11:26 PM Janessa Phua Pei Xuan, LLB Candidate, SMU Yong Pung How School of Law

    Trade and Investment Integration: Shaping the Future of the Asia Pacific



    On 25 October 2022, the Singapore Management University Yong Pung How School of Law (“SMU YPHSOL”) and the Asia Pacific Law Review jointly organized and hosted the workshop “Trade and Investment Integration: Shaping the Future of the Asia Pacific”. The workshop sought to reflect the vital role of New Asian regionalization in shaping economic governance. New Asian regionalism refers to a new norm or policy that has supported Asia’s ascending economic power, trade dynamics and investment initiatives.

    Opening remarks were delivered by Professor Julien Chaisse (Editor-in-Chief of the Asia Pacific Law Review, Professor, School of Law of the City University of Hong Kong). He introduced the speakers as leading academics from the Asian region, who would provide insight into Asian regionalization in various dimensions.

    Panel 1

    The first panel discussion was moderated by Professor Chaisse.

    The Dynamics of Asia Pacific Trade Integration

    Professor Kim Soo Yeon (Professor, National University of Singapore), articulated a conceptual framework for analyzing the dynamics of Asia-Pacific integration in  her paper.

    Her proposed conceptual framework consists of two elements: regionalization, which is society-led and driven by private economic actors, and regionalism, which is a state-led institution building approach that formalizes most of the cooperation in the grassroots.


    She argues that in the Asia-Pacific context, regionalization occurs first, subsequently followed by regionalism. The main driver of new Asian regionalism is the need for regulatory coordination to facilitate production networks. Countries in the region have therefore signed Preferential Trade Agreements (“PTAs”) and committed on legalizing and harmonizing behind the border trade barriers.


     Asia-Pacific Economic Cooperation (“APEC”) and mega-regional Free Trade Agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) and the Regional Comprehensive Economic Partnership (“RCEP”) are institutions that drive regionalism and state-led institution building in the region. In particular, she emphasized ASEAN’s tenacity and continued relevance over time, and its contribution to economic integration through the establishment of the ASEAN Economic Community.


    Professor James Nedumpara (Professor, Indian Institute of Foreign Trade) suggested that Professor Kim could explore whether ASEAN agreements are deep or shallow integration agreements. Secondly, she could undertake a more comprehensive examination of the empirical evidence and evaluation of the institutions. Thirdly, she could explore whether these trade agreements could lead to more integration in value chains in the Asian-Pacific region. Fourth, the definition of “Asia-Pacific” could be explored in greater detail. Finally, it would be ideal to include literature on how economic integration can occur through interpersonal interaction.


    Competition with the State: NMEs, SOEs, and FTAs

    Dr. Deborah Elms (Founder, Executive Director of the Asian Trade Centre), elaborated on the relationship between non-market economy (“NME”) and the process of negotiating Free Trade Agreements (“FTAs”) in her paper.


    Dr. Elm addressed two questions: First, where does the presumed competitive challenge from an NME fit within an FTA? Second, have FTAs tried to address the NME issue?


    She first contextualised the controversy surrounding NMEs. NMEs create competitive challenges broadly across the economy, and this is most evident from issues like the distortion of prices and dumping. Increasingly, governments are more concerned with competitive challenges that arise specifically from state-owned companies (“SOEs”) rather than state competition across the entire economy.


    She then examined how the CPTPP has dedicated Chapter 17 to the regulating SOEs. This represents the first significant attempt to craft rules to regulate SOEs through an FTA.


    First, the CPTPP defines SOEs as enterprises where the government owns more than 50% of share capital, controls more than 50% of voting rights, or can appoint the majority of members of the board of directors. Second, SOEs which engage in commercial activities must grant non-discriminatory treatment and refrain from causing adverse effects by using governmental assistance. Third, these sections only apply to firms whose annual revenue derived from commercial activities have exceeded threshold amounts. Finally, members of the CPTPP have also created country-specific schedules to outline exemptions.


    However, Chapter 17 of the CPTPP has been poorly implemented. Other FTAs have not adopted similar rules, which suggests that countries are still grappling with the issue of state-led competition.


    Professor Chaisse asked if it was possible to define “competitive commercial activity” within the CPTPP.


    Firstly, Professor Prabhash Ranjan (Professor, Jindal Global Law School)wondered whether the finding that most FTAs do not use trade remedies could be explained in the context of third regionalism or the new regional economic order.


    Secondly, he wondered if the CPTPP could be examined in light of the new regional economic order. He questioned whether this was an instance of some elements of the Washington consensus being transferred to ASEAN or Asian FTAs.


