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China No Trojan Horse for CPTPP

Oct 13, 2021
  • Zhou Xiaoming

    Former Deputy Permanent Representative of China’s Mission to the UN Office in Geneva

As the protocol chief of the department, I remember watching, somewhat astonished, as Chinese Premier Zhu Rongji walked into the building of the Ministry of Foreign Economic Relations and Trade in the early morning of Nov. 15, 1999 — a fateful day. Negotiators from China and the United States were winding up their last session after four days of unsuccessful and sometimes acrimonious talks on China’s accession to the World Trade Organization, as the luggage of the U.S. trade delegation was on its way to the airport for a morning flight back to America. In one hour’s time, Zhu bargained and struck a deal with the Americans that removed the final major obstacle for China’s joining the world body. 

Behind Zhu’s surprise visit lay the conviction of Chinese leaders that the country’s future rested on opening up to the outside world. They considered the WTO accession critical to ensuring that the China’s direction of travel would be irreversible, regardless of changes in leadership, and that by anchoring the country in the WTO, the ship of China would not likely change course in the violent political winds and storms overseas.

A similar moment seemed to have arrived on Sept. 16 this year when China applied to join the Comprehensive and Progressive Trans-Pacific Partnership trade agreement known as the CPTPP. In its own way, the bid marks a milestone in the country’s drive to open its economy wider to the rest of the world.

China’s move was warmly received in Singapore, Malaysia, Vietnam and Mexico. However, Japan and Australia were less enthusiastic, questioning the country’s qualifications. Commentators in the Western mass media attributed the reservations of the two countries to their strained relations with Asia’s economic giant. One might suspect that their concern over the possibility of China’s accession eroding their own influence and authority in the CPTPP also played a part.  

Objections by Japan and Australia would result in China being denied the green light, as consent of all extant members is required for any country to be admitted to the trade pact. And it’s fair to say that China would be kept out of the CPTPP without the blessing of the United States. Although a White House spokesperson indicated that it was up to the CPTPP members to accept or reject China’s bid, no one should assume that Washington would stand idly by when push came to shove.

Although it’s a nonmember, the U.S. still pulls strings in the regional free trade zone by various means. For example, through the “poison pill clause” in the United States-Mexico-Canada Agreement, Washington can effectively veto Mexico or Canada entering a free trade agreement with China, a country Washington defines as a “nonmarket country.” This provision in the USMCA says that if any of the three members concludes a free trade agreement with a nonmarket country, the other two are  permitted to exit the deal on short notice.

Admittedly, China still has to take some big steps to meet rigorous CPTPP standards in quite a number of areas, including labor, intellectual property rights, data flow and state-owned enterprises, despite its intensified efforts to upgrade its foreign investment laws and regulations in the recent past. The efforts required of China will be nothing but massive, and changes could be extremely challenging and painful.

The Chinese government appears to be keenly aware of the wide gap between core CPTPP standards and the current laws and practices in the country, and it is determined to remove these technical barriers. According to the Ministry of Commerce, China has conducted a comprehensive review of CPTPP rules and has identified reform measures it may need to take and laws and regulations that may require amendment. Further, China plans to hold consultations with CPTPP members shortly.

Apparently, in the face of all the obstacles and challenges, China is undeterred — which begs the question: Why is China so determined to join the CPTPP?

For one thing, apart from consolidating China’s economic integration drive, CPTPP membership is thought to be conducive to the development of a fundamental system and regulatory regime consistent with prevailing rules and norms in international trade and investment. Over the past decades, the emphasis with regard to integrating China with the globe has been on ensuring, by connecting the domestic market with the overseas one, the free flow of goods and factors of production such as labor and capital. The new strategy introduced in 2019, however, focuses on “institutional opening-up,” which means calibrating the rules and systems in the country against the best global practices. In what could be described as systemic convergence, it calls for aligning the country with the rest of the world in rules, regulations, management and standards.

What endears the CPTPP to Chinese decision-makers is the fact that its rules focus on industrial policies, investment, regulatory frameworks and the environment. Joining the agreement will, it is believed, contribute to the development of a new higher-lever open economic system, which is China’s ultimate objective in economic reform.

In addition, the accession bid is expected to assist the country’s economic reforms. Just as the Biden administration feels compelled to invoke China to garner bipartisan support for his domestic agenda, Chinese leaders have from time to time found it necessary and useful to use external pressure to drive economic reform. Challenging as it may be, the pressure that seeking CPTPP membership generates would be handy when it comes to stonewalling the powerful resistance to far-reaching reforms that the government wishes to push through.

Obviously now, as in 1999 when China was navigating its way into the WTO, Chinese leaders are convinced that opening its economy is the only option for the country to move forward.   

China’s readiness to play by the CPTPP rulebook would unlikely be sufficient for CPTPP membership though. It is geopolitics, rather than China meeting the high bar of CPTPP standards, that will determine the outcome of the CPTPP bid. China’s accession application is already politicized and largely perceived with suspicion and concern in the West. It has been portrayed as diplomatic maneuvering and part of the great-power rivalry between China and the U.S. in much of the Western media. Further, it has been even viewed as a national threat to the U.S. by some members of Congress.

The political barriers, as opposed to the technical ones, to China’s entry into the CPTPP may prove insurmountable. Considering Washington’s desire to contain the rise of China, there is good reason to believe that Washington will block China’s entry.

But China’s accession would provide a powerful boost to the economic integration in the Asia-Pacific region. Additionally, gains for the world economy would be significant. According to the Peterson Institute, China’s joining the CPTPP would double the global economic gain of the trade agreement, from $14.7 billion to $63.2 billion annually, twice the GDP of Malaysia. At a time when the global economy badly needs a shot in the arm, China deserves to be cheered on in its push for membership in the CPTPP. 

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