Media  Foreign Affairs and National Security  2020.12.07

Is China a free trader or just a free rider?

the japan times on November 25, 2020

Trade Policy China

“Will China join the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)?” a director of a TV news show asked me on a midnight phone call last week. “Are you kidding?” I sleepily murmured. “No,” he said, “President Xi Jinping just announced it this afternoon!” OK, that was a call I had to take.

According to the director, Xi told a virtual Asia-Pacific Economic Cooperation summit meeting hosted by Malaysia that China would “actively consider” joining the CPTPP (or TPP-11), an economic partnership agreement among Japan and 10 other regional economies. The United States withdrew from the original Trans-Pacific Partnership Agreement (TPP) in 2017.

He then told me that President Xi also urged countries to “defend multilateralism” and called for the establishment of an “Asia-Pacific free trade zone at an early date.” I growled, “When has China become a champion of multilateral free trade?” and told him “It’s typical Chinese propaganda.”

Still, he kept asking me questions: Will China after successfully completing negotiations on the world’s biggest free trade agreement, the Regional Comprehensive Economic Partnership, or RCEP, take on a new free trade initiative? Will this put the United States and Japan in an awkward position? Will China dominate the world of free trade?

The following are some of my personal observations:

Can China really join a new TPP?

Absolutely not, at least, for the time being. The RCEP is no CPTPP; the requirements for joining the RCEP, which includes a variety of ASEAN member states, are much lower than those that were required to enter into the original TPP agreement, though no country would officially admit as much.

Will China eventually try to join a new TPP?

It is highly likely they will. The Nikkei Shimbun carried an interview with a professor of international relations at Peking University who said, “In China, voices are growing now in favor of its early accession to the TPP before the United States comes back. China’s participation in the new rule-making would be of interest to Beijing.”

What if negotiations start on China joining such a group?

The professor, a highly respected scholar in China, may not know in detail the actual practices behind negotiating trade agreements. If China wishes to join the CPTPP, Beijing must accept all the terms and conditions already contained in the existing agreement as it is currently written.

On issues of market access for goods, China must negotiate from scratch with all 11 members. Nonetheless, China also must accept the already established CPTPP rules for such goods, including on national treatment, rules of origin, customs administration and technical barriers to trade.

The same goes for other issues such as cross-border trade in services, financial services, telecommunications, electronic commerce, just to name a few.

I assume that in order to address many of these issues, the Chinese Communist Party will need to alter the current way it governs its economy. Requirements for accession to the group are as high as the standards that leading economies such as the United States, Canada, Japan and Australia had to meet in order to join the original TPP.

In other words, to be accepted as a new member, China needs to fundamentally change its restrictive trade practices, laws and regulations. These requirements are of course quite common in the world of free trade agreements.

Will China’s participation pose a challenge to Japan?

Not at all. The Peking University professor told the Nikkei that “China’s accession to the TPP would test Japan. If Tokyo refuses it, Japan must confront China. Tokyo, however, cannot easily agree to it because Washington will never agree to it.” Again, the Chinese professor does not necessarily know the realities involved in trade negotiations.

Japan has nothing to worry about. If Beijing wishes to join a new TPP, it is welcome to join after it changes its current trade regulations to meet CPTPP requirements. It is as simple as that. Reformers in China are fully aware of this. If China transforms itself into a real free trading nation without “Chinese characteristics,” its inclusion in the group is always welcome.

Should the United States return to the agreement?

I sincerely hope so. The recent successful negotiation on the RCEP may have emboldened the leaders in Beijing and they seem to have enjoyed helping craft the new trade rules. It is quite possible that they are now confident that China can join, change, and remake the rules of trade under a new TPP.

Based on my experience as Japan’s chief negotiator for trade in services at the World Trade Organization from 1994 to 1996, I don’t expect China to abide by the ordinary rules or regulations for joining the free trade agreement.

For a free trade agreement to work, like-minded trading partners, including the United States, must be united and prevent revisionist nations from rewriting the existing rules. It is high time for Washington to rejoin so it can have a say in crafting such frameworks.

Joe Biden has started naming cabinet members for the next U.S. administration. The Trump administration was neither interested in the TPP nor other multination trade agreements. I sincerely hope the Biden administration takes the initiative and returns to the CPTPP to make the free and open Indo-Pacific vision a reality.

Given the domestic political realities though, it will be difficult for Biden and his team to do so. But free riders of free trade systems should not make rules for the real free traders. Tokyo, as are many other like-minded Indo-Pacific capitals, is hopeful Washington will rejoin the world of international trade.