China throws wrench in Trans-Pacific trade pact
VSrequest from Hina adhere to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (cptpp) landed on the desk of Damien O’Connor, New Zealand Minister of Commerce, on September 16. The location was a fitting nod to the history of the deal. In 1999, a meeting between trade ministers of two smaller exporting powers, New Zealand and Singapore, kicked off what has become one of the world’s largest free trade areas. . Timing was also important. China’s request came just a day after it was announced that America and Britain would help Australia build a fleet of nuclear-powered submarines.
While the United States is still the dominant military power in Asia, China’s economic weight is now unprecedented. The latter’s attempt to join the 11-member trade alliance, as far-fetched as it seems, raises cptpps geopolitical importance beyond anything imagined more than two decades ago. He also underlines the folly of an America folded in on itself abandoning the precursor of the pact, the Trans-Pacific Partnership (tpp), in January 2017. The cptpp, a slight modification of this initial agreement, entered into force at the end of 2018. It is one of the most advanced trade agreements in the world.
When New Zealand and Singapore first proposed a trade alliance out of frustration at the slowness of the World Trade Organization (omc), China was not even a member of the World Trade Body yet, and its economic weight was low compared to today. Its share of world merchandise exports was 3.4%. Last year, that figure rose to 14.7%, making China the only country in the world with a double-digit share.
When America was still actively involved in building the tpp alliance, it was presented – and sold to the Americans – as a tool to prevent China from exerting influence over trade rules. It’s still hard to imagine China’s bid to be successful in the short term. The cptpp is a detailed agreement requiring deep economic integration, and new members must be admitted unanimously. âChina is surprisingly close to the meeting cptpp conditions in many areas. But where there are gaps, they are huge, âaccording to Jeff Schott of the Peterson Institute for International Economics (tart), a think tank in Washington, direct current. He believes that the country has made enormous progress in recent years in the area of ââintellectual property and investment rights. But the predominance of public enterprises (soes), weak labor rights and concerns about data privacy leave a lot of ground to catch up.
Treatment of soes is a perpetual scarecrow of many of China’s trading partners. To become a member of cptpp, Vietnam in particular has had to accept restrictions on support for its own state-owned enterprises and increased transparency on their operations and structure, which China should reflect. Data governance is a case where China is moving, on the contrary, in the opposite direction from that which would be necessary for accession. The cptpp countries are committed to promoting the cross-border transfer of information. In contrast, China has become the global example of data localization: a data protection law passed last month will make it harder for foreign companies to transfer data out of the country.
Existing members of the pact are also unlikely to accept admission on a promise of upcoming changes. Relations between China and many of its major trading partners and neighbors have deteriorated in recent years, making membership a much more difficult diplomatic sell than joining the omc, which it did in 2001. At the time, says Kazuhito Yamashita, a former Japanese trade negotiator who participated in the accession talks, optimists argued that China should be allowed to join the omc and that the problems could be corrected later by law enforcement. The opposite opinion was that it would be very difficult to change things in a communist economy. “It was true.”
But even if his chances of joining the cptpp are soon thin, there may be other reasons for China to announce its intention. Most countries did not aspire to become members of an anti-Chinese bloc. Indeed, some might even look forward to the potential economic gains of having China on board. When negotiations for US membership began in 2008, the US was a larger trading partner than China for several of the countries that are now members of the agreement – New Zealand, Peru and Chile, for example. Today, among cptpp Members only, Canada and Mexico trade more with America than with China. A tart article published in 2019 estimated the global income gains due to cptpp now it is $ 147 billion a year. If China were included, that would increase to $ 632 billion. The benefits for many members would be over 1% of their actual income.
But for other governments, relations with China have deteriorated to the point that its admission borders on the inconceivable. âCountering China’s political, economic and cyber influence is the motivation behind many Australian and Japanese policies. The strategic math on China is solidifying in both countries, âsaid Nigel Cory, trade expert at the Information Technology and Innovation Foundation in Washington, direct current, and a former Australian diplomat.
Driving a wedge between countries that view the bid primarily as an economic boon and those that view it primarily as a political threat can prove diplomatically useful for the Chinese leadership. “It is motivated by the desire to put sticks in the wheels, to have fun,” said Charles Finny, a former New Zealand diplomat who launched the country’s trade negotiations with China in 2004.
China is already the largest member of the Regional Comprehensive Economic Partnership, a larger but shallower trade deal concluded last year. It contains fewer membership conditions, but unlike the cptpp includes all major Southeast Asian economies, as well as South Korea. Joining both, if it were to happen, would make the country an increasingly formidable leader in trade diplomacy in Asia.
From outside the cptppAmerica has no direct bearing on the outcome of candidate discussions. The country has influence, of course, and particularly with its immediate neighbors. Its free trade agreement with Mexico and Canada requires one of the three to consult with the others before entering into negotiations with a country with which neither currently has a trade agreement. Its agreement on submarines with Australia could also strengthen the latter’s determination to promote American interests in the region, even economic ones.
Most bets are that China’s bid to join the deal will fail. And yet, not so long ago, few would have bet that China would show more interest in membership than America. While demand means nothing else, it remains a vivid illustration of how quickly America’s trade influence in Asia has waned.