Global Trade Review - 11 March 2021
China steps up talk of joining CPTPP
By Jacob Atkins
China has sent fresh signals it is seriously considering the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as part of the Asian giant’s new drive to boost further trade integration.
The CPTPP came into effect in late 2019, and comprises 11 countries including Australia, Canada, Japan and Mexico. It succeeded the Trans-Pacific Partnership (TPP), which former US President Donald Trump withdrew his country from in 2017.
Presenting China’s annual government work report on March 5, Premier Li Keqiang said the world’s second-largest economy “will actively consider joining” the agreement. This year’s report, which sets out general guidelines for China’s policies for 2021, has a strong focus on broadening the country’s opening-up policies and increasing international economic cooperation.
Li’s remarks come a month after Beijing’s commerce ministry said at a press conference that it is actively looking into accession to the trade pact in order to foster what it calls a new development paradigm, adding that it is “willing to enhance technical exchanges and communication with all CPTPP members”.
China already has bilateral free trade deals with several of the agreement’s signatories, and late last year wrapped up the Regional Comprehensive Economic Partnership (RCEP), which covers the 10 Asean member states, Australia, New Zealand, Japan and South Korea.
Indeed, it was just after RCEP’s signing in November when Chinese President Xi Jinping told the Asia-Pacific Economic Cooperation (Apec) Economic Leaders’ Meeting that Beijing was “favourably considering” applying to join the CPTPP.
Chinese membership of the trans-Pacific accord in its current form could net the country a US$298bn boost to national income by 2030, according to a 2019 paper by the Peterson Institute for International Economics (PIIE).
According to the same analysis, Chinese exports would jump US$638bn by 2030 if it joined the CPTPP, with imports rising by a similar amount.
Furthermore, Chinese entry would yield a 55% surge in trade over the next 10 years for the agreement’s signatories, the PIIE predicts.
“If China wants in, in the long term, then the sooner it enters, the better,” Lisa Toohey, a trade law expert at Australia’s University of Newcastle, tells GTR.
Because it was not one of the countries that originally negotiated the pact, China will have to largely accept the trading rules as they are, says Toohey, an assistant dean at the university’s law school.
“I think it will be a long process because they are going to have to very seriously evaluate whether they want to take on the commitments that are already in the CPTPP.”
Entry to the pact would demand deep domestic reforms in China that may be hotly resisted by some branches of the state apparatus, Toohey cautions.
Provisions aimed at creating a level playing field between state-owned enterprises have been singled out as an internal battleground. Meanwhile, rules on intellectual property and data transfers between member states could also give Beijing pause, the PIIE paper pointed out.
If China joins, it will also wield negotiating power if the US also attempts to re-enter the bloc under new President Joe Biden, says Deborah Elms, executive director at the Asian Trade Centre, a think tank.
“The advantage of being in versus being out… is that the current members get to decide whether new members are going to be allowed in. And of course they get to decide, in part with the others, what are the provisions that [they’re] going to accept from this new member.”
She believes Xi’s remark on the CPTPP last year is a signal that China’s leaders are serious about the move, and as further positive messages come out from the Chinese administration about the potential for the country’s accession to the deal, the US will have to move quickly in order not to be shut out.