In a new paper, I critically evaluate whether the CPTPP SOE rules provide an ideal model for regulating Chinese SOEs. I argue that CPTPP does not provide such a model if the goal is to strengthen disciplines over Chinese SOEs. I offer a detailed analysis of the lack of development or deficiencies in the CPTPP SOE chapter when compared to China’s WTO-plus obligations using China’s current SOE reform for illustration. I show the CPTPP SOE chapter does not provide more rigorous or workable rules but rather has a narrower coverage and more carve-outs.
I also review some major post-CPTPP FTAs of the US and the EU (e.g. USMCA, EU – Japan FTA, EU – Vietnam FTA) and show that they are largely based on the CPTPP SOE chapter. While they seek to gradually address the deficiencies and expand the coverage of the subsidy/SOE rules, they have either maintained the extensive exceptions (i.e. USMCA) or created additional ones (i.e. the EU FTAs). Overall, other than the inclusion of services subsidies and the additional types of prohibited subsidies, they do not extend beyond China’s WTO-plus obligations. To the extent that they leave some deficiencies in the CPTPP SOE chapter unaddressed and maintain the extensive exceptions, they are not as rigorous as the existing WTO rules tailored to China.
However, I think the CPTPP and the post-CPTPP US/EU FTAs offer a more incremental and balanced approach that may facilitate multilateral negotiations. Essentially, this is because they allow governments the flexibility to develop preferred exceptions to counterbalance gradually expanded or tightened rules. To adopt this approach, however, WTO Members will need to be prepared to negotiate with China on replacing the potentially very broad and rigid China-specific rules with more balanced new rules that are applicable to all Members. The consequence is that we will have softer rather than stronger disciplines on Chinese SOEs.
This paper is the third in a series of papers that Prof Henry Gao and I explore the ways to apply/develop multilateral disciplines on Chinese SOEs: see here, here and here. I would be grateful for any comments via the blog or to my email weihuan.zhou@unsw.edu.au.
