The University of Auckland’s Manqing Cheng takes a look at the Chinese government’s considerations on joining the CPTPP despite domestic opposition
Comment: China made a bid to join the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) last week despite some domestic opposition.
The official application to join the 11-nation free trade agreement was made by Commerce Minister Wang Wentao to Damien O’Connor, Minister for Trade and Export Growth. (New Zealand is Depositary of the CPTPP which means applications to join are lodged here.)
The reasons for the opposition are diverse. First, some consider it’s enough for China to focus on facilitating existing free trade associations. Second, that China will face immense difficulties in joining the CPTPP. For example, some members will not accept China; the US, though not in the CPTPP, would obstruct by influencing its allies such as Japan; others may also reject on the grounds that China cannot meet the high standards set by the agreement. Third, that the CPTPP rules were formulated by the US and will not benefit China.
Nevertheless, China is going ahead with its application. This article analyses the Chinese government’s considerations on joining the CPTPP despite this domestic opposition.
The first consideration is that China would gain huge economic benefits. The Peterson Institute for International Economics calculates “Chinese membership in the CPTPP would yield large economic and political benefits to China”, and the CPTPP’s estimated global income gains of $147 billion would quadruple to $632 billion with China’s participation.
Secondly, CPTPP membership would contribute to China’s domestic reform and promote opening up with institutional guarantees. This occurred with China’s entry into the World Trade Organisation, which brought reforms to laws, regulations, policies, measures and practices that were required to meet membership commitments.
In other words, joining an external agreement with high standards forces internal reforms.
Thirdly, membership of the agreement would enable China to participate in the construction of a global trade governance system. At present, there are three possible paths for Asia-Pacific economic integration: Free Trade Area of the Asia-Pacific (FTAAP), Regional Comprehensive Economic Partnership (RCEP) and the CPTPP.
China is already involved in FTAAP and RCEP. If it joins the CPTPP, it will likely play a part in consolidating these three paths into the Asia-Pacific economic integration. CPTPP membership will also help China to negotiate other high-level free trade agreements in the future, for example China-Japan-Republic of Korea agreements with higher standards, and free trade agreements with more developed economies.
On the other hand, WTO reform has become an inevitable trend. The key content of the reform is the remoulding of trade rules, and some CPTPP rules may also be incorporated into the multilateral level of WTO in the future. The negotiation of acceding to the CPTPP is also a process of enhancing the acceptance capacity of rules for China to play a proactive role in the later WTO reform.
If China’s entry into WTO represents enrolling in existing multilateral trade rules, then joining the CPTPP signifies taking initiative in the renewal of trade rules. Among the existing high-standard free trade agreements, only the CPTPP has largely distinct members. There are developed and developing economies, capitalist and socialist states, super and small powers, North and South American countries, and countries in Asia and Oceania. If China wants to integrate into a high-standard trade agreement to strengthen its ability to engage in global trade governance, CPTPP is the best choice at present.
Fourthly, CPTPP membership would help with possible China-US economic frictions in the future. For China, there are plenty overlaps between demands of the US and CPTPP rules, and the improvements made by China to comply with the CPTPP rules will serve better implementation of bilateral agreements between China and the US.
Just as during the Obama administration, the US intended to take TPP (the Trans-Pacific Partnership Agreement) as a tool to restrain China, CPTPP may be used by the US to oppose China at any time due to its re-entry.
If China joins, the instrumental effectiveness of the CPTPP for the US could be greatly weakened. The US has officially seen China as a rivalry and China’s rise as a threat. Since the US keeps its eyes on the Indo-Pacific and is anticipated to take big actions soon, it seems more necessary for China to further connect with the world to hedge and prevent.
Finally, in the time before applying to the CPTPP, China has actively advanced the RCEP negotiations, built the Belt and Road initiative and reserved efforts for the CPTPP negotiations. Huge regional trade agreements are harder to negotiate than regular ones.
The high standard of CPTPP is undoubtedly a challenge to China’s existing rules and that, coupled with the influence of the US and competing interests of other countries, the negotiation process will be exceedingly difficult. Therefore, before officially embarking on the CPTPP negotiations, China opted to sort out and reinforce its own international economic governance projects. And now, it appears the time is ripe.
