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China applies to join Asian trade deal US abandoned

Bloomberg - 16 September 2021

China applies to join Asian trade deal US abandoned

Beijing has applied to join an Asia-Pacific trade pact once pushed by the U.S. as a way to isolate China and solidify American dominance in the region.

China submitted the formal application letter to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to New Zealand, according to a statement late Thursday in Beijing. Commerce Minister Wang Wentao had a follow-up call with his counterpart Damien O’Connor, as New Zealand is the depositary nation for the agreement.

The application is certain to spark a reaction from Washington, where a number of lawmakers had already expressed concern about China’s efforts to join. However, there’s no sign the administration of President Joe Biden is interested in rejoining the deal.

The original deal was envisioned by the U.S. as an economic bloc to counterbalance China’s growing power, with then-President Barack Obama saying in 2016 that the U.S., not China, should write the regional rules of trade. His successor Donald Trump pulled out of the deal in 2017, with Japan leading the revised and renamed pact to a successful conclusion the following year.

The application is the result of months of behind-the-scenes discussions after President Xi Jinping said in 2020 the nation was interested in joining. China is the second country to apply to join the 11-nation deal, after the U.K. asked to become a member earlier this year.

“It’s a perfectly rational calculation by the Chinese leadership,” according to Hosuk Lee-Makiyama, director of the European Centre for International Political Economy in Brussels. “Given how the Chinese market is driving the economic recovery, their cards will never be this strong again. Or rather, the cost of rejecting China’s application will never be this high.”

Australia Dispute

The negotiations about joining won’t be simple — China and CPTPP member Australia are in the midst of an economic and trade dispute which has seen China apply tariffs or block billions of dollars of Australian exports. Still, China last week publicly lobbied Canberra for its support to join the deal.

Canada is also in a dispute with China, with one Canadian citizen jailed for 11 years and another still awaiting sentencing in cases that are seen as linked to the arrest in Canada of the daughter of the founder of Huawei Technologies Co.

Negotiations could also take a long time. The U.K. is seeking to conclude talks to join by the end of 2022, the former British trade secretary said in August.

A former U.S. trade official said China’s membership in the group isn’t assured given its trade regime and direction toward more central control of its economy.

Trade Rules

“It’s extremely difficult, if not impossible, to see how they could embrace the CPTPP rules governing state-owned enterprises, labor, e-commerce, the free flow of data, among others, as well as comprehensive market access commitments,” said Wendy Cutler, vice president of the Asia Society Policy Institute and a former acting deputy U.S. Trade Representative.

Another expert was more confident China will be successful.

“In the long term, they will be able to work out some of the differences, especially as these countries realize that China is going to be the biggest market for them and the U.S. is not going to join anytime soon,” said Henry Gao, associate professor of Law at Singapore Management University, who has written extensively on Chinese law and the World Trade Organisation.

But it won’t happen anytime soon, he said, as “the accession process would probably drag on for a couple of years.”

The U.S. administration hasn’t announced any concrete trade policies for the region, although there are reports it’s discussing a digital trade deal covering Asia-Pacific economies.

The CPTPP ranks third among the largest free-trade agreements behind the $26 trillion Regional Comprehensive Economic Partnership and the $21.1 trillion U.S.-Mexico-Canada Agreement. China’s addition to the CPTPP would make it the most valuable free-trade agreement ever signed.

The 11 signatories of the CPTTP have combined economic value worth about $13.5 trillion, or about 13% of global gross domestic product.

 source: Bloomberg