Trans-Pacific Partnership not best way forward for China at present

By Du Ming Source:Global Times Published: 2014-6-4 19:53:01

China's attitude toward the 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."

However, I submit that China should not seek to join the TPP talks for now. 

At first sight, there are some good reasons why China should join the TPP talks as soon as possible. For instance, as a preferential trade agreement, the TPP is discriminatory by nature. Therefore China's foreign trade and investment 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 a set of rules which it had no part in making. The TPP might also be used as a driver of China's domestic economic reforms.

However, the case against China's joining the TPP is grounded on some practical considerations.

To begin with, the US and Japan are highly unlikely to admit China in the current negotiations.

To be fair, the US has never explicitly excluded the possibility of China joining the TPP. Indeed, the US publicly welcomed China's participation, but only under the condition that China is able to meet the "high standards" required by the TPP. 

Since China is unlikely to agree to the concessions on State-owned enterprises, services, intellectual property and labor that the US would demand, the US does not have much incentive to involve China.

The power dynamics in the current TPP negotiations ensure that the final TPP text will reflect US interests to the largest possible extent.

It may well be that the US wishes China will 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 opportunity for China to shape the future trade rules by early participation in the TPP negotiations is merely wishful thinking.

Some people are worried that some TPP members are developing countries and their export products are highly similar to those 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 the US.

Nonetheless, the simulation results show that the possible effects of the TPP on Chinese exports would be relatively modest. In contrast, all TPP member countries would benefit enormously from China's entry. 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 the 1980s. The two sides have not reached a major breakthrough after several rounds of bilateral parallel negotiations. US President Obama's recent trip to Japan again failed to narrow the divergences between the two sides.

Moreover, 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 vested 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 significant than other US free trade agreements.

China should be braced for the fact that its possible accession to the TPP will probably be more challenging than its WTO accession a decade ago.

The US strategy is clear: Washington wants China to agree to the TPP rules written by it, and some rules are clearly targeted at China. However, in view of the width and depth of the TPP disciplines, it is doubtful whether the benefits of joining the TPP truly outweigh the strategic, political and economic costs.

The author is a law professor at Lancaster University Law School in UK.

Posted in: Viewpoint

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