 2008, but bilateral FTA

talks have made little progress. India would, however, be part of an RCEP arrangement.†

 Taiwan. Beijing views its bilateral FTA with Taiwan, the ECFA, as an agreement between two customs 

territories within one sovereign state. Taiwan has been precluded by China from signing FTAs with other 

countries as a sovereign state. The United States and Taiwan share a special security relationship dating 

back to the 1979 Taiwan Relations Act.‡ Although the United States and Taiwan have explored the 

potential of a bilateral FTA for over a decade, bilateral trade negotiations have not materialized. Taiwan 

is, however, keen to join the TPP talks. As of August 2014, it was engaged in an “administration-wide 

effort to ready itself for eventual accession” to the TPP, including the creation of a patent linkage system 

for marketing approval of pharmaceuticals.

160

Going forward, different stakeholders in the United States will need to work out how the TPP can best serve the 

national interest. In theory, the TPP can serve several purposes. The agreement is expected to expand market 

access for U.S. goods and services outside the WTO, particularly by removing non-tariff barriers. The TPP could 

also refresh and build on the 1994 NAFTA and the bilateral FTAs that the United States has with certain TPP 

members. Some economists argue that, as opposed to fiscal and monetary policy, free trade is a “cost-free” form 

of economic stimulus. At the same time, the TPP can consolidate the U.S. “Asia pivot” by strengthening 

relationships with U.S. allies in the Asia Pacific.161 Mega-regionals could help preserve U.S. influence in the 21st 

century trade regime by promoting a “premium” standard that the WTO is unable to deliver and many FTA

signatories are unwilling to enforce.

 

* This U.S.-GCC Agreement will establish a Joint Committee to discuss areas where both the GCC and the United States share mutual 

interests, including considering opportunities for enhancing economic, commercial, investment and technical cooperation, fostering their 

economic relations and increasing the volume of trade and investment between them. Office of the U.S. Trade Representative, Ron Kirk 

Announces Agreement with Gulf Cooperation Council to Strengthen Economic Ties, Expand Trade and Investment Relationship,

September 2012. http://www.ustr.gov/about-us/press-office/press-releases/2012/september/ustr-kirk-announces-agreement-gcc. 

† According to China’s Ministry of Commerce, the latest status of the China-India FTA is as follows: “In 2003, China and India 

established a Joint Study Group to examine the potential for economic engagement between the two countries. In October 2007, the Joint 

Task Force finalized its report on the feasibility of a China-India Regional Trading Arrangement (RTA). According to the feasibility 

report, a China-India RTA will be mutually advantageous. Both sides welcomed the conclusion of the feasibility study on the RTA 

between the two countries, and agreed to explore the possibility of commencing discussions on a RTA that meets the common 

aspirations of both countries and will also benefit the region.” China Ministry of Commerce. 

http://fta.mofcom.gov.cn/topic/enindia.shtml.

‡ The Taiwan Relations Act is an act of the U.S. Congress that, since the recognition of the People’s Republic of China, has defined the 

non-diplomatic relations between the United States and the Republic of China on Taiwan.
U.S.-China Economic and Security Review Commission 34 

Critics point out that after the United States formed NAFTA, granted permanent normal trade relations to China, 

and signed a bilateral FTA with South Korea, its trade deficits with these economies widened. Moreover, given 

that the United States is already a very open economy, the sectors that its TPP partners now want to open—such 

as dairy farming, automotive, and textiles—would impact sensitive sectors of the U.S. economy. To protect 

vulnerable economic groups, the United States can negotiate special provisions—such as carve-outs, phase-ins, 

safeguards, and strict ROO—but this might taint the integrity of the U.S. commitment to free trade. Still others 

contend that TPP talks are diverting the USTR’s scarce resources away from the WTO Doha Round.

In the meantime, China is attempting to define the trade agenda in Asia and become the focal point for regional 

economic integration. In addition to the ongoing RCEP negotiations, China has pushed for a revival of the Free 

Trade Area of the Asia Pacific (FTAAP). If completed, FTAAP would be the first agreement in the Asia Pacific

incorporating both the United States and China. FTAAP would include many of the same members and issue 

items as the TPP so there is potential for harmonization. However, FTAAP negotiations could also divert 

attention from the TPP and, by extension, U.S. emphasis on high-standard trade rules in Asia.

162

Even if Washington integrates China into higher-standard initiatives on some fronts, China will retain the ability 

to align with those who oppose aspects of the U.S. agenda, and find ways to undermine the spread of U.S. norms. 

China has approached trade agreements in a more opportunistic and less consistent manner than the United States, 

and that is unlikely to change under President Xi. Since the 2013 leadership transition, Beijing is reverting to a 

policy China used in the late 1990s, when the prospect of joining the WTO served as a conduit for domestic 

reform. But while the WTO exacted rigorous demands, preferential trade allows China to make concessions 

incrementally and selectively. This hedging strategy defuses pressure and buys time for China’s new leaders to 

increase their leverage.
U.S.-China Economic and Security Review Commission 35 

Acronyms

ACFTA ASEAN-China Free Trade Area

AJCEP ASEAN-Japan Comprehensive Economic Partnership

APEC Asia Pacific Economic Cooperation

APTA Asia Pacific Trade Agreement

ASEAN Association of Southeast Asian Nations

BIT bilateral investment treaty

CAFTA Central American Free Trade Agreement

CEPA Comprehensive Economic Partnership Agreement

CRTA Committee on Regional Trade Agreements

CSSTA Cross-Strait Service Trade Agreement

ECFA Economic Cooperation Framework Agreement

EFTA European Free Trade Association 

EU European Union

FDI foreign direct investment

FIRB Australia’s Foreign Investment Review Board

FTA free trade agreement

FTAAP Free Trade Area of the Asia Pacific

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GCC Gulf Cooperation Council

