China Formally Applies to Join Asian Trade Deal Trump Abandoned
(Bloomberg) -- China has applied to join an Asia-Pacific trade pact once pushed by the U.S. as a way to isolate Beijing and solidify American dominance in the region.
The country submitted a formal application letter to join the deal, known officially as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, according to a statement late Thursday in Beijing.
The treaty was originally envisioned by the U.S. as an economic bloc to counterbalance China’s growing power, with then-President Barack Obama saying in 2016 that the U.S., not China, should write the regional rules of trade. His successor Donald Trump pulled out of the deal in 2017, with Japan leading the revised and renamed pact to a successful conclusion the following year.
The application is certain to spark a reaction from Washington, where a number of lawmakers had already expressed concern about China’s efforts to join. There have been no signs from the administration of President Joe Biden that it’s interested in rejoining the deal.
“It’s a perfectly rational calculation by the Chinese leadership,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy in Brussels. “Given how the Chinese market is driving the economic recovery, their cards will never be this strong again. Or rather, the cost of rejecting China’s application will never be this high.”
The application underlines the increasingly complicated geopolitical situation in Asia, where China is the dominant economy and main trading partner for many, but competition with the U.S. is getting worse. Australia, Singapore, New Zealand and Japan are CPTPP members and close allies of the U.S., but along with China they’re also members of the Regional Comprehensive Economic Partnership, which was successfully negotiated last year.
Military and diplomatic tensions between China and Japan, the largest economy in CPTPP, have been increasing due to Beijing’s increased military presence around islands that both nations claim as their own, Chinese threats to Taiwan, and other factors.
Regarding China’s application, “Japan must look properly at whether it is ready to reach the high level of TPP,” Foreign Minister Motegi Toshimitsu said in Tokyo Friday. “We will confer with other member countries and deal with this, taking into account strategic issues,” he said, adding that the U.K.’s application would be dealt with first.
Taiwan had also expressed interest in joining CPTPP and had been talking with members of the group, with some Japanese ruling party lawmakers last month supporting its entry. However, the Chinese application will complicate that as Beijing opposes Taiwan joining any international organization or group.
Taiwan will continue to talk to the members and will apply when there is consensus, the island’s Minister of Economic Affairs Wang Mei-hua told reporters Friday. China has surprised CPTPP members with its sudden bid, according to Wang, who said there were concerns whether China could meet the deal’s high standards.
Tensions with Australia
The bid from China to join CPTPP was made less than a day after Australia, the U.S. and the U.K. announced they would form a more cohesive defense arrangement to offset China’s rising military prowess. China attacked that agreement, but it will now need to negotiate with Australia and probably the U.K. about CPTPP accession.
Any talks won’t be simple -- China and Australia are already in the midst of an economic and trade dispute, which has seen Beijing apply tariffs or block billions of dollars of Australian exports, despite the two nations having a free-trade agreement. Still, China last week publicly lobbied Canberra for its support to join the deal.
Australian Trade Minister Dan Tehan said Friday that all 11 member nations would need to be in agreement for negotiations to start, and pointedly noted China would have to talk directly to the other nations. Australia ministers haven’t talked to their Chinese counterparts since early last year, and Tehan is still waiting for a response to a letter he sent Commerce Minister Wang Wentao in January.
After China’s application was submitted, Wang had a follow-up call with his counterpart Damien O’Connor of New Zealand, which is the depositary nation for the agreement.
“China will, according to procedures of CPTPP, engage in necessary consultations with members,” Chinese Ministry of Foreign Affairs spokesman Zhao Lijian said in Beijing. China joining the deal will help regional economic recovery after Covid-19, and the application “demonstrates China’s firm resolve in opening up and promoting regional economic cooperation,” he said.
Canada is another CPTPP member that’s in a dispute with China, with one Canadian citizen jailed for 11 years and another still awaiting sentencing in cases that are seen as linked to the arrest in Canada of the daughter of the founder of Huawei Technologies Co.
A number of members of Congress have been calling for the U.S. to either rejoin the CPTPP or to be more active on trade diplomacy in the region. However, the Biden administration hasn’t announced any concrete trade policies for the region, although there are reports it’s discussing a digital trade deal covering Asia-Pacific economies.
“The future of technology, trade and defense is either going to be led by the Chinese Communist Party or by the United States and our allies,” U.S. Senator Ben Sasse said in response to the news. “If China sees the value in building alliances across the Pacific, why can’t the United States? Let’s get back into a position of leadership instead of retreat.”
A former U.S. trade official said China’s membership in the group isn’t assured given its trade regime and direction toward more central control of its economy.
“It’s extremely difficult, if not impossible, to see how they could embrace the CPTPP rules governing state-owned enterprises, labor, e-commerce, the free flow of data, among others, as well as comprehensive market access commitments,” said Wendy Cutler, vice president of the Asia Society Policy Institute and a former acting deputy U.S. Trade Representative.
Japanese Finance Minister Aso Taro also expressed doubt that China could meet the requirements.
“Is China in a state where it can join?” Aso asked Friday in Tokyo. “From the perspective of the 11 nations that will be accepting new members, right now we’re just at the point of asking ‘are we going to do this? Really?’”
Others were more confident China will be successful.
“In the long term, they will be able to work out some of the differences, especially as these countries realize that China is going to be the biggest market for them and the U.S. is not going to join anytime soon,” said Henry Gao, associate professor of law at Singapore Management University, who has written extensively on Chinese law and the World Trade Organization.
But it won’t happen anytime soon, he said, as “the accession process would probably drag on for a couple of years.”
The U.K. applied to join first and is seeking to conclude talks to join by the end of 2022, the former British trade secretary said in August.
The CPTPP is one of the largest free-trade agreements in the world, behind RCEP, the U.S.-Mexico-Canada Agreement, and the European Union-Japan Economic Partnership Agreement. The 11 signatories of the CPTPP have combined economic value worth about $13.5 trillion, or about 13% of global gross domestic product.
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With assistance from Bloomberg