China's CPTPP entry

By Ahn Choong-yong

Chinese President Xi Jinping made global headlines at the APEC summit on Nov. 20, 2020 by announcing that China was considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into effect in December 2018.

The news came amid a likely reconfiguration of the Asia-Pacific trade landscape due to unabated trade tensions between the United States and China and the conclusion of the Regional Comprehensive Economic Partnership (RCEP) five days prior to the announcement.

Significantly deviating from former U.S. President Donald Trump's “America first” policy, the Biden administration is returning to global governance by reviving multilateral institutions, including the Paris Agreement, the World Health Organization and the World Trade Organization (WTO). The Joe Biden administration's pivot back to Asia might see the U.S. revisit the CPTTP, after mending urgent domestic affairs, including public anti-globalization sentiment.

The U.S. has lost a great deal of its leadership credibility in Asia when it comes to safeguarding the liberal trade order. Despite the U.S. withdrawing from the Trans-Pacific Partnership (TPP), the deal was salvaged laboriously under Japan's leadership with the remaining key members either dropping or compromising on some sensitive items in the final agreement.

In addition to China, the United Kingdom, South Korea, Indonesia, Thailand and Taiwan have also expressed interest in joining the CPTPP. Major signatory economies of the TPP and the RCEP are Asia Pacific Economic Cooperation (APEC) members.

If every country interested in an expanded CPTPP, including China, were to commit to the high standards of its clauses even with a raised reentry bar, it would help create progress toward APEC's long-cherished aim of creating a Free Trade Area of the Asia Pacific (FTAAP), identified as a goal by APEC leaders as early as 2004.

Seven of the eleven CPTPP members, including Japan and Australia, are intersection economies also belonging to the RCEP. China's entry into the CPTTP in the absence of the U.S. could be viewed as creating an advanced “RCEP-II,” provided that the clauses signed in “RCEP-I” are upgraded to closely match those in the CPTPP chapters.

An expanded CPTPP, with a rejoined U.S. and newly joined China, alongside other wishful entrants from the RCEP, could lead to an FTAAP. It should be welcomed as an ideal building block toward the stalled WTO quest for multilateralism with the most-favored nation principle.

But in reality, China's entry into the CPTPP is more complex. If partner countries disagree on the key components of a “level playing field,” efforts toward economic integration are unlikely to bear fruit. There are several sticking points for new entrants into the CPTPP, especially China.

This includes the prohibition of state subsidies for state-owned enterprises, investor―state dispute settlement, intellectual property rights over biological products, labor conditions for government procurement, data free flows and localization restrictions and digital trade.

The picture of enhanced free trade becomes more complex and unrealistic when transparency standards for the implementation of the free trade pact and strategic security elements for the Indo-Pacific are considered.

Some of these points have been embraced in the EU―China Comprehensive Agreement on Investment (CAI) in principle concluded on Dec. 30, 2020, allowing the European Union enhanced market access in China. Still, China's CAI commitments fall short of the high standards of the CPTPP.

The TPP was originally designed by the U.S. to counter China's assertive rise. In response, China became enthusiastic about concluding an RCEP, originally perceived by ASEAN and Japan to rival the TPP. If these twin motivations for regional hegemonic leadership remain unchanged, the U.S. and China are unlikely to be in the same expanded CPTPP boat.

With a possible return of the U.S. to the CPTPP on the horizon, the U.S. and other major TPP signatories are likely to screen new members while writing reinforced trade rules. The CPTPP would then become more politically like-minded.

Given this politico―economic dichotomy, China's entry might be a long shot. Some experts claim China is motivated by a domestic reform agenda, referencing CPTPP's high standards. But it remains to be seen how China carries out its domestic reforms to meet CPTPP entry requirements.

Amid the challenging and unpredictable circumstance, an early conclusion of the China, Japan and South Korea trilateral trade agreement ― under negotiation since 2012 despite intrinsic trilateral acrimonies ― could help expedite a convergence of the two mega deals. The leaders of the three countries have already committed to realizing a “free, non-discriminatory, transparent, predictable and stable trade and investment environment” at the Chengdu trilateral summit in 2020.

Many RCEP economies are experiencing their worst economic downfall since the Great Depression due to COVID-19 and want to avoid being forced to side economically with the U.S. or China in the years to come. Only once the two major powers collaborate can urgent global issues like the ongoing pandemic and climate change be effectively dealt with.

To bring them together, the regional “constructive powers” belonging to both the CPTPP and RCEP should raise their collective voice to safeguard a deeper, rule-based, regional free trade order and serve as honest brokers.

In due process, major trading powers in the Asia Pacific should be non-assertive, non-unilateral and non-treacherous. And for any sustainable and large FTAAP in the Asia Pacific, mutual trust is key.

Ahn Choong-yong (cyahn@cau.ac.kr) is distinguished professor at the Graduate School of International Studies, Chung-Ang University. This article was published in East Asia Forum on March 26.