Dr Ming Du
China’s attitude toward the US-led Trans-Pacific Partnership (TPP) has shifted over the past few years. Initially, China viewed the TPP as a US strategic tool to contain China’s rise and dominate the Asia-Pacific region. More recently, China’s attitude has been less suspicious. According to the Ministry of Commerce, China ‘will analyze the pros and cons as well as the possibility of joining the TPP, based on careful research and according to principles of equality and mutual benefit’.
I submit that China should not seek to join the TPP in the short term.
Granted, there are some good arguments why China should join the TPP talks as early as possible. To begin with, as a preferential trade agreement, the TPP is discriminatory by nature. China’s foreign trade and investment flows will be negatively affected if China is excluded from the TPP. Furthermore, if China seeks membership in the TPP after all negotiations are completed, China will have to go through a strenuous accession process and comply with all the trade disciplines that it did not play a role in making. Finally, the TPP might be used as a driver to push forward China’s long-needed domestic economic reforms.
The case against China’s joining the TPP is grounded on some practical considerations. First, the US and Japan will not admit China in the current negotiations. To be fair, the US has never explicitly excluded the possibility for China to join the TPP. Indeed, the US publicly welcomed China’s participation, but only under the condition that China is able to meet the ‘high standards’ set. Since China is unlikely to agree to various concessions on state-owned enterprises, services, intellectual property and labour that the US will demand, the US does not have much incentive to involve China in TPP talks before all negotiations are finished.
As part of the grand ‘rebalancing’ strategy in Asia, the TPP is the US’s central economic piece to counterbalance China’s meteoric rise as a new global power. The power dynamics in the current TPP negotiations ensure that the final TPP text will largely reflect US interests. From the US perspective, the only effect of including China in the current negotiations is to make the TPP more difficult to negotiate. It may well be that the US wishes China to join the TPP after all the rules are written, but there is no reason for the US to open the TPP to China at present. The argument that China should join the TPP talks as early as possible so that China can play a role in shaping the future trade rules in Asia-Pacific region is merely wishful thinking.
Second, some people are worried that some TPP members are developing countries and their export products are highly similar to that of China’s. As products from TPP member countries enjoy preferential market access, the TPP will pose a severe threat to China’s exports to US. However, the economic simulation results show that the possible effects of the TPP on Chinese exports are relatively modest. Indeed, China is so deeply embedded in the global supply chain trade that it is difficult to marginalize China or throw China out of the international trade system. On the other hand, if China were a member of the TPP, all TPP member countries would benefit enormously from China’s entry.
Third, there are a number of thorny issues to be settled in negotiations leading up to the TPP Agreement. A successful completion of TPP negotiations should not be taken for granted. For example, between the US and Japan, there are long-standing issues on access to Japanese markets for US goods, services and agriculture dating back to 1980s. The two sides have not reached a major breakthrough after several rounds of bilateral parallel negotiations. Obama’s recent trip to Japan again failed to narrow the divergences between the two sides.
Finally, even if current TPP members have agreed on the basic terms of a trade deal, it may be extremely difficult to sell the deal back home. This is especially the case for the US and Japan where sectoral interests are likely to press for special carve-outs, transitions or aggressive undertakings that other economies are not prepared to accept. After negotiations, the final TPP rules may be diluted and revised, rendering any agreement no more significance than any other US free trade agreements.
In conclusion, whenever China intends to join the TPP, China should be braced for the fact that its accession will probably more challenging than its WTO accession a decade ago. As things stand today, it is not clear whether the benefits for China to join the TPP outweigh the strategic, political and economic costs. As it is always a challenging process for China to join the TPP, early negotiation does not bring any benefits to China and will not make a difficult accession process any easier.
Ming Du is a Reader at Lancaster University Law School. His research and teaching interests are in international economic law, in particular WTO and foreign investment law; comparative business law; and Chinese law. He recently published a paper entitled ‘China’s state capitalism and world trade law‘ in the International and Comparative Law Quarterly.
You can find out more about Ming’s research at http://www.lancaster.ac.uk/fass/law/profiles/ming-du