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Don’t Count China Out of the CPTPP

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Don’t Count China Out of the CPTPP

The now-frozen trade deal with the EU shows China can be willing to push the boundaries of reform into areas that might surprise observers.

Don’t Count China Out of the CPTPP
Credit: Depositphotos

Ever since China first expressed interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) last November, one particular sticking point has cropped up time and again: How could Beijing meet the CPTPP’s demanding entry requirements? These analyses rush to their conclusions and overlook a crucial point. In recent years, Beijing has clearly demonstrated a willingness to consider trading economic concessions for geopolitical gains – look at how it approached the negotiations on the Regional Comprehensive Partnership (RCEP) and the EU-China Comprehensive Agreement on Investment (CAI).

Following the conclusion of the RCEP in January, Alex Yu-Ting Lin and Saori N. Katada argued in The Diplomat that Beijing’s motivation to join the CPTPP stemmed from its recognition that the bloc’s accession requirements could provide fresh impetus for economic reform at home. In other words, Beijing is not seeking to join the CPTPP in order to control any apparent anti-China or anti-state capitalism sentiment from within.

China would not be out of place within the CPTPP. After all, its 11 members make an eclectic bunch. To date, the primary motivation for CPTPP membership has typically been that membership can raise a state’s profile as a proponent of free trade; or that pressure brought by the thresholds for accession will inspire domestic reform in areas such as labor rights, environmental protection, intellectual property (IP) protection, and enabling more tariff-free trade.

Before the application of tit-for-tat sanctions between the EU and China in May, it appeared that Beijing had been willing to politically conclude an investment agreement with Brussels for the very same reason: that the EU-China CAI could further stoke the fires of economic reform at home with the view to ratification. After all, the EU-China CAI also contains provisions that left trade policy analysts puzzled as to whether this agreement represented an about-face in China’s economic philosophy. These provisions included taking steps to undertake reforms ensuring greater transparency regarding the role of state-owned economies (SOEs) in the economy, improving market access across a range of industries, facilitating greater openness to foreign firms in domestic standards-setting, and strengthening its IP protection provisions.

Analysts met Beijing’s agreement to Brussels’ terms in these areas with a healthy degree of skepticism. However, there were also signs that China was serious in its intention to reach deep into its economic reform policy tool kit to reconfigure its economy in the interests of meeting the standard required for ratification. When I interviewed the European ambassador to China, Nicolas Chapuis, in March – just after the political conclusion of the EU-China CAI but a few days before both sides applied sanctions – he argued that Beijing clearly took the EU-China trade and investment relationship seriously because President Xi Jinping had taken over from Premier Li Keqiang at high-level meetings between the two. Furthermore, at that time, according to Chapuis, Xi was pushing for the two sides to ratify the deal as soon as possible.

While it’s too simplistic to say that the president’s seal always equals a done deal – in China’s distinctively opaque policy environment, that is not always the case – it is a good indication of the importance or lack thereof of any given policy area. One can infer that China was at least considering making concessions for the Europeans.

And so, returning our attention to the CPTPP, it is worth considering the hypothetical: Had tit-for-tat sanctions not scuttled the CAI indefinitely, would China have made the changes to its economy that its trade negotiators will have known MEPs in Brussels would demand? To put it more simply, was China willing to back up its big commitments with real action? After all, that is the question that the trade teams of the CPTPP’s 11 member states will be mulling over while considering their response to China’s application.

Like the China-EU CAI, the CPTPP includes provisions that one assumes would leave Chinese state planners reeling, such as high standards that go far beyond tariff removal. With regulations guiding market access, labor rights, and government procurement, CPTPP offers some of the most liberal trade policy on offer. Similarly to the CAI, Beijing would likely have to ratify outstanding International Labor Organization (ILO) conventions, including provisions on the use of forced labor, to gain membership in the CPTPP, based on Vietnam’s experience in joining the bloc.

But if Beijing was willing to agree to these conditions once, could it not agree to them again? Policy initiatives such as the “dual-circulation strategy” and “common prosperity” appear as the antithesis to the spirit and ambition of the CPTPP by making China appear more autarkic. But underneath those charged political pronouncements, China’s trade negotiators have been whittling down the height of the barriers blocking China’s entry into the CPTPP.

While far from the levels required to qualify for CPTPP membership, even without the impetus of a ratification deadline looming, China has continued to make progress on market access – in recent years, the number of restricted measures on the negative list has been reduced by nearly two-thirds, a threshold it is expected to cross when it is next re-issued. On the environment, according to diplomats in Beijing, China is reportedly considering coming out against the financing of coal power generation projects at COP26, which would be a significant step in the world’s struggle with climate change. Granted, the ILO conventions on forced labor likely remain far off; China will continue to argue that it is not obliged to sign them while the United States continues to have only ratified 14 of the total 189 (although the U.S. has ratified Convention No. 105 on the Abolition of Forced Labor). But in areas such as IP protection provisions and providing foreign firms with improved access in standards-setting, China has been raising its game, too.

In conclusion, when appraising China’s application to join the CPTPP, it is worth considering and remembering that China had shown willingness to reform and improve its standards before. It would be a challenge, for sure, but Beijing shouldn’t be counted out from rising to the occasion.