China’s Free Trade Agreement diplomacy

Abstract

This thesis examines China’s bilateral Free Trade Agreement (FTA) diplomacy. I adopt international regime theories to wrestle with how Beijing pursues diplomatic objectives through institutionalized economic relationships. It employs an eclectic approach encompassing three main research paradigms – realism, liberal institutionalism and constructivism - to test how China uses FTAs as a diplomatic means to achieve political ends. Six of ten FTAs that China has signed are investigated: ASEAN, New Zealand, Pakistan, Chile, Peru and Costa Rica. The China-Singapore FTA (CSFTA) is omitted as it replicates the China-ASEAN FTA (CAFTA) model. Thus, the CSFTA is treated as part of the CAFTA. The China-Iceland FTA and China-Swiss FTA are also left out because both of them came into force in July 2014 and are outside the research period. For the same reason, the China-South Korea FTA and the China-Australia FTA are not included as independent case studies. But all recently concluded FTAs are mentioned from time to time since they are not mutually exclusive, but together constitute a unique network. A key aspect of this thesis is that it demonstrates that no one international regime theory can fully explain the various dimensions and complexities of China’s FTA diplomacy. Instead, it verifies the utility and necessity of eclecticism as a formal analytical tool. As FTAs are institutional mechanisms established to foster economic cooperation, liberal institutionalism remains the leitmotif in FTA studies. However, it cannot fully account for China’s security-oriented FTAs, a dimension in which realism has major influence. In addition, FTAs are not purely material mechanisms but are affected by constructivist variables, such as state identities and norms. Strict formulations of institutionalism, realism and constructivism are therefore less convincing than eclectically incorporating all three research paradigms. This eclectism helps highlight the uniqueness of each case and allows more nuanced understandings of the varying strengths and weaknesses of the FTAs in the case studies. This thesis finds that China’s FTA diplomacy is half-successful in achieving political goals. On the one hand, its mega-economy, huge foreign exchange reserves, large domestic market, and the CCP government’s ability to allocate resources, have allowed Beijing to achieve some of its desired outcomes. On the other hand, the PRC is constrained by its peripheral and international environment, its level of economic development, emerging state capitalism, and big power relations. As a result, in some respects the FTA diplomacy has resulted in either half-wins or failures.