Economics, International economy

Is China bending on the Pacific Trade Pact?

Image Credit: Shutterstock

Image Credit: Shutterstock

It’s too early to render any definitive judgment, but Chinese officials may be signaling a change of stance regarding participation in the Trans-Pacific Partnership Agreement — or it could just be a head feint before the June 6 California G-2 summit (though carefully not so labeled) between President Barack Obama and PRC President Xi Jinping. What has piqued the interest of trade experts was the sudden announcement by Chinese Commerce Ministry spokesman, Shen Danyang, that the PRC would “study” joining the US-led TPP. Specifically, Shen stated on the ministry’s website: “We will analyze the advantages, disadvantages, and the possibility of joining the TPP based on careful research and according to principles of equality and mutual benefit. China has attached importance to the TPP negotiations and continuously followed their development.” He concluded: “China also hopes to exchange information and material with TPP members on the negotiations.” Chinese officials have made statements of interest previously, but the timing of these comments has sparked new speculation about a possibly evolving Beijing stance.

This morning (Friday, May 31) the Washington correspondent for China Daily followed up with a column calling the statement the “strongest sign that Beijing has overcome its earlier opposition to the proposed accord.”

In truth, the PRC has been all over the map in statements and positioning on the TPP.  While the government itself has been circumspect, Chinese academics, opinion leaders from myriad policy institutes, and media outlets, have advanced a drumfire of skeptical, critical, and even paranoid explanations about the dark motives of the United States in taking the lead in TPP negotiations since 2009. In the paranoid category, the main argument has been that the whole exercise is an attempt by the United States to “encircle” and “contain” China. It is a form of “soft confrontation” opined one scholar. Others have argued that the real aim is to disrupt East Asian regional cooperation and downgrade ASEAN centrality — a clear attempt to throw a scare into the preternaturally skittish ASEAN leaders.

Over the past year, as the TPP grew in size (first with the addition of Canada and Mexico, and then, crucially, with Japan’s entrance into the proposed pact), and as the talks moved toward a 2013-2014 deadline for completion, Beijing has stepped up countermoves. It has pushed hard (thought with little actual success) for accelerated decisions on a China/Japan/Korea (CJK) FTA. And regionally, it has led the way for negotiations for a Regional Comprehensive Economic Partnership Agreement (RECEP) that will compete with the TPP.

Depending on how all this plays out, one risk for China is that a new stance on the TPP will confuse its RECEP and CJK partners. Is Beijing now shifting regional trade priorities? And if it is seriously considering a medium- to long-term bid for TPP membership, where does this leave its other regional negotiations? What about the much touted defense of ASEAN centrality? All good questions.

But in terms of the upcoming Obama-Xi meeting, picking up on Beijing’s new statement on the TPP, President Obama should take the opportunity to make it clear that the TPP is open to all APEC members — as has been the policy from the outset of the negotiation. If and when China is ready to accept the obligations that are in process of being negotiated, the United States and other TPP members will welcome it into the agreement. Privately, the president could also convey to Xi that while the broad framework will be set by the time China bids for membership, TPP members are aware that adjustments will have to be made to accommodate China’s special interests — while also making it clear that the issues for negotiation will be the timing of new obligations, not their substance. This, by the way, is pretty much the terms by which Japan was granted TPP membership.

Such a US stance would also have the benefit of undercutting anti-TPP elements in China, assuaging the fear of a number of Asian TPP nations (and potential new members) that, despite its avowals, the US goal is an exclusive, non-PRC regional economic architecture.

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