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China’s Choice: To Lead or to Follow on Asian Economic Integration
Region: Asia
Theme: Economics
Published August 18, 2014
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For many years, the major trading countries coexisted comfortably under a multilateral trading system. Major trade liberalizations were agreed upon multilaterally. In most cases, trade disputes were resolved peacefully under the WTO dispute settlement system. The industrialized economies even reached a gentlemen’s agreement that no bilateral FTA should be reached among them at the expense of the multilateral route of trade liberalization. All this is about to end. Trading nations are now forging free trade alliances on their own, fragmenting the world trading system and making trade diversions prevalent. Every country is feeling less secure and going for more FTAs. This situation might give rise to a “warring states” scenario (as in ancient China), which could replace the “Congress of Vienna’s system of international trade.” China is now accelerating the pace of negotiating FTAs, in particular in Asia, largely in response to developments in the negotiations of the TPP, TTIP, and other regional initiatives for economic integration. This chapter discusses the internal and external contexts that China faces, its responses so far, and its possible future behavior, with a focus on the steps it is taking in Asian economic integration.

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