China and the CPTPP - right move, wrong timing?

Opinion: China's application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement comes at an awkward political moment. But in terms of trade and trade policy, it comes with a lengthy history and understandable logic behind it, writes Associate Professor Robert Scollay.

The CPTPP is of course essentially a continuation of the original TPP (Trans-Pacific Partnership) by the 11 members remaining after the United States withdrew.

During the TPP negotiations there was extensive discussion and debate both inside and outside China as to whether China should join the negotiations. The question debated and analysed within China was whether China's economic reforms had progressed far enough to enable it to honour the commitments it would be required to make as a TPP member.

Chinese advocates of TPP membership argued that economic reform in China would be further catalysed by TPP membership, just as it had been earlier by China's entry into the WTO. Chinese officials engaged in serious discussions with their counterparts in the United States, as the acknowledged unofficial "gatekeeper" to the TPP.

In the event China concluded that it was not yet in a position to fully comply with the anticipated TPP rules, and decided not to pursue TPP membership at that time.

In the meantime extensive work was being undertaken in APEC and elsewhere on the proposal for a Free Trade Area of the Asia-Pacific (FTAAP), a free trade area covering both sides of the Pacific that would build upon the TPP and the (now-completed) Regional Comprehensive Economic Partnership (RCEP).

Given the extensive trade agreements already existing among Asia-Pacific countries, the principal new linkage in the Asia-Pacific "trade architecture" arising from the FTAAP would be the joining together of the United States and China in a single agreement. Trade experts and modellers in the United States and elsewhere predicted substantial economic gains for both the United States and China. As late as 2016 the United States and China were jointly chairing a high-level APEC study aimed at mapping out a pathway to eventual establishment of the FTAAP. How quickly and how far times have changed!

These efforts came to a halt with the advent of the Trump presidency, followed by the subsequent downward spiral in US-China relations. The FTAAP remains an ambition of a number of Asia-Pacific governments and business interests, reflected in its quiet retention as a background item on APEC's agenda.

The CPTPP is a "strong" though by no means perfect trade agreement. It is acknowledged as a leader in the introduction of badly needed trade rules that address the realities of today's international trade, including rules on such contentious issues as the treatment of state-owned enterprises.

On this criterion it is considerably stronger than the RCEP. New Zealand has firmly and consistently advocated the application of the principle of "open plurilateralism" to the CPTPP, making membership open to any country prepared to adhere to its rules.

Given the care that China took earlier in assessing potential TPP membership in terms of its ability to comply with TPP rules, China's application for CPTPP membership could be taken as an indication that it now judges that it can meet the rules of the agreement. China's acceptance of CPTPP rules would be a significant step forward in the retention of an effective "rules-based" multilateral trading system.

At the same time, for the Biden Administration China's entry into the CPTPP would be a notable setback for its determined efforts to internationally isolate China, as well as an unwelcome complication for any yet-to-made decision by the United States on possibly seeking to re-join the CPTPP itself. An instinctive negative reaction could be anticipated from the United States to a decision by the CPTPP members to admit China to the agreement.

From a regional (and global) perspective on the other hand, the inclusion of both China and the United States in the CPTPP, however implausible in today's toxic geopolitical environment, would effectively remove the main roadblock to achievement of the FTAAP.

It would also be a major step toward repairing the fault lines that threaten to permanently shatter the international trading system. As this year's APEC chair, would it perhaps not be out of place for New Zealand to point to the obvious desirability of such an outcome?

In practice, the toxic geopolitics are likely to decide the outcome. All members of the CPTPP effectively have the power to veto any new membership application.

Australia's trade minister has promptly indicated that Australia will veto China's application to join the CPTPP as long as the current state of Australia-China relations persists. This is happening in the same week that Australia has joined a transparently anti-China security arrangement with the United States.

A lurch by Australia toward a reprise of the claim made in the early 2000s by then Australian Prime Minister John Howard to be acting as the United States' "deputy sheriff" in East Asia is likely to be no more popular in the region now than it was then.

Other members of the CPTPP, including New Zealand, may well be grateful if Australia's veto of China's CPTPP membership absolves them from the need to make a decision now that would inevitably damage their relationships with either China or the United States.

New Zealand faces the added challenge of maintaining good political and economic relations with Australia, as well as in the East Asia region as a whole, where its trade and economic interests increasingly lie. Our challenges in navigating today's toxic geopolitics just got harder.

Associate Professor Robert Scollay is director, APEC Study Centre at the University of Auckland.

This article reflects the opinion of the author and not necessarily the views of the University of Auckland.

Used with permission from NZ Herald, Robert Scollay: China and the CPTPP - right move, wrong timing? 20 September 2021.

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