Does China still need the CPTPP?

Academic Jianyong Yue notes that despite China’s seeming eagerness to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), doing so may in fact hinder it from realising its full potential, given the strict regulations of the group. Perhaps it might be better for China to focus on developing its domestic market and turning into a strong consumption power capable of supporting its industrial upgrading and economic transformation.
An aerial view of shipping containers stacked at a port in Lianyungang, in eastern China's Jiangsu province on 12 January 2024. (AFP)
An aerial view of shipping containers stacked at a port in Lianyungang, in eastern China's Jiangsu province on 12 January 2024. (AFP)

On 5 October 2015, 12 Pacific Rim countries, led by the US, agreed to the Trans-Pacific Partnership (TPP). This trade liberalisation agreement billed as one that would "establish new 21st century trade rules" immediately gained worldwide attention, because it intentionally excluded China. In the words of then US President Barack Obama, “We can’t let countries like China write the rules of the global economy.”

Excluding China

The conclusion of this agreement did not sound the alarm in China; on the contrary, domestic public opinion generally interpreted the TPP as a product of US-driven “deglobalisation”. In contrast to this “counter-current”, China, still in a “semi-peripheral” position in global international division of labour, saw itself as a new standard-bearer for globalisation and free trade.

However, based on the rules of the TPP, the agreement was clearly not related to “deglobalisation”. On the contrary, it was a clear attempt by the US to rebuild a new global trend of greater liberalisation without China’s participation.

It is common knowledge that economic interdependence does not necessarily lead to harmonious political relations between countries. Before China joined the World Trade Organization (WTO) in December 2001, the US policy of “engagement” had given way to a policy of “congagement” — containment and engagement. At the end of that year, the US Nuclear Posture Review blatantly included China among the seven countries against which preemptive nuclear strikes could be justified if necessary.

It remains in question whether China’s miraculous high-speed economic growth in the “golden decade” after joining the WTO would have occurred without the change in US international strategy after the September 11 attacks — shifting from traditional geopolitical competition to global counter-terrorism.

Unlike the tariff war initiated by the Trump administration in 2018, the TPP negotiations led by the Obama administration were a more potent economic weapon to undermine China. 

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A logo is seen at the World Trade Organization (WTO) headquarters before a news conference in Geneva, Switzerland, on 5 October 2022. (Denis Balibouse/Reuters)

The US’s willingness to admit China to the WTO was primarily based on the assessment that, at the time, China was too weak to be of concern to the US, and integrating China deeply into the global economic system would better serve the economic and strategic interests of the US in the Far East. 

In recent years, research in the Western international relations academia indicates that China’s accession to the WTO has promoted, rather than weakened, key US national interests in the Far East. Moreover, US political elites were not fooled by China's strategy of maintaining a low profile and biding its time. If not for the impact of the global financial crisis from 2007 to 2009, the timeline for the US to initiate a trade war with China might have been significantly accelerated.

A more potent economic weapon

In fact, with the implementation of the Obama administration’s "pivot to Asia" strategy in November 2011, decoupling from China increasingly became an important means for the US to economically restrain China. Unlike the tariff war initiated by the Trump administration in 2018, the TPP negotiations led by the Obama administration were a more potent economic weapon to undermine China.

There are three key aspects of the TPP. Compared to the WTO, the TPP sets higher labour and environmental standards and strict restrictions on subsidies to state-owned enterprises.

WTO rules were essentially designed to induce growth while suppressing catching up and overtaking, encouraging outward-oriented economies. At the same time, it aimed to limit the economic sovereignty of member countries concerning the preservation and safeguarding of their own businesses, forcing latecomer countries to abandon economic nationalism. Such “anti-developmental” economic and trade rules could trap developing countries in “growth without development”, or “semi-peripheral development”, that is the “middle-income trap”.

The secret behind the export-oriented growth miracle following China's joining the WTO lies in the “low human rights” and wanton environmental destruction. Raising standards in these two areas (including allowing the formation of independent unions) would directly weaken the cost advantage of Chinese products. Strict restrictions on subsidies to state-owned enterprises would greatly constrain the implementation of industrial policies relating to Made in China 2025, making it difficult for domestic enterprises to upgrade their industries. 

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(From left) Australia Prime Minister Julia Gillard, Singapore Prime Minister Lee Hsien Loong, Vietnam President Truong Tan Sang, Brunei Sultan Hassanal Bolkiah, US President Barack Obama, Chile President Sebastian Pinera, Peru President Ollanta Humala, Malaysia Prime Minister Najib Razak and New Zealand Deputy Prime Minister Bill English pose for photo after attending the Trans-Pacific Partnership (TPP) Ministers & Leaders meeting at Hale Koa Hotel in Hawaii, on 14 November 2011. (SPH Media)

Thus, it can be said that the emergence of the TPP could not only weaken China's growth potential but also restrain its development capabilities, posing a significant obstacle to China’s structural transformation and modernisation.

China faced a tough dilemma. Joining the TPP would preserve short-term trade opportunities, but it could severely inhibit industrial upgrading and long-term growth potential. However, not joining would immediately jeopardise China’s economic growth due to the loss of trade opportunities resulting from the “trade diversion” effects of the TPP. The social and political consequences of not joining would be hard to predict, despite the unaffected autonomy in development.