    Thirdly, he wondered if elements of the Washington consensus are still present in Asian FTAs, or whether Asian FTAs have diverged from others in terms of how they have delat with SOEs.  He also wondered whether the use of international competition law is the best way  to regulate SOEs.


    Industrial Policy in Asia-Pacific Integration: The Case of the ASEAN Countries

    Professor Sherzod Shadikhodjaev (Professor, KDI School of Public Policy and Management) discussed localization and subsidy issues as addressed under trade rules, with an emphasis on the policies of ASEAN members, and outlines the ‘ASEANization’ of industrial policies in the future, in his paper.


    While ASEAN members set their own industrial policies, their policies are subject to applicable WTO rules, ASEAN rules, and the Regional Trade Agreements (“RTAs”) which they are party to. He evaluates ASEAN members’ localization policy and use of subsidies as an industrial policy tool in light of these overlapping rules.


    First, he considered the issue of localization. ASEAN members’ digital localization rules can be divided into three main groups: those with no digital localization rules, those who have digital localization rules and data centre residence requirements, those who have digital localization rules and no data centre residence requirements.


    Second, he considered the issue of subsidies. Although the subsidies adopted by ASEAN member states are rarely challenged before the WTO, they are frequently countered by the United States (“US”) and the European Union (“EU”) through Countervailing Duties ("CVD") in accordance with the WTO’s Agreement on Subsidies and Countervailing Measures (“SCM Agreement”). ASEAN countries consequently face several challenges. Firstly, the subsidizing government should cooperate with investigating authorities undertaking CVD investigations. Secondly, the US has removed ASEAN members from its list of developing countries for the purposes of US CVD law. These ASEAN members cannot benefit from special and differential treatment under the SCM. Finally, the EU recently countervailed cross-country subsidies, which has a chilling effect on investment and raises legal issues under WTO law.


    He proposed the following: first, ASEAN members must be more willing to accept regional content that originates within ASEAN. Second, the movement of data across ASEAN should be freer from localization requirements. Finally, ASEAN must undertake a collective and coordinated approach to defend common industrial policy interests outside the bloc.


    Dr Elms opined that Professor Shadikhodjaev could narrow the focus of the paper, define ‘industrial policy’ and explain why it is a key element in this discussion. Additionally, his conclusion that ASEAN could have undertaken greater coordination was self-evident  because ASEAN’s industrial policy intentionally allows sovereign states to pursue their own interests, over that of the bloc’s.


    Asian Regionalism and the Reshaping of State-owned Enterprises Rules

    Ms Su Xueji (Postdoctoral Fellow, City University of Hong Kong), explored how ASEAN members have interacted with developed countries in SOE rulemaking in her paper.


    Ms Su sought to answer three questions. First, why do ASEAN parties consent to the SOE rules in the CPTPP negotiations? Second, does the participate of ASEAN countries in the CPTPP negotiations reflect an ASEAN approach and how? Third, what are the contributions of ASEAN countries to SOE rule making?


    In response to the first question, Ms Su argued that the fact that the ASEAN members accepted the CPTPP rules should not be interpreted as their concessions to Western demands. Committing to international law obligations may provide ASEAN governments with an impetus to restart SOE reforms.


    As for the second question, she argued that the ASEAN members have tried softening the CPTPP rules in three ways. First, ASEAN members such as Singapore, Malaysia and Vietnam had heavily contested an overly restrictive definition of SOEs. For instance, the CPTPP SOE rules only address the behaviour of SOEs in conducting commercial activities. Second, there are general carve-outs from SOE rules. Finally, there are country-specific carve outs from the SOE rules.


    In response to the third question, she argued that the ASEAN regional competition policies are also instructive. This is a soft law approach that leads to the harmonization of national competition policy, which provides for exceptions for SOEs. However, outside of national competition laws, there is no clear pattern of SOE rules that could be identified in RTAs concluded by the Asian countries.


    She concluded by suggesting that the ASEAN way of structured flexibility has manifested in its ASEAN competition law and policy harmonization, and also in the interregional setting in the CPTPP.


    Professor Shadikhodjaev suggested that it would be useful to first explain why countries retain SOEs and why this remains a problem. Second, it would also be useful to identify patterns when comparing SOE reforms in ASEAN countries and SOEs in ASEAN countries. Finally, it would be beneficial to examine more countries when determining whether ASEAN has contributed to the more flexible approach endorsed by the CPTPP.



    Panel 2

    Professor Pasha L. Hsieh (Professor, Jean Monnet Chair, SMU YPHSOL) chaired the next panel.

    Asian Regionalization of International Investment Law: A Special Emphasis on South Asia

    Professor Prabhash Ranjan contrasted regionalization within South Asia and in the ASEAN region in his paper.

    Firstly, the most important regional organization in South Asia is the South Asian Association for Regional Cooperation (“SAARC”). However, SAARC’s trade and investment integration efforts have been stalled since 2007. In contrast,the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (“BIMSTEC”) is increasingly emerging as an importantregional organisation . In particular, the BIMSTEC Framework Agreement provides for investment integration.

    Professor Ranjan then examined the bilateral treaties between countries in South Asia. Unlike the ASEAN region, South Asia has taken tentative steps towards the legalization of its investment regionalism and has refrained from attaching significance to investment treaties with one another.


    Professor Ranjan then considered whether South Asia satisfied the three requirements of “third regionalism”, namely the massive proliferation of FTAs, interregional economic agreements and soft-law instruments providing impetus to regional economic integration. First, there has been no proliferation of FTAs in the South Asian region or involving South Asian countries. This can be contrasted with the proliferation of FTAs in the ASEAN region. Second, South Asia’s approach towards interregional economic integration is vastly different from that of ASEAN’s. ASEAN has adopted an incremental approach towards promoting interregional investment integration through the ‘ASEAN plus one’ and ‘ASEAN plus six’ frameworks. Although India is a party to this framework, it has yielded mixed results. Besides India, Professor Ranjan notes that other South Asian countries have not participated in ASEAN-led initiatives. However, Professor Ranjan opines that it would be interested to examine the BIMSTEC Charter in greater detail, which expressly allows BIMSTEC to conduct external relations. Thirdly, South Asian countries have not utilized any soft law instruments to boost investment integration in South Asia.


    He then examined whether there is a discernible New Regional Economic Framework (“NREO”) process in South Asian investment regionalism. Although he opines that BIMSTEC is potentially a new vehicle for legalizing investment regionalism, it has not adopted ASEAN’s “ASEAN Minus X” formula which is characterized by a flexible decision-making scheme. There is therefore no discernible NREO influence in South Asia.


    He concluded that the success of ASEAN economic integration cannot be projected onto South Asia. Nevertheless, South Asian countries could consider ASEAN’s model to promote their investment cooperation.


    Ms Su agreed with Professor Ranjan’s argument that there is a lack of integration in South Asia. First, she wondered whether India’s withdrawal from investment treaty makings would affect the integration effect of ASEAN. Professor Ranjan could consider the role of other Southeast Asian countries in investment treaty making. Second, she noted the contrast between India’s withdrawal from Asian regionalism because of its political conflict with Pakistan and India’s engagement with other South Asian countries in BIMSTEC. She questioned whether India takes an interest in South Asian regionalism but in another form, and whether other non-investment issues remain on the regionalization agenda.






    Shaping Trade in Goods Relevant to Renewable Energy Generation: The RCEP’s Potential and Limitation

    Professor Michelle Limenta (Professor, Universitas Pelita Harapan) assessed how the RCEP’s tariff liberalisation measures could facilitate trade in environmental goods and the non-tariff constraints that could limit its potential in supporting trade in environmental goods in her paper.


    She began by establishing that there is no universally agreed definition of the term “environmental goods” in the RCEP or the WTO’s Environmental Goods Agreement.


    She then examined the RCEP’s tariff liberalization regime. The degree and approaches of tariff liberalization vary among the RCEP economies. Additionally, the RCEP faces limitations in dealing with non-tariff measures affecting trade in renewable energy goods. Firstly, there are no specific provisions to restraint the use of unilateral trade remedies targeting renewable energy products. Secondly, the RCEP’s potential could also be undermined by trade defence instruments imposed by the non-RCEP parties targeting cross-border subsidies of renewable energy products. Thirdly, local content requirements cannot be reconciled with the RCEP’s objectives of trade liberalization and regional market integration. The RCEP provisions that deal with local content requirements are limited to investment measures.


    She made the following proposals.  Firstly, the RCEP economies could consider establishing a list of environmental goods with a view to eliminating their custom duties immediately or within the timeframe agreed by the RCEP economies. Secondly, the RCEP economies could consider including a chapter regarding non-tariff barriers in renewable energy generation. This may include a commitment to refrain from adopting measures providing for local content requirements. Finally, the RCEP economies could include renewable energy subsidies in a list of permissible subsidies.


    Professor Yan Yueming (Visiting Assistant Professor of Law, SMU YPHSOL) questioned why the RCEP was unique to the objective of achieving sustainable development goals. Additionally, she raised several questions. First, she sought greater clarity on the definition, scope and the relationship between environmental goods of interests, renewable and clean energy generation.

