Debate on China's TPP role regains momentum

Trade | Zheng Yangpeng

Should China join the talks on the Trans-Pacific Partnership? The old debate seems to have regained momentum.

In a May visit to Japan, United States Undersecretary of Commerce for International Trade Francisco Sanchez said the US would welcome China joining the TPP.

In response, China's Ministry of Commerce said China will analyze the possibilities of joining the pact and assess the pros and cons based on research and the principles of equality and mutual benefit.

The ministry said China, which has attached importance to the TPP talks, has been soliciting the opinions of various government departments and industries on the trade pact.

But sources in the Ministry of Commerce told China Daily that China is becoming "positive" toward the US-led Trans-Pacific free trade agreement. A consensus has been reached on the importance of the free trade pact, a step forward from some time ago, when many people were opposed to the proposal.

The US launched the TPP in 2010 in an attempt to strengthen trade relations with the Asia-Pacific region.

In April, participating countries approved Japan joining the TPP talks. Eleven nations are involved, including Canada, Peru, Chile, Vietnam and New Zealand.

Although none of the experts interviewed by China Daily were against involvement in the negotiations, some questioned the integrity of the US' push for the partnership, and others wondered whether China could soon meet the standards of the pact.

Steve Orlins, who heads the National Committee on United States-China Relations, favors China's accession to the TPP. Speaking at the recent Third Global Think Tank Summit held in Beijing, Orlins cited the history of China's accession to the World Trade Organization to illustrate the importance of "trying the unthinkable".

Differing opinions

He said China's accession to the WTO has had two major results. First, it served as a base for China's domestic reform. Second is the enormous growth of global trade.

"Now it comes to the TPP. People in the US said, don't try because it will only lead to disappointment What I'm seeing is more receptivity to the possibility of China entering the negotiations.

"Is it going to be easy? No. It is going to be really, really hard. But does that mean we shouldn't try? My response is let's try because we've been through this before," Orlins said.

But Zhang Yansheng, secretary-general of the Academic Committee of the National Development and Reform Commission, expressed reservations at the same panel.

He argued that the circumstances prevailing when China prepared to join the WTO were very different from those now.

"We were very sure that China wanted to participate in globalization. Joining the WTO was the chance. We were also quite sure that China wanted to adjust itself to international business norms," said Zhang.

"Now the US is pushing for the TPP, as well as the Transatlantic Trade and Investment Partnership with the European Union. Is it launched for China's new round of reform?" he asked.

He said there are voices in the West doubting whether globalization, launched by the West, really served the West's interests.

After all, China has jumped from being the seventh-largest economy before entering the WTO to the second spot now. Its foreign trade now represents more than 10 percent of the global total.

The US and EU, though, have fallen into crisis and seen their share of global trade contract.

"The biggest question presented by the TPP and TTIP is: Is globalization still the direction in which we are heading? Are we abandoning the open multilateralism embodied by the WTO?" Zhang asked.

Ding Yifan, deputy director of the China Development Research Center, a top Chinese think tank, said: "Developed countries in North America and Europe were champions of global free trade negotiations and founders of the WTO system.

"Now they are active participants in regional free trade area negotiations. Have they lost confidence in multilateral free trade negotiations or in their own competitiveness? "

Zhang said China would like to regard the TPP as a high-standard free trade agreement and one that could provide leverage for China's reforms.

But TPP is not the only choice. Others include the Closer Economic Partnership Arrangement, an agreement between the mainland and Hong Kong, the Economic Cooperation Framework Agreement, an agreement between the mainland and Taiwan, and the Regional Comprehensive Economic Partnership, an ASEAN-led economic bloc.

No reason to fear

Zheng Yongnian, director of the East Asian Institute of the National University of Singapore, argued there is no reason for China to be afraid of the TPP, because history shows that, though many pacts were very demanding at the beginning, they lowered their standards during the negotiation process.

"What's more, China should realize that without China, the second-largest economy in the world, any international economic organization could not be effective," he said.

In March, Shinzo Abe, Japan's new prime minister, announced Japan's bid to enter the TPP talks. In late July, Abe is expected to formally announce the start of the negotiations.

With the world's third-largest economy on board, the final TPP pact will cover nearly 40 percent of global economic output and one-third of trade worldwide.

Yves Tiberghien, an associate professor with the University of British Columbia, who specializes in Japan and East Asia's economies, said it "could make sense" for Japan to pursue both the TPP and the trilateral FTA with China and South Korea.

"But to only follow the TPP, I would argue, is not in Japan's interest because, at this point, 25 percent of Japanese goods go to China while only 15 percent go to the US."

He said compared with the TPP, the trilateral FTA is more relevant to address the classic "East Asian paradox": While integrated more and more in trade and investment flows in a liberal or decentralized way, the three countries' intensive links have not been institutionalized.

He said the drawback of the TPP is that in the past few years, it was integrated into the US' "pivot to Asia" strategy and appeared to be "slightly confrontational toward China". He added: "It is a very demanding agreement. And it would not suitable for China for 10 or more years."

To make the TPP work for China, Tiberghien suggested there may be a need for "dual-tracking". A long time frame would be needed for a transitional phase.

Contact the writer at zhengyangpeng@chinadaily.com.cn