Behind the whys and wherefores of China's CPTPP application
ALTHOUGH Chinese President Xi Jinping announced his decision to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) last November, Beijing's formal application last month seems to have flummoxed many. Some think it is meant to be a joke. Others are shocked by its perceived audacity - China wants membership of a trade grouping that was originally, and specifically, designed by the US to exclude the country.
So how did things get to this point? Yes, the Obama administration did want to set the rules of the road for trade and investment among Pacific economies without China. But the Trump administration abandoned the entire project. It then fell to Japan to persuade 10 others in the region to sign up to a revised version in 2018. The trade pact links Singapore, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Vietnam.
A clue to Beijing's gambit may be in the fact that Taiwan also formally applied to join the CPTPP a week later under the name that it uses in the World Trade Organization - the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu. Since 2018, Taipei has been working assiduously to ensure that its domestic laws align with the agreement's requirements.
Well before Beijing showed any interest in the pact, Australia had explored the possibility of a free trade agreement (FTA) with Taiwan. That proposal was dropped under pressure from China as an FTA would have implied that the island enjoyed a sovereign status. So Canberra switched strategy and indicated that it deemed Taipei a fit candidate for CPTPP membership, seeking refuge from Beijing's wrath in numbers. The pact is not fixated on sovereignty as a basis for economic cooperation; it was formulated with the possibility of membership for both Taiwan and Hong Kong. And there can be no doubt Beijing had advance intelligence that Taipei was about to act and, given Beijing's policy of blocking Taiwan's participation in international organisations, wanted to get a foot in the door first.
That explains Beijing's timing. Beijing has other motives as well. Mr Xi's announcement last November was made days after the conclusion of the Regional Comprehensive Economic Partnership (RCEP). A shallower agreement, but one that brings in all of Asean and its major trade partners, the RCEP is expected to come into force on Jan 1, 2022. China hopes that the RCEP will fix Asean within its trade orbit. At the same time, Beijing's aims to be a participant in all trade deals in the Pacific region, the better to have a handle on the rules of every trade network. To this end, China's State Council appointed an international trade representative - its top negotiator of trade agreements - after the post had been left vacant for more than two years. Its Ministry of Commerce made a Chinese version of the trade pact available on its website.
It has been argued that China's state-owned enterprises would pose an insurmountable obstacle to its accession to the CPTPP. But, if and when the talks get going, Beijing will no doubt point to state-owned sectors in both Vietnam and Mexico and press its case for a similar carve-out.
Unfortunately for Beijing, the greatest obstacle in China's way may be Washington. The CPTPP works by consensus; every member must agree to admit any newcomer. But both Canada and Mexico have a trade pact with Washington which contains a "poison pill" clause that, in effect, gives the US a veto over any other trade deal that the other two might want to enter. The tensions between Beijing and Washington could prove to be the biggest obstacle to China's CPTPP membership.
