China, still missing from the Trans-Pacific Partnership – Sara Hsu

The Transpacific Partnership (TPP) in a proposed investment treaty covering both sides of the Pacific Ocean, including the US, but China is missing. Since the treaty covers 40% of the global GDP, China´s stance towards the TPP is key, writes financial analyst Sara Hsu in the Triple Crisis.

Sara Hsu:

Amidst these negotiations, China’s stance has been unclear. In the beginning of its formation, after the United States joined the talks, some Chinese scholars viewed the treaty as an attempt by the U.S. to counterbalance China’s power in the Pacific region. In the past couple of years, however, China has been officially open to the treaty while remaining outside of negotiations. While President Xi is explicitly open to trade cooperation, the rumored high labor, free data movement, and intellectual property standards imposed by the treaty present barriers to China’s participation. While the details of the high labor and environmental standards are unknown and controversial, a Wikileaks post on the intellectual property standards reveals strong pro-big business protections for patents. China was invited to join the TPP in 2012 by then-U.S. Secretary of State Hillary Clinton, but continues to analyze its potential gains from joining.

This so-called “high-standards” treaty is less suitable for China than other proposed treaties whose talks are under way. China already has several bilateral agreements in place, including those with Switzerland, Chile, and ASEAN, and is currently engaged in talks to build an Asia-Pacific Free Trade Area and a Regional Comprehensive Economic Partnership, and to put into place the recently approved China-South Korea Free Trade Agreement. The Asia-Pacific Free Trade Area would eliminate trade barriers across 21 countries in the region, while the Regional Comprehensive Economic Partnership would promote free trade across the ten ASEAN nations plus Australia, China, India, Japan, South Korea and New Zealand.

The reality is that China is unlikely to join the TPP, as joining would force the nation to raise its standards in several disparate areas that are economically or politically costly. As free trade agreements go, the devil is in the details, and from the little we have seen of those details associated with the TPP, they are not easily transferable to China. Further, the Asia-Pacific Free Trade Area would be more geographically expansive, including powerhouses such as the United States, Canada, Russia, Japan, South Korea, Australia, and Mexico, and a number of other countries. President Xi has promoted what he refers to as an “Asia-Pacific dream.” Although the U.S. has not been overly supportive of the Asia-Pacific Free Trade Area, this proposal falls more in China’s favor, as it would lead to relatively higher gains in trade for China and potentially less costly requirements.