Last week on May 31, Beijing’s Commerce Ministry announced in a press release that China is looking at the possibility of joining the Trans-Pacific Partnership (TPP) talks. While this shouldn’t necessarily be an issue worth raising, including China into the TPP talks does not initially appear to gel with what the United States is trying to do with the partnership.
The TPP, as led by the United States and other countries from
around the Pacific Rim, is plodding along with the understanding that China
will not be included in the talks due to restart in the middle of this July. Even
though it’s hard to see this as anything but containment, the path of necessary
reforms is already laid out for China. Anything is possible should they choose
to work on their trade openness.
Washington looks at the TPP as a framework within the Pacific
where larger regional issues and trade liberalisation initiatives can be
discussed and as path for their international trade agenda. After the United
States announced that its post-war plans will focus heavily on the
Asia-Pacific, Washington opened up two main fronts to streamline their plans:
economic and military.
These fronts do not work in segregation, but the two have not
appeared to work in concert either. United States Secretary of Defence Chuck
Hagel said recently the current American administration feels the military
aspect of its so-called “pivot” to the Asia-Pacific has been unfortunately
overblown in the media.
United States plans to engage with the region on all levels, and prefers not to
be regarded as a hegemonic military presence as opposed to a beneficent
economic presence. Any talk of a ‘containment’ strategy around China is
misguided and certainly not the reaction Washington wanted. But this message,
whether it was ever meant for greater publicity, seems to have been missed by
planners in Beijing.
China has always suspected the real motive behind the “pivot” was
to enclose China to better manage its rising power. Emphasising the US Navy’s
shifting deployment strategy in the media was probably not the fault of
journalists, as Mr Hagel intimates. But if the American strategy in the Pacific
Rim is not to directly contain China then Beijing argues there should be few
barriers to join the TPP. In a way, China is calling the American’s bluff.
China wants to join the TPP because it is taking the advice of
every serious economist on the planet. Free international trade, which is a
huge part of the TPP, is unarguably a good thing. With the membership of the
TPP being expanded – Japan and Canada are two recent inclusions – then greater
trade diversity and promotion should only increase. Including China should only
add to the efficacy of the agreement.
But the deck is somewhat stacked against China. Not only do the
other members, especially the United States, feel that including China could
risk the world’s second largest economy dominating the group when it comes to
trading goods, the present state of the Chinese economy does not meet the
standards of transparency required for entry and it is unclear whether it will
in the foreseeable future.
it stands, countries can only join the partnership if they fall towards the
‘open’ end of the continuum. As a perfect example, New Zealand made a huge fuss
when Canada applied for access to the TPP because the Canadian dairy industry
is heavily protected. Things have since calmed down.
Countries which cannot meet the standards of trade openness need to
reform or risk missing out on the benefits of free international trade. China
has struggled to meet the requirements set down by the inaugural members,
especially around intellectual property rights and state-owned enterprises. But
even though Washington has faith that China will meet the structural
requirements in the future, this doesn’t exactly explain why China has been
snubbed in the past.
In comparison, Vietnam has been accepted into the club. It has at
least the same amount of problems with trade transparency, intellectual
property rights, and state-owned enterprises as China. Vietnam also has
relatively high tariffs and invasive state intrusion on the economy. So
including them, but leaving China in the cold, lends weight to the argument
that the United States could be using the TPP as a tool against China.
The TPP appears to be less about economics and standards than it
is about politics and how Washington would like the Asia-Pacific region to look
now that it’s getting more involved. This is just the way things are when the
United States boasts an economic output larger than the following three economies
Including America in the TPP was always going to mean bending to
Washington’s rules when it came to trade openness. For any smaller county
looking to participate in a free trade agreement with the United States, there
will have to be some compromises inevitably favouring the larger economy.
Intellectual property rights is on the top of the agenda for the United States
right now, and countries entering into trade agreements with America will be
required to enforce U.S.-style property laws they might not actually be ready
If China is willing to undertake economic reforms then its path to
join the TPP should be changed from essentially impossible, as it stands today,
to potentially considered. The Chinese Communist Party is moving towards
separating China’s economy from their outright control, but this process will
take time. China is also pursuing free trade agreements with South Korea
bilaterally, and South Korea and Japan on a trilateral basis, so perhaps these
will be good litmus tests.
The principal hazard for the TPP is political. It could split the
Pacific into members and non-members putting China permanently on the outside.
For New Zealand, which already has a superbly functioning FTA with China,
leaving them in the cold must feel a little strange.