Pacific Money | Economy

China Won’t Rush to Join CPTPP. Neither Should the US.

Patience – and careful attention to laying the domestic groundwork – would benefit both countries more than a race to join the trade pact.

By Alex Yu-Ting Lin and Saori N. Katada for
China Won’t Rush to Join CPTPP. Neither Should the US.
Credit: Twitter/ Chile MFA

The signing of the Regional Comprehensive Economic Partnership (RCEP) in November 2020 has renewed concerns about U.S. absence in Asia. China’s expressed interest in joining the Comprehensive Progressive Trans-Pacific Partnership (CPTPP), just days after RCEP’s conclusion, only exacerbated these concerns. In response, there are many vocal calls urging the incoming Biden administration to act swiftly and decisively by rejoining the CPTPP. This response is natural, but premature, as it assumes that China’s interest in the CPTPP is largely to undermine U.S. influence in Asia.

Yet China’s expressed interest in the CPTPP is neither new nor necessarily driven by geopolitical competition imperatives. Instead, it reflects a longstanding strategy since the early 2010s wherein Chinese leaders praise the CPTPP (and its predecessor) and announce their interest in joining to facilitate domestic economic reforms.

If the United States prematurely announces its intention to rejoin the CPTPP, but later becomes hampered by domestic anti-globalization sentiments, that will be even more harmful to U.S. credibility in Asia. A more patient strategy in which the U.S. first addresses its own domestic challenges and allows China to work theirs out will be beneficial for both countries.

Continuity in China’s Policy Stance on (CP)TPP

On November 20, 2020, Chinese President Xi Jinping announced at the Asia-Pacific Economic Cooperation (APEC) Summit that China would “favorably consider” joining the CPTPP, the 11-member mega free trade agreement that came into effect in 2019 after the U.S. exited its predecessor, the Trans-Pacific Partnership (TPP). To observers, the conclusion of RCEP and China’s interest in the CPPTPP warrant concern from the U.S. for two reasons. First, Xi’s announcement appears to signal a fundamental policy shift: Now emboldened by RCEP’s success, China is ready to take advantage of U.S. absence in regional economic governance after four years of the Trump administration. Second, with 15 Asia Pacific member countries, RCEP is now the largest regional free trade agreement. As such, there is the real potential for U.S. marginalization from Asia.

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Hence, questions about China’s geopolitical motives, including suggestions that Beijing wants to gut the CPTPP from the inside before the U.S. rejoins, have become commonplace. Indeed, one commentary even called Xi’s announcement part of an eight-year revenge on former President Barack Obama, a champion of the TPP. In this context, rejoining the CPTPP has emerged as a potential countermeasure for the U.S., one which will allow Washington to reassure regional allies that it intends to return as a credible leader.

Many observers have attributed China’s position toward the CPTPP to intensifying U.S.-China geopolitical competition. However, Xi’s expressed willingness to engage the CPTPP is not a recent phenomenon. Rather, it is a continuation of China’s previous policy of engaging the original TPP. As we demonstrate more extensively elsewhere, Chinese officials have consistently expressed the willingness to engage the TPP in the past decade. For example, in 2013, Chinese Premier Li Keqiang clearly indicated that China is willing to “discuss exchanges and interactions with frameworks such as the TPP.” In the years that followed, various ministries repeatedly emphasized that they were studying the feasibility for China to join the TPP.

What are China’s possible motivations? In large part, they are driven by domestic reform considerations. Throughout the original TPP negotiations, there was wide consensus in and outside of China that it would not be able to join because of the TPP’s demanding entry requirements. However, as a previous article has shown, Chinese academics and officials have consistently emphasized the need for China to study how the original TPP could help its domestic reform agendas even without being a part of it.

Indeed, China’s conventional developmentalist strategy of export promotion leveraging the country’s lower cost of labor has generated splendid results in the past four decades. However, it has arrived at its limits. China now needs to move to the next level. Although the CPTPP has relaxed a few requirements from the original TPP (e.g., intellectual property right protection on biologics and labor conditions for government procurement), China’s actual entry will remain hampered by serious obstacles, such as the prohibition of noncommercial assistance to state-owned enterprises (SOEs). Chinese observers – including Long Yongtu, Beijing’s former top trade official who helped negotiate China’s WTO entry – have already began to focus attention on how China can use the potential for CPTPP entry to facilitate domestic reforms in the aftermath of Xi’s announcement, as seen here and here. As such, the expressed interest in joining the (CP)TPP, even if it does not actually happen, is often intended to generate momentum for, and discussions of, domestic reforms in China.

Opportunities and Challenges

A more patient approach may benefit both the U.S. and China in the long-term for two reasons. First, China has a longstanding strategy of using external pressure created by regional trade frameworks such as the CPTPP to advance the country’s domestic economic reforms. For example, CPTPP rules can foster environmental protection and greener development in China; it can even help with difficult SOE reforms. Xi’s desire to prioritize continued growth of China’s economy can be an opportunity for the United States. Indeed, reforms driven by CPTPP rules can create a proverbial “win-win” outcome for the U.S. and China, as high-standard investment protection (e.g., against forced disclosure of source code) allows American firms to operate in China with lowered risk of state coercion. Granted, the U.S. and China are probably going to compete in various domains moving forward. However, at least in the economic domain, the U.S. does have an interest to see China become more open – however difficult this endeavor might be. Not only will it facilitate the maintenance of the existing economic order, the world may also enjoy increased access to the market of 1.4 billion people.

Second, patience gives the Biden administration time to first take care of potential domestic constraints from within the United States. Consistent backlashes in the U.S. against economic globalization, driven by the perception that globalization is taking jobs away from American workers, will be exacerbated if the U.S. tries to rejoin the CPTPP prematurely. Voters, especially ones from the “Rust Belt” states, may not see such a move kindly. Indeed, the 2022 mid-term election will tie President Joe Biden’s hands. Hence, the timing is crucial and the Biden administration should focus on laying the domestic groundwork first. Granted, it may be enticing to reassure regional allies in Asia that the U.S. is back by acting quickly. However, a situation in which the U.S. declares interest in rejoining the CPTPP, but later become hampered by its own domestic politics, is going to be even more harmful to U.S. credibility in the region.

We do not mean to suggest that China poses no challenges to the U.S. or the rest of Asia. China’s use of economic instruments to impose pressure on others is well-documented, and China’s newly introduced export control system has raised concerns. Clearly, the U.S. needs to engage Asia and the CPTPP is an important instrument to do so. But the U.S. must get China right and act with prudence. Patience on both sides will better serve the U.S. and China in the long term.

Alex Yu-Ting Lin is a Ph.D. candidate in political science and international relations at the University of Southern California. He is currently a research fellow with the International Security Program, Belfer Center for Science and International Affairs, Harvard Kennedy School, and a Hans Morgenthau Fellow in Grand Strategy with the Notre Dame International Security Center. He can be followed on Twitter @ytalexlin.

Saori N. Katada is a professor in political science and international relations, University of Southern California and author of “Japan’s New Regional Reality: Geoeconomic Strategy in the Asia-Pacific.”  She has her Ph.D. from the University of North Carolina at Chapel Hill (Political Science), and her B.A. from Hitotsubashi University (Tokyo)