Abstract
Trends in Chinese and U.S. approaches to regional integration are likely to profoundly affect other states and even the future of global economic governance. Showing a possible paradigm shift, the Belt and Road Initiative (BRI) and 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 convergence or 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 exist since both the BRI and trade policies of the Trump Administration are under development. The interaction between 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 trade 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 trade routes. 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 outbound investment and trade growth is expected to take place in BRI jurisdictions.

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). 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.

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 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.” 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). 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.