China should be able to meet standards set out in a major trans-Pacific trade pact, trade experts say, forcing members to make a politically uncomfortable decision on whether to let Beijing join a deal created to counter its growing influence.
Britain joined the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) at a meeting in Auckland this month just over two years after its application, clearing the way for members to consider others from China, Taiwan, Ukraine, Costa Rica, Uruguay and Ecuador.
China's application, by far the biggest economy, is next in line if they are dealt with in the order they were received, although that is not a given.
When asked whether there was a time frame for when the next applications would be considered, CPTPP host nation New Zealand's Trade Minister Damien O'Connor said: "No."
The free trade agreement has its roots in the U.S.-backed Trans-Pacific Partnership, developed in part to counter China's growing economic dominance. The U.S. pulled out under President Donald Trump and it was reborn as the CPTPP with members including close U.S. allies Japan, Australia and Canada.
China wants to be part of the CPTTP because the ruling Communist Party places a lot of stock in its economic performance, which has suffered recently due to various trade restrictions, and because it sees the bloc's high accession requirements as fresh impetus for economic reform at home, analysts say.
The absence of the world's largest economy incentivizes China to meet the high entry requirements as "the hidden motive" for Beijing is to "defeat the scheme by the U.S. to use the CPTPP as a way to contain China," said Henry Gao, a law professor at Singapore Management University.
A Chinese Ministry of Foreign Affairs spokesperson said its application was in line with efforts to deepen reform and expand trade cooperation with other countries.
TECHNICAL HURDLES
The CPTPP requires countries to eliminate or significantly reduce tariffs, make strong commitments to opening services and investment markets and has rules around competition, intellectual property (IP) rights and protections for foreign companies.
"The conventional wisdom is... that 'Oh well, it's too high level and China with its state-owned enterprises (SOE) couldn't get into that agreement. So therefore it's not going to happen.' I think that is completely wrong," Tim Groser, a former New Zealand trade minister and chief trade negotiator said.
He said there was a desire by at least some in China to use the agreement to drive reform such as in SOEs.
However, China offers SOEs subsidies and could struggle to meet the requirement to be an open and market-driven economy. And while IP rights are improving, there continue to be high-profile cases of IP theft from Western companies.
The CPTPP also has a focus on digital trade and prohibits forcing foreign companies to store local data in country - for example, in China. Beijing's data sovereignty laws have only become tighter in recent years.
"If a country's economies rules are really quite far apart from what CPTPP says, then inevitably there's quite a big question about whether they could undertake really, really massive reforms," said Graham Zebedee, Britain's CPTPP chief trade negotiator, without commenting specifically about China's application.
Trade experts noted the pact does have exemptions, such as protections for national security, and China showed it could liberalise when it joined the World Trade Organization.
"The CPTPP is important for us. Not because it'll be easy but exactly because it will be difficult and tough," China's Ambassador to New Zealand Wang Xiaolong said in a recent speech. He said potential accession was an "impetus to the domestic reforms" that would be undertaken.
SHADOW OF POLITICS
Ultimately the decision will be political rather than technical, because a deal to allow a new entrant must be agreed upon by all members. Australia, for example, has said it would not endorse China's application while Beijing continues to block the import of Australian goods including wine and barley.
Furthermore, the U.S., Australia, Britain, Canada, Japan, and New Zealand last month signed a statement condemning economic coercion that was widely seen as referring to China's behavior at a time when many countries are looking to lessen supply chains' reliance on Beijing.
Hopes also remain that the U.S. might reconsider its early CPTPP withdrawal, creating a dilemma for signatories given their veto power and the risk China, if admitted, could block a future U.S. entry.
"I think Japan, Australia, Canada and Mexico, they have to all act on their own. The U.S. walked away, so they shouldn't really try to restrict others to talk with other partners," said Wang Huiyao, president of the Center for China and Globalization think tank and a former member of the Chinese People's Political Consultative Conference political advisory body.
When asked if the U.S. would reconsider joining the CPTPP, U.S. Secretary of State Antony Blinken told reporters in Wellington last week it is focused for now on the Indo-Pacific Economic Framework, which aims to improve supply chains and business conduct but is not a free trade agreement.
China has backed a rival Asia-Pacific trade pact called the Regional Comprehensive Economic Partnership (RCEP), which excludes the U.S. and involves cutting tariffs rather than opening up economies and dictating labour and environmental standards as the CPTPP does.
For CPTPP members, China's application is not the only political dilemma. Taiwan is also seeking to join the pact, in a move opposed by China that member trade negotiators remain unsure about.
"It's a consensus. So ultimately it depends on what everyone decides at the table," said Natalie Black, Britain's trade commissioner for Asia Pacific.
© (c) Copyright Thomson Reuters 2023.
26 Comments
TokyoLiving
The world needs China..
Like it or not..
LOL!!..
TaiwanIsNotChina
If they can't even find reasons to keep the mercantilist CCP out, there is something seriously wrong with the CPTPP. What about the seafood bans and rare earth export limits?
deanzaZZR
Good luck getting a two-thirds vote on anything in the Senate that does not include a bunch of pork barrel spending.
deanzaZZR
What about the CHIPS and Inflation Reduction Acts which include both subsidies and protectionism?
