China’s formal application to join the CPTPP, filed on September 16 with CPTPP depository state New Zealand, was an unexpected development coming after more than a year of Chinese musings about interest in applying to join the trade pact. Potential CPTPP membership for China was first formally acknowledged by Premier Li Keqiang back in May of 2020, an expression of interest reiterated by President Xi Jinping at the APEC Summit in November of last year. Many observers considered China’s interest more of a placeholder than a serious intent, but after conclusion of the Regional Comprehensive Economic Partnership (RCEP) Agreement in 2021, a 15 nation plurilateral trade pact of which China is a leading member, China has continued to put flesh on the bones of its expressed commitment to trade liberalization.
There are informed commentators who argue that Beijing is ready to meet the high standards of entry to the CPTPP, has been preparing for some time to do so, and that domestic policy adjustments would be minimal. That said, there are a number of areas of the CPTPP that will give China pause such as labor rights, disciplines on State Owned Enterprises (SOEs), and digital trade. China would not be the only member country with strong state-owned entities (Vietnam, Singapore and Mexico all fit into this category), but the role of SOEs in China’s domestic economy far outweighs the role of state capital in current CPTPP members. The Agreement brings SOEs under “WTO Plus” disciplines, including commitments regarding commercial considerations, transparency, non-discrimination and non-commercial assistance (subsidies).
China reportedly began checking with CPTPP members on technical aspects of the agreement back in May of this year and will have a detailed knowledge of what is expected. Adoption of CPTPP standards would assist domestic economic reformers within China in advancing their agenda. On the other hand, China may consider that its economic weight is such that it may be able to negotiate exceptions and special treatment, long transition periods and other concessions. If it entered formal negotiations and pursued this negotiating strategy, this could result in rifts between CPTPP members and undermine the integrity of the Agreement. CPTPP members are already issuing differing reactions regarding China’s application, with Australia and Japan expressing caution while Malaysia and Singapore were more welcoming. Malaysia’s endorsement comes with a caveat since Malaysia itself has not ratified the Agreement. Not having implemented its signed commitment, Malaysia will not have a say or play a role in negotiating with new entrants until such time as it completes ratification and brings the Agreement into force in Malaysia.
There is another potential reason for China’s formal application at this time, and that is strategic. Under this scenario, China realizes that it would be difficult to meet the standards of the CPTPP given current Chinese economic policy, yet has little to lose by making an application knowing that either (1) its application will not be endorsed by all members, yet China will have “demonstrated” its willingness to promote economic liberalization or (2) more likely, there will be cautious endorsement but negotiations will be difficult, protracted, and may not reach a conclusion. After all, China’s WTO accession negotiations took over 15 years. Under this scenario China not only buys time, but it shines a spotlight on the absence of the United States from the CPTPP, while scrambling the cards on Taiwan’s entry.
Taiwan has been preparing a CPTPP bid for some time but has proceeded with excessive caution. When the UK launched its own bid to join the CPTPP earlier this year, Taipei took this as an opportunity to further delay, wanting to take stock of how the UK’s negotiating process played out. In addition, President Tsai Ing-wen’s government is facing domestic political constraints arising from the influence of the protectionist agricultural lobby as well as health and safety concerns regarding food imports. However, within a week of Beijing formally submitting its CPTPP application, Taipei also filed its request with New Zealand. With Beijing’s foot in the door first, however, Taiwan will now have to contend with the formula that was invoked when both China and Taiwan joined the WTO. China joined first, with Taiwan following almost simultaneously. While CPTPP members are not obliged to follow the WTO precedent, it will be a powerful factor and as long as China drags out the negotiations on its own entry, the longer Taiwan will have to wait.
Having successfully checked Taiwan’s application with its gambit, China has also rubbed salt into a self-inflicted wound that the Trump Administration brought about when it cancelled U.S. membership in the CPTPP’s predecessor, the twelve nation Trans-Pacific Partnership (TPP). The TPP, U.S.-led and inspired, was often seen as a trade counterweight to China in the region. When the U.S. abandoned--on Trump’s first day in office—the TPP Agreement that it had successfully negotiated and signed, it dropped a large rock on its foot (to use a Chinese expression). The Biden Administration must now consider how best to restore U.S. economic leadership in the Asia Pacific region. Unfortunately for Biden, most Democrats have little appetite for further trade liberalization and many Republicans are still beholden to Trump’s policies, destructive as they have been for American interests.
There is a great deal of irony in seeing China use a trade pact originally developed and promoted by the United States as a means to expose the lack of U.S. commitment to the region. At the same time, China could potentially benefit from accepting trade disciplines consistent with CPTPP standards. Its application also gives the current CPTPP members some negotiating leverage with China, while at the same presenting them with a dilemma in terms of deciding how to handle Beijing’s application—and Taiwan’s.
As a strategic move, China’s application is a clever master stroke. It reflects China’s long-term view of its role in the region and is both a serious economic move and, at the same time, a strategic political gambit.
