China’s CPTPP bid reveals the political dimension of global trade ambitions
Authors: Zhijie Ding, Columbia University and Wanjun Zhao, UC Berkeley
In September 2021, China applied for membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This application came four years after the United States pulled out of the nascent arrangement. While China is clearly motivated by a desire to expand trade and facilitate industrial expansion, its political motivations are less clear.
Some argue that Beijing is ready to meet the CPTPP’s high standards and intends to use accession negotiations to accelerate domestic market-oriented reforms. Others remain sceptical of China’s track record in observing the WTO’s principles of non-discrimination, openness, transparency and market-oriented policies. They maintain that Beijing is unlikely to follow through on its commitments and that its application is merely a bid to expand its influence.
These contradictory explanations are both partially correct and are a result of differing interpretations of global trade rules by China and the West. China is willing to embrace reforms, but not in the ways hoped for by the United States and its partners. Underpinning Beijing’s application to join the CPTPP are its three-fold political motivations — facilitating domestic economic reforms, popularising its own interpretation of global trade rules and strengthening its economic leverage via-à-vis countries in the Asia Pacific region.
Contrary to accusations of non-compliance with WTO norms, China has made strides toward non-discrimination through market-oriented reforms. Since 2003, China has embraced a policy of ‘grasp the big, release the small’, reducing its number of state-owned enterprises (SOEs) through privatisation, asset sales, and mergers and acquisitions. China has enacted a series of mixed-ownership reforms since 2013, welcoming private capital into SOEs. China also committed to trialling CPTPP rules in some of its free trade zones and overcoming other regulatory hurdlesas part of the Phase One deal.
Beijing’s commitment to deepening reforms is also evident in its interest in building an alternative to the US-based Clearing House Interbank Payments System (CHIPS). Russia’s invasion of Ukraine has made many fear the possibility of the world economy dividing into two parts. But whether China seeks to complement or rival the prevailing international financial infrastructure, building a robust alternative to CHIPS is ‘tied up with the broader project of currency internationalisation’. China has an incentive to pursue reforms that bolster the renminbi as an international currency.
Caution is still warranted. Amid intensified US–China trade and technological conflicts, Beijing has little incentive to adopt every reform demanded by Washington, not to mention that China and the West have consistently disagreed on what ‘reform’ should mean.
Given Beijing’s unapologetic claims that its practices are compliant with global trade rules, its CPTPP bid is likely an attempt to popularise its own interpretation of global trade rules. For example, despite China’s mixed-ownership reforms of its SOEs, private shareholders remain subordinate to the state in corporate governance. This has been exacerbated by a strengthening of party cells within SOEs since 2013. Recent evidence also points to continued favouritism towards Chinese SOEs in the form of more accessible and cheaper credit.
These realities, combined with the claim that China’s SOE reforms are in line with CPTPP rules, suggest that Beijing holds a much more conservative interpretation of global trade rules. Seeking accession while maintaining its distinctive interpretation of CPTPP provisions, Beijing likely hopes to shape global trade rules in its favour.
Caution regarding China’s geostrategic motives is not misplaced, as it has shown a propensity to extract political gains from its economic ties. For example, Beijing halted most of the South Korean company Lotte’s operations following Seoul’s decision to participate in a US-led defence system. More recently, it responded to Australia’s call for a COVID-19 origin inquiry with import restrictions.
In fact, China applied to join the CPTPP just one day after the formation of the AUKUS security pact. Thus, China’s CPTPP bid is likely a defensive move against AUKUS and an attempt to expand its influence in the Asia Pacific.
In early 2022, the United States launched its Indo-Pacific Strategy, with the goal of encouraging more sustained cross-border collaboration on trade, data and supply resilience in the region. President Joe Biden’s recent visit to South Korea and Japan also highlights his willingness to engage in regional trade partnerships.
Given the United States’ growing interest in the region and China’s political calculus, the Biden administration should seriously consider complementing its existing initiatives with a re-entry into the CPTPP. Given Beijing’s readiness to adopt reforms, however modest they may be, it would be in Washington’s interest to join the talks that shape these reforms.
With global trade strained by ambiguous rules, the United States should welcome China’s attempts to define global trade rules and use CPTPP negotiations for consensus building. And in light of Beijing’s geostrategic motives, Washington could use the CPTPP to grow its influence beyond extant arrangements. In addition, domestic opposition to re-entering the CPTPP may have eased, given trade liberalisation’s disinflationary potential and the political salience of the United States’ 40-year high inflation.
China’s CPTPP bid is an unparalleled opportunity for clarifying ambiguous global trade rules and easing ongoing trade tensions. But given that current CPTPP members and the United States are unlikely to accept China’s demands wholesale, China should be prepared to make concessions.
While encouraging China to undertake genuine reform efforts, the United States and its partners should also adopt a more open-minded attitude and negotiate with China in good faith. Current CPTPP member states should establish an accession working group and kickstart China’s accession negotiations as soon as possible.
Zhijie Ding is a Master of International Affairs candidate at the School of International and Public Affairs at Columbia University.
Wanjun Zhao is a research assistant at University of California, Berkeley.