China submitted a formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in September last year. Beijing says its application is consistent with efforts to reform and open up the economy, but it is unclear whether China can meet the trade pact’s standards. Kandy Wong specially for the South China Morning Post.
What is the CPTPP?
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is the successor to the Trans-Pacific Partnership (TPP), which was a key plank in the Obama administration’s “Pivot to Asia” strategy that aimed to create an economic counterweight to China’s regional influence.
The CPTPP emerged after former US president Donald Trump withdrew the country from the TPP in 2017, soon after taking office.
Japan led negotiations with 10 other countries, including New Zealand, Australia, Brunei, Canada, Chile, Malaysia, Mexico, Singapore, Peru and Vietnam for the new trade pact.
The deal was signed in March 2018 and came into force in December that year. It incorporated nearly all the provisions of the original TPP relating to anti-corruption, competitive bidding for government procurement, adherence by state-owned enterprises (SOEs) to market principles, some transparency and due process, as well as commercial data flows across borders with little state interference.
As one of the world’s biggest multilateral trade agreements, it has high standards for investment, financial services, intellectual property, the environment and labour rights.
Is China a member of the CPTPP?
No, but it submitted a formal application to join the CPTPP in September last year.
In February, commerce ministry spokesman Gao Feng said China has been in discussions with members of the Pacific Rim trade deal about entry.
Japan, Australia, New Zealand and Canada are open to the possibility, Maria Adele Carrai, an assistant professor of Global China Studies at New York University Shanghai, wrote in an analysis for the Hinrich Foundation in April.
But they have raised concerns about China’s ability to comply with reforms needed for accession, which can prolong the process, she said.
Current members could also be influenced by the US, she added, despite not being part of the trade agreement.
For entry, there must be consensus among all 11 members.
Who else has applied to join the CPTPP?
Taiwan submitted a bid to join the trade bloc six days after China. Beijing, which considers the self-ruled island a breakaway province to be reunited by force if necessary, opposes moves by Taipei to join any international agreements and organisations.
Britain submitted an application to join the pact in February 2021. It took the country about seven months to have its first meeting with a CPTPP working group in September last year.
Why is China interested in being part of the CPTPP?
China’s application is viewed in some quarters as a “spoiler” to ruin the trade bloc’s momentum, as it does not need or want to participate in the CPTPP, Carrai said.
Joanna Shelton, a non-resident senior associate with the Economics Programme at the Centre for Strategic and International Studies, said on the think tank’s website in November that China’s formal application to join the CPTPP, a day after Australia, Britain and the US announced the so-called Aukus defence alliance, was a clear effort to divide Washington from its allies and partners.
Wang Xiaohong, deputy director of the information department at China Centre for International Economic Exchanges, said in an interview with the Shanghai Securities News in October that China’s participation in the deal could deepen domestic reforms, such as enhancing innovation and efficiency, ensuring supply chain resilience and developing the digital economy.
What are the benefits for China in joining the CPTPP?
Wang Shouwen, China’s vice commerce minister, said in March Beijing’s intentions to join are consistent with the country’s efforts to reform and open up the economy.
Membership would help other countries strengthen cooperation with China for trade in goods and services, investment and in other areas, he added.
The CPTPP could increase China’s gross domestic product (GDP) by 0.74 to 2.27 percentage points and its exports by 4.69 to 10.25 percentage points, according to a model developed by Li Chunding, a professor at the school of economics and management at China Agricultural University.
GDP will grow by 0.25 percentage points and exports by 0.09 percentage points if China does not join the trade pact, the model showed.
Chinese scholars are positive about the country’s involvement in the CPTPP, but concerned about its ability and commitment to meet the rules of the trade pact, Carrai said.
What challenges does China face for entry into the CPTPP?
There are strict provisions banning data localisation and prohibiting the forced transfer of source code, according to Carrai, which conflicts with China’s restrictive data laws.
China’s cybersecurity law stipulates that personal information, as well as important data collected and generated by critical information infrastructure operators should be stored within the territory, she said.
But the specific scope and extent of national security and personal information protection are not clearly defined.
China’s’ support for SOEs, through industrial subsidies and other trade distorting practices, does not meet CPTPP standards, which highlights more neutral competition, Wang Xiaohong told The Paper in March.
Disclosure of information by SOEs, such as shareholding structure and which board members also have government responsibilities, is not comprehensive at the moment, Wang said.
The country’s anti-monopoly law and anti-unfair competition law are also not implemented equally in every sector of the economy, she added.
Other hurdles for China include the CPTPP’s commitment to eliminate forced labour and allow freedom of association, neither of which is part of the rival Regional Comprehensive Economic Partnership (RCEP), Carrai said.
China has only one legal labour union and its effectiveness is questionable, she said, and there is room for improvement on issues like forced labour, worker discrimination and conditions, as well as employment security.
What is RCEP and how is it different to the CPTPP?
RCEP is a free-trade agreement between the 10-member Association of Southeast Asian Nations (Asean), plus Australia, China, Japan, New Zealand and South Korea.
RCEP, which took effect for most of its 15 members on January 1, is the world’s largest free-trade agreement, covering nearly a third of the global population and about 30 per cent of its GDP.
The trade deal aims to consolidate Asian production bases and markets for maximum efficiency, while the CPTPP focuses on combining production hubs from many countries in the Americas, Europe and Asia, according to an analysis by Thailand’s Kasikorn Research Centre released in November last year.
RCEP primarily establishes regulations for market entry and investment, while the CPTPP covers areas beyond those found in other free-trade agreements, including labour and environmental standards, free flow of information and government procurement.
As a result, the CPTPP can challenge member states to elevate their regulations within the agreed time frame, the analysis said.