GPA Agreement on Government Procurement

ILO International Labor Organization

IP intellectual property

ITA Information Technology Agreement

MFN most favored nation

MOA China’s Ministry of Agriculture

MOFCOM China’s Ministry of Commerce

NAFTA North American Free Trade Agreement

NDRC China’s National Development and Reform Commissions

RCEP Regional Comprehensive Partnership

ROO rules of origin

S&ED U.S.-China Strategic and Economic Dialogue

SACU South African Customs Union

SAR special administrative region
U.S.-China Economic and Security Review Commission 36 

SOE state-owned enterprise

SPS sanitary and phytosanitary

TISA Trade in Services Agreement

TPP Trans-Pacific Partnership

TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights

TTIP Transatlantic Trade and Investment Partnership

USTR Office of the U.S. Trade Representative

WTO World Trade Organization
U.S.-China Economic and Security Review Commission 37 

References

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in Northeast Asia?” The Pacific Review 18:2 (June 2005): 189–216.

Richard Baldwin, “Multilateralizing Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free 

Trade,” The World Economy 29:11 (2006): 1451–1518.

Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following 

the Global Trend towards Comprehensive Agreements?” German Development Institute, July 2013.

Pasha Hsieh, “China-Taiwan ECFA, Geopolitical Dimensions and WTO Law,” Journal of International 

Economic Law 14:1 (2011): 121–156.

Yang Jiang, “China’s Pursuit of Free Trade Agreements: Is China Exceptional?” Review of International Political 

Economy 17:2 (May 2010), 238–261.

Junji Nakagawa and Wei Liang, “A Comparison of the FTA Strategies of Japan and China and Their Implications 

for Multilateralism,” Indiana University Research Center for Chinese Politics and Business (RCCPB) Working 

Paper 11 (October 2011).

Peter A. Petri and Michael G. Plummer, “The Trans-Pacific Partnership and Asia-Pacific Integration: Policy 

Implications,” Peterson Institute for International Economics Policy Brief PB12-16, June 2012.

John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” 

Journal of Contemporary China 18:58 (January 2009): 27–46.

Guiguo Wang, “China’s FTAs: Legal Characteristics and Implications,” American Journal of International Law 

105:3 (July 2011): 493–516.

Jeffrey D. Wilson, “Resource Security: A New Motivation for Free Trade Agreements in the Asia-Pacific 

Region,” The Pacific Review 25:4 (2012): 429–453.

World Economic Forum, “Mega-regional Trade Agreements: Game-Changers or Costly Distractions for the 

World Trading System?”(Geneva, Switzerland: July 2014).

Hidetaka Yoshimatsu, “Domestic Political Institutions, Diplomatic Style and Trade Agreements: A Comparative 

Study of China and Japan,” New Political Economy 15:3 (2010): 395–419.

Ka Zeng, “Multilateral versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free 

Trade Agreements (FTAs),” Journal of Contemporary China 19:66 (September 2010): 635–652.
U.S.-China Economic and Security Review Commission 38 

Endnotes

 

1

 APEC, “Annex A – The Beijing Roadmap for APEC’s Contribution to the Realization of the FTAAP,” November 2014. 

http://www.apec.org/Meeting-Papers/Leaders-Declarations/2014/2014_aelm/2014_aelm_annexa.aspx. 

2

 Deepak Bhattasali, Shantong Li, Will Martin, China and the WTO: Accession, Policy Reform, and Poverty Reduction Strategies World 

Bank, World Bank and Oxford University Press, 2004, 1.

3 Asian Development Bank, Asian Economic Integration Monitor—November 2014, November 2014, 20. 

http://www.adb.org/sites/default/files/publication/149353/aiem-nov-2014.pdf. 

4 China’s Ministry of Commerce, “China FTA Network.” http://fta.mofcom.gov.cn/english/index.shtml.

5 United Nations Conference on Trade and Development, “International Investment Agreements Navigator: China.”

http://investmentpolicyhub.unctad.org/IIA/CountryBits/42#iiaInnerMenu.

6 Liu Debiao, Introduction to China’s Free Trade Agreements, China Commerce and Trade Press, June 2012, 367. Staff translation.

7 United Nations Economic and Social Commission for Asia and the Pacific, “Asia-Pacific Trade Agreement Fact Sheet.”

http://www.unescap.org/tid/apta/factsheet08.pdf.

8 Liu Debiao, Introduction to China’s Free Trade Agreements, China Commerce and Trade Press, June 2012, 10. Staff translation.

9 Yang Jiang, “China’s Pursuit of Free Trade Agreements: Is China Exceptional?” Review of International Political Economy 17:2 (2010), 

251.

10 China FTA Network, “ASEAN-China FTA.” http://fta.mofcom.gov.cn/topic/chinaasean.shtml.

11 Kevin Brown, “Biggest Regional Trade Deal Unveiled,” Financial Times, January 1, 2010. http://www.ft.com/intl/cms/s/0/823707e4-

f6f1-11de-9fb5-00144feab49a.html#axzz2dpgTsDCO.

