Newsnero | 2 February 2022
The US doesn’t need CPTPP to assert itself in the Asia-Pacific
by Alan Beattie - Financial Times
Sometimes international diplomacy is so inept that it becomes genuinely entertaining. Recent US trade policy in the Asia-Pacific region is a case in point. Over a decade ago, the US charted a plan to export its economic model and surpass China through the Trans-Pacific Partnership. The Idea : To lure voracious American consumers with preferential access to rewrite the tariff, copyright, subsidy, regulatory and investment rules of the world’s fastest growing region.
The George W. Bush and Barack Obama administrations signed the accord, but Donald Trump and then Joe Biden decided imports were politically toxic and withdrew without ratification. Amusingly, this allowed China to escalate its campaign for trade hegemony in Asia by bidding for membership. China is currently dancing happily at every party in Asia Pacific that it can attend. It is a founding member of the Regional Comprehensive Economic Partnership, a shallow but far-reaching trade agreement, and is also bidding to join the Digital Economic Partnership Agreement between Singapore, Chile and New Zealand.
With the 11-member TPP (now called the CPTPP after adding the clarification “Comprehensive and Progressive Agreement for”) abandoned, the Biden administration is now reduced to vaguely mumbling about creating its own partnerships in Asia. No one believes it will achieve much, especially without additional market access.
The US definitely made a mistake. But it is too strong to say, as some are saying, that this is a huge foreign policy mistake that will fatally weaken American influence.
Certainly CPTPP members allied with the US are dismayed at their absence. Officials from Australia, Canada, Japan and New Zealand are glancing nervously at each other – and up at their political masters – to scrutinize their collective determination to deny easy access to China.
If existing CPTPP governments want to block or delay China’s accession, they can set a high bar for demonstrating compliance with rules on data localization, state-owned enterprises, subsidies, intellectual property rights, government procurement, and so on. They are already making it difficult for the UK, which has also applied to join, just to show they are not wimps. The UK government was somewhat surprised when they were forced to squeeze through a series of small-diameter tires to prove their laws met CPTPP criteria.
Japan, a leading skeptic, has circulated proposals laying down very harsh conditions for China. Mexico and Canada could also invoke the poison pill provision in the US-Mexico-Canada trade deal, which allows a member to leave the country if others sign a pact with a non-market economy like China.
Stopping Chinese accession depends on both political will and technical acumen. It is a in advance Judgment call, no retroactively objective fact of whether commitments on issues such as SOEs are being met. As Lithuania and Australia note, Beijing has opportunities to break trade rules that can be difficult to prove. A Japanese official says : “The use of economic coercion in relation to Australia goes directly against the spirit of the TPP.”
The longing for renewed US engagement, so unworldly, continues. The official says that although the political landscape is hostile to trade, “the TPP is based on American standards and we still strongly hope that the US will change its stance and return to the TPP.”
Although unlikely, the failure to join the CPTPP does not mean that the US is giving up its regional influence, be it economic or strategic. As the Japanese official also points out, American companies that are less dependent on trade deals to gain market access — such as technology and financial services — have a strong presence in Asia.
As for geopolitical influence, recent experience suggests that actual firepower is more important than economic nature. Trade deals do not automatically imply political alignment or influence. It is not the EU with its “deep and comprehensive free trade agreement” with Ukraine that takes part in security summits with Russia, but the USA with its troop stations in Eastern Europe. Australia and China have a trade deal dating back to 2015, but it hasn’t stopped Beijing from pressuring Canberra.
None of the US strategic capabilities – military power, security arrangements like the Australia-UK-US agreement, cybersecurity expertise, information sharing, imposing harsh financial sanctions on the dollar payment system – require CPTPP membership. And all are certainly more important when it comes to projecting American influence. Taiwan wants to join the CPTPP as a counterweight to China. But it’s clearly better for Taiwan’s security and prosperity if the US deploys enough naval and air forces in the South China Sea to repel a Chinese invasion than having to tinker with its IP law so it can strike a trade deal with the US.
It’s true that US economic diplomacy has been comically weak and inconsistent over the past decade. It was undermined by the American public’s excessive fear of trade deals, promoted by lobbies such as organized labor and the steel industry. But his ineptitude towards the CPTPP should not lead to advice of desperation. Trade deals are important, but they are neither necessary nor sufficient for American foreign policy to prevail in the Asia-Pacific region.