June 27, 2020

HE DOESN'T JUST LOVE OUR ENEMIES; THEY LOVE HIM BACK:

China and the Trans-Pacific Partnership: In or out? (Gary Clyde Hufbauer (PIIE), Jeffrey J. Schott (PIIE) and Zhiyao (Lucy) Lu, June 23, 2020, Peterson Institute)

The Trans-Pacific Partnership (TPP) was designed in 2016 to be almost China-proof, with stringent obligations requiring transparency and trade liberalization. As former US Trade Representative Michael Froman put it, Chinese participation would be welcomed only when China could meet TPP's terms, which it was far from doing. The United States was not keeping China out; China was just not ready to come in.

President Donald Trump then pulled the United States out of the TPP in January 2017. The remaining 11 TPP countries suspended some of the controversial terms favored by the United States and implemented the pact, renamed the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), in late December 2018. Membership was open to all countries, including China. Has the US departure opened the door for China to join sooner rather than later?

The answer depends on the terms that China would agree to if it signed up to the club. The original vision of the Obama trade team in launching the TPP was that it would have sufficient clout to rival China's extensive trade relations across the Pacific. They also hoped that it would pressure Beijing to adopt bolder economic reforms to sign up. But without US officials screening new applicants, China could now seek to negotiate accession under revised and more flexible terms and enhance its regional economic influence. This would be bad news for the United States, both in economic and geopolitical terms. If elected president, Joe Biden should figure out a way to persuade Congress that joining the CPTPP best serves US interests.

Chinese participation in the US-designed TPP was always considered a long shot. TPP requirements conflict with current Chinese practice; China would have to embrace unprecedented domestic reforms to meet disciplines on state-owned enterprises, data flows and localization restrictions, labor obligations, and subsidies. Yet when President Trump closed the door on US participation in the TPP in January 2017, he opened an opportunity for China to enter and reshape Asian economic integration by modifying the terms of the CPTPP. 

Posted by at June 27, 2020 7:21 AM

  

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