12 Yang Jiang, “China’s Pursuit of Free Trade Agreements: Is China Exceptional?” Review of International Political Economy 17:2 (May 

2010), 251; Henry Gao, “China’s Strategy for Free Trade Agreements: Political Battle in the Name of Trade,” Asian Regional Workshop 

on Free Trade Agreements: Towards Inclusive Trade Policies in Post-crisis Asia, Bangkok, December 2009, 14. 

http://ink.library.smu.edu.sg/sol_research/971/. 

13 “China-ASEAN FTA Pact Set to Boost Trade Volume,” China Daily, December 30, 2009. http://www.chinadaily.com.cn/china/2009-

12/30/content_9244077.htm.

14 Kevin Brown, “Biggest Regional Trade Deal Unveiled,” Financial Times, January 1, 2010. http://www.ft.com/intl/cms/s/0/823707e4-

f6f1-11de-9fb5-00144feab49a.html#axzz2dpgTsDCO.

15 Ignatius Ismanto and Indra Krishnamuti, “The Political Economy of ASEAN-China FTA: An Indonesian Perspective,” World Trade 

Institute, 2014, 10–11.

16 ASEAN-China Free Trade Area, “China, ASEAN to Upgrade FTA, Solve Disputes,” August 30, 2013. http://www.aseancn.org/Item/8372.aspx. 

17 Kevin Brown, “Biggest Regional Trade Deal Unveiled,” Financial Times, January 1, 2010. http://www.ft.com/intl/cms/s/0/823707e4-

f6f1-11de-9fb5-00144feab49a.html#axzz2dpgTsDCO.

18 Demetri Sevastopulo, “Beijing Woos Southeast Asian Traders in Bid to Boost Poor Provinces,” Financial Times, September 9, 2013. 

http://www.ft.com/intl/cms/s/0/8a7d4338-1942-11e3-83b9-00144feab7de.html#axzz2eOnEN2U0.

19 Nargiza Salidjanova, Iacob Koch-Weser, and Jason Klanderman, “China’s Economic Ties with ASEAN: A Country-by-Country 

Analysis,” U.S.-China Economic and Security Review Commission, March 17, 2015. 

http://www.uscc.gov/Research/china%E2%80%99s-economic-ties-asean-country-country-analysis.

20 China FTA Network, “China-Hong Kong CEPA.” http://fta.mofcom.gov.cn/topic/enhongkong.shtml. 

21 Ministry of Commerce, “The Implementation of China and Pakistan Free Trade Agreement as from July 1, 2007,” July 4, 2007. 

http://chinatradeextra.com//index.php?option=com_iwpfile&file=pdf11/wto2007_3232.pdf. 

22 Guiguo Wang, “China’s FTAs: Legal Characteristics and Implications,” American Journal of International Law 105:3 (July 2011): 498.

23 World Trade Organization, “Factual Presentation Free Trade Agreement between Pakistan and China (Goods) Report by the Secretariat,” 

WT/REG237/1 (Committee on Regional Trade Agreements: Geneva, December 1, 2008).

http://chinatradeextra.com//index.php?option=com_iwpfile&file=pdf12/wto2008_7003.pdf.

24 “Pakistan, China Agree to Enter FTA Phase II,” Nation (Pakistan), January 14, 2015. http://nation.com.pk/business/14-Jan2015/pakistan-china-agree-to-enter-fta-phase-ii. 

25 World Trade Organization, “Factual Presentation Free Trade Agreement between Pakistan and China (Goods) Report by the Secretariat,” 

WT/REG237/1 (Committee on Regional Trade Agreements: Geneva, December 1, 2008).

http://chinatradeextra.com//index.php?option=com_iwpfile&file=pdf12/wto2008_7003.pdf. 

26 General Administration of Customs of the People’s Republic of China, via CEIC Database.

27 Junji Nakagawa and Wei Liang, “A Comparison of the FTA Strategies of Japan and China and Their Implications for Multilateralism,” 

Indiana University Research Center for Chinese Politics and Business, October 2011, 19. 

http://www.indiana.edu/~rccpb/Working_Paper/Liang%20Nakagawa%20RCCPB%2011%20FTAs%20PUB.pdf. 

28 China FTA Network, “China-New Zealand FTA.” http://fta.mofcom.gov.cn/topic/ennewzealand.shtml.

29 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend towards 

Comprehensive Agreements?” German Development Institute, July 2013, 13. 

30 New Zealand Ministry of Foreign Affairs and Trade, “New Zealand-China Free Trade Agreement: National Interest Analysis.” 

http://www.chinafta.govt.nz/1-The-agreement/3-Publications/National-interest-analysis.pdf. 

31 New Zealand Ministry of Foreign Affairs and Trade, “New Zealand-China FTA Fact Sheet.”

http://chinatradeextra.com/index.php?option=com_iwpfile&file=pdf12/wto2008_2002a.pdf. 
U.S.-China Economic and Security Review Commission 39 

 

32 New Zealand Ministry of Foreign Affairs and Trade, “New Zealand-China FTA Fact Sheet.”

http://chinatradeextra.com/index.php?option=com_iwpfile&file=pdf12/wto2008_2002a.pdf. 

33 PRC Ministry of Commerce and New Zealand Ministry of Foreign Affairs and Trade, “A Joint Study Report on a Free Trade Agreement 

Between China and New Zealand,” 2004. http://www.mfat.govt.nz/downloads/trade-agreement/china/chinanzftastudy.pdf.

34 General Administration of Customs of the People’s Republic of China via CEIC Database.

35 General Administration of Customs of the People’s Republic of China, via CEIC Database.

36 Liu Debiao, Introduction to China’s Free Trade Agreements, China Commerce and Trade Press, June 2012, 250. Staff translation.

