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China’s bid to join CPTPP: Neither serious nor sincere

The Japan Times | 10 November 2021

China’s bid to join CPTPP: Neither serious nor sincere

by Brad Glosserman

China says it wants to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

It’s a smart move, tactically and strategically, by Beijing, with potentially profound consequences for the pact and the region. Expert opinion is divided on whether to let China in. It should be allowed to join — but only if it is prepared to live up to the CPTPP standards. There can be no bending of the rules to accommodate Beijing.

It’s far more likely, however, that Beijing is neither serious nor sincere about its readiness to comply with CPTPP standards as they are written. The Chinese leadership is testing members’ commitment to the agreement’s purpose and ambition while assessing the limits of Beijing’s influence.

The CPTPP is the third incarnation of the Trans-Pacific Strategic Partnership Agreement, a four-country (Brunei, Chile, New Zealand and Singapore) trade deal that went into effect in 2005. It was adopted by the Bush administration (and seven other countries) as the cornerstone of a larger regional trade initiative, the Trans-Pacific Partnership. The TPP was a reaction to the failure of global trade talks at the World Trade Organization (WTO) and sought to set the “gold-standard” for economic integration, addressing current and anticipated issues, covering everything from environment protection and labor, to digital commerce to state-owned enterprises. The TPP would lock in the rules and values of the most advanced economies and oblige member economies to embrace greater liberalization, the rule of law, sustainable economic policies and respect for the dignity of the worker.

The Obama administration took those negotiations to the finish line and then, in an amazing blunder, dropped the ball and failed to get U.S. ratification of the deal. (The assumption seems to have been that since the deal was political poison — both candidates in the 2016 presidential election rejected it — a lame duck president and Congress would ratify the pact after Hillary Clinton won the vote.) But then-President Donald Trump withdrew the U.S. from the agreement shortly after taking office. Then, in one of the most important parts of his legacy, Prime Minister Shinzo Abe resurrected the deal as the CPTPP, or TPP-11.

CPTPP went into effect on Dec. 30, 2018, after more than half the signatories ratified the agreement. It represents about 13.4% of global gross domestic product, roughly $13.5 trillion, making it one of the world’s largest economic trade areas. It retains two-thirds of the original agreement, with the other provisions, largely pushed by the U.S., suspended after Trump’s withdrawal.

CPTPP members always expected their number to expand, and there remains hope that the U.S. will reverse course again and join the party (although that looks like an increasingly distant dream). The U.S. refusal to get smart has produced what former U.S. diplomat Kurt Tong called in a recent Nikkei article, “the supreme irony of watching passively as its primary strategic rival becomes a beneficiary of a regional market-opening arrangement that the United States crafted for its own benefit.”

Tong was referring to China’s official application on Sept. 16 to join the CPTPP. It’s a canny play. CPTPP members are at the center of an emerging regional economic order and they will play a decisive role in shaping trade rules. But it is a mistake to frame this as a mere “trade deal.” The CPTPP is, as Japanese leaders understand, more a strategic agreement than a trade pact. It sets the terms of engagement for the most important region of the world and the governments that set those rules will shape the region’s evolution.

China’s application triggered intense speculation about its motives. Some argue that Beijing is sincere about wanting to join the CPTPP since it will be a tool to modernize its economy. That rationale is hard to credit as the Chinese government doubles down on policies to promote the development of national industries, puts up new trade barriers, imposes trade sanctions, warns against the dangers of interdependence and reliance on foreign inputs for the economy, while simultaneously urging Chinese companies to create dependencies among their trading partners.

On Nov. 1, for example, new data protection rules went into effect in China that directly conflict with the CPTPP. There are no indications that China is prepared to distance the state and the market as the CPTPP would require and instead is more deeply integrating the two.

China’s record of compliance isn’t encouraging, either. It has ignored WTO requirements when convenient and violated the terms of its free trade agreement with Australia when angered.

Others insist that Beijing’s goal is gaining admission precisely to dilute CPTPP standards, particularly those regarding state-owned enterprises, access for foreign investors, the digital economy, intellectual property, labor unions and environmental protection. Accession is a negotiated process, and by this logic, Beijing aims to use its weight to win substantive concessions in the form of eased requirements and exemptions. Mireya Solis, an keen-eyed analyst of Asian economies at the Brookings Institution, warns that “a successful Chinese CPTPP bid brokered through broad exemptions could result in a watering down of the agreement’s standards.”

A third argument is that Beijing isn’t that interested in the CPTPP and its chief objective is thwarting Taiwan’s bid to join the group. Taipei’s interest in membership has been well known and it submitted its own application just days after Beijing did. Historically, institutions used careful choreography to admit both China and Taiwan.

Beijing is counting on the same process for CPTPP deliberations, but it isn’t clear if those rules still apply. Tong argued that simultaneous consideration of their applications would force Beijing and Taipei to compete to join and encourage better behavior — but that assumes that Beijing is serious about membership.

The best thing that CPTPP members can do is encourage other governments to join negotiations with China and Taiwan. Since a number have expressed interest, including the U.K., that shouldn’t be hard. (Japan can score extra points by encouraging South Korea to join and not seeking a quid pro quo for doing so.) Hopefully, the other prospective members won’t ask for concessions, making it easier to hold the line against demands from Beijing.

The CPTPP isn’t supposed to be flexible. Prospective members must submit detailed action plans if they expect to be unable to meet pact requirements. Reportedly, the grace periods extended to the original 11 members will not be extended to the next round of entrants.

While a couple of members (Singapore and Malaysia) are reputed to favor Chinese membership, new members have to win unanimous approval of all active members and it’s hard to see Japan, Australia or Canada forgiving Chinese shortcomings. METI minister Koichi Haguida recently told his APEC counterparts that the CPTPP should maintain its high standards, a shot across Beijing’s bow even though he reportedly never mentioned China by name.

The obvious opposition of Canberra and Ottawa makes me wonder if China’s aim is to gum up the works. Its CPTPP application seems to be an attempt to maintain the high ground on trade issues, a position it has held since the Trump administration. This is a stark contrast with the U.S., which still isn’t ready to join. Its application forces CPTPP members to navigate between the Chinese bid, that of Taiwan and those of other prospective members. Their trade bureaucracies should be able to handle multiple applications, but putting China in the mix magnifies diplomatic sensitivities and complicates decision-making.

If (or more likely when) membership is denied, Beijing will complain that high-minded talk about inclusivity was a sham, and the CPTPP was intended, like other U.S.-designed institutions, to draw a line through the region.

If China is sincere, however, then the logic guiding decision-making in Beijing defies reality. The Chinese government cannot believe that it can abuse countries in the naked pursuit of national interests, defying international law and international commitments and then expect those same countries to offer China material benefits that are conditioned on its honoring still more commitments. As the saying goes, “Fool me once, shame on you …” If this is an accurate depiction of Beijing’s calculations, then China’s diplomatic partners must think hard about the consequences of this approach in this and other areas — and prepare.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions” (Georgetown University Press, 2019).

 source: The Japan Times