China and the United States can play a positive-sum game on the CPTPP

Author: Cai Penghong, Shanghai Institutes for International Studies

China’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is prompting domestic and international discussion. People are asking questions about Beijing’s motivations, the obstacles China must overcome before ascension and the entry requirements it must meet to gain membership.

China is serious about joining CPTPP. Its application is the consequence of a long-held policy position. In 2013, Chinese President Xi Jinping consulted with then US president Barack Obama on the Trans-Pacific Partnership (TPP) during a visit to the United States. Despite some critics then warning that features of the TPP were traps China should avoid, China’s Ministry of Commerce and Ministry of Foreign Affairs then implied China was positively considering TPP entry.

The United States did not respond to this enthusiasm positively. The TPP was a centrepiece of US geopolitical strategy in the Asia Pacific and it was natural for the United States to adopt a sceptical attitude towards China’s inclusion in the initial stages of negotiations. An early research report produced by Peter Petri and others, and delivered by a staff member of the US State Department at a one-and-half track conference at the Peterson International Economics Institute in Washington, was proof of this position: China was to be considered among the last candidates for TPP entry when the Asian Track, which included China, combined with the TPP Track.

Despite this, China has never stopped seeking out FTAs with other countries, as set out in Xi’s 2014 regional economic strategy the ‘19th Group Study of the Political Bureau of the Communist Party of China Central Committee Calling for Accelerated Fulfillment of the Free Trade Area Strategy’. China’s application for CPTPP entry is a new milestone in the context of China’s FTA policy. It is not a surprise but rather an outcome of Xi’s decision to actively consider joining the TPP and its successor the CPTPP over the last decade.

China is still confronting some challenges with respect to core CPTPP articles. One is the forced labour issue and how China is to deal with the labour clause (CPTPP Article 19.2), which requires eliminating all forms of forced or compulsory labour. As a signatory to the International Labour Organization, it is necessary for China to accept the fundamental principles of labour rights, irrespective of whether it has signed other international conventions or not. China’s labour policies do not allow for forced labour. One does hear stories of rights violations, like the cases of child labour in some factories. But central and provincial government policy prohibits it.

The second thorny issue China must address relates to digital provisions, in particular, forbidding the forced disclosure of source code (Article 14.17). The issue can be analysed at two levels: at the level of government policy and at the level of commercial operations.

The Chinese government, like some signatories, has already adopted some cybersecurity laws that are in principle consistent with international standards. CPTPP rules on source code are mostly consistent with commercial operations in industries such as banking, healthcare information management, animation and gaming. After China issued regulations on source code some years ago, international banking organisations invested in China and remain there.

For instance, JPMorgan still operates and has been approved in 2021 to fully own its securities ventures in China. China must be paying attention to complaints made by foreign investors because forced disclosure of source code not only amounts to protectionism but also acts as a stumbling block to China’s CPTPP accession.

Perhaps another vulnerable point is the internet. China might need time to completely open the internet window, which it started 25 years ago. But some CPTPP members, like Vietnam, are already inconsistent in their application of relevant rules, requiring that international tech companies conduct their business in line with restrictive cybersecurity laws.

The biggest obstacle for China is the United States. The United States will continue leveraging its geopolitical influence as it renegotiates CPTPP entry. If the United States were to re-join, the current 11 CPTPP members may find it difficult to oppose US revision of CPTPP articles. If the Biden administration would like to renegotiate the CPTPP, members are likely to welcome a US return, despite the few…

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