Divergence, Convergence or Crossvergence of Chinese and U.S. Approaches to Regional Integration: Evolving Trajectories and Their Implications

• Author: Wang Heng
• Pages: 150-185

150 TSINGHUA CHINA LAW REVIEW [Vol. 10:2

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DIVERGENCE, CONVERGENCE OR CROSSVERGENCE OF

CHINESE AND U.S. APPROACHES TO REGIONAL

INTEGRATION: EVOLVING TRAJECTORIES AND THEIR

IMPLICATIONS

WANG Heng

Abstract

Trends in Chinese and U.S. approaches to regional integration are likely to profoundly aff ect

other states and even the future of global economic governance. Showing a possible paradigm

shift, the Belt and Road Initiative (BRI) a nd North American Free Trade Agreement (NAFTA)

renegotiation reflect the latest major developments in China and the U.S. regarding regional

integration. In particular, the U.S. pursues managed trade, shifts to bilateralism, and adopts an

aggressive approach. This article analyses a core question: will Chinese and U.S. trade

approaches converge, diverge or both, and why? For the analysis of the converg ence o r

divergence, four aspects will be covered: the objectives of regionalism, the instruments for

regionalism, the approaches to multilateralism, and the role in rulemaking. This paper argues

that Chinese and U.S . trade approaches are likely to diverge and converge, leading to

crossvergence (a simultaneous convergence and divergence of regulatory approaches).

Divergence can be found in fundamental areas and particularly the approaches to regionalism

and multilateralism. Convergence appears to occur only in selected areas (e.g. investment and

intellectual property). Uncertainties exi st since both the BRI and trade policies of the Trump

Administration are under development. The interaction b etween Chinese and American

approaches will affect the shaping of the international economic legal order.

I. INTRODUCTION

The development of further globalization (e.g. the 11 Trans-Pacific

Partnership (TPP) countries’ support of the pact) and de-globalization

(e.g. the Trump Administration’s trade policy) profoundly affects

regional integration. As two major economies that have different trade1

approaches, China and the U.S. play a crucial role in regional

integration and may considerably influence other economies and the

globe. The interaction between the Chinese and U.S. approaches may

affect the future of global governance.

Recent regional integration practices of the U.S. and China show a

possible paradigm shift. For China, the Belt and Road Initiative is the

major development of regional integration that explores new tr ade

routes.2 It is the feature point of an era of proactive trade policy in

China. The BRI involves a large number of jurisdictions and has an

increasingly broad coverage, ranging from investment and trade to

economic cooperation and culture. A large portion of China’s future

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1 Unless otherwise stated, trade is understood in its b road sense here as the case with free trade

agreements, which extends to finance, investment and non-trade concerns (e.g. environment and labor).

2 International Centre for Trade and Sustainable Development, Bridges Negotiation Briefing: A Guide to

the WTO’s Eleventh Ministerial Conference (2017), https://www.ictsd.org/sites/default/files/

2017_bridges_negotiation_briefing_-_final5.pdf.

2018] CHINESE AND U.S. APPROACHES TO REGIONAL INTEGRATION 151

outbound investment and trade growth is expected to take place in BRI

jurisdictions.3

For the U.S., the engagement in regional integration has largely

focused on the renegotiation of the North American Free Trade

Agreement (NAFTA), although there is considerable rhetoric of

bilateral trade relations with Asian trading partners (e.g. the possible

renegotiation of the U.S.-Korea Free Trade Agreement).4 Since the

U.S. has withdrawn from the TPP, the Trump Administration’s

NAFTA renegotiation is the most important, latest movement of the

U.S. toward regional integration. Regardless of the NAFTA

renegotiation outcome, it suggests a fundamental shift in the U.S. trade

approach away from multilateralism and mega-regionalism

(particularly the TPP).

