China will likely fail in its CPTPP bid — but it's a 'smart' move against the U.S., say analysts

Xi Jinping, the Chinese President, on January 30, 2015. China applied to join CPTPP. This 11-nation trade pact was established in 2018, after the U.S. pulled out of the Trans-Pacific Partnership. AFP
China's bid to join the Comprehensive & Progressive Trans-Pacific Partnership will probably fail, but the fact that it submitted an application highlights the absence of U.S. economic policies in Asia-Pacific. Analysts agree. CPTPP, a mega trade pact of 11 nations formed after Donald Trump pulled the U.S. from the Trans-Pacific Partnership in 2018. The TPP was negotiated by President Barack Obama to increase U.S. economic engagement with Asia-Pacific and counter China’s growing influence in that region. Before China can become a member, all 11 signatories to the CPTPP must accept China's request. The CPTPP includes Australia, Brunei (Canada), Chile, Japan Malaysia, Mexico, New Zealand Peru, Singapore, and Vietnam.

Analysts believe Beijing's diplomatic relations with certain member countries will hurt its chances. They also said that China may have difficulty meeting the demands of the trade pact for equal playing fields in many areas of the economy. China isn't the only country that has applied to join CPTPP. The U.K., Taiwan and other countries have also done so.

Allies of the United States in CPTPP

Allies of the United States in the CPTPP, such as Australia, Canada, and Japan, increasingly see China as a "strategic menace" and could block China's application. Analysts from Eurasia Group, a risk consultancy, stated that China is becoming a "strategic danger". To rebuild trust with the US, Beijing would have to make significant concessions on many issues. Analysts said that the consent of these countries is unlikely if there is not a significant shift in Chinese policies. According to reports, one of the candidates for Japan's next prime minster has doubted China's ability meet CPTPP standards. In a Wednesday speech, Dan Tehan, Australia's Trade Minister, stressed that any country that wants to join the trade agreement "will have to adhere to all the rules.

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Japan is currently involved in a territorial dispute with China over the East China Sea. Australia, however, has been subject to import tariffs imposed from China. Through the United States-Mexico–Canada Agreement (USMCA), Canada and Mexico may be able to stand in China's path. A "poison pill” provision in the trade agreement requires that each member consults the others if it wants to make a trade deal. Analysts believe the clause could have been targeted at China. The Trump administration negotiated USMCA. It replaces NAFTA, the North American Free Trade Agreement.

CPTPP Standards met

Analysts believe that China could have difficulty meeting CPTPP provisions, which promote cross-border data flow, labor and environment protection, as well restrictions on state-owned businesses, in addition to political obstacles. The unfair trade practices of China have been criticized by U.S. businesses and European Union companies, including the subventioning of state-owned firms, lack intellectual property protection, and forced technology transfer.

China's entry in the trade pact will require it to agree to regulations on state firms, labour, and environmental regulation. This would be a significant departure from China's current position. Capital Economics

According to Capital Economics, economists wrote that China's entry in the trade pact would mean it had to comply with rules regarding state firms, labour, and environmental regulations. This would be a significant departure from China's current position. They said that it was difficult to reconcile the CPTPP's demand for equality with the push for self-sufficiency.

Others trade experts believe it will not be difficult for China meet the requirements of the mega trade agreement. CPTPP's ambitions are lower than TPP and it has many exceptions and loopholes that could help China meet the more difficult provisions. Stephen Olson, senior researcher at Hinrich Foundation, which focuses on trade issues, stated that CPTPP is not as ambitious as TPP. Olsen stated that China already has demonstrated its extraordinary skill in manipulating, evading and nullifying trade rules in agreements in cases where the exceptions are not sufficient.

Analysts said that China's CPTPP bid was a sign of China's growing economic power in Asia-Pacific. The U.S. has been primarily focused on security concerns in the region, despite its success. Analysts said that this is especially true when China's application was made following the establishment of AUKUS (Australia, the U.K., and the U.S.) a new security partnership. Analysts from Eurasia Group said that this move was smart diplomacy after the AUKUS security alliance announcement. It turns diplomatic attention on trade and investment issues within the Asia-Pacific, where China has made little progress against its economic heft.