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About the author: Xiangyu Ma (LL.M. Class of 2022) is a contributor to Travaux. Prior to joining Berkeley Law, he obtained his LL.B. degree from Wuhan University in China. Previously, he worked with public and private stakeholders across different legal sectors such as PE, bankruptcy, dispute resolution, and infrastructure construction. He is particularly interested in the topics of comparative law, alternative dispute resolution, and European integration.
On September 16, China formally submitted a request to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). CPTPP is a survivor of the Trans-Pacific Partnership (TPP), an effort led by former President Barack Obama intended to economically counter China’s influence in the Asia-Pacific region and to put pressure on China to raise its standards. However, the US government withdrew from this regional trade pact in 2017 before the agreement entered into force, per guidance from former President Donald Trump. Led by Japan, CPTPP was created as a succeeding agreement, and eleven countries signed the agreement in March 2018. It is unsurprising that China applied for membership in the CPTPP, as Chinese President Xi Jinping previously announced China’s interest in joining the CPTPP at last year’s signing ceremony of the Regional Comprehensive Economic Partnership (RCEP), another Asia-Pacific trade agreement. However, China still faces hurdles in joining the CPTPP considering the agreement’s “extremely high standards” and China’s rising tensions with member states and other applicants.
Why Joining the CPTPP is Important for China
The strongest impetus for China to join the CPTPP is the potential for significant economic benefits and trade promotion effects resulting from joining. One study estimates that China's accession to CPTPP would boost its GDP growth by 0.74 to 2.27 percentage points and export growth by 4.69 to 10.25 percentage points. Another study calculates that China’s membership in the CPTPP would yield $298 million on China’s total income by 2030. However, if China cannot join the CPTPP, it would face an estimated loss of $10 billion because of the trade diversion effect. Considering China’s economic downturn and tense diplomatic relations with other major powers, China’s economic growth resulting from joining the CPTPP would undoubtedly enhance China’s domestic political stability. This has long been a top priority of the Chinese government as it views a growing economy as vital to maintaining social stability.
The CPTPP also provides China the opportunity to further advance its Belt and Road Initiative (BRI). As Chinese President Xi Jinping’s most ambitious economic and geopolitical strategy, BRI’s major goal is to “advance the building of free trade areas and promote liberalization and facilitation of trade and investment.” All CPTPP members except Australia, Canada, Japan, and Mexico have engaged in the BRI. Despite China’s more rapid trade growth with BRI countries than with non-BRI countries, Australia, Canada, Japan, and Mexico are key players in the Asia-Pacific, making them indispensable in establishing a high-standard free trade area in this region. Nonetheless, China does not have free trade agreements with these four countries. Although some are under negotiation, the prospects are gloomy – for instance, last year Canada abandoned free trade talks with China as the Trudeau government was increasingly under domestic pressure, receiving critiques that the government was too willing to concede to China to increase trade. China’s accession process to the CPTPP may bring these trade talks back and may even conclude with a more fruitful outcome than originally discussed.
In the meantime, Chinese membership in the RCEP cannot fully substitute the benefits of joining the CPTPP, even though the RCEP includes seven countries that are CPTPP members. For example, CPTPP adopts the “negative list” approach with regard to market access, meaning that all services sectors are considered liberalized by default, such as financial and investment services, except those restricted and prohibited areas. On the contrary, the RCEP adopts that approach in only five non-service sectors: manufacturing, agriculture, forestry, fishery, and mining.
Hurdles of China’s Accession to the CPTPP
In September, Japanese Economy Minister Yasutoshi Nishimura commented on China’s bid for CPTPP stating that “Japan believes that it's necessary to determine whether China, which submitted a request to join the TPP-11, is ready to meet its extremely high standards.” Among these standards, the most noticeable one for China is labor protection. CPTPP Chapter 19 makes special provisions on labor protection, covering a wide array of topics including labor rights, non-derogation, enforcement of labor laws, forced or compulsory labor, etc. Article 19.3(1) requires member states to “adopt and maintain in its statutes and regulations, and practices” the labor rights dictated in the International Labor Organization Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998). However, China has yet to ratify international conventions protecting labor rights such as The Convention Concerning Forced or Compulsory Labour (1930), Convention concerning the Abolition of Forced Labour (1957), The Freedom of Association and Protection of the Right to Organise Convention (1948), and The Right to Organise and Collective Bargaining Convention (1949). Therefore, it is a challenge for China to accept the CPTPP’s forced labor and freedom of association requirements and right to collective bargaining when there are no explicit domestic law provisions protecting these rights.
Additionally, CPTPP Article 28.9 states that labor disputes are subject to CPTPP’s dispute settlement procedures and if the panel finds a party in non-conformity with the agreement, the responding party shall eliminate such non-conformity. If the panel finds that such non-conformity still exists, then retaliatory measures such as suspension of benefits and monetary payments can be applied. Considering China’s different understanding of labor rights and increasing assertiveness on the global stage, China’s willingness to fully abide by these demanding requirements is highly questionable. Nevertheless, the possibility still exists. Vietnam, another socialist country in Asia and a CPTPP member, took a landmark step in 2019 to conform with the CPTPP by adopting a new Labor Code, recognizing the right of workers to form independent unions and to engage in collective bargaining. Vietnam may be an appropriate model for China to follow given their similar political systems and ideology. Additionally, Yang Guohua, one of the most influential international economic law scholars in China and former Deputy Director-General in charge of WTO-related affairs at the Chinese Ministry of Commerce, compared China’s attempt to join the CPTPP with China’s accession to the World Trade Organization (WTO), thinking the former requires sweeping domestic reform but will eventually benefit China as the latter did.
Another obstacle for China’s CPTPP bid comes from the US, a non-CPTPP country, in an indirect way. In November 2018, the US signed the Agreement Between the United States of America, the United Mexican States, and Canada (USMCA) with Canada and Mexico, who are both CPTPP members. Article 32.10 of the USMCA reads “Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).” In a recent US State Department briefing, the spokesperson stated that the US “expect[s] that China’s non-market trade practices and China’s use of economic coercion against other countries would factor into the CPTPP’s parties’ evaluation as a potential candidate for accession.” Therefore, the USMCA may serve as a tool for the US to deter Canada and Mexico from negotiating with China as it attempts to join the CPTPP.
China’s tense relationship with other applicants may also negatively impact its accession process. On September 22, Taiwan, in the name of “The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu”, announced its formal request to join the CPTPP. A day later, the Chinese Ministry of Foreign Affairs Spokesperson Zhao Lijian stated firm opposition to the request in a policy briefing. However, Japanese Foreign Minister Toshimitsu Motegi’s responses to both applications were slightly different, suggesting greater support for Taiwan over Mainland China. Taiwan aims to acquire its membership ahead of Mainland China. If that happens, Mainland China’s application might be blocked because the Accession Process dictates that approval of membership accession to the CPTPP requires a consensus.
Conclusion
As the WTO’s Doha round negotiation disastrously failed and the WTO Appellate Body experienced deadlock, the CPTPP’s importance as a trade pact for a region covering over fifty percent of the world population cannot be overstated. Chinese membership in the CPTPP will not only benefit the state but can also boost the world economy. However, before its official membership, some basic questions need to be clarified: How successful would China be in reforming domestic policies to comply with the CPTPP? Where would the Sino-US relationship go? Will China’s application be blocked by other members? All of these questions raise uncertainty about China’s bid for the CPTPP and even the future of the Asia-Pacific. China’s application to join the CPTPP may not be the end of US efforts to economically contain China in the Asia-Pacific, but merely signals the end of the beginning.