37 KPMG, “Asia Pacific Trade & Customs News: Special China Edition,” March 2009.

http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/Asia-Pacific-Trade-Customs-News-O-200903.pdf. 

38 Chris Devonshire-Ellis, “Understanding China’s Free Trade Agreements,” China Briefing, February 10, 2014. http://www.chinabriefing.com/news/2014/02/10/understanding-chinas-free-trade-agreements.html. 

39 Guiguo Wang, “China’s FTAs: Legal Characteristics and Implications,” American Journal of International Law 105:3 (July 2011): 493–

516. 

40 Hong Kong Customs and Excise Department, “Economic Cooperation Framework Agreement (ECFA).”

http://www.customs.gov.hk/en/trade_facilitation/ecfa/ecfa/.

41 “Pending ASEAN-China FTA Said to Pressure Taiwan to Complete ECFA,” Inside U.S.-China Trade, November 18, 2009.

http://chinatradeextra.com/inside-us-china-trade/pending-china-asean-fta-said-pressure-taiwan-complete-ecfa. 

42 Cindy Wang, “China Thaw Lets Taiwan Expand Trade Deals to Add Singapore,” Bloomberg, November 7, 2013. 

http://www.bloomberg.com/news/articles/2013-11-07/china-thaw-allows-taiwan-to-expand-trade-deals-to-add-singapore. 

43 “Pending ASEAN-China FTA Said to Pressure Taiwan to Complete ECFA,” Inside U.S.-China Trade, November 18, 2009.

http://chinatradeextra.com/inside-us-china-trade/pending-china-asean-fta-said-pressure-taiwan-complete-ecfa.

44 “Taiwan Moves Closer to ECFA Referendum that U.S. Sources Think Unlikely,” Inside U.S-China Trade, May 12, 2010. 

http://chinatradeextra.com/inside-us-china-trade/taiwan-moves-closer-ecfa-referendum-us-sources-think-unlikely; Loa Lok-sin and 

Vincent Y. Chao, “ECFA Referendum Proposal Rejected,” Taipei Times, June 4, 2010. 

http://www.taipeitimes.com/News/front/archives/2010/06/04/2003474657. 

45 Mo Yan-chih, “Cross-Strait Service Trade Pact Signed,” Taipei Times, June 22, 2013. 

http://www.taipeitimes.com/News/front/archives/2013/06/22/2003565371. 

46 C. Fred Bergsten et al., Bridging the Pacific: Toward Free Trade and Investment between China and the United States, Peterson Institute 

for International Economics, October 2014, 193–194.

47 Michael Heath and Ian McDonald, “Australia-China Trade Deal to Drive Exports Beyond Mining,” BloombergBusinessweek, November 

16, 2014.

48 John Garnaut, “Tony Abbot Seals Free Trade Deal with Beijing,” Sydney Morning Herald, November 17, 2014. 

http://www.smh.com.au/federal-politics/political-news/tony-abbott-seals-free-trade-deal-with-beijing-20141116-11nsk9.html. 

49 John Garnaut, “Tony Abbot Seals Free Trade Deal with Beijing,” Sydney Morning Herald, November 17, 2014. 

http://www.smh.com.au/federal-politics/political-news/tony-abbott-seals-free-trade-deal-with-beijing-20141116-11nsk9.html. 

50 John Garnaut, “Tony Abbot Seals Free Trade Deal with Beijing,” Sydney Morning Herald, November 17, 2014. 

http://www.smh.com.au/federal-politics/political-news/tony-abbott-seals-free-trade-deal-with-beijing-20141116-11nsk9.html. 

51 Phoebe Sedgman, “China to Cut Agriculture Tariffs in ‘Game Changer’ for Australia,” BloombergBusinessweek, November 17, 2014. 

52 Sean Miner, “At Long Last, a China-Australia FTA,” Peterson Institute for International Economics China Economic Watch, December 

4, 2014. http://blogs.piie.com/china/?p=4164. 

53 John Garnaut, “Tony Abbott Seals Free Trade Deal with Beijing,” Sydney Morning Herald, November 17, 2014. 

http://www.smh.com.au/federal-politics/political-news/tony-abbott-seals-free-trade-deal-with-beijing-20141116-11nsk9.html. 

54 John Garnaut, “Tony Abbott Seals Free Trade Deal with Beijing,” Sydney Morning Herald, November 17, 2014. 

http://www.smh.com.au/federal-politics/political-news/tony-abbott-seals-free-trade-deal-with-beijing-20141116-11nsk9.html. 

55 John Kerin and Julie-Anne Sprague, “Chinese Companies to Import Workers,” The Land (Australia), November 18, 2014. 

http://www.theland.com.au/news/agriculture/agribusiness/general-news/chinese-companies-to-import-workers/2717588.aspx. 

56 World Trade Organization Committee on Regional Trade Agreements, “Factual Presentation Free Trade Agreement between Chile and 

China (Goods) Report by The Secretariat,” April 23, 2008. 

http://chinatradeextra.com/index.php?option=com_iwpfile&file=pdf12/wto2008_2445a.pdf.

57 Ministry of Commerce, “China and Chile Hold the 1st Round of FTA Talks on Investment,” January 19, 2009. 

http://chinatradeextra.com//index.php?option=com_iwpfile&file=pdf13/wto2009_0325.pdf.

58 Ka Zeng, “Multilateral Versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free Trade Agreements 

(FTAs),” Journal of Contemporary China 19:66 (2010): 641.

