Joining trade agreement will be a test for China
On Thursday, just after Australia had announced a new defence alliance with the United States and Britain, China announced that it had formally applied to join the Comprehensive Progressive Agreement for Trans-Pacific Partnership.
This is a free trade agreement comprised of 11 countries including Japan, Australia, Mexico, Singapore, Peru, Vietnam, New Zealand, Canada, Chile, Brunei, and Malaysia.
It is unclear what China’s motivations are. Richard Maude, president of the Asia Society, says it is a shrewd political move on the part of China, but other commentators appear mystified given the current circumstances.
Japanese Finance Minister Taro Aso (pictured above) said at a news conference:
“I don’t know, the way China is now—could it really be in a position to become a new member?”
His colleague, chief government spokesman Katsunobu Kato, came to his daily briefing armed with a long list of areas where he questioned Beijing’s qualifications, including its protection of intellectual property like trademarks and subsidies to state-owned companies.
Australia’s trade minister, Dan Tehan, made it plain on Friday that Australia would veto the Chinese application unless China agreed to drop its trade sanctions against Australian exports like beef, wine and barley and agree to engage in trade discussions. Australia, Japan and Singapore make up the committee that assesses applications.
On Sunday the prime minister, Scott Morrison, said he would urge President Biden to make an application to join the agreement when he met with him at the end of next week.
The United States was a founding member of the initial Trans-Pacific Partnership, which was an initiative of the Obama administration, but Donald Trump pulled America out. President Biden has said he will revise that decision. The United Kingdom has formally applied to join the organisation.
The current members are sceptical about Chinese membership.
According to the Wall Street Journal, although Washington is no longer a member, the TPP retains the original U.S. vision that free-trade deals should limit the ability of companies to use preferential government treatment to outcompete the private sector. That issue has become more important as China, under President Xi Jinping, has showered subsidies on industries and companies deemed strategic like Huawei Technologies Co.
It will be a challenge for China to meet the pact’s standards, said Stephen Jacobi, a former trade negotiator who is now executive director of a group of leading New Zealand exporters:
“But it is hard to believe that China would have taken this step if it was not prepared at least to consider reform in these areas.”
Yorizumi Watanabe, a former Japanese diplomat who is now a professor at Kansai University of International Studies, said China’s application was a chance for Japan and other American allies to draw Beijing back into the international fold and make it follow rules like treating foreign companies fairly:
“There are intellectuals in China who believe the country needs to develop by entering into a system of advanced trading rules such as the TPP. Japan can tell China, ‘If you want to get along with the U.S., you need to follow TPP rules, and Japan will help you do that.’”
It is possible that the Chinese application to join the CPTPP represents another step in the contest between the internationalists and the nationalists within China. If so, it would be a good idea for an Australian senior minister to send an encouraging message without resiling from Australia’s demands that China drops its trade sanctions against our exports.