Experts ask China to join TPP as Beijing seeks bigger role in globalization

TPP protesters in the US. Photo: Getty Images

Some Chinese experts have recently suggested that China should grasp the golden opportunity to join the Trans-Pacific Partnership (TPP) as part of its efforts to reap more economic benefits and increase its international influence in the process of globalization.

Just three days into office, President Donald Trump signed an executive order to withdraw the US from the TPP trade deal, sticking to his promise made during the presidential campaign and leaving a huge space in the Asia Pacific region that these experts deem China could fill.

The 12-nation, high-standard TPP was led by the US under Barack Obama, and was widely seen as a part of his rebalance to Asia policy aimed at containing China. Obama has publicly said that the TPP would let the US, not China, lead the way on global trade. Currently, the remaining 11 member nations still want to make the treaty a reality in absence of the US.

Covering for approximately 40 percent of the global trade, the TPP was an international trade agreement between the US, Australia, Japan, Canada, New Zealand, Singapore, Chile, Mexico, Peru, Malaysia, Brunei and Vietnam. The deal, which was signed by the member nations in February 2016, was designed to deepen economic ties between these nations, eliminate tariffs and foster trade to boost growth.

Expanding trade in services

Wang Huiyao, president of the Center for China and Globalization (CCG), a private think tank based in Beijing, is among those who believe that a TPP membership is a good option for China to boost its trade in services needed in its push to implement the supply-side reform.

Being a beneficiary of globalization, China has become the world's largest trader since joining the World Trade Organization (WTO) in 2001. But China's long-held advantage in goods trade is fading away, as the Southeast Asian countries are increasingly replacing it as a new global manufacturing hub due to the relatively lower production costs.

"The TPP represents the world's highest standard for the service trade, which will, together with the tertiary industry, serve as a new growth point for China's economy. China needs to increase the service trade to upgrade its foreign trade structure, which will better promote the implementation of the supply-side reform," said Wang.

He added that China's Going Out policy should not only focus on exporting manufacturing capacity but also on exporting its services and technologies overseas.

In 2016, 51.6 percent of China's gross domestic product (GDP) was contributed by the service industry, up 1.4 percentage points from a year earlier, a record high, China's National Bureau of Statistics (NBS) data showed in January.

Wang estimated that the share of the service industry in China's GDP will hit 60 percent by 2020.

The CCG president further pointed out that the participation in the TPP, which involves areas ranging from goods and services trade, investment, and finance to the protection of intellectual property, labor and environment, reform of state-owned enterprises, as well as government procurement and anti-corruption, could help China "better export its capital, technologies and services in the industries of communications, software, banking, tourism, aviation and so on".

Geopolitical leverage

Although the US has abandoned the TPP, other member nations are trying to salvage the trade deal, with Australia explicitly saying that it is open to China's participation in the trade bloc.

Commenting on the Australian invitation, Wang said that China could use the TPP as an economic diplomacy tool to ease tensions in the Asia Pacific region, where it is at odds with some TPP member countries such as Japan and Vietnam over long-standing territorial disputes in the East China Sea and South China Sea.

Two weeks ago, the CCG released a report to support the view. In the report, researchers said that it is high time for China to "fully take part in the international affairs and the process of globalization" in the face of the Trump administration's hostility.

Trump has made some eye-catching adjustments in the US' foreign policies, with some breaking the diplomatic traditions that former federal governments have followed for decades. In Twitter where the president habitually voices his views, Trump has angered China by challenging the one-China principle and blaming the country for failing to put more pressure on North Korea. In a recent meeting with Japanese Prime Minister Shinzo Abe, Trump reiterated the US' commitment to giving "100 percent" support to the island country, expressing objection to unilateral action seeking to undermine the Japanese administration of the islands in the East China Sea. The new defense treaty between the US and Japan now covers the Diaoyu Islands which are claimed by both China and Japan. Trump has also tried to improve the bilateral ties with Russia, China's strategic partner.

"On the diplomatic front, the US' exit from the TPP might to some extent offer an opportunity for China to deepen the multilateral cooperation and dialogues and improve its relations with the related countries in the Asia Pacific region," the report said.

At a seminar held by the CCG in February, Huo Jianguo, former president of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said, "Through economic diplomacy, China can seize the chance to increase its influence in international affairs."

'TPP superior to RCEP'

Despite domestic suggestions and Australia's open invitation, the Chinese government has been reluctant to accept the idea that Beijing could join the TPP trade deal.

In a recent meeting with his Australian counterpart Julie Bishop in Canberra, Chinese Foreign Minister Wang Yi hinted that China is seeking less prescriptive trade agreements which can fully reflect the different levels of development in different countries, after Bishop asked China to consider the "great opportunities" the TPP might present to the world's second-largest economy.

In talks with Bishop, the Chinese foreign minister, instead, placed high value on the Regional Comprehensive Economic Partnership (RCEP), which he described as a trade deal comparable with the TPP.

The RCEP is a multilateral trade agreement being negotiated between the Association of Southeast Asian Nations (ASEAN) countries and their six Free Trade Agreement (FTA) partners including China, Australia, India, Japan, New Zealand and South Korea.

However, the CCG president holds a different view. He said that in some areas the TPP is superior to the RCEP, whose negotiation is still in the pipeline. "The degree of openness to the service trade and other standards in the RCEP are relatively low. Thus it cannot serve as an alternative for a global economic pact in the 21st century," he said, calling the TPP as a "very mature system".

He added that it might take a long time to finalize the RCEP negotiations because Japan, South Korea and India are not very enthusiastic about sealing the deal mainly led by ASEAN countries.

At the seminar in February, Huo suggested that China should take the initiative to join the TPP because the trade framework features some valuable standards representing the new trend of the 21st century. "(Joining the TPP) is very important for China to gain an upper hand in international competition," Huo said.

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