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THROUGHOUT the years of arcane and secretive talks that culminated in this week’s Trans-Pacific Partnership agreement, participants have brushed aside the notion that the TPP was designed to exclude China. This was not, its advocates protested loudly, an ‘anyone but China club’. Perhaps too loudly.
Those assertions strained credulity. When their guard slipped, the TPP’s cheerleaders often spoke of the new pact not in terms of economics but of geopolitics.
The TPP in its realpolitik guise was the economic complement to Washington’s military pivot to Asia, a means of binding the US more closely to its Asian allies in the face of a resurgent China. In a much-discussed recent paper for the Council on Foreign Relations, Robert Blackwill and Ashley Tellis wrote that the TPP should be seen as part of ‘grand strategy’ to push back against China’s rise.
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By signing preferential trade deals with allies, Washington could help stop China from freeriding on the international trading system and counter what they called Beijing’s ‘geoeconomic power’. Even this week, Barack Obama, the US president who has pinned much hope on the TPP’s legacy-burnishing effects, could not resist a dig at Beijing. “We can’t let countries like China write the rules of the global economy,” he said.
Now that the TPP framework has been agreed, if not yet ratified, member states should make good on their word that their club is not barred to Chinese entry. They should invite Beijing to join. China should go one better still. It should call everyone’s bluff by starting negotiations to do just that.
The idea is not as outlandish as it sounds. From Beijing’s perspective, there are good reasons to be inside the TPP tent. True, the TPP — less of a trade pact and more of a behind-the-borders exercise in protecting investments and standardising regulations — has faults aplenty. It goes too far in strengthening corporate clout by allowing companies to sue sovereign powers accused of eroding their profits.
True, too, the TPP contains provisions against state exercise of economic power that seem almost designed with China in mind. Even so, the aims of the TPP and those of China’s hoped-for economic transformation are roughly aligned. In the late 1990s, Zhu Rongji, then premier, led China’s last great economic overhaul by using its 2001 accession to the World Trade Organisation to push domestic change. Today the TPP could play a similar role.
Take the TPP’s prohibition of preferential treatment of state-owned enterprises. China falls short of that standard, supplying its behemoth SOEs with everything from cheap credit to cheap electricity. Yet Beijing has explicitly said it wants to stop such practices by forcing its mostly inefficient SOEs to operate on a more commercial basis.
Similarly, the TPP has strict provisions on intellectual property covering trademarks, copyrights and patents, all areas flouted by Chinese companies. Yet China’s leaders know this has to change too. As their own companies, some of them heavy spenders on research and development, move up the value chain, Beijing will want to protect their innovations rather than encourage a promiscuous attitude towards intellectual property.
The TPP has environmental provisions to prevent countries from attracting investments through trashing their own ecosystem. Again, China is moving gingerly in this direction as it seeks to clean up the environmental wreckage its early-stage industrialisation has caused. On labour issues too, China’s domestic reform agenda and TPP provisions are in sync. China wants to see a higher proportion of output in the pockets of its workers, who would then have more money to spend.
Certainly, Beijing would be wary of unleashing genuinely independent trade unions. But it may at least be able to pay lip service to the idea of collective bargaining in the country’s own economic interests. The TPP might be good for China, then, by kick-starting its stalled economic transformation from state-led manufacturing to private-led services. But could it possibly be allowed to join? The hurdles may not be as high as they seem.
Other countries, such as Vietnam, are TPP members. Vietnam is a one-party state with coddled SOEs and an attitude towards intellectual property every bit as cavalier as China’s. If Hanoi can join, surely Beijing can make the grade as well.
Shinzo Abe, Japan’s prime minister, has been one of the most explicit in envisioning the TPP as a geopolitical organisation. Yet this week he appeared to open the door to Chinese membership, saying the TPP would have more ‘significant strategic meaning if China joined’. Mr Abe is right. Without China, the TPP looks like a containment strategy in disguise. With China on board, it could help ease Beijing into a post-WTO world. The TPP might then begin to resemble the forward-looking trade pact its advocates pretend it always was.
Published in Dawn, Business & Finance weekly, October 12th, 2015
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