    Secondly, it would be interesting to conduct comparative analysis with respect to the discussion on trade concessions made in the RCEP, vertically among states and horizontally between industries.

    Thirdly, as for non-tariff measures, Professor Yan wondered if there were updates for the anti-dumping or CAD cases between 2008 to 2014. Additionally, she questioned the effect of the Biden administration and the US-China trade war on the RCEP.

    Lastly, Professor Limenta could elaborate more on her proposals. It would be interesting to assess how states would balance their interests and compromise, and how the other political powers would affect these results.

    Professor Hsieh suggested that the recently concluded Green Economy Agreement is also an interesting case study.




    Labour and trade in Asia Pacific: Origin, development and prospects

    Professor Yan Yueming investigated how Asia-Pacific economies develop and promote labour rights through labour provisions and policies in FTAs and other economic agreements and examine underlying forces that drive such development in her paper.


    She begun by providing some context about the prevailing debate over the nexus between labour standards and international trade, and whether there is a need to include labour related provisions in the WTO system. While developed countries believe that international trade must be promoted in a way that is aligned with labour protections, developing countries argue that this would impair their comparative advantage.


    She observed that firstly, states in the Asia-Pacific were relatively more active in inserting labour provisions in FTAs in the last decade (2012-2021) than in the previous one (2002-2011). Secondly, there is significant diversity in the labour provisions inserted into Asia-Pacific FTAs.


    She then evaluated the driving forces and legal implications of these labour clauses. Firstly, labour rights law in Asia Pacific international trade agreements are largely driven by international actors like the US and the EU.  Secondly, there are a few active promoters in the Asia-Pacific, such as New Zealand, Japan and Korea. However, the problem is that the adoption of these practices is not consistent, especially by Korea.


    Finally, she suggested that there is a need for a unique compliance mechanism for the Asia-Pacific. This is because the compliance mechanisms devised by the US and EU are mechanisms favoured by a developed country. Additionally, institutions and larger players in the region should play a more significant role in promoting a unique approach towards labour protection.

    Professor Hsieh noted that there are several countries in Asia which concluded Bilateral Investment Agreements. In this regard, he wondered if current FTAs incorporate at least some elements of financial labour agreements.


    Professor Limenta suggested that Professor Yan could look at how labour provisions in Asian-Pacific FTAs have been implemented in the Asia-Pacific countries. This might tell us which countries are willing to pursue labour standards.


    Panel 3

    The third panel was moderated by Professor Lau Kwan Ho (Assistant Professor, SMU YPHSOL).


    Digital services and Digital Trade in the Asia Pacific: A New Model of Digital Trade Integration?

    Professor Neha Mishra (Lecturer, Australian National University) and Professor Ana Maria Palacio Valencia (Visiting Research Fellow, UNU-CRIS) explored digital trade integration in the Asia-Pacific through the lens of international trade agreements in their paper.


    To explore digital trade integration in the Asia-Pacific through the lens of international trade agreements, the authors evaluated and contrasted provisions on digital trade and digital services in the CPTPP, RCEP, ASEAN E-Commerce Agreement and Digital Economy Partnership Agreement (“DEPA”). Although the initiatives led by Asian countries often appear less ambitious at first sight, in terms of types of commitments and areas covered, such PTAs can be equally relevant and perhaps better suited in promoting digital trade integration as they reflect the pragmatism of Asian countries. These PTAs are tailored to their differences in digital development levels and differences in political and ideological preferences. 


    The authors argue that these agreements are meant to leverage the collective power of the Asian Pacific developing countries, and they are expressions of the pragmatic incrementalism that characterises New Asian Regionalism.


    They began by evaluating the differences in these PTAs, the reasons for these differences and what it entails. One differentiating factor is the underlying goal of each agreement, while another is the ideological differences and level of development between different countries. Another differentiating factor is the state that is leading the negotiations.


    The ASEAN approach is reflected in the RCEP and the ASEAN E-Commerce, as compared to DEPA and CPTPP which represents Singapore’s liberal approach. The ASEAN approach is a more incremental one that recognises that policy preferences are non-negotiable before trade agreements. 


    In concluding their presentation, the authors opined that it would be useful to explore whether the Asian approach could be used as a model for the rest of the world. This is because the Asian model demonstrates the capacity for global leadership by Asian countries in enabling cross-border digital trade and provides a viable model for digital trade integration amongst countries with varying levels of digital development.


