COMMENTS / EXPERT ASSESSMENT
CPTPP could be a strong trading partner for China
Illustration: Luo Xuan/GT
Much attention has been paid to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which officially came into effect on Sunday. Without the US, the 11-member free trade agreement, formerly known as the Trans-Pacific Partnership (TPP), now covers 13 percent of the global economy.
Some observers are concerned about the impact of the free trade agreement on China and questions like whether or not China can join it have also set off a wave of discussions. In fact, there is no need to be overanxious about the new massive free trade zone, which may bring China both opportunities and challenges.
As for the CPTPP itself, there have always been a lot of uncertainties in its outlook since the US pulled out of the original TPP in 2017. Moreover, as Japan, which has spearheaded efforts to rescue the trade deal, now has to enter negotiations for a bilateral free trade agreement with the US, the CPTPP will most likely face major problems, like whether the free trade deal will be transformed and what the transformation will be like.
Judging by the current situation, China may find itself at a disadvantage as the CPTPP may lead to a new system in terms of division of labor. Some industries dominated by Japanese-funded companies will most likely rearrange their manufacturing structure within the CPTPP framework. In such context, some companies may withdraw from China in pursuit of joining the new industrial layout.
Nevertheless, the CPTPP may also provide opportunities for China. If the spirit of free trade can last and continue to develop, the trade volume among the CPTPP member countries will rise, which may then also enhance their trading relationships with other third-party countries. In this sense, the bright side of the CPTPP for China is that it may make a stronger trading partner for the country, bringing it more trade opportunities.
With regard to the odds of China joining the CPTPP, a number of issues need to be considered. Whether a country should ink a free trade agreement first depends on whether the deal fits its own requirements for economic development, in other words, whether it can create a favorable environment for the country's development. When it comes to signing a trade agreement or an economic cooperation agreement, it is essential for a country to evaluate its applicability from the perspective of its own economic characteristics and requirements. In the case of the CPTPP, some of the CPTPP terms are not in the interests of China, therefore it is still too early to talk about whether China will join the free trade agreement.
Some of the CPTPP contents pose relatively high requirements, which are hard for China to meet at the current stage as it may take some time for China to carry out reforms to meet these requirements. For this reason, it seems more beneficial for China to opt not to join the CPTPP for the time being. In addition, if, under certain circumstances, the CPTPP members are willing to make changes to the rules to invite China in, China will give it appropriate consideration.
As a major economy in the world and a trade power in Asia, China is supposed to play a leading role in regional trade and economic cooperation for the foreseeable future. In this sense, rather than considering whether or not it should join the CPTPP, it is more practical for China to consider whether it can spearhead efforts to build an East Asian economic model or a new economic cooperation circle centered around China, Japan and South Korea to replace the CPTPP.
With regards to the impact of the CPTPP on the ASEAN-led Regional Comprehensive Economic Partnership (RCEP), the impacts may be limited. The two trade deals themselves are not mutually exclusive in terms of their contents. On the contrary, the two are complementary to each other to a certain extent. The CPTPP is a high-quality, high-level trade agreement, while the entry threshold for RCEP is relatively low, which is more suitable for most developing countries. So the CPTPP is unlikely to have much impact on the negotiations of the RCEP.
The article was compiled based on an interview with Chen Youjun, a senior research fellow at the Institute for World Economy Studies of the Shanghai Institutes for International Studies. bizopinion@globaltimes.com.cn
