CPTPP: keep it about trade
China and Taiwan's applications must be judged separately on their economic merit and commitment to reform. Doing any less will threaten free trade in the region
Today I wrote an in-depth piece on the CPTPP. Now that China and Taiwan are both in the running to join the CPTPP, one of the world’s most ambitious economic projects could become the latest to fall victim to zero-sum superpower power struggles. There is a way to handle the dual application though. An approach that upholds the integrity of the pact though, and ensures it continues to deliver prosperity for the region. I outline this below.
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CPTPP: keep it about economics
Now that China and Taiwan are in the running to join the CPTPP, ‘One China policy’ politicking could threaten the primacy of economics in considering new members for the group. As the most comprehensive next-generation integration effort in the Asia-Pacific region, CPTPP members should vote on each country’s application based on its economic merits and its commitment to market reform.
Only by doing this can the pact remain a bastion for trade liberalization at a time when superpowers’ zero-sum games for hegemony threaten regional integration.
Enter the dragon?
Experts disagree about how ready China is to join the pact.
Mireya Solis at Brookings says the CPTPP has chapters on labor and state-owned enterprises mandating freedom of association, eliminating all forms of forced labor, and establishing disciplines on the commercial activities of public enterprises, which Beijing would struggle with.
The CPTPP also covers the digital economy, requiring free data flows and restricting data localization. Seeing Article 31 of China’s new Data Security Law requires data be stored within the country, and that cross-border transfers are subject to security review measures, China would struggle here too.
The CPTPP also forbids governments from forcing disclosure of tech firm’s source code. Yet recent ambush investigations into ride-hailing app Didi’s data troves by Chinese authorities do not bode well for this either.
Despite the high bar though, Long Yongtu, the trade official who helped negotiate China’s WTO entry, claims the pressure brought by the thresholds for CPTPP accession will benefit Beijing by inspiring it to pursue further reform in key areas.
As for those areas it refuses to reform, like SOEs, other analysts point to fellow socialist Vietnam, who got exemptions for SOEs. Given SOEs importance to China, “it is only reasonable to anticipate that China will push hard for similarly extensive exceptions under the CPTPP,” Henry Gao and Weihuan Zhou.
Solis counters that, compared to Vietnam, China’s “mammoth size is bound to make many CPTPP members wary of extending similar flexibilities.”
Regardless of obvious gaps, China’s application should be considered seriously with a view to the long-term prospects of reform. As Dominic Maegher writes, there should be an extended consultation process with China and members should “feel no pressure to rush this process.”
The same should be true for Taiwan, though, due to its preparedness, the consultation probably need not be so long.
At the ready
No matter what metric you look at, Taiwan is currently a better fit for the pact than China.
Taiwan ranked sixth in the world in the Heritage Foundation’s 2021 Index of Economic Freedom. China was 107th. The current CPTPP members’ average ranking is 31, and none fall below 100.
There is overwhelming local support for Taiwan’s entry to the pact and Taiwan’s leading trade negotiator has reported it will add 2% to GDP, though the country's agriculture and auto-parts industries will be likely hit by increased competition.
John Deng, Taiwan’s head trade negotiator, says the government has been steadily reforming industry regulations with an eye to ascension for years. The several remaining amendments in the pipeline and are almost complete, he said.
This is not the first time Taiwan has been ready to join a trade group ahead of Beijing.
On January 1, 2002, Taiwan joined the WTO, just three weeks after China.
Taiwanese diplomats say their country was economically ready to join far earlier than China, yet Beijing refused to let Taipei to precede it. This meant Taiwan had to wait until China completed extensive negotiations on reforms. Taiwan’s WTO membership bid was officially approved the day after China got the same greenlight.
Were this to happen again now it would needlessly hold up Taiwan and hampen the development of the group since China’s reforms will clearly take longer to implement.
Again, just as CPTPP members should keep ‘One China’ politics separate from the economics of each candidate, each applicant’s timeline for acceding should also be independent of the other’s. As Maegher writes “neither Taiwan’s nor any other country’s application should be delayed pending progress elsewhere.”
Unfortunately, given the centrality of Taiwan to the intensifying U.S.-China rivalry, keeping the two applicants separate is no mean task.
Middle Powers
This free trade pact has been hijacked to serve superpower’s geopolitical agendas before, but against all odds it has grown and evolved, thanks to middle powers in the region who have upheld the mantle of free trade for the benefit of all.
In the beginning, there were four — Brunei, Chile, New Zealand, and Singapore. The Trans-Pacific Strategic Economic Partnership Agreement, or TPSEP, as it was known then, — the progenitor of the TPP and now the CPTPP — was signed in 2005.
It wasn’t until 2009 when the US entered the scene that the pact morphed into the TPP and, under American leadership, became explicitly exclusive of China. As Obama said, the pact was to ensure the US and not China “is the one writing this century’s rules for the world’s economy.”
Ultimately though American policymakers bit off more than their constituents could chew as the 2016 election saw both Trump and Clinton stoking anti-TPP sentiment on the campaign trail to win votes, the pact’s fate looked bleak. On his first day in office, Trump withdrew the US, dealing a decisive blow to the pact just after all other members had signed on.
The intermediary years saw the remaining eleven countries pick up the pieces and forge ahead with leadership shown by middle powers, especially Japan. Recast as the ‘CPTPP’, the pact kept most of the same ambitious targets, while also removing some provisions pushed by Washington that were unpopular among the other participants.
Although the group was stung by American withdrawal after making politically painful concessions on their domestic fronts, members kept the door open to the US should it decide to rejoin again.
Now that Beijing has come pounding on the door, it could be China’s turn to make a cynical power move to isolate the US, undermining the pact’s principle of openness in the process. Weary of China’s intentions, the US may yet rejoin in a last minute attempt to regain the influence ground it conceded in 2016. Yet were the pact to descend into another US-China battleground, it would be disastrous for liberal trade in the region.
In an ideal world, having the US and China join would balloon the reach of the CPTPP, expanding its new level playing field to cover the vast majority of global trade, and triggering deeper economic integration. This may sound like a fantasy given the present rivalry between the two, but it remains a distant possibility if member states were to stand firm and insist newcomers, regardless of their size, uphold the pact’s high standards.
The same now holds true in judging the applications of China and Taiwan.
Despite the enormity of the pressures, CPTPP members must resist the pull toward zero-sum, either-or politicization of the applications of China and Taiwan and insist on assessing each applicant on its own merits. Only then can the promise of an inclusive and principled vision for trade for the world’s most dynamic region be upheld.
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- Liam
Founder of Policy People