The Chinese government should consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-nation free trade alliance, to show Beijing remains committed to open trade as its tariff battle with Washington drags on, a Chinese think tank said on Wednesday.
The US’ absence from the new trade block, which officially launched at the end of 2018, gives China a “time window” for expanding its “circle of friends” and avoiding being excluded from any new trade system, the Beijing-based Centre for China and Globalisation said in a research report unveiled at a media briefing.
Participating nations in the CPTPP include Japan, Australia, Vietnam and Mexico.
“We should make preparations in advance and join as many regional trade blocks as possible,” centre founder Wang Huiyao, who also serves as an adviser to China’s State Council, told reporters.
Joining CPTPP – which would require China to meet the partnership’s standards on labour, state-owned enterprises, service trade and intellectual property – would be a “good” way “to build consensus [within China] and reduce friction with the US”, Wang said.
CPTPP is an improved version of the Trans-Pacific Partnership, which was dealt a staggering blow when US President Donald Trump withdrew the US from it on January 23, 2017 in one of his first acts after his inauguration.
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However, the remaining countries, guided strongly by Japan, managed to preserve the deal, which represents 13.2 per cent of the world’s economic output and 500 million people. The first ministerial-level conference of the CPTPP is expected to take place in Tokyo on January 19 with the top agenda item being setting the process for admitting new members. South Korea and Britain are new candidates.
Talks with China are going very well!
— Donald J. Trump (@realDonaldTrump) January 8, 2019
The Chinese government’s official line about CPTPP is that it is open to joining, although many analysts say Beijing is far from ready to agree to the terms. For instance, one of the alliance’s rules is that member countries must share information about their state-owned enterprises with each other. China, which regards state firms as the backbone of its national economy, could have difficulty accepting that stipulation.
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China has been pushing ahead with the Regional Comprehensive Economic Partnership (RCEP) deal, a proposed free trade agreement between the 10 member states of the Association of Southeast Asian Nations (Asean), with terms that China can meet more easily than the CPTPP.
However, as Trump pushes for bilateral trade deals with major trading nations and the multilateral framework set by the World Trade Organisation becomes increasingly clunky, China is starting to sense the risks of being isolated from the world trade system.
Such feelings were inflamed by the inclusion of a “poison pill clause” in the recently updated North American trade pact that gave Washington an effective veto over any attempt by Canada or Mexico to agree to a free-trade deal with a “non-market economy” – a provision that was widely seen as targeting Beijing.
The months-long trade war with the US has added urgency to Beijing’s need to find new partners.
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The latest round of talks between US and Chinese officials concluded in Beijing on Wednesday. Delegates to the talks did not reveal what specifically was discussed, or if anything was agreed to.
Although Wang, the think tank founder, had said China and the US were likely to reach a deal through negotiations, he acknowledged that differences will remain.
As such, joining the CPTPP would be a relatively easy way for Beijing to gain an edge over the US, Wang said, calling the prospect a “low hanging fruit”. However, Beijing would serve its interests better by waiting two years to join in case a new US president replaces Trump in the White House after the 2020 election, he said. A new chief executive could have a different view on the issue of China joining the CPTPP, Wang said.
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“Domestic opposition [against CPTPP] in China has been disappearing, after the US pulled out of the deal,” Wang said. “The trade war has made people realise that the country must open up further for its own benefits.”
Tu Xinquan, a University of International Business and Economics professor, told the media briefing that CPTPP would be good place for China to exercise its trade influence. Joining CPTPP might be “more feasible” for Beijing than attempting to push ahead with multilateral trade talks at WTO, he said.
However, China would still face “technical obstacles” before it could join the free trade deal, Tu said, citing Beijing’s treatment of state-owned enterprises and rules regarding free information flow. China has the world’s most censored internet under a concept of “cyberspace sovereignty” and a huge police force to back up its control of the information highway behind its Great Firewall.