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Leaving China out of the TPP Is a Terrible Mistake

Oct 08 , 2015

Trade ministers from the U.S. and 11 other countries around the Pacific may have reached a long-awaited trade deal on Monday, but plenty of questions and obstacles remain as Congress considers whether to approve the Trans-Pacific Partnership.

Those trying to drum up support say the TPP would help the U.S. counter China’s influence over the Pacific because it’s not a partner of the trade deal. This argument might sound good on Capitol Hill and in other policy forums, butit’s incredibly flawed for many reasons.

For one, it’s naive to believe that China can be locked out of a preferential trading network. Despite its present currency and stock market corrections (all part of the transition to a “normal” market­based economy), China recently overtook the U.S. as the world’s leading trading nation and it is determined to become the world’s largest economy this decade.

By the end of 2014, China had invested $870 billion worldwide in an effort to expand its sources for raw materials and industrial components. For example, China’s investments in Bangladesh ($3.8 billion) and Pakistan ($17.8 billion) outstripped the loans those countries received from the IMF, which gives it a greater say in those countries’ economies and political debates.

What’s more, China has asked for a share of Angola’s oil reserves in exchange for its investment in that nation’s road development. This is in addition to its well-known, aggressive investments in mining companies across Africa.China is also pushing to create an international bank that would help finance infrastructure projects across the Asia Pacific; the Asian Infrastructure Investment Bank has the support of 47 regional and 20 non­regional members, including TPP nations, such as Australia, Brunei, Malaysia, New Zealand, Singapore and Vietnam.

Since 2005, China has been creating its own free trade agreements with many of the same countries involved in TPP, such as Brunei, Chile, Malaysia, New Zealand, Singapore, Peru and Vietnam. This is a crucial point in understanding the flawed logic behind any belief that China could be excluded from a preferred crossPacific trading community.

The result of all these diplomatic thrusts and counter moves could very well be the absurd and confusing emergence of two overlapping trading blocs that need each other economically, but distrust each other intensely. Wouldn’t it be far better to increase economic efficiency and improve political understanding with Beijing by constructing a TPP that includes China as a charter member?


Copyright: Fortune

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