Author: Kristen Hopewell, UBC
As its economic weight increases, China’s growing participation in bilateral and mega-regional trade agreements will bring countries closer to its orbit, consolidate its position in regional and global supply chains, and strengthen its growing dominance in the Asia-Pacific region. . Such initiatives will also accelerate the transfer of global economic power from the United States and Europe to China. Not only has China become the world’s largest trading nation, but two-thirds of the world now trades more with China than with the United States.
Beijing is capitalizing on the vacuum left by the abdication of American leadership in Asia-Pacific. Since its withdrawal from the Trans-Pacific Partnership (TPP) in 2017, Washington has not had a coherent economic and trade strategy for the region. This left the field open to China, which profited from the US disengagement and alienation of its close allies by the Trump administration. Despite US President Joe Biden’s commitment to international cooperation and rebuilding US alliances, his administration does not appear to have any plans to repair the damage done by his predecessor or re-engage with Asia.
China welcomed the opportunity to deepen trade and investment ties with countries in the region. Last year, China and 14 other countries signed the Regional Comprehensive Economic Partnership (RCEP), a trade agreement covering nearly a third of the world’s population and economy.
The trade pact will reduce tariffs, harmonize and streamline customs procedures, and strengthen Asian supply chains. Its primary importance lies in replacing the patchwork of bilateral agreements with a common set of rules, including a unified rules of origin framework, making it an important step towards deepening regional economic integration.
The deal is expected to generate $ 209 billion in economic gains, with the majority of that going to its three main participants – China, Japan and South Korea. The pact also represents the first three-state free trade agreement for which previous efforts to foster increased economic cooperation have been hampered by long-standing political tensions.
The importance of RCEP is also geopolitical because it signals the growing centrality of China in the development of global trade rules. RCEP will serve as an important platform for future rule making, as China is expected to exert increasing influence on regional regulation and standard setting.
China has also asked to join the rival Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP). The deal was originally the cornerstone of the United States’ economic strategy to contain China’s growing influence in the Asia-Pacific region, but when Washington withdrew from the Trans-Pacific Partnership (TPP) in 2017 , its remaining members went ahead and created the CPTPP.
Replacing the United States in the CPTPP would be an important symbolic and strategic victory for China. China is unlikely to meet the high standards of the deal – especially for labor, state-owned enterprises, digital commerce, and government procurement – but its existing 11 members are likely to come under pressure to support the membership of the China. Participants may waive or relax some of its requirements by granting China long transition periods or exemptions from specific provisions of the CPTPP. The founding member, Vietnam, obtained exemptions from some of the provisions relating to state-owned enterprises.
For some CPTPP members, the prospect of boosting exports by expanding access to the huge Chinese market may be enough to sustain membership. Singapore and Malaysia have already signaled their support for China’s membership application.
Others, like Japan and Australia, are much more suspicious. An increasing number of countries have been the target of China’s trade aggression, an issue that has raised concerns about deepening trade ties with China. In retaliation for Canada’s involvement in the Huawei extradition case, China blocked US $ 4 billion in Canadian agricultural exports. China has also blocked a long list of Australian imports in retaliation for its calls for an independent investigation into the origins of the COVID-19 pandemic.
In recent years, Beijing has used the threat and imposition of trade restrictions to punish more than a dozen countries for perceived slights – including Japan, South Korea, New Zealand, Norway, Sweden, the Philippines, Taiwan, Mongolia and the United Kingdom. China has militarized trade as an instrument of economic coercion against weaker states – in violation of the fundamental World Trade Organization principle that trade should be based on the rule of law rather than brute power.
While expanding membership of the CPTPP is important in expanding the scope of the agreement, its participants will need to exercise caution when considering China’s membership application. CPTPP participants must be confident that the new members will abide by and abide by its rules, especially when China has resorted to aggressive unilateral trade actions and arbitrarily abused its market power when dealing with other states.
Many countries come to view deepening trade and investment ties with China as a double-edged sword. While such links can bring short-term business benefits, they can ultimately lead to greater vulnerability.
Kristen Hopewell is the Canada Research Chair in Global Politics at the University of British Columbia and author of The clash of powers: US-Chinese Rivalry in Global Trade Governance.