China hints at joining TPP talks
New Straits Times | 02 January 2014
China hints at joining TPP talks
By Frank Ching | Frank.ching@gmail.com | Twitter: @FrankChing1
ECONOMIC DIPLOMACY: Interest shows idea of a partnership is gaining momentum
FOR the first time since it came into existence in 1995, the World Trade Organisation last month achieved a breakthrough, reaching a series of agreements to streamline trade that are expected to boost the world economy by up to a US$1 trillion (RM3.28 trillion) a year.
Even so, progress in the Doha round of talks has been frustratingly slow and countries will continue to move on their own to reach regional free trade agreements, such as ongoing talks spearheaded by the United States to set up a Trans-Pacific Partnership (TPP).
While the original goal was to reach agreement by the end of last year, the 12 countries involved, which account for up to 40 per cent of global gross domestic product (GDP), announced on Dec 10 after a meeting in Singapore that they would meet again this month. No new deadline was announced.
In November, South Korea indicated interest in joining the TPP talks and it is now holding preliminary discussions, even though acting deputy US trade representative Wendy Cutler said the negotiations were already in the "end game" and it would be very difficult for any country to join the discussions.
Now, China is also indicating interest. Foreign Minister Wang Yi, while outlining diplomatic priorities for this year, said economic diplomacy would be a major focus of Chinese diplomacy in the new year and that "China will face the member states of the Trans-Pacific Partnership talks with an open attitude, as well as other regional or cross-region free trade agreement (FTA) initiatives".
China is very much involved in regional FTA talks, including bilateral discussions with South Korea, trilateral talks with South Korea and Japan, as well as the Regional Comprehensive Economic Partnership, or RCEP, talks involving the 10 Asean states as well as Australia, India, Japan, Korea and New Zealand, which, when concluded, will involve three billion people with a combined GDP of US$17 trillion.
TPP and RCEP have been seen as rival trading blocs, especially as China was not in the TPP and the US was not in RCEP. However, some countries are involved in both.
South Korea was hesitant to join the TPP because it was seen as an anti-China bloc even though the Korea Institute for International Economic Policy, a government-funded think tank, estimated that membership in the TPP would increase Korean GDP by 2.6 per cent over a 10-year period.
If both China and South Korea join the TPP, that grouping will account for more than 50 per cent of the global economy.
China first indicated interest in the TPP talks seven months ago when its Commerce Ministry said it was studying the possibility of joining the talks. That came as a surprise because a common view then was that the trade pact constituted an attempt by the US to contain China’s rise — the economic counterpart of the military "pivot to Asia". However, China again expressed interest a few months ago during the strategic and economic dialogue in Washington, held in the wake of the Sunnylands summit meeting between (US president) Barack Obama and (China president) Xi Jinping. Washington indicated that China could join the TPP negotiations and briefed the Chinese on the talks.
A note of uncertainty was injected into the future of the talks last month when more than 150 Democratic members of the House of Representatives wrote a joint letter to Obama stating their opposition to granting him fast-track authority in trade negotiations.
Fast-track authority means that when agreement is reached, Congress can approve or disapprove, but cannot make amendments. In the absence of such authority, Congress can examine and object to any article of what will be an extremely complex document.
Since the Trade Act of 1974, all US FTAs have been negotiated with Congress, granting the president fast-track authority. Unless the Obama administration can obtain such authority, the entire TPP negotiations may become stillborn.
The recent interest indicated by South Korea and China shows that the idea of a TPP is gaining momentum. While additional negotiating partners inevitably means a slower pace, issues already agreed will not be revisited.
Despite the opposition to fast-track authorisation by Democrats, the proposal is by no means dead since the House is controlled by Republicans, who by and large favour a free trade agreement. So, the opposition party may come to the rescue of Obama where the TPP is concerned.
In fact, China’s interest could well be a positive factor. The US Congress may see this as an opportunity to lock Beijing into an agreement that ensures a level playing field for American business.
