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Perspectives: China’s CPTPP accession raises fundamental questions about its place in world trade

China’s ambition to join the eleven-country Asia Pacific pact CPTPP seems genuine. It will now be up to other countries to decide the extent to which they are comfortable with its engagement in the world trade system.

Last week’s announcement that China wished to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership caused a considerable stir.

Most of the immediate comments were dismissive. Some think this was a response to the previous day’s announcement of an Australia-UK-US defence partnership or simple wishful thinking.

Such an attitude displayed lack of knowledge in Europe and the United States of China’s trade policy. Indeed, China’s president Xi Jinping already announced at the APEC summit in November 2020 that China was considering joining the agreement, and it seems the formal accession letter may have been sent before the defence agreement.

Similarly, the idea that China is indulging in wishful thinking as it cannot meet the requirements of ‘a high standard trade agreement’ does not fully stand up to scrutiny. The text of the CPTPP dates back several years to a predominantly United States model, and there is no single clause that immediately seems to present an insurmountable obstacle to China joining.

It could also be noted that the other current accession country, the United Kingdom, has some issues with the text, as well as broader political question marks about whether it belongs in a Pacific agreement. This brings to the fore the political question, as to whether CPTPP members want China to join, which might rather expose divisions on the agreement’s main purpose.

In turn, this leads to the broader question as to the trade policy of the US, UK, and EU towards China. Recently it seems that the US in particular does not seem comfortable with China being a global trade player. Their application to CPTPP now means choices need to be made.

China’s trade policy is not that dissimilar to that of the UK

The issue with China’s participation in the world trade system is evidently not about its trade policy, which is rather orthodox. It already has FTAs with a number of CPTPP members including Australia, New Zealand, Singapore, and Chile. There are also agreements in place with Switzerland and Iceland.

Showing a determination to complete agreements only otherwise seen in post-Brexit UK, China also signed in recent years a mini agreement with the US under President Trump, an investment agreement with the EU, and the Regional Comprehensive Economic Partnership. Like the UK, it almost seems like the countries and subjects are irrelevant, China just wants deals.

One of the reasons for all of this activity is surely as a response to the perception after 2013 that the US were negotiating the then TPP, plus TTIP with the EU, as China containment. Thickening economic relations in response seems like a logical response, with the bonus since 2016 of the US offering little competition.

Open trade remains important to China

The opening of the Chinese economy predated their accession to the WTO in 2001 but given growth in the last 20 years the country seems to have benefitted from more open trade. Such growth has however encouraged western populists to believe it came at the expense of the US and Europe, with unfair and unlawful practices such as intellectual property theft contributing.

The evidence linking China’s growth and Europe’s left behind areas is sketchy: technological change may be a more likely culprit. Nonetheless, the concern has grown that the country has not kept to their WTO accession commitments, while at the same time threatening more of ‘our’ jobs for example through leadership in electric vehicles.

There is evolution in the Chinese economy to be considered, most notably the ‘dual circulation strategy’. Details of this are sketchy but it seems to involve both remaining internationally competitive while also building up domestic demand supply. This of course sounds remarkably similar to US and EU policies to develop resilience while still being global players.

Tensions between the domestic and international are one of the economic policy themes of the moment, but there are particular issues in China. One aim of their economic development is to develop international brands, but of late there seems to have been crackdowns on some of these, most notably Alibaba, possibly because independent brands may also pose a political threat.

At the same time there have also been positive legal developments, such as a data privacy law. The dream of some, of China being incentivised to reform through joining trade agreements, is not yet fully expired – though it seems very optimistic.

CPTPP accession will be a political choice

Economically many fears about China can be dismissed as simple protectionism, though the scale and impact of forced labour feels more serious. It is not protectionist to have genuine political concerns in particular around government activities in Xinjiang, while wider security concerns are also present but not always well defined.

It is political issues that have seen parliamentarians in the UK and EU sanctioned by the Chinese government, with clear trade policy effects. The Comprehensive Agreement on Investment seems unlikely to be ratified as a result. There have also been angry statements from official Chinese media and diplomats making matters worse.

Meanwhile Australia has been the apparent victim of politically motivated anti-dumping duties on barley and wine which are apparently political in origin. Appealing for their support to join CPTPP after this seems optimistic.

So, it is likely that we have a situation where China could technically meet the accession criteria for CPTPP but has recently been exacerbating existing distrust.

It is hard to envy CPTPP countries trying to find a path through this without a fully detailed accession process.

Similarly, it is easy to see UK accession delayed simply by trying to resolve issues related to China.

Ultimately whether China can accede to CPTPP is a difficult political decision member countries must take. It returns to the question of whether our economies should remain open to China, go back to the idea of encouraging reform, or seek to withdraw access it already has. There is no simple answer that any country seems to have right now.

 

 David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

 

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