59 World Trade Organization Committee on Regional Trade Agreements, “Factual Presentation Free Trade Agreement between Chile and

China (Goods) Report by The Secretariat,” April 23, 2008.

http://chinatradeextra.com/index.php?option=com_iwpfile&file=pdf12/wto2008_2445a.pdf. 

60 World Trade Organization Committee on Regional Trade Agreements, “Factual Presentation Free Trade Agreement between Chile and 

China (Goods) Report by The Secretariat,” April 23, 2008. 

http://chinatradeextra.com/index.php?option=com_iwpfile&file=pdf12/wto2008_2445a.pdf.

61 Ministry of Commerce, China and Chile Hold the 1st Round of FTA Talks on Investment, January 19, 2009. 

http://chinatradeextra.com//index.php?option=com_iwpfile&file=pdf13/wto2009_0325.pdf.

62 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend towards 

Comprehensive Agreements?” German Development Institute, July 2013, 20.
U.S.-China Economic and Security Review Commission 40 

 

63 Oxford Analytica, “China And Peru Sign Free Trade Agreement,” May 11, 2009. http://www.forbes.com/2009/05/08/peru-china-ftabusiness-oxford-analytica.html. 

64 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend towards 

Comprehensive Agreements?” German Development Institute, July 2013, 21.

65 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend towards 

Comprehensive Agreements?” German Development Institute, July 2013, 21.

66 World Trade Organization RTA Database, “China-Costa Rica.” http://rtais.wto.org/ui/PublicMaintainRTAHome.aspx.

67 Gov.cn, “China-Costa Rica FTA Takes Effect Monday,” August 1, 2013. 

http://chinatradeextra.com//index.php?option=com_iwpfile&file=aug2011/wto2011_2327.pdf

68 Gov.cn, “China-Costa Rica FTA Takes Effect Monday,” August 1, 2013. 

http://chinatradeextra.com//index.php?option=com_iwpfile&file=aug2011/wto2011_2327.pdf

69 Richard Milne, “Iceland Agrees Trade Pact with China,” April 15, 2013. http://www.ft.com/intl/cms/s/0/6d2dad8c-a5d8-11e2-9b77-

00144feabdc0.html#axzz2g0inOYh7.

70 Marc Lanteigne, “The Sino-Swiss Free Trade Agreement,” CSS Analyses, February 2014. 

http://www.css.ethz.ch/publications/pdfs/CSSAnalyses147-EN.pdf

71 Observatory of Economic Complexity, “Iceland.” http://atlas.media.mit.edu/profile/country/isl/. 

72 Iceland Ministry for Foreign Affairs, “Free Trade Agreement between Iceland and China Fact Sheet.” http://www.mfa.is/media/ftakina/China_fact_sheet_enska_15042013_Final.pdf.

73 “The Rice Man Cometh,” Economist, April 20, 2013. http://www.economist.com/news/china/21576444-foothold-europe-what-rice-mancometh.

74 “The Rice Man Cometh,” Economist, April 20, 2013. http://www.economist.com/news/china/21576444-foothold-europe-what-rice-mancometh.

75 Steven Lee Myers, “Arctic Council Adds 6 Nations as Observer States, Including China,” New York Times, May 2013. 

http://www.nytimes.com/2013/05/16/world/europe/arctic-council-adds-six-members-including-china.html; “The Rice Man Cometh,” 

Economist, April 20, 2013. http://www.economist.com/news/china/21576444-foothold-europe-what-rice-man-cometh.

76 “The Rice Man Cometh,” Economist, April 20, 2013. http://www.economist.com/news/china/21576444-foothold-europe-what-rice-mancometh.

77 Andrew Ward, “Geothermal Power: A Laboratory for Life after Fossil Fuels,” Financial Times, September 28, 2011. 

http://www.ft.com/intl/cms/s/0/50fe2a3e-e5e4-11e0-8e99-00144feabdc0.html?siteedition=intl#axzz2g0inOYh7.

78 Iceland Ministry for Foreign Affairs, “Free Trade Agreement between Iceland and China Fact Sheet.” http://www.mfa.is/media/ftakina/China_fact_sheet_enska_15042013_Final.pdf.

79 “China, Switzerland Sign Free Trade Agreement,” Reuters, July 6, 2013. http://www.reuters.com/article/2013/07/06/us-china-tradeidUSBRE96503E20130706.

80 Marc Lanteigne, “The Sino-Swiss Free Trade Agreement,” CSS Analyses, February 2014. 

http://www.css.ethz.ch/publications/pdfs/CSSAnalyses147-EN.pdf

81 Marc Lanteigne, “The Sino-Swiss Free Trade Agreement,” CSS Analyses, February 2014. 

http://www.css.ethz.ch/publications/pdfs/CSSAnalyses147-EN.pdf

82 William H. Cooper, “Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy,” Congressional Research Service, 

January 2014, 8–16.

83 China Ministry of Commerce, “China FTA Network.” http://fta.mofcom.gov.cn/english/index.shtml.

84 John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 46.

85 Hidetaka Yoshimatsu, “Domestic Political Institutions, Diplomatic Style and Trade Agreements: A Comparative Study of China and 

Japan,” New Political Economy 15:3 (2010): 402–411.

86 Shom Sen, “Can the Trans-Pacific Partnership Negotiators Seal a Deal on Agriculture?,” Asia (Asia Society blog), May 28, 2014. 

http://asiasociety.org/blog/asia/can-trans-pacific-partnership-negotiators-seal-deal-agriculture. 

