Rethinking the (CP)TPP as a Model for Regulation of Chinese State-Owned Enterprises

This paper challenges the widespread view that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) provides the most advanced rules for regulating China’s state-owned enterprises (SOEs). It argues that compared to China’s existing World Trade Organization (WTO) obligations, particularly those specifically tailored to it, the CPTPP SOE chapter does not provide more rigorous or workable rules but rather has narrower applications and more carve-outs. More recent US/EU free trade agreements (FTAs) are largely based on the CPTPP SOE chapter. While these FTAs also seek to address some deficiencies in the CPTPP SOE chapter and gradually expand the rules on subsidies and SOEs, the expanded rules are balanced by the inclusion of extensive exceptions. This balanced approach may be used to facilitate multilateral negotiations of SOE rules, but if this approach is adopted, WTO Members will need to be prepared to negotiate with China on replacing the potentially very broad and rigid China-specific WTO rules with more balanced new rules that apply to all members. The likely consequence would be softer rather than stronger disciplines on Chinese SOEs.