Why China wants to join Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?
In September 2021, China applied to join the Trans-Pacific Partnership, a free trade agreement among 11 countries. It was the country's first attempt to join a major trade pact since the US exited the project four years earlier. Although China's application was welcomed by the other members of the CPTPP, such as Malaysia, Vietnam, and Singapore, some countries, such as Canada and Japan, expressed their doubts about the country's potential to join
The U.S. also reacted strongly, with many experts and politicians labeling China as “unqualified.” Following the announcement, Taiwan also submitted an application. These developments, which were welcomed by both Japan and the U.S., support China's decision to join the trade agreement.
The original name of the trade agreement, which was known as the TPP, the Trans-Pacific Partnership. It was created by the Obama administration in February 2016. However, it didn't take effect after the Trump administration exited the project in 2017. In March 2018, the 11 participating countries reached a new agreement. The new trade agreement, known as the CPTPP, was largely unchanged from the original TPP. It eliminates some of the US' proposed provisions, such as a provision that allowed multinational corporations to sue their local partners. The U.S. strategy to contain China has failed with the evolution of the trade agreement.
The agreement, which is now in force among seven members, including Japan, Singapore, Australia, and New Zealand, is awaiting approval by the legislatures of the other countries. Some of the other countries that are waiting to join include Peru, Malaysia, and Brunei. As part of the agreement's procedures, new applicants are required to regularly consult with their counterparts to address their concerns and questions.
This year, Britain became the first country to officially apply for membership of the trade agreement. It has since reached an agreement with the other members, and South Korea is expected to start the process soon. On the other hand, China's entry is expected to be more complex due to the country's various obstacles and resistance. Despite the various obstacles that it faces, China's decision to join the trade agreement was well thought out. Its objective is to make the most of the opportunities that the agreement provides.and even after the various steps that the US has taken to contain China, the Trump administration has not been able to provide the necessary market space for its Asian partners. This is why it decided not to join the CPTPP once again. As a result, the US will not be able to provide the necessary support to the regional economic integration process. The US continues to invest heavily in Asia to strengthen its political and military capabilities. It also intends to expand its reach through its proxy forces in the region. Despite the various steps that it has taken to contain China, the Trump administration has not been able to provide the necessary market space for its Asian partners. Some of the countries in the region are concerned that the US' actions are contributing to the regional security risks and political instability.
The US continues to invest heavily in Asia to strengthen its political and military capabilities. It also aims to establish an artificial and encirclement of China in order to provoke military conflicts. Despite this, Asian countries are aware that the American moves are contributing to the region's political instability and security risks.
China, on the other hand, has been promoting the establishment of international economic integration within the Asia Pacific region. Through its activities, China has been able to negotiate free trade agreements with other countries. It also pushed for the establishment of a free trade area between China and Japan. Last year, China was able to successfully push for the conclusion of the RCEP, which is a comprehensive economic partnership agreement among 11 countries. It will provide a framework for the establishment of an Asia-Pacific free trade circle. The RCEP agreement was signed by Japan, China, South Korea, Australia, and New Zealand. Most of the members of the CPTPP have already joined. Due to its massive population and geographical position, China is a vital part of the Asia Pacific region. It is also connected by land and maritime transportation channels to other countries such as Russia. As a member of the CPTPP, China can participate in in-depth consultations with its neighbors and other Asian countries. To ensure that the RCEP agreement will be beneficial for both parties, China has to open its market further. This will allow it to promote trade and economic cooperation with other countries.
Political Dimensions for Global Trade Ambitions
Some believe that China is ready to meet the high standards of the RCEP agreement. They also believe that the country will use its membership to accelerate its domestic market-oriented reforms. However, some members are still skeptical of China's commitment to follow the rules of the World Trade Organization. They believe that its application is a way to expand its influence and that it is not following through on its pledges.
The contradictory explanations given by China and the West regarding its decision to join the RCEP agreement are partially correct. Although it is open to reforms, it is not in the ways that the US and its partners hoped for. As a result, China's participation in the trade agreement is mainly motivated by its desire to strengthen its economic leverage and influence the Asia Pacific region. Despite the criticisms about its non-compliance with the WTO's rules, China has been able to make significant progress in its efforts to improve its market-oriented reforms. In 2003, it started implementing a policy known as "grasp the big, release the small." This has resulted in the reduction of its state-owned enterprises. As In 2013, China began implementing mixed-ownership reforms. It also started implementing the rules of the CPTPP in some of its free trade zones. These reforms were part of the Phase One deal of the RCEP agreement. Being the part of its efforts to improve its market-oriented reforms, China is also developing an alternative to the US-based payment system known as the Clearing House Interbank System.
After the recent political developments in Ukraine, China's efforts to build a robust alternative to the US-based payment system are still focused on the overall project of currency internationalization. Inspite the various technological and trade conflicts between China and the US, China is still not expected to adopt every reform that the US demands. This is because the two countries have been continuously contradicting each other regarding what reforms should mean. China's insistence that its practices are in line with global trade rules, its bid for the CPTPP is likely aimed at popularizing its own interpretation of these rules. For instance, despite the mixed-ownership reforms that it has been implementing in its state-owned enterprises, private shareholders still remain under the control of the state. Also, recent evidence has shown that Chinese SOEs have been receiving preferential treatment in the form of cheaper credit and more accessible credit.
The fact that China's SOE reforms are in line with the rules of the CPTPP also suggests that the country is more conservative when it comes to interpreting global trade rules. As it seeks to join the organization, China is likely to continue developing its own interpretation of the rules. Caution should be maintained regarding China's geostrategic motives. For instance, it has been carefully monitoring the activities of South Korea's Samsung and other companies after it joined a US-led military alliance. It also responded to Australia's call for a COVID-19 origin inquiry. One day after the US and other countries formed the AUKUS security pact, China applied to join the CPTPP. This move is likely aimed at maintaining its influence in the Asia Pacific.
The US launched its Indo-Pacific Strategy in early 2022. It aims to encourage more sustained collaboration on various trade and supply-related issues in the region. President Joe Biden's recent trips to Japan and South Korea also highlighted the US' willingness to participate in regional trade partnerships. As the US' interest in the region and China's political calculus rise, it is important that the Biden administration re-enters the CPTPP. Although China's reforms are not expected to significantly change the country's trade practices, it is still important that the US participate in the negotiations that will shape these changes. The US should welcome China's efforts to establish global trade rules and participate in the negotiations of the CPTPP to build consensus. In addition, due to its geostrategic motives, Washington can use the organization to expand its influence in the region. Some factors that may have contributed to the softening of the US' opposition to re-entering the trade agreement include the country's 40-year high inflation and the disinflationary potential of trade liberalization.
Conclusion
The successful bid by China to join the CPTPP provides an opportunity to address the various issues that have been hindering the development of global trade rules. However, given the US and other members' unwillingness to accept China's demands, it is important that the country makes concessions. While the US and other members should encourage China to carry out reforms, they should also negotiate in a more open-minded manner. To expedite China's entry into the trade agreement, the members should establish a working group to start the negotiations immediately.
Pic Courtsey-Oj Serrano at unsplash.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