87 Ka Zeng, “Multilateral versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free Trade Agreements 

(FTAs),” Journal of Contemporary China 19:66 (September 2010): 647–649.

88 “China, Switzerland Pledge Closer Cooperation,” Xinhua, July 18, 2013, via Factiva.

89 Luigi Jorio, “China Opens Up to Swiss Exporters,” Swissinfo.ch, December 4, 2013. http://www.swissinfo.ch/directdemocracy/freetrade-agreement_china-opens-up-to-swiss-exporters/37462288.

90 Data from WTO trade profiles. http://stat.wto.org/CountryProfile/WSDBCountryPFHome.aspx?Language=E.

91 Luigi Jorio, “China Opens Up to Swiss Exporters,” Swissinfo.ch, December 4, 2013. http://www.swissinfo.ch/directdemocracy/freetrade-agreement_china-opens-up-to-swiss-exporters/37462288.

92 Luigi Jorio, “China Opens Up to Swiss Exporters,” Swissinfo.ch, December 4, 2013. http://www.swissinfo.ch/directdemocracy/freetrade-agreement_china-opens-up-to-swiss-exporters/37462288.

93

“Top China Stories from WSJ: Boost for Swiss Watches, Pernod Plans,” China Real Time (Wall Street Journal blog), May 28, 2013. 

http://blogs.wsj.com/chinarealtime/2013/05/29/top-china-stories-from-wsj-boost-for-swiss-watches-pernod-plans/; Duncan Mavin, “Still 

Bad Times for China Watch Sales,” Wall Street Journal, May 28, 2013. 

http://www.wsj.com/articles/SB10001424127887323855804578510842109304014. 

94 Pasha Hsieh, “China-Taiwan ECFA, Geopolitical Dimensions and WTO Law,” Journal of International Economic Law 14:1 (2011): 144.
U.S.-China Economic and Security Review Commission 41 

 

95 Robert Z. Lawrence. “China and the Multilateral Trading System,” Faculty Working Papers Series RWP06-045, John F. Kennedy School 

of Government - Harvard University, October 2006, 24–25; Ka Zeng, “Multilateral Versus Bilateral and Regional Trade Liberalization: 

Explaining China’s Pursuit of Free Trade Agreements (FTAs),” Journal of Contemporary China 19:66 (2010): 638.

96 Wenfei Law, “A Practical Guide to the New Free-Trade Agreement between Switzerland and China,” December 2013, 6–8. 

http://www.wenfei.com/fileadmin/pdfs/China_Publications/Wenfei_FTA_Publication_December_2013.pdf.

97 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend towards 

Comprehensive Agreements?” German Development Institute, July 2013, 11.

98 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend towards 

Comprehensive Agreements?” German Development Institute, July 2013, 19.

99 Stephen J. Ezell, Robert D. Atkinson and Michelle A. Wein, “Localization Barriers to Trade: Threat to the Global Economy,” 

Information Technology & Innovation Foundation, September 2013. http://www2.itif.org/2013-localization-barriers-totrade.pdf?_ga=1.247557959.1907798020.1432306948; Charles Clover and Lucy Hornby, “Business Alarmed at Chinese Plans to Curb 

Data Transfer,” Financial Times, April 14, 2015. http://www.ft.com/intl/cms/s/0/e11024f4-e281-11e4-aa1d00144feab7de.html#axzz3arvudNpk. 

100 Wenfei Law, “A Practical Guide to the New Free-Trade Agreement between Switzerland and China,” December 2013, 6–8. 

http://www.wenfei.com/fileadmin/pdfs/China_Publications/Wenfei_FTA_Publication_December_2013.pdf.

101 C. Fred Bergsten et al., Bridging the Pacific: Toward Free Trade and Investment between China and the United States, Peterson 

Institute for International Economics, October 2014, 251; Zhang Jiangping, “How Far Away is China from the TPP?” in New Directions 

in Asia-Pacific Economic Integration, ed. Tang Guoqiang and Peter A. Petri, East-West Center, 2014, 72.

102 Ka Zeng, “Multilateral Versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free Trade Agreements 

(FTAs),” Journal of Contemporary China 19:66 (2010): 638.

103 Based on research of original FTA and BIT documents.

104 Based on research of original FTA and BIT documents.

105 Based on research of original FTA and BIT documents.

106 Based on research of original FTA and BIT documents.

107 Shintaro Hamanaka, “Anatomy of South-South FTAs in Asia: Comparisons with Africa, Latin America, and the Pacific Islands, Asian 

Development Bank, September 2012, 24. http://www.aric.adb.org/pdf/workingpaper/WP102_Hamanaka_Anatomy_of_SouthSouth_FTAs.pdf; Robert Z. Lawrence. “China and the Multilateral Trading System,” Faculty Working Papers Series RWP06-045, John 

F. Kennedy School of Government - Harvard University, October 2006, 28–29.

108 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend 

towards Comprehensive Agreements?” German Development Institute, July 2013, 7.

109 John Ravenhill and Yang Jiang. “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 29.

110 John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 29.

111 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend 

towards Comprehensive Agreements?” German Development Institute, July 2013; John Ravenhill and Yang Jiang, “China’s Move to 

Preferential Trading: A New Direction in China’s Diplomacy,” Journal of Contemporary China 18:58 (January 2009): 27–46.

112 Data from the United Nations Conference on Trade and Development (UNCTAD). 

http://unctad.org/en/Pages/DIAE/International%20Investment%20Agreements%20(IIA)/Country-specific-Lists-of-BITs.aspx?Do=51,50.

