Trade
The complexities of China’s CPTPP entry
Author: Choong Yong Ahn, Chung-Ang University
Chinese President Xi Jinping made global headlines at the APEC summit on 20 November 2020 by announcing that China was considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into effect in December 2018. The news came amid a likely reconfiguration of the Asia Pacific trade landscape due to unabated trade tensions between the United States and China and the conclusion of the Regional Comprehensive Economic Partnership (RCEP) five days prior.
Significantly deviating from former US president Donald Trump’s ‘America First’ policy, the Biden administration is returning to global governance by reviving multilateral institutions, including the Paris Agreement, the World Health Organization and the World Trade Organization (WTO). The Biden administration’s pivot back to Asia might see the United States revisit the CPTTP, after mending urgent domestic affairs, including public anti-globalisation sentiments.
The United States has lost a great deal of its leadership credibility in Asia when it comes to safeguarding the liberal trade order. Despite the United States withdrawing from the Trans-Pacific Partnership (TPP), the deal was salvaged laboriously under Japan’s leadership with the remaining key members either dropping or compromising on some sensitive items in the final agreement.
In addition to China, the United Kingdom, South Korea, Indonesia, Thailand and Taiwan have also expressed interest in joining the CPTPP. Major signatory economies of the TPP and RCEP are also members of APEC. If every country interested in an expanded CPTPP, including China, were to commit to the high standards of its clauses even with a raised re-entry bar, it would help create progress toward APEC’s long-cherished goal of creating a Free Trade Area of the Asia Pacific (FTAAP), identified as a goal by APEC leaders as early as 2004.
Seven of the eleven CPTPP members, including Japan and Australia, are intersection economies also belonging to the RCEP. China’s entry into the CPTTP in the absence of the United States could be viewed as creating an advanced ‘RCEP-II’, provided that the clauses signed in ‘RCEP-I’ are upgraded to closely match those in the CPTPP chapters. An expanded CPTPP, with a re-joined United States and newly joined China, alongside other wishful entrants from RCEP, could lead to an FTAAP. It should be welcomed as an ideal building block toward the stalled WTO quest for multilateralism with the most-favoured nation principle.
But in reality, China’s entry into the CPTPP is more complex. If partner countries disagree on the key components of a ‘level playing field’, efforts toward economic integration are unlikely to bear fruit. There are several sticking points for new entrants into the CPTPP, especially China. This includes the prohibition of state subsidies for state-owned enterprises, investor–state dispute settlement, intellectual property rights over biological products, labour conditions for government procurement, data free flows and localisation restriction and digital trade.
The picture of enhanced free trade becomes more complex and unrealistic when transparency standards for the implementation of the free trade pact and strategic security elements for the Indo-Pacific are considered. Some of these points have been embraced in the EU–China Comprehensive Agreement on Investment (CAI) in principle concluded on 30 December 2020, allowing the European Union enhanced market access in China. Still, China’s CAI commitments fall short of the high standards in the CPTTP.
The TPP was originally designed by the United States to counter China’s assertive rise. In response, China became enthusiastic about concluding RCEP, originally perceived by ASEAN and Japan to rival the TPP. If these twin motivations for regional hegemonic leadership remain unchanged, the United States and China are unlikely to be in the same expanded CPTPP boat. With a possible return of the United States to the CPTTP on the horizon, the United States and other major TPP signatories are likely to screen new members while writing reinforced trade rules. The CPTPP would then become more politically like-minded.
Given this politico–economic dichotomy, China’s entry might be a long shot. Some experts claim China is motivated by a domestic reform agenda, referencing CPTPP’s high standards. But it remains to be seen how China carries out its domestic reforms to meet CPTPP entry requirements. Amid the…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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