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Evaluate TPP Comprehensively and Objectively

Jun 12 , 2014
  • Zhou Shixin

    Research Fellow, Shanghai Institutes for Int'l Studies

In recent years, some Chinese scholars seemed to exaggerate the role of TPP (The Trans-Pacific Partnership Agreement), saying that for China joining TPP was just like “joining WTO” for the second time; some even said that “for China, joining WTO is just like ‘college entrance examination’, and joining TPP is just like ‘postgraduate entrance examination’”. 

For years, the U.S. has shown its disappointment and displeasure at APEC and the WTO Doha round. At the APEC international trade forum held on South Korea’s Jeju Island in May of 2005, a U.S. APEC high-ranking official said to me that APEC was like a Tea House with much empty talk and a summit fashion show in addition, so it was meaningless in fact. During my visit to the U.S. from July to August in 2012, some U.S. scholars told me that Doha Development round was dead already, economic globalization was in difficulty, thus strengthening regional economic cooperation was in line with the U.S. interests, an only way out for the Obama’s Two-Ocean Strategy, i.e. TPP and TTIP (Transatlantic Trade and Investment Partnership), was intended to revitalize the U.S. economy. 

Some Chinese scholars believe that Obama’s Two-Ocean Strategy was intended to cast aside APEC and turn WTO into an empty house, thus starting a set of new rules for global economy and trade. 

Is that really the case? Facts tell that it is not entirely so. 

On December 17, 2013, the Ninth Ministerial Conference of the WTO held in Indonesia’s Bali Island finally reached an agreement on “early harvest” of Doha round after it was postponed for one day, covering three parts including trade facilitation, some agricultural issues and development. The conference made it clear that within the following 12 months, there will be work plans for all the Doha round pending issues, particularly those about agriculture, relationship between developing and the least developed countries. 

During the negotiation of Doha round “early harvest”, the Chinese delegation played “a central role” in reaching an agreement by consultation with Cuba and other five Latin American countries and Pakistan; the U.S. delegation played “an active role”, and its representative repeated the opinion of Chinese representative in his speech that “the conference has no other choice but to be successful”. After the Bali agreement was reached, President Obama shook hands and spoke with Cuban leader Raul Castro at Nelson Mandela’s funeral in South Africa. 

It is well known that EU, China and the U.S. are among the top three in the total world trade, so they are the biggest beneficiaries of the early harvest gained by Doha round. As the most practical country in the world, how wouldn’t the U.S. play “an active role” in such a matter of big interest? 

After the agreement was reached on Bali Island, WTO Director-General Azevêdo pointed out that TPP and TTIP belonged to “a small multilateral economic and trade cooperation”, and if the new rules set by this small multilateral cooperation are to be implemented they have to be brought to Geneva and to be passed by the WTO consisting of 159 members, because the trade among these 159 members accounted for 95% of the total world trade. 

The basic rules of GATT and WTO were set by the western developed countries headed by the U.S. and are the only multilateral trade rules. These rules have been effective for more than 70 years after the world war and have made great contributions to the world economic and trade development. Therefore, what benefits can the U.S. get if it turns the WTO into an empty house or overthrows it to start afresh? 

Some Chinese scholars still believe that Obama pushes forward TPP with the intention to contain and curb China’s economic rise. 

At present, 11 countries have taken part in TPP negotiations: the U.S., Canada, Mexico, Japan, Singapore, Australia, Vietnam, Chile, Peru, New Zealand and Brunei. As is known to all, being old members of the North America Free Trade Agreement, Canada and Mexico have no need to talk with the U.S. about tariff reduction and they join TPP in order to expand to Asia-Pacific area. What the U.S. needs is to talk with the other nine members. 

The U.S. trade with Japan accounts for half of the U.S. total trade with all nine members. Whether the U.S. and Japan can have a successful talk relates to the success or failure of TPP, while the U.S. trade with other nine members only accounts for 10.68% of total U.S. trade of $3846.4 billion in 2013. 

The U.S. trade with China Mainland valued at $562.4 billion in 2013, accounting for 14.62% of the U.S. total foreign trade. If Hong Kong and Macao are included, the US-China trade valued at $611 billion, accounting for 15.88% of the U.S. total foreign trade. 

Thus, it can be seen that the U.S. trade with TPP nine members was $410 billion, only equivalent to 67% of Sino-U.S. total trade of $611 billion.

During my visit to Washington in July 2012, Miss Ennis, Vice-Chairman of U.S.-China Business Council, said to me: “Without China, U.S. economic and trade cooperation with Asia will be at least half unsuccessful.” 

Again, compare China with Japan: In 2000, China was only the 11th largest export market for the U.S.; in 2007, China became the third largest export market for the U.S., surpassing Japan, only next to Canada and Mexico. In 2000, the U.S. export to China (including Hongkong and Macao) was $30.95 billion, accounting for 4% of its total export that year. In the same year, the U.S. export to Japan was $65.3 billion, accounting for 8.3% of its total export. In 2013, the U.S. export to China (including Hongkong and Macao) was $164.82 billion, accounting for 10.44% of its total export; in the same year, the U.S. export to Japan was $65.14 billion, accounting for 4.12% of its total export. Within 14 years, U.S. net export to China (including Hongkong and Macao) increased by $133.9 billion, a growth of 432%; over the same period, U.S. net export to Japan reduced by $0.2 billion, a negative growth of 0.3%. Since 2010, China has been the biggest export market for the U.S. agricultural produce, including soybeans, corn, wheat, beef, mutton and pork, and poultry. China’s population is still increasing while its arable land is decreasing; yet Chinese people’s living standard is increasing. These three factors determine that China is a long-term, steady and reliable market for the U.S. agricultural produce. 

At present, the U.S. met a big difficulty in promoting TPP negotiations. The plan to reach an agreement by the end of 2013 met with resistance. In March and April of 2014, the U.S. and Japan intensified their negotiations, striving for an agreement before Obama visited Japan on April 23-25, but in vain. Japan demanded that, as an exception, five items of agricultural produce (i.e. rice, wheat, beef and pork, dairy products and granulated sugar) should not be put into the range of tariff reduction, but considered that the U.S. should immediately impose zero tariffs on auto, etc. Abe even seriously said that if the demand failed to be met, Japan would withdraw from TPP at any cost. 

Obama intended to support Japan over the dispute of the Diaoyu Islands and in Japan’s plan to lift ban on exercising the right of collective self-defense in exchange for Abe’s concession in TPP negotiations, but without any result. American media generally believed that Obama’s visit to Japan was a failure. 

If TPP negotiations cannot wrap up by the end of October this year, Obama’s intention to use TPP and TTIP to add another dimension to the Democratic Party’s mid-term election will be hard to realize and negotiations will fall into a long-term fruitless status. 

Zhou Shijian is a senior fellow at the Tsinghua Center for US-China Relations.

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