By David A. Gantz, J.D.
Will Clayton Fellow in Trade and International Economics, Center for the United States and Mexico
Jorge Huerta-Goldman, Ph.D., LL.M.
Managing Director and Founder of TILPA in Geneva
China’s formal request for membership in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) in mid-September once again demonstrates the utter folly of the U.S. withdrawal from the TPP in January 2017. Many observers then believed that the withdrawal would significantly reduce future U.S. economic as well as political clout in Asia, which are increasingly entwined; evidence today is that those doubters were right. Nor in the face of key domestic priorities and significant congressional opposition to new trade agreements is it likely that the Biden administration will seek to rejoin the TPP/CPTPP.
The timing of China’s announcement of the request is anything but coincidental. It was apparently designed to divert attention from the major significance of the U.S.-U.K.-Australia nuclear sub agreement (AUKUS) to strengthen the allies’ ability to counter Chinese military expansion in the South China Sea. The Chinese request adds further embarrassment to the U.S. — now a bystander when it comes to the CPTPP — at a time when the U.S. is reeling from the adverse diplomatic fallout. The trilateral pact, apparently concluded without much consultation with France, another nuclear power, has created a serious diplomatic rift with France and perhaps other NATO allies as well. Coming a month after the United States’ chaotic withdrawal from Afghanistan, again without any meaningful consultation with allies, the new diplomatic blunder necessarily makes U.S. friends and foes alike seriously question whether the Biden administration’s “America’s back” claims should be given credence.
China is already the No. 1 trading partner of all of the CPTPP Parties except Mexico and Canada. Given that inescapable fact one must wonder whether the CPTPP-11 can resist Chinese candidacy over the long term even given today’s frosty relations between China and Australia and China and Japan and economic coercion of weaker neighbors, along with concerns over Chinese political hegemony (particularly in the South China Sea) for other CPTPP partners.
One can also question the seriousness of the Chinese request given the enormous hurdles that would have to be overcome before China could be meaningfully considered. All 11 Parties would have to support the addition of any new member, but China, unlike the U.K. which has also recently applied, is a special case.
First, China’s centrally controlled economy, particularly its extensive, WTO-illegal subsidies to favored state-owned or controlled enterprises such as those producing artificial intelligence, robots, electric cars, computer chips and other goods that are part of the “Made in China 2025” policies, and weak protection of intellectual property, are inconsistent with multiple provisions of the CPTPP. Obligations governing transparency, labor rights and protection of the environment would also be extremely difficult for the Xi administration to accept. Surely, the CPTPP-11 realize that China as a Party would be no more likely to honor CPTPP obligations than it has been with regard to WTO strictures. Although the CPTPP, unlike the WTO, incorporates investor-state arbitration, whether the state-to-state dispute settlement mechanism in CPTPP would be effective against China is an open question, exacerbated by the neutering of the WTO’s Appellate Body in 2019.
Secondly, for some members China’s serious human rights violations with regard to its Muslim and other minorities and the citizens of Hong Kong, along with its continuing threats to Taiwan, would be a bar to Chinese accession given that those policies are no more likely to be changed than the economic ones.
Third, although the U.S. is no longer a CPTPP Party, a provision in the USMCA (U.S., Canada and Mexico), article 32.10, gives the U.S. a veto power should Mexico and/or Canada (both Parties to the CPTPP) undertake free trade area negotiations with a “non-market economy” (e.g., China). If they do so, the U.S. would have the option to withdraw from the USMCA. While CPTPP has economic and political significance for both Canada and Mexico it pales in both economic and political importance to the USMCA, given the thousands of miles of common borders and the dependence on the U.S. to take more than 75% of both Canada’s and Mexico’s imports. Given the USMCA language, it is possible that even the commencement of formal negotiations between the CPTPP-11 and China would raise issues under the provision, although the economic costs of withdrawal to the U.S. would also be substantial.
Finally, Taiwan’s formal request on September 22 to join the CPTPP adds additional complexities to the dilemmas already facing the CPTPP-11. Taiwan is a major trading partner and investor for many of the CPTPP economies and clearly much more capable than China of accepting the many obligations of the “high standards” CPTPP. At the same time, it seems highly unlikely that a CPTPP with both Taiwan and China as Parties would be acceptable to China. It can thus be assumed that Taiwan’s request for membership will be vehemently opposed diplomatically despite the fact that both China and “Chinese Taipei” are separate members of the WTO.
Consequently, the “reasonable time” under the CPTPP during which new applicants for CPTPP membership must be evaluated could be a very long time indeed, for both China and Taiwan. It may well be that the Chinese request for admission, rather than a serious desire for participation, is better viewed as a not-so-subtle means of reminding its Asian neighbors and trading partners that China rather than the U.S. now and probably in the future is the reigning superpower in the Pacific.
__
The authors’ book, The Comprehensive and Progressive Trans-Pacific Partnership, will be published by Cambridge in December 2021.