China submitted its official application to join the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on September 16. Japan, the CPTPP’s chair this year, said it would consult with members to respond to China’s request. However, considering its strained relations with the majority of members, whether China will succeed in its bid to join the free trade agreement (FTA) remains unclear.
The Partnership comprises Australia, New Zealand, Canada, Chile, Mexico, Peru, Japan, Brunei, Malaysia, Singapore, and Vietnam. Barring the Latin American nations, most of these members have disputes of some nature with China.
Japan, Brunei, Malaysia, and Vietnam have long-standing territorial disputes with China in the East and the South China Seas (SCS).
Similarly, Australia’s diplomatic and trade relations with China have also significantly soured over the recent past. China has “indefinitely” suspended key economic dialogue with the country and also levelled a number of tariffs and duties against Australian imports after the Morrison government called for a probe into the origins of the coronavirus, disputed China’s claims in the SCS, banned Chinese telecom Huawei from building its 5G network, and criticised its policies in Hong Kong, Xinjiang, and Taiwan, among various other policies that Beijing has deemed anti-China.
New Zealand-China ties have also run into issues, as Auckland has criticised Beijing’s treatment of Uighur Muslims in the Xinjiang province, its draconian national security law in Hong Kong, and its unwillingness to allow Taiwan to join the World Health Organization.
In contrast, China’s relationship with Latin American countries, including Mexico, Peru, and Chile, is at an all-time high. In fact, despite their geographic proximity to the United States (US), China is the biggest trading partner of Peru and Chile and the second-largest trade partner of Mexico.
However, despite its tense ties with a majority of member countries, China is likely to succeed in its bid to join the CPTPP.
By one estimate, the CPTPP in its current form has the potential to generate annual global income of up to $147 billion. With the inclusion of China, these gains are expected to quadruple to $632 billion, which is over 25% more than what members would have made under the original TPP with the United States. In light of the huge economic gains on offer, member countries will most likely brush aside their differences and welcome China on board. This is evidenced by the fact that most Western countries, who have been the harshest critics of China, have also seemingly bent their principles to protect their economies.
New Zealand Prime Minister Jacinda Arden has said on multiple occasions that the two countries’ simmering diplomatic tensions do not have a bearing on their economic relationship, which she said remains in “good shape”. The countries have a standing FTA and Auckland has already indicated its interest in China joining the CPTPP.
Canada’s tense relationship with its second-largest trading partner, China, has also eased a little since Ottawa released Huawei CFO Meng Wanzhou and Beijing freed the two Michaels in response. According to the Chinese government-owned media house Global Times, Chinese investment in Canada has created almost 30,000 jobs in the country, explaining why the Trudeau government has been reluctant to rock the boat too hard.
The most concrete indication of Beijing’s entry into the FTA is that it is not unprecedented. The Regional Comprehensive Economic Partnership (RCEP), which was signed in November 2020, is made up of several overlapping members, including Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam.
If Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam did not oppose signing the RCEP with China only 10 months ago, there is little reason to suggest that they would do so with the CPTPP. Given how Australia’s relationship with China has deteriorated since then, Canberra may be on the fence this time around but it too has said that it remains open to “dialogue” with Beijing.
However, China’s path to the CPTPP will not be bump-free. Australia, whose total exports to its biggest trading partner have dropped by around $5.4 billion over the past year, will most likely use this opportunity to push for a relaxation of tariffs, duties, and other punitive trade measures enacted by China against its exports. In fact, Australian Trade Minister Dan Tehan has already said that Australia will oppose China’s entry into CPTPP until the Asian giant withdraws its punitive measures against Australian goods and services and resumes minister-to-minister contacts. Tehan has also said that all CPTPP members, including Australia, must be convinced of China’s “compliance” with existing trade agreements.
In fact, Australia also wrote in a letter to the World Trade Organisation last week that China’s disruptive trade practices threaten the business community worldwide and are inconsistent with its commitments to the Organization. Moreover, Tehan said that through future CPTPP negotiations, Canberra will expect Beijing to prove that it “would fully implement its commitments under the agreement [CPTPP] in good faith.”
China has already shown its readiness to comply with some of the demands of CPTPP members by relaxing restrictions on international companies. Earlier this month, its finance ministry told local governments that foreign-owned businesses’ “right to participate fairly in government procurement must be assured” as long as their products are made in China.
The application process is expected to take a year or two, which gives China some time to continue lobbying for its entry. However, as RCEP as already taught us, the pot of gold waiting for both sides at the end of negotiations will likely cause governments to ignore human rights concerns, political and ideological differences, and territorial disputes. Likewise, the strict labour and environmental regulations prescribed by the CPTPP are also likely to be ignored, as they have been in the past. All in all, the CPTPP is likely to be yet another example of diplomatic and territorial disputes taking a backseat due to China’s centrality and indispensability to global trade.
Despite Claims Otherwise, China’s Entry Into the CPTPP Appears Inevitable
In pursuit of large financial gains, current members will be willing to put aside their political differences, just as they did while signing RCEP, and give China entry into the CPTPP
October 29, 2021
SOURCE: VCG