In the context of regional integration, this paper analyses possible

trends in the Chinese and U.S. trade approaches that have not yet been

fully explored. These approaches may, in the future, converge or

diverge. There is also a third possibility: crossvergence, which means

a simultaneous convergence and divergence of regulatory

approaches.5

This article will explore a key question in light of the latest trade

practice in regional integration (particularly the BRI and the NAFTA

renegotiation): will Chinese and U.S. trade approaches converge,

diverge or both, and why? The paper will not focus on the Sino-U.S.

trade relationship due to lack of the to scope and the pre-existence of

significant literature on this issue. Instead, it will examine the

approaches of the two states when they engage with other parties to

understand the possible trend of their development.

The paper proceeds in five parts. Part I analyzes the latest

development of the Chinese and U.S. trade approaches to regional

integration to set out the analytical framework. Part II to V analyze the

likelihood of the convergence, divergence and crossvergence of these

approaches, examining why there is such movement, so as to better

understand their future trajectories and implications. In this process,

four aspects will be covered to explore the possible convergence or

divergence: the objectives of regionalism, the instruments for

regionalism, the approaches to multilateralism, and the role in

rulemaking. The last section provides a short conclusion, reflecting on

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3 John Cremer, Law firms gear up to serve clients tackling issues surrounding belt and road initiative

(Nov. 1, 2016, 5:37 PM), SOUTH CHINA MORNING POST, http://www.scmp.com/specialreports/

business/topics/one-belt-one-road/article/2041878/law-firms-gear-serve-clients.

4 International Centre for Trade and Sustainable Development, supra note 2, at 4.

5 Yu, Peter K., TPP, RCEP, and the Crossvergence of Asian Intellectual Property Standards in

GOVERNING SCIENCE AND TECHNOLOGY UNDER THE INTERNATIONAL ECONOMIC ORDER:

REGULATORY DIVERGENCE AND CONVERGENCE IN THE AGE OF MEGAREGIONALS, 277–97 (Peng Shin-

yi, Liu Han-Wei & Lin Ching-Fu eds., 2018).

152 TSINGHUA CHINA LAW REVIEW [Vol. 10:2

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the differences between the observations of convergence and

divergence and the possible continuation of crossvergence.

At the beginning, two points deserve attention. First, the BRI and

the Trump Administration’s trade policy cannot be completely

separated from the pre-existing one. There are at least two reasons:

One is that both are a continuation of its previous trade practice,

although substantial difference exists and will be explored. The other

is that the holistic approach of combing the latest development with

previous policy helps better understand its evolvement.

Second, the article provides a tentative conclusion. It is too early

to reach firm conclusions, given a number of uncertainties and

dynamics and lack of available information. However, the conclusion

helps better understand the development of these trade approaches. As

moving targets, the BRI and the NAFTA renegotiation are developing

and changing. Obviously, the trade policy of the Trump

Administration is still very much under development. One may argue

that the BRI until now remains largely a vision or framework, and has

not brought many normative innovations in trade. One commentator

even argues “[a]part from its emphasis on infrastructure development,

it is not yet clear how such a model differs from the other international

initiatives.” 6 Generally, China’s trade approach used to vary

according to the demands of trade partners, which is evidenced by

malleability as the striking feature of China’s free trade agreements

(FTAs).7 It remains to be seen how China interacts with a large

number of BRI states who have totally different positions, and whether

the BRI could provide international public goods. As another major

dynamic, China’s investment policy is in transition from post-

establishment protections to binding investment liberalization

obligations with advanced economies (particularly in the investment

treaty negotiations with the U.S. and EU). It is not clear whether and

how this shift will occur in the BRI.

II. NEW DEVELOPMENT OF THE CHINESE AND U.S. TRADE

APPROACHES

The section will provide a brief survey of the latest developments

in the two countries’ trade approaches. It does not intend to represent

a thorough analysis of the entirety of these trade approaches, which

would require vastly more breadth and depth in a separate paper.

Given space limits, this Part aims to focus on major aspects that help

understand the trend in the two countries’ trade approaches.

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6 Yiping Huang, Understanding China's Belt & Road Initiative: Motivation, framework and assessment,

40 CHINA ECONOMIC REVIEW 314, 320 (2016).

7 Jun Zhao & Webster Timothy, Taking Stock: China's First Decade of Free Trade, 33 UNIVERSITY OF

PENNSYLVANIA JOURNAL OF INTERNATIONAL LAW 65, 99 (2011).