Free Trade Zones

Editorial: How China stands to gain from joining the Pacific Trade Pact


The Chinese government recently applied to join the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), which has gained worldwide attention. The move comes after careful consideration by Chinese policymakers and reflects China’s determination to deepen reforms and broaden its openness. What China needs to do next is redouble its efforts to meet the entry requirements for the CPTPP so that its application is accepted as soon as possible.

China’s official decision to join CPTPP surprised some people, but before that there were signs that it could happen. Last year, Premier Li Keqiang mentioned at his annual press conference at the end of the National People’s Congress that China “has a positive and open attitude towards joining the CPTPP.” With the signing of the “Regional Comprehensive Economic Partnership Agreement” (RCEP) in November 2020, President Xi Jinping, while attending the 27th Informal Meeting of Leaders of the Asia-Pacific Economic Cooperation (APEC) by liaison video, said, “China will actively consider joining the CPTPP. This was followed by the successful and timely conclusion of negotiations on the EU-China Comprehensive Agreement on Investments (CAI) on December 30. Therefore, China’s candidacy to join the CPTPP is natural.

During the past year, China has had informal contacts with CPTPP members in accordance with the relevant provisions of the agreement. It is clear that China’s decision to apply comes after a careful study and assessment of the terms and conditions of membership. In recent years, China has continued to deepen its reforms and openness. It continued reforms aimed at streamlining administration, delegating power and improving government services, pushing forward its reforms of state-owned enterprises, and strengthening the construction of free trade zones. All of these have increased China’s chances of being accepted into the CPTPP.

If China is successful, it will benefit both sides. Experts estimate that CPTPP membership will increase China’s GDP growth by 0.74 to 2.27 percentage points and its exports by 4.69 to 10.25 percentage points, under different scenarios. China needs the help of the CPTPP to overcome the current difficulties of its reform and opening up, as the CPTPP is a next-generation trade agreement of the highest level and a high-level model for future trade agreements. On the other hand, the CPTPP must also expand and strengthen its influence. So far, the CPTPP is the largest free trade area in the Asia-Pacific region and the third largest in the world. Together with China, the CPTPP would cover a third of global GDP and encompass nearly 2 billion people, making it the largest regional free trade area in the world. China’s accession to the CPTPP will be conducive to regional economic integration in the Asia-Pacific region. In the short term, it would also facilitate economic recovery, trade development and investment growth in the post-pandemic world.

Joining the CPTPP as soon as possible has become China’s latest goal to advance market-oriented reforms and institutional opening. The global landscape is changing due to the emergence of competition from the great powers and the Covid-19 pandemic. China’s request for membership in the CPTPP has both political and economic implications. It would help China emerge from the crisis of international isolation and facilitate the implementation of its dual-traffic economic strategy. As a next step, China can follow the relevant CPTPP procedures and conduct the necessary consultations with each member. Admission to the CPTPP requires the unanimous consent of all current members. This means that China’s acceptance into the CPTPP is not something that will happen overnight; the country will have to engage in long and difficult negotiations. Some people abroad even claim that China may not be able to launch formal trade negotiations with some member countries due to their strained bilateral relations.

To this end, the departments concerned must prepare for the worst, show patience and determination, and avoid rushing or stopping halfway. It must also be recognized that, in order to join the CPTPP, China cannot rely solely on the size of its market or its economy. It will have to carry out a series of substantial market-oriented reforms and opening-up. Therefore, China should be aware of the gap between CPTPP requirements and its existing international obligations and start to broaden common ground. This is where China has to work hard. The harder China works, the more proactive it can be in the negotiation process.

The CPTPP has “comprehensive and progressive” in its name because it not only maintains a firm commitment to reduce tariffs and eliminate non-tariff barriers, but also sets higher standards on certain issues in the areas of competitive neutrality, intellectual property rights, environmental protection, labor rights and public procurement. Domestic and international analysts generally agree that issues such as state-owned enterprises (SOEs), labor and electronic data are the main obstacles to China’s entry into the CPTPP. When it comes to CPTPP rules, China doesn’t have to limit its options to agreeing to all terms and conditions or not joining the pack. In the follow-up consultations, in addition to listening to requests from outgoing members, China could make requests that are reasonable from its point of view. It should be noted that some national advocates have argued that China should press for exemptions under the CPTPP. However, the CPTPP’s rules are generally in line with China’s strategic orientation towards further reform and opening up of its economy. The CPTPP represents the future direction of the global multilateral trading system, and the creation of exception clauses could lead to a slowdown in the economy as a whole. In addition, requiring extended exceptions is also unfair to member countries that have worked hard to join the CPTPP. It might even lower the level of the CPTPP, which would probably be difficult for members to accept.

China’s candidacy to join the CPTPP is generally viewed as positive both at home and abroad, however, some doubts have been raised. At the national level, some are concerned about the potential impact and the challenges that this decision could bring. Of course, China will feel the impact to varying degrees in certain areas over a certain period of time. But then, what would be the point of joining the CPTPP if it did not call into question the existing Chinese system at all? The Chinese people must have confidence in the resilience of China. Most importantly, they should take a long-term view of changing challenges and further strengthen the country’s resilience by deepening reform and widening openness.

For China, joining the CPTPP is not about grabbing a fruit at hand, but rather a fruit that China can only reach by stretching and standing, as it was. the case with its accession to the World Trade Organization (WTO) at the turn of the century. At the time, China held lengthy negotiations – in China, the process is said to have taken so long that negotiators’ hair turned gray – and amended tens of thousands of laws and regulations. The pros and cons have been widely discussed within its political, business and academic communities. This allowed ordinary people to gain a basic understanding of the WTO and the whole process was essentially a collective learning experience of globalization for the nation. China’s accession to the WTO has since become a powerful engine of the country’s rapid economic growth. To become a member of the CPTPP, China must learn from its successful experiences and let the Chinese people know that China’s entry into the CPTPP will create a perfect opportunity for the country to deepen domestic reform and opening up, which will be the best way for China to cope with internal and external challenges.

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