113 Henry Gao, “China’s Strategy for Free Trade Agreements: Political Battle in the Name of Trade,” in East Asian Economic Integration: 

Law, Trade, and Finance, ed. Ross P. Buckley, Richard Veixing Hu, and Douglas W. Arner, Edward Elgar Publishing, 2011, 104–106; 

John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 27–46.

114 Stephen Hoadley and Jian Yang, “China’s Cross-Regional FTA Initiatives: Towards Comprehensive National Power,” Pacific Affairs 

80:2 (Summer 2007): 346–347.

115 Yunling Zhang, “The Impact of Free Trade Agreements on Business Activity: A Survey of Firms in the People’s Republic of China,” 

ADBI Working Paper Series 251, Asian Development Bank Institute, October 2010.

116 Yunling Zhang, “The Impact of Free Trade Agreements on Business Activity: A Survey of Firms in the People’s Republic of China,” 

ADBI Working Paper Series 251, Asian Development Bank Institute, October 2010.

117 Richard E. Baldwin, “Multilateralizing Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade,” The World 

Economy 29:11 (2006): 1451–1518.

118 USTR, 2014 Report to Congress on China’s WTO Compliance, December 2014. https://ustr.gov/sites/default/files/2014-Report-toCongress-Final.pdf.

119 “No Need to Nitpick over China’s Market Economy Status,” People’s Daily, September 28, 2011. 

http://en.people.cn/90780/7606975.html.

120 John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 33.

121 U.S.-China Economic and Security Review Commission, Hearing on U.S.-China Economic Challenges, written testimony of Elizabeth 

Drake, February 21, 2014.

122 Ka Zeng, “Multilateral versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free Trade Agreements 

(FTAs),” Journal of Contemporary China 19:66 (September 2010): 644–645.
U.S.-China Economic and Security Review Commission 42 

 

123 Norihiko Shirouzu, “China, Switzerland Sign Free Trade Agreement,” Reuters, July 6, 2013. 

http://www.reuters.com/article/2013/07/06/us-china-trade-idUSBRE96503E20130706; China Daily, “China-Switzerland FTA a ‘Strong 

Signal’ against Protectionism,” July 8, 2013, via Factiva.

124 “Ministry Hails FTA with Switzerland,” China Daily, May 28, 2013, via Factiva.

125 Dave Smith, “The iPhone 6’s Battery Will Be Built By ‘Foxbot’ Robots in China,” Business Insider, July 7, 2014. 

http://www.businessinsider.com/foxconn-will-replace-workers-with-robots-2014-7#ixzz3an054BBh. 

126 John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 37–38.

127 Jeffrey D. Wilson, “Resource Security: A New Motivation for Free Trade Agreements in the Asia-Pacific Region,” The Pacific Review 

25:4 (2012): 444–446.

128 Yang Jiang, “China’s Pursuit of Free Trade Agreements: Is China Exceptional?” Review of International Political Economy 17:2 (May 

2010): 254–255.

129 Iceland Review, “Joint Oil Search in Icelandic Waters to Reconcile Norway and China?” November 16, 2013. 

http://www.icelandreview.com/icelandreview/search/news/Default.asp?ew_0_a_id=404156; RIA Oreanda News, “Norway and China to 

Explore Offshore Iceland,” December 12, 2013, via Factiva.

130 “Warming Up to Iceland,” Economist, April 17, 2013. http://www.economist.com/blogs/analects/2013/04/china-and-iceland.

131 Jeffrey D. Wilson, “Resource Security: A New Motivation for Free Trade Agreements in the Asia-Pacific Region,” Pacific Review 25:4 

(2012): 444–446.

132 Jeffery D. Wilson, “Resource Security: A New Motivation for Free Trade Agreements in the Asia-Pacific Region,” Pacific Review 25:4 

(2012): 439–440.

133 Office of the U.S. Trade Representative, 2014 Report to Congress on China’s WTO Compliance, December 2014, 80. 

https://ustr.gov/sites/default/files/2014-Report-to-Congress-Final.pdf. 

134 Andrew Szamosszegi and Cole Kyle, “An Analysis of State-Owned Enterprises and State Capitalism in China,” Capital Trade, Inc.,

prepared for the U.S.-China Economic and Security Review Commission, October 26, 2011, 16, 33–43. 

http://www.uscc.gov/sites/default/files/Research/10_26_11_CapitalTradeSOEStudy.pdf/

135 Ka Zeng, “Multilateral versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free Trade Agreements 

(FTAs),” Journal of Contemporary China (September 2010), 19:66, 647–649.

136 “China Will Not Lift Ban on U.S. Beef, Yet,” China Daily, March 11, 2013. http://usa.chinadaily.com.cn/epaper/2014-

03/11/content_17338191.htm.

137 John Ravenhill and Yang Jiang, “China’s Move to Preferential Trading: A New Direction in China’s Diplomacy,” Journal of 

Contemporary China 18:58 (January 2009): 40.

138 Hsiang-Yi Chang, “Demystifying ECFA: The Early Harvest List, 3 Years On,” Commonwealth Magazine, May 2, 2014. 

http://english.cw.com.tw/article.do?action=show&id=14757&offset=5.

139 Ka Zeng, “Multilateral versus Bilateral and Regional Trade Liberalization: Explaining China’s Pursuit of Free Trade Agreements 

(FTAs),” Journal of Contemporary China 19:66 (September 2010): 651.