Desert Tortoise
You can't let the thief into the store.
deanzaZZR
China is already a member of good standing with Regional Comprehensive Economic Partnership. Which country wouldn't want increased access to the 2nd largest economy in the world.
https://en.wikipedia.org/wiki/Regional_Comprehensive_Economic_Partnership
Desert Tortoise
Which country wouldn't want their ip stolen by their mandatory equity "partner" and have their business decisions second guessed by some CCP puke installed by the party to oversee your business? There I fixed it for you.
Once upon a time when Hu Jintao was CCP General Secretary and PRC President that kind of thinking seemed sensible. But today under Xi Jinping everyone is looking for the exits. The Chinese economy is not going to grow like the past and the future is increasingly bleak looking.
deanzaZZR
Sure, the days of 8-10% yearly growth is done. China will easily average 5% growth over the next decade and more. That's a trillion dollars of new wealth generated every year. Only fools would ignore that and the leaders of South Korea, Japan and other Asian countries are not fools.
We can all agree that 10 years of Xi was plenty. He won't be in charge forever.
OssanAmerica
China does not play by the world's rules. Keep them out.
"Size of the market for counterfeit products in China
Counterfeiting has grown from a 30 billion USD trade problem in the 1980s to a market worth 600 billion USD in 2021, accounting for 2.1% of all trade worldwide. 80% of the world’s counterfeits originate from China.
Despite the enactment of intellectual property (IP) regulations, trade data trends project the global counterfeit trade to exceed 3 trillion USD in the next few years."
https://daxueconsulting.com/counterfeit-products-in-china/#:~:text=Size%20of%20the%20market%20for,world's%20counterfeits%20originate%20from%20China.
OKuniyoshi
A person would have to be living in a well, if he/she does not know/think that it will be a political/geopolitical decision when it comes to China, its not trade anymore. And, its all driven by the American and mostly Western , willing or unwilling allies.
wtfjapan
The world needs China..
Like it or not..
India entered the chat, we are the alternative, like it or not
Peter14
China needs the world..
Like it or not..
kaimycahl
A drug addict can not be a drug dealer because he will smoke up all of his product, the same for China they can't do business because they can't trust each other just as a liar can't be a saint!! Dealing with China is like allowing a fox to guard a the hen house!!!
Desert Tortoise
Probably not. The Chinese consumer isn't going to rescue the Chinese economy. 70% of household wealth in China is tied up in real estate that is losing value as their population declines. The demand for housing has collapsed. Real estate construction is about 20% of the Chinese economy and that is stalled. Because families are so fearful of the future they are saving intensely. Over the past decade the proportion of the Chinese GDP generated by household spending has declined to about 40% of the total GDP where in the US it is over 75% of GDP. China's demographics combined with their reliance on construction to boost GDP and high debt load are going to greatly constrain China's growth potential.
Desert Tortoise
That doesn't seem to be Mr. Xi's plan. There is no heir apparent. Xi himself is not grooming a successor. There is some speculation that the recent firing and disappearance of Qin Gang may be related to some play Qin to become a successor that displeased Xi or caused him to feel threatened. If however Mr. Xi cannot successfully address China's demographic decline and the cascading economic problems they create he may be the last CCP leader of China.
deanzaZZR
lol. I suggest you expand your reading list beyond the Epoch Times. I have far more faith in China's business acumen and entrepreneurial skills than moribund Japan when it comes to demographic challenges.
TaiwanIsNotChina
The Japanese believed in magic robots, too, to address this problem.
Desert Tortoise
China under Xi no longer rewards innovation. Xi tells businesses to look to the sclerotic state owned industries for guidance. New apps have to be approved by the central government before they can be offered to the public. The government requires every business with more than 50 employees to employ someone from the CCP who can second guess and over ride management, boards of directors if applicable and the owner(s). The regions have lost the autonomy they enjoyed under Jiang Zemin and Hu Jintao. Xi Jinping is a Maoist true believer who has re-imposed top down central control and who favors state owned industries over private enterprise. In his speeches in China, which I recommend you read, he clearly states that capitalism has to be destroyed so China can achieve socialist perfection. He is very clear on that point in his speeches.
deanzaZZR
@Desert Tortoise Here's an oldie, but a goodie, 天高皇帝遠, Heaven is High and the Emperor is far away. If you know anything about Chinese people, they have plenty of individual ideas and plans to better themselves and their families. Don't believe Xi is pulling all of the levers. It is impossible.
@Xavier Nice, this must be the first thumbs up from Buffet towards Japan since the economic bubble. It's not likely to last.
elephant200
Good then you guys stay out of Chinese market, we are 1.4billion populations. Big enough to make all of you regrets missing your opportunity!
elephant200
Japan is your hope, good luck with that. If you guys like "Old man or Old women Economy" as your trading partner. Do you know what do they needs ? Nappies !
Rodney
If China joins America will be finished. Simple as that.
njca4
I have a good idea - let's invite China into another trade agreement so they can rip off more of our technology, flood the market with cheap goods and bankrupt homegrown industries.
I hope we're not going to do that again