September 22, 2021

Asia

CHINA: Obstacles to CPTPP membership are not necessarily fatal

BY Gabriel Wildau

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( 5 mins)
  • China’s application faces significant obstacles on issues including state-owned enterprises, labor rights, and data flows, but these challenges are not insurmountable.
  • The fate of China’s bid will likely depend more on political decisions by the bloc’s existing 11 members than on China’s ability to meet the agreement’s technical and legal provisions.
  • Australia and Canada are unlikely to support China’s application unless existing diplomatic disputes are resolved, while Japan will also be skeptical.

China’s Commerce Ministry formally applied to join the Comprehensive and Progressive Agreement Trans-Pacific Partnership (CPTPP) on 16 September. Though China’s bid may not succeed, the application is more than a symbolic gesture. Beijing would be unlikely to embark on a long and complex accession process that the leadership believes is destined to fail. The decision to apply should therefore be understood as a serious effort to gain membership.

Though China’s application faces significant obstacles on issues including state-owned enterprises (SOEs), labor rights, and data flows, these challenges are not insurmountable. Ultimately, the fate of China’s application will likely depend more on political decisions by the bloc’s existing 11 members rather than on technical considerations about China’s qualifications. Unanimous agreement among members is required for China to gain membership or even to begin formal negotiations on accession.

China’s bid to join CPTPP is a continuation of Beijing’s strategy of leveraging China’s economic weight to counter US influence in Asia, much as the Australia-UK-US defense agreement (AUKUS) announced on 15 September represents a continuation of Washington’s security-focused approach to the region. Beijing’s interest in CPTPP predates AUKUS – President Xi Jinping publicly confirmed China’s intentions in November – but the timing of Beijing’s formal application may have been related to the defense pact.

The benefits to Beijing of joining the bloc are clear. Beyond purely economic gains, Beijing would increase its regional economic influence and rule-setting ability, which already received a boost from the conclusion of the Regional Comprehensive Economic Partnership (RCEP). Former US President Donald Trump withdrew from CPTPP in 2017, and Chinese membership would likely foreclose the possibility of the US re-joining, even if US domestic politics shifted back in a pro-free trade direction. In fact, even the launch of formal negotiations over Chinese accession might serve this purpose, regardless of the eventual outcome.

Political considerations

One interpretation of China’s accession bid is that it can serve a political purpose even if it ultimately fails, by exploiting latent divisions within the bloc. While Japan, Canada, and Australia will be reluctant to support China’s bid, Southeast Asian and Latin American countries will be more supportive. Malaysia has already expressed support for China’s bid. While Washington and its rich, democratic allies view CPTPP as a tool to counter Chinese influence in Asia, the bloc’s emerging-market members value the agreement mainly for its economic benefits, which China’s membership would enhance. An intra-bloc dispute over Chinese membership would prevent CPTPP from serving as a united front against Chinese influence. While a final outcome may be years away, even the short-term decision on whether to launch formal negotiations with Beijing could highlight these divisions.

The prospects for Japan, Canada, and Australia’s supporting Chinese membership look bleak. Sino-Australian relations have deteriorated sharply over the last two years as Beijing imposed trade sanctions in response to Canberra’s blocking of Huawei and its call for an international investigation into the origins of Covid-19. As AUKUS demonstrates, Canberra aims to strengthen its alliance with Washington and would likely prefer to preserve the option of the US re-joining rather than agreeing to admit China. On the other hand, Beijing might eventually be willing to lift trade sanctions as a concession to win membership, which could be persuasive to Canberra.

Tokyo would likewise worry that supporting China’s bid would alienate Washington, and Japanese foreign policy hands also have their own concerns about rising Chinese influence. Taro Kono, who is leading in polls to replace Prime Minister Yoshihide Suga as head of the ruling Liberal Democratic Party, said that “China cannot fulfill the requirements for CPTPP membership today” but stopped short of ruling out the possibility. Other candidates similarly expressed skepticism but left the door open. Japanese business interests would likely welcome Beijing’s membership in the pact.

For Canada, Chinese membership would also yield economic benefits, but Ottawa is unlikely to support Beijing’s application unless the dispute over the arrest of Huawei’s chief financial officer and Beijing’s retaliatory arrests of two Canadian expatriates is resolved.

Legal and policy considerations

SOEs, subsidies, labor rights, and data will likely be the biggest formal obstacles to China’s membership application, but none of these are insurmountable. Though CPTPP’s requirements on SOE discipline are stronger than those in the World Trade Organization (WTO), China’s WTO accession agreement included commitments beyond those in standard WTO rules. Though stronger than the WTO’s, the CPTPP’s requirements are arguably less demanding than the “WTO plus” commitments that China has already accepted. Though critics argue that China has not met its WTO commitments, Chinese behavior arguably violates the spirit rather than the letter of WTO law in most cases. In addition, the CPTPP allows exceptions to certain SOE rules for specific members including Mexico and Vietnam. Beijing could ask for similar exceptions.

On data, Beijing already agreed to provisions in RCEP on the free flow of data across border similar to those in CPTPP. Though the CPTPP provisions are stronger, it is not obvious that existing Chinese rules violate them. For example, CPTPP prohibits rules that require forced transfer of source codes but allows exceptions for government procurement and financial services, where China’s existing rules are concentrated. CPTPP also contains various exceptions for national security, public order, and public morals – largely copied from WTO rules – that Beijing could invoke. Existing WTO precedents suggest that these exceptions allow for significant flexibility.

On labor rights, despite accusations of forced labor in Xinjiang, the existence of certain Chinese labor laws may be technically sufficient to meet the pact’s requirements.

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