140 Tsai-Lung Hong and Chih-Hai Yang, “The Economic Cooperation Framework Agreement between China and Taiwan: Understanding 

Its Economics and Politics,” Asian Economic Papers 10:3 (2011): 90.

141 Henry Gao, “China’s Strategy for Free Trade Agreements: Political Battle in the Name of Trade,” in East Asian Economic Integration: 

Law, Trade, and Finance, ed. Ross P. Buckley, Richard Veixing Hu, and Douglas W. Arner, Edward Elgar Publishing, 2011, 104–106.

142 Robert Sutter and Chin-Hao Huang, “Military Diplomacy and China’s Soft Power,” Comparative Connections 8:2 (2006). 

http://csis.org/publication/comparative-connections-v8-n2-china-southeast-asia-relations.

143 Qi Li, “RCEP: The Opportunity and Countermeasures for China,” Asia-Pacific Economy 1 (2013): 14–15. Staff translation.

144 Vinod K. Aggarwal and Min Gyo Koo, “Beyond Network Power? The Dynamics of Formal Economic Integration in Northeast Asia,” 

Pacific Review 18:2 (June 2005): 205–206.

145 “RCEP: The Newest Product of Regional Economic Integration,” China Commerce 2 (2013): 56–57. Staff translation.

146 China’s Ministry of Commerce, “Free Trade Agreement between the Government of the People’s Republic of China and the 

Government of the Republic of Chile,” 2006. http://fta.mofcom.gov.cn/topic/enchile.shtm.

147 Office of the U.S. Trade Representative, “Chile Free Trade Agreement.” http://www.ustr.gov/trade-agreements/free-tradeagreements/chile-fta/; Office of the U.S. Trade Representative, “Peru Trade Promotion Agreement.” http://www.ustr.gov/tradeagreements/free-trade-agreements/peru-tpa.

148 Office of the U.S. Trade Representative, “United States – Chile Free Trade Agreement Preamble.” http://www.ustr.gov/tradeagreements/free-trade-agreements/chile-fta/final-text. 

149 Office of the U.S. Trade Representative, “United States – Peru Trade Promotion Agreement: Preamble.” http://www.ustr.gov/tradeagreements/free-trade-agreements/peru-tpa/final-text. 

150 China’s Ministry of Commerce, “Free Trade Agreement between the Government of the People’s Republic of China and the 

Government of the Republic of Chile: Preamble,” 2006. http://fta.mofcom.gov.cn/topic/enchile.shtml. 

151 China FTA Network, “China Norway FTA.” http://fta.mofcom.gov.cn/topic/ennorway.shtml.

152 Teddy Ng, “China-Norway Free Trade Talks Nearing Agreement,” South China Morning Post, May 28, 2013. 

http://www.scmp.com/news/china/article/1247695/china-norway-free-trade-talks-nearing-agreement; China FTA Network, “China and 

Norway Hold Eighth Round of FTA Negotiations,” September 19, 2013. 

153 “Cold Shoulder,” Economist, February 18, 2012. http://www.economist.com/node/21547832; Jamil Anderlini and Clare MacCarthy, 

“China Snubs Norway in Visa Reforms,” Financial Times, December 6, 2012. http://www.ft.com/intl/cms/s/0/7aa84f82-3f6a-11e2-b0ce00144feabdc0.html#axzz2fifd5pBk.
U.S.-China Economic and Security Review Commission 43 

 

154 United States Department of the Treasury, “U.S. and China Breakthrough Announcement on the Bilateral Investment Treaty 

Negotiations,” July 15, 2013. htpp://www.treasury.gov/connect/blog/Pages/U.S.-and-China-Breakthrough-Announcement-.aspx.

155 Axel Berger, “Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China Following the Global Trend 

towards Comprehensive Agreements?” German Development Institute, July 2013, 11.

156

“Economic Integration in Asia and Free Trade with the EU,” European Policy Center, September 25, 2012. 

http://www.epc.eu/events_rep_details.php?cat_id=6&pub_id=2958&year=2012.

157 MOFCOM, “China-SACU FTA.” http://fta.mofcom.gov.cn/topic/ensacu.shtml; MOFCOM, “China-GCC FTA.” 

http://fta.mofcom.gov.cn/topic/engcc.shtml.

158 Daniel Langton, “United States-Southern Africa Customs Union (SACU) Free Trade Agreement Negotiations: Background and 

Potential Issues,” Congressional Research Service, July 2012. fpc.state.gov/documents/organization/109530.pdf; The White House, “To 

Implement the United States-Bahrain Free Trade Agreement, and for Other Purposes.” http://georgewbushwhitehouse.archives.gov/news/releases/2006/07/20060727-14.html.

159 Bao Chang, “Sino-Gulf FTA ‘May Be Signed This Year’,” China Daily, April 18, 2013. http://www.chinadaily.com.cn/business/2013-

04/18/content_16416969.htm; China FTA Network, “China-GCC FTA.” http://fta.mofcom.gov.cn/topic/engcc.shtml.

160

“Taiwan Works to Build ‘Patent Linkage’ for Drugs as Part of TPP Bid Prep,” Inside U.S.-China Trade, August 12, 2014. 

161 Ashley J. Tellis, “Balancing without Containment: An American Strategy for Managing China,” Carnegie Endowment for International 

Peace, 2014, 42–54.

162 Mireya Solis, “China Flexes Its Muscles at APEC with the Revival of FTAAP,” East Asia Forum, November 23, 2014. 

http://www.eastasiaforum.org/2014/11/23/china-flexes-its-muscles-at-apec-with-the-revival-of-ftaap/.