    Professor Thomas Streinz (Adjunct Professor of Law, New York University) questioned the extent to which actual integration could be achieved through regionalism as opposed to regionalization, given protectionism in the region.  Secondly, he suggested that more examples as to how agreements relate to one another would be useful. Thirdly, he questioned the assumption that the CPTPP is an Asian agreement, given the involvement of Western states. Lastly, he also wondered whether it made sense to consider regionalism when thinking about digital trade.


    Global Data and AI Governance in the Asia Pacific

    Professor Thomas Streinz explored the extent to which governmental and intergovernmental actors within the Asia Pacific are shaping global data and Artificial Intelligence (“AI”) governance through instruments of international economic law in his paper.


     First, he provided a brief overview of how domestic regulatory efforts interact with international, inter-governmental regulation in the realm of global data and AI governance.


    Second, he discussed the development of international economic data and AI law. There are several ways to apply international economic law to artificial intelligence. AI can be disintegrated into their components, although this does not fit neatly into traditional international economic law. Alternatively, AI can be disintegrated into their functions, and then compartmentalized according to international economic law. The last option is to develop new rules for AI. In the absence of successful multilateral rulemaking, mega-regional initiatives like the Trans-Pacific Partnership agreement (“TPP”) have been the main sites of development for rules addressing regulatory issues in digital economies. Trade agreements like the TPP deviate from the traditional understanding of trade law. Provisions within the TPP favour “free data flows” and push back against “data localization”. What this suggests is that “data” is increasingly a novel regulatory object of international economic law. This suggests that international economic law is increasingly embracing its megaregulatory agenda in the digital domain.


    Third, he explored how governmental and inter-governmental actors in the Asia-Pacific have shaped data and AI governance through instruments of international economic law.

    He discussed the RCEP, an ASEAN-led agreement designed to deepen ASEAN’s economic relations with its trading partners by creating an economic mega-region with harmonized rules of origin. He also discussed the DEPA, which includes a new generation of AI-related provisions that seek to coordinate not just AI governance between the parties but also beyond. The interesting question is whether there would be an Asian regionalism approach that could influence other digital trade agreements. 


    Finally, there are other questions that would be interesting to examine. First, how significant is the DEPA and the DEAs to data governance in the Asia-Pacific? Second, what is the potential and limits of New Asian Regionalism in Global Data and AI Governance? How significant is this beyond the Asia-Pacific, and how is this affected by geopolitics?

    Professor Mishra questioned Professor Streinz’s reference to erga omnes in his paper. Additionally, she wondered what the movement to international data law entailed in the broader Asia-Pacific context.

    International Trade and Investment Dispute Settlement in Asia Pacific

     Professor James J. Nedumpara provided an overarching examination of the evolution of dispute settlement in the field of international trade and investment with specific reference to the Asia-Pacific region in his paper.

    Most countries in the Asia-Pacific region have refrained from using the WTO’s dispute resolution mechanism. Most countries in the Asia-Pacific region had adopted protectionist measures such as a development model of import substitution industrialization, high import tariffs, infant industry protection, the use of SOEs and export subsidies. This meant that external competition was minimized through a range of policy measures and exploring international markets was not a priority.

    As such, Asia-Pacific countries were mostly reluctant to become active and effective users of the WTO’s dispute resolution mechanism. Key exceptions include Japan, Korea, and India, which have become an active participant in the last 15 years.


     Nevertheless, trade agreements such as the WTO serve to de-politicise economic frictions. Countries that otherwise have fraught political ties join coalitions during trade negotiations before multilateral bodies like the WTO. India has collaborated with China to submit the proposal on special and differential treatment under the WTO.


    He concluded that while the ASEAN style of non-confrontation may inform the region’s approach to dispute settlement, the active involvement of Asia-Pacific countries at various dispute settlement signifies that the region has the potential to not just follow but lead in this area.


    Professor Kim raised some questions. First, although Professor Nedumpura had discussed the role of Asia Pacific countries and their existing trade measures with respect to disputes before the WTO, this could be developed further. Secondly, she wondered whether there is a possibility that Asian countries would turn more to dispute settlement mechanisms and Regional Trade Agreements (“RTAs”) and if so, whether that is a good sign. Furthermore, she questioned if there would be a movement to RTAs if the dispute settlement mechanism is in crisis. Lastly, Professor Kim questioned whether Asian countries must take a side in any Great Power conflicts.


    * The writer would like to thank the SMU Yong Pung How School of Law, the Asia Pacific Law Review, Professors Pasha Hsieh and Julien Chaisse for organising the webinar and for the opportunity to attend and cover the event, and Professor Pasha Hsieh for his comments on this piece.

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