Biggest hurdles to China entry into trans-Pacific trade pact are
political
Send a link to a friend
[July 31, 2023]
By Lucy Craymer and Joe Cash
AUCKLAND/BEIJING (Reuters) - China should be able to meet standards set
out in a major trans-Pacific trade pact, trade experts say, forcing
members to make a politically uncomfortable decision on whether to let
Beijing join a deal created to counter its growing influence.
Britain joined the Comprehensive Progressive Trans-Pacific Partnership (CPTPP)
at a meeting in Auckland this month just over two years after its
application, clearing the way for members to consider others from China,
Taiwan, Ukraine, Costa Rica, Uruguay and Ecuador.
China's application, by far the biggest economy, is next in line if they
are dealt with in the order they were received, although that is not a
given.
When asked whether there was a time frame for when the next applications
would be considered, CPTPP host nation New Zealand's Trade Minister
Damien O'Connor said: "No."
The free trade agreement has its roots in the U.S.-backed Trans-Pacific
Partnership, developed in part to counter China's growing economic
dominance. The U.S. pulled out under President Donald Trump and it was
reborn as the CPTPP with members including close U.S. allies Japan,
Australia and Canada.
China wants to be part of the CPTTP because the ruling Communist Party
places a lot of stock in its economic performance, which has suffered
recently due to various trade restrictions, and because it sees the
bloc's high accession requirements as fresh impetus for economic reform
at home, analysts say.
The absence of the world's largest economy incentivises China to meet
the high entry requirements as "the hidden motive" for Beijing is to
"defeat the scheme by the U.S. to use the CPTPP as a way to contain
China," said Henry Gao, a law professor at Singapore Management
University.
A Chinese Ministry of Foreign Affairs spokesperson said its application
was in line with efforts to deepen reform and expand trade cooperation
with other countries.
TECHNICAL HURDLES
The CPTPP requires countries to eliminate or significantly reduce
tariffs, make strong commitments to opening services and investment
markets and has rules around competition, intellectual property (IP)
rights and protections for foreign companies.
"The conventional wisdom is... that 'Oh well, it's too high level and
China with its state-owned enterprises (SOE) couldn't get into that
agreement. So therefore it's not going to happen.' I think that is
completely wrong," Tim Groser, a former New Zealand trade minister and
chief trade negotiator said.
He said there was a desire by at least some in China to use the
agreement to drive reform such as in SOEs.
However, China offers SOEs subsidies and could struggle to meet the
requirement to be an open and market-driven economy. And while IP rights
are improving, there continue to be high-profile cases of IP theft from
Western companies.
The CPTPP also has a focus on digital trade and prohibits forcing
foreign companies to store local data in country - for example, in
China. Beijing's data sovereignty laws have only become tighter in
recent years.
"If a country's economies rules are really quite far apart from what
CPTPP says, then inevitably there's quite a big question about whether
they could undertake really, really massive reforms," said Graham
Zebedee, Britain's CPTPP chief trade negotiator, without commenting
specifically about China's application.
[to top of second column]
|
China's Ambassador to New Zealand Wang
Xiaolong speaks at the China Business Summit in Auckland, New
Zealand July 17, 2023. REUTERS/Lucy Craymer/File photo
Trade experts noted the pact does have exemptions, such as
protections for national security, and China showed it could
liberalise when it joined the World Trade Organization.
"The CPTPP is important for us. Not because it'll be easy but
exactly because it will be difficult and tough," China's Ambassador
to New Zealand Wang Xiaolong said in a recent speech. He said
potential accession was an "impetus to the domestic reforms" that
would be undertaken.
SHADOW OF POLITICS
Ultimately the decision will be political rather than technical,
because a deal to allow a new entrant must be agreed upon by all
members. Australia, for example, has said it would not endorse
China's application while Beijing continues to block the import of
Australian goods including wine and barley.
Furthermore, the U.S., Australia, Britain, Canada, Japan, and New
Zealand last month signed a statement condemning economic coercion
that was widely seen as referring to China's behaviour at a time
when many countries are looking to lessen supply chains' reliance on
Beijing.
Hopes also remain that the U.S. might reconsider its early CPTPP
withdrawal, creating a dilemma for signatories given their veto
power and the risk China, if admitted, could block a future U.S.
entry.
"I think Japan, Australia, Canada and Mexico, they have to all act
on their own. The U.S. walked away, so they shouldn't really try to
restrict others to talk with other partners," said Wang Huiyao,
president of the Center for China and Globalization think tank and a
former member of the Chinese People's Political Consultative
Conference political advisory body.
When asked if the U.S. would reconsider joining the CPTPP, U.S.
Secretary of State Antony Blinken told reporters in Wellington last
week it is focused for now on the Indo-Pacific Economic Framework,
which aims to improve supply chains and business conduct but is not
a free trade agreement.
China has backed a rival Asia-Pacific trade pact called the Regional
Comprehensive Economic Partnership (RCEP), which excludes the U.S.
and involves cutting tariffs rather than opening up economies and
dictating labour and environmental standards as the CPTPP does.
For CPTPP members, China's application is not the only political
dilemma. Taiwan is also seeking to join the pact, in a move opposed
by China that member trade negotiators remain unsure about.
"It's a consensus. So ultimately it depends on what everyone decides
at the table," said Natalie Black, Britain's trade commissioner for
Asia Pacific.
(Reporting by Lucy Craymer in Auckland and Joe Cash in Beijing;
Editing by Jamie Freed)
[© 2023 Thomson Reuters. All rights
reserved.]This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |