Regional trade deals are gaining importance

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  • By Liu Da-nien 劉大年

Chinese Premier Li Keqiang (李克強) on May 28 said that “China has a positive and open attitude toward joining the CPTPP [Comprehensive and Progressive Agreement for Trans-Pacific Partnership]” at a news conference in connection with the third session of the Chinese National People’s Congress.

It was the first time that China has officially expressed a willingness to join the partnership. Although it has taken no concrete action yet, and no feasibility study has appeared, the comment has changed the dynamic surrounding the future of regional economic integration.

China has always looked on CPTPP membership with reservations, because its predecessor, the Trans-Pacific Partnership (TPP), was tailor-made for the US. Almost no changes were made between the TPP and the CPTPP, and China has found it difficult to accept the US’ rules.

As a US-China trade dispute and the COVID-19 pandemic have prompted a reorganization of the global supply chain, China’s main objective is to use free-trade agreements to find another opening to break through and minimize the impact of US containment.

If the Regional Comprehensive Economic Partnership is signed in November, it would further consolidate China’s position in the Asia-Pacific region and put it at an advantage over the US, which has only bilateral agreements in the region, but no multilateral ones.

Most CPTPP members have been supportive of China’s announcement and think that it would be beneficial to regional trade stability, although they also have their own individual agendas.

Australia, for example, is supporting Chinese membership, because it hopes to use the bilateral talks preceding Chinese membership to mend deteriorating relations between the two countries.

It is worth considering that as CPTPP entry requires a unanimous decision among the members, the US could try to use Mexico to block China.

The US position would also have an effect on Chinese membership.

US President Donald Trump would not bring the US into the organization, but Democratic presidential candidate and former US vice president Joe Biden, who leads Trump in the presidential election polls, has said that he would be willing to consider CPTPP membership for the US.

If the US were to join, the possibility of a Chinese membership would drop.

Taiwan must also evaluate CPTPP developments. Apart from solving trade issues, such as the import of food products from Japan, it must also consider Chinese interference.

If China applies for CPTPP membership and Taiwan also receives an entrance ticket, the process might follow the same procedure as when the nation joined the WTO in 2002: Taiwan would only be able to join after China does.

As the COVID-19 pandemic wreaks havoc on the world, countries feel the importance of maintaining supply chain stability and guaranteeing industrial security.

With the inefficiencies of the multilateral WTO, the best option is to use regional trade agreements to lower obstacles to trade and consolidate supply chains by initiating industrial cooperation.

Regional integration would pick up speed around the world, and in addition to forming new free-trade agreements, existing ones would expand their membership, and widen their scope. This would set off another wave of competition.

Liu Da-nien is director of the Chung-Hua Institution for Economic Research’s Regional Development Study Center.

Translated by Perry Svensson

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