... external forces are still needed to push for institutional change in China despite 45 years of reform and opening up. Does this not prove that the system has become stagnant, with no ability for self-transformation? 

Outward-oriented strategy may not be suitable

In March 2018, following the US’s “permanent withdrawal" from the TPP in January 2017 under the Trump administration, the remaining member countries, led by Japan, reached a new agreement and renamed it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In the present, what is puzzling is China’s dallying on whether or not to join the CPTPP.

On 16 September 2021, the day after the establishment of the AUKUS military alliance involving Australia, the UK and the US, China’s Ministry of Commerce formally submitted an application to join the CPTPP, indicating a clear intention to alleviate the increasingly heavy geopolitical pressure — the urgency of this move was perceived globally.

Subsequently, accession to the CPTPP was incorporated into the report of the Chinese Communist Party’s 20th National Congress at the end of October 2022. The decision to “accelerate joining the CPTPP” was further emphasised at the Central Economic Work Conference in December 2022.

The swift momentum of China’s engagement with the CPTPP indicates that its importance goes beyond geopolitical considerations and is prioritised to address current economic challenges. After all, maintaining economic growth is crucial for the legitimacy of the regime. The CPTPP is also endowed with the sacred connotations of “forcing reform” and a “second entry into the world”. It is noteworthy that such rhetoric has been persistent since China sought to join the WTO in the late 1990s.

However, external forces are still needed to push for institutional change in China despite 45 years of reform and opening up. Does this not prove that the system has become stagnant, with no ability for self-transformation? 

... China still clings to an “outward-oriented” mindset and appears anxious in doing so (a stance that is easily exploited by negotiating counterparts).

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This file photo taken on 11 March 2021 shows China's President Xi Jinping (centre) singing the national anthem with other leaders and delegates during the closing session of the National People's Congress at the Great Hall of the People in Beijing. (Nicolas Asfouri/AFP)

Also, the high cost of joining the WTO 22 years ago was portrayed as “forcing reform” — the popular term at the time was “government accession to the WTO”, meaning pressuring the government to evolve towards openness, transparency and the rule of law. The results of this “pressure” are evident for all to see.

Furthermore, as Lee Kuan Yew said, an export-led growth may not be sustainable for China in the long term. Since officially introducing the concept of “internal circulation” in May 2020 and subsequently proposing the “construction of a large domestic market” as a major strategy in response to trade wars and the new Cold War, China still clings to an “outward-oriented” mindset and appears anxious in doing so (a stance that is easily exploited by negotiating counterparts). How can this be the panacea for China to overcome economic difficulties and move towards independent development?

Becoming a strong consumption power

As the world’s second largest economy, is it a dead end for China if it does not join the CPTPP? The US's withdrawal from the then TPP was a strategic error. However, the Democratic Biden administration has shown no intention of returning to the agreement, as the US government is vigorously pursuing economic nationalism to revitalise its competitiveness. 

A country like the US, which places extreme importance on its sovereignty and explicitly equates “economic security” with “national security”, will not rejoin the CPTPP unless the latter satisfies its national interest requirements.

It should be noted that the US itself is a large market, and between the freshly competitive, reindustrialised US and the CPTPP, it goes without saying who needs whom more. A country like the US, which places extreme importance on its sovereignty and explicitly equates “economic security” with “national security”, will not rejoin the CPTPP unless the latter satisfies its national interest requirements.

Since the end of the First World War, elites around the world have recognised and valued the importance of having a vast domestic market for national survival and development. During the Weimar Republic, then German Foreign Minister Gustav Ernst Stresemann — a prominent politician with liberal internationalist leanings — realised that in order to compete with the US with its almost limitless resources and vast domestic market, Germany needed geographic control of part of western Europe with its rich resources and population of 150 million, as well as the large spaces of Central and Eastern Europe, otherwise there would be no economies of scale. To this end, he was willing to resort to nationalism if necessary.

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A view of the Port of Hamburg, undated. (SPH Media)

Stresemann’s vision of a Central European market (Mitteleuropa) became a reality after the Second World War. Fortunately, amid the post-war trend of the “liberal democratic order”, Germany, in collaboration with France, rose again as an economic giant. It became a pivotal economic superpower by promoting the construction of the European common market, rather than through warfare.

China already has an empire-like geographical and population scale, which is an advantage that many countries would envy. With appropriate political and economic reform measures, particularly the construction of a unified domestic market, China can turn into a strong consumption power capable of supporting its industrial upgrading and economic transformation. This, in itself, can become a favourable bargaining chip for China in diplomatic negotiations and could potentially lead to autonomous development with minimal cost of openness. 

Would this approach not be more favourable for China’s long-term national interests, compared with the risky and uncertain prospect of joining the CPTPP?

There is no such thing as a free lunch. A country that loses its ability for self-innovation and resorts to drastic measures, relying on “pressure” to drive “progress”, is unlikely to have a great future.

Daring to address its own problems, especially systemic shortcomings, and building on this to reshape a new consensus for reform and development, should be the grand mission and historical responsibility of Chinese politicians — that is, to strategically develop China’s own large market, drawing lessons from history and pursuing autonomous development.

Related: China’s application to join CPTPP comes to the fore, after the UK’s entry | China joining the CPTPP: It's a matter of time | CPTPP: How China’s membership could be a win-win