China and the TPP

The East Asia Forum ponders China’s potential participation in the Trans-Pacific Partnership (TPP), a multilateral trade pact which the United States and a lineup of eight other nations have proposed to join, and the need for China to help set the rules rather than try to sign up once the agreement is fully baked:

As the major growth engine of the global economy, China’s exclusion from the TPP raises questions about the TPP’s likely success. The TPP’s purpose is to weld the region together and lock in growth of trans-Pacific economic relationships. The central strategic challenge for the TPP, therefore, relates to China’s membership.

But can China join? And should it join? The biggest risk of the TPP is political: that it might divide the region strategically between its members and the rest, with China being on the outside. The TPP has been supported by two prominent US trade policy figures, Fred Bergsten and Jeffrey Schott of the Petersen Institute of International Economics, as a way, they say, for the US to engage in East Asia as ‘China propelled the advance of Asian regionalism’. ‘These countries are well on the way toward creating an Asian bloc, a development that could “draw a line down the Pacific” by discriminating against [the US]’, they add.

Yet if the TPP proceeds on terms set by the US, it would be very difficult for China to join, and the TPP itself, according to Christopher Findlay, may ‘drive the region apart with systematic exclusion of non-members, including China’. This wedge through the middle of the Pacific will be political as well as economic. China would have to join the TPP on US terms as the TPP has now become a creature fashioned largely by Washington. Bergsten and Schott give priority to Japanese and Korean membership, envisioning the use of those strengthened alliance relationships to balance the influence of China.

The United States breathed new life into the TPP during last month’s APEC meeting, when President Barack Obama set an ambitious timetable for drafting the pact’s legal framework before the end of next year. Caixin writes that while Obama’s announcement left many on the mainland concerned that China has been left out, the TPP can and should motivate the PRC to shake off its aversion to economic reform and position itself for a seat at the table:

On the mainland, many were upset that China was not invited to the TPP talks. Some warned the Beijing government to be wary of the pact since, in their eyes, China could get caught in a trap. If China joins TPP, they said, it would be forced to play by U.S. rules. But if China stays out, they added, it would risk being marginalized.

We disagree. TPP’s proposed free trade zone in fact echoes the aims of China’s economic reform policy, and should be seen as an opportunity for the Chinese government to liberalize the economy, to the nation’s benefit. Beijing should treat this trade pact as it did its accession to the World Trade Organization, with a proactive yet prudent stance, all the while making decisions strictly based on China’s best interests.

See also previous CDT coverage of China and the WTO, including its report card as the 10-year anniversary of its membership accession approaches.