With the US absent, China should seize the day and join the CPTPP to promote a more integrated trading order in Asia
●Since the CPTPP’s launch, the massive trade pact has been beneficial to its members, and China would be no different.
●Other members have also shown interest in Beijing joining, which would be one step closer to a free-trading Asia-Pacific.
By Wang Huiyao |
President of Center for China and Globalization(CCG)
With globalisation under fire from populism and protectionism, regional economic integration has become a major path for international cooperation. Following positive progress in talks towards the Regional Comprehensive Economic Partnership (RCEP), China now has an important window of opportunity to join the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership (CPTPP).
Reborn out of the US-led Trans-Pacific Partnership, the CPTPP has been remoulded by Japan and Australia. Even without the US, its impact in the Asia-Pacific region cannot be underestimated.
Covering a population of over 500 million people and total gross domestic product of US$10.57 trillion, the current 11-member CPTPP is the largest free trade area in the Asia-Pacific region and the third-largest in the world. The promise of the CPTPP is reflected by the list of countries that have signalled interest in joining, including Colombia, Indonesia, South Korea, Thailand and Britain. If China were to join, the FTA would cover nearly 30 per cent of global GDP.
Since the CPTPP came into force at the start of this year, its benefits are already showing. For example, Vietnam, despite facing the challenge of meeting the CPTPP's high standards, has seen no serious harm from opening up and greatly reducing tariffs. On the contrary, it has one of the top winners from the agreement so far.
Trade between Vietnam and the other 10 members increased rapidly under CPTPP. Vietnam customs data shows that in the first seven months of this year, Vietnam enjoyed a trade surplus of US$1.8 billion, over half of which came from CPTPP trade. Exports to Mexico are up 35.6 per cent, exports to Malaysia are up by nearly 22 per cent and exports to Canada increased by nearly 14 per cent. Vietnam's textile industry and infrastructure development have also benefited from CPTPP.
Vietnam's gains from the CPTPP reflect the "comprehensive and progressive" nature of this trade agreement. Its members include both developed countries such as Japan, Australia and Canada, as well as emerging high-growth potential economies such as Chile, Malaysia, Mexico and Vietnam.
To strike a balance and enable cooperation between developed and developing countries, the CPTPP combines fairness and inclusiveness, promoting the accelerated opening-up of developing countries while allowing reasonable efforts to secure protection. As an inclusive high-standard trade agreement, the CPTPP is more friendly to developing countries like China.
Against the current context of rising protectionism and sluggish global growth, the CPTPP offers a viable way to promote international cooperation and multilateralism. In years to come, CPTPP will be an important vehicle for economic integration in the Asia-Pacific region. China's timely accession to the agreement will enable deeper involvement in regional cooperation, along with working to establish the RCEP as soon as possible.
Previously, China's main concerns about joining CPTPP touched on areas such as intellectual property, environmental protection, data flow management, labour standards and reform of state-owned enterprises.
However, multiple factors have seen China step up towards CPTPP standards. These include the deepening of China's domestic reform and opening up, as well as external influences such as China-US trade frictions.
In line with its innovation-driven development strategy, China has made considerable improvements in IP protection in recent years. The World Bank's intellectual property protection index shows that China's protection level is higher than the world average. Plus, once the newly passed Foreign Investment Law comes into force, the IP protection in China will be largely strengthened.
Regarding environmental protection, the concept of green development is increasingly integrated into all aspects of China's economy. From greening the Belt and Road Initiative, to innovative desert governance, to the "Blue Ocean Vision" signed during the G20 Osaka Summit, China's efforts in environmental governance are increasingly clear.
Other CPTPP issues such as data flow management, labour standards and reform of state owned enterprises are also important aspects of China's ongoing reform process.
In the long run, joining CPTPP is aligned with China's development strategy and will help accelerate reforms through increased openness. At the same time, it would demonstrate China's commitment to opening up, provide initiative in China-US trade negotiations and give China a larger say in the shaping of new international trade architecture.
Most CPTPP members are positive regarding China's participation. In dialogue with CPTPP members, the Centre for China and Globalisation has heard from ministers from Australia, Canada, New Zealand and Malaysia, as well as ambassadors from New Zealand, Singapore and Japan, that these countries would welcome China's participation.
Given Japan's leading role in CPTPP, China-Japan relations will play a key role in whether China can join. Indeed, bilateral relations are warming and trade ties are deepening. At the recent G20 Osaka Summit, Japanese Prime Minister Shinzo Abe invited President Xi Jinping to pay a state visit to Japan in the spring of 2020.
While the US is absent from the CPTPP, there is a valuable window for China to start negotiations on joining the agreement. With question marks remaining over the global free trade agenda and China-US economic relations, joining CPTPP will open up a new route for China's economic integration in the Asia-Pacific region, while also supporting progress towards establishing the RCEP and the Free Trade Area of the Asia-Pacific.
China should seize this important window of opportunity to contribute to the integration of the Asia-Pacific region and help counter the trend of deglobalisation.