Comment: Is it too late for the United States to join the CPTPP?

LONDON: Following the signing of the Regional Comprehensive Economic Association (RCEP) on November 15, trade has once again become a key issue for Asian geopolitics and geoeconomics.

The RCEP was a clear indication that Asian states would go ahead and even undertake the heavy lifting of drafting regional trade agreements without the leadership or involvement of the US.

Now, another deal that previously involved the United States will become the focus of regional diplomacy.

A few days after the RCEP deal, while the ink was still drying, Chinese President Xi Jinping delivered a speech at the Asia-Pacific Economic Cooperation CEO Dialogue.

Xi left little doubt that China will continue to pursue multilateral trade deals in the region. In fact, he suggested that Beijing would be open to joining the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP).

But a Biden administration has also indicated its desire to rejoin the CPTPP, setting a binary choice for current members on the direction the deal should take.

NOT THAT EASY FOR CHINA TO JOIN CPTPP

The CPTPP is one of countless deals in Asia, often referred to by analysts as the “noodle bowl” of multiple and sometimes overlapping deals, but with a very different genesis than the RCEP.

While the RCEP emerged as an extension of existing trade agreements signed by the Association of Southeast Asian Nations with other states, the CPTPP is the successor to the Trans-Pacific Partnership (TPP), which brought together a disparate group of 12 nations around the Rim of the Pacific to develop a more ambitious set of trade rules.

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The TPP died in January 2017, when the new Trump administration withdrew from the agreement (despite the fact that it was already signed), and the remaining 11 nations decided to continue as CPTPP.

However, without US involvement and pushing for stricter trade rules and liberalizations, the CPTPP watered down some 22 provisions, including issues on intellectual property, patent protection, and investor-state dispute resolution.

The CPTPP may still be a leg for China to join. Unlike the RCEP, the CPTPP ensures that member states share information about SOEs and their subsidy, a key step in limiting or at least regulating state intervention.

For China, whose economy relies heavily on state-owned companies and state control, this could be too onerous a request to contemplate joining.

The CPTPP also includes high-level labor standards that require members to legislate acceptable working conditions that could make Beijing distrustful due to its vast and cheap labor for low-cost manufacturing.

UNITED STATES OUT OF GROWING TRADE IN ASIA

However, the fact that this discussion is happening in public is testament to the fact that China seeks to distinguish itself from the US as a committed member of the regional trade process.

Meanwhile, Asia, having been dismayed by the isolationism of the Trump administration, seems ready to move on even without US involvement. They have done so by signing the RCEP and now with major trading nations like Japan reportedly eager to expand the CPTPP.

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Therefore, the United States is now on the sidelines of the key decisions being made and the structures that are being built in Asia.

The country’s exclusion from Asia-Pacific decision-making was aptly symbolized by a visual reminder last week.

As the 21 heads of government and state gathered for the APEC CEOs Virtual Dialogue, all but one sat in front of APEC’s approved blue background – US President Donald Trump sat under a presidential seal in front of a yellow wall.

FREE TRADE A HARD SELLING IN THE US.

This could change with a new president. For President-elect Joe Biden, who has presented a much more internationalist manifesto, reengaging with the CPTPP to help guide and shape the rules that will determine how the world’s largest economies interact seems like an obvious goal.

But getting national approval to do so might not be that easy. Developing free trade agreements was once the bipartisan consensus in Washington.

Doing so boosted economic growth and ensured that the United States was a world leader in trade regulation and rule-making in the post-Cold War era.

Only a minority of voices on the left of the political spectrum raised objections when the United States signed the North American Free Trade Agreement in 1994 and a series of bilateral FTAs ​​followed in the 2000s.

But President Trump, since his 2016 presidential campaign, has skillfully capitalized on growing resentment among the working class in the US at the perception that jobs are being offshored and FTAs ​​are undermining American industry.

Now free trade agreements are much harder to sell nationally, and both Democrats and Republicans are wary of undermining the support of working-class communities.

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UNCLEAR WHICH CPTPP THE UNITED STATES IS SIGNING

Even if Biden could muster enough support in Congress to sign and ratify a new multilateral trade agreement, it is unclear what the United States would be signing with the CPTPP.

The 22 provisions were watered down when the United States withdrew in 2017 only suspended and not reversed, leaving the door open for them to be reinstated if the United States wishes to return.

But it is far from clear that the other 11 nations in the agreement would be happy to revise the existing agreement, much less re-establish the original TPP, to appease a United States that has proven inflexible and capricious in the past.

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For close allies of the United States such as Japan, South Korea, Canada and Australia, having the United States return would certainly be an economic and diplomatic blessing, but for others such as ASEAN members Vietnam and Malaysia who have a more balanced relationship with China and the United States. , the calculation may differ.

Countries like these can make careful calculations based on the facts of the geography that make China a neighbor. Would it be better to appease the United States or continue to develop a more integrated Asian economy by encouraging Chinese participation?

Furthermore, it is unclear whether CPTPP members would prefer a stricter CPTPP with the US included, or the current CPTPP with China forced to agree to already more stringent trade rules upon joining.

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As such, even if Biden can muster enough domestic support to rejoin the CPTPP, there is a risk that Asia has already moved on.

With 15 Asian nations that have signed the RCEP and more negotiations underway for deals like the China-Japan-South Korea trilateral FTA, the region’s trade architecture is developing without the US.

Asian states must make both a political and an economic decision: a shallower free trade zone with China involved or a deeper one with the United States.

AN OBJECTIVE OF OFFICIAL ADMINISTRATION

Despite national and international difficulties, joining the CPTPP will likely be a goal of the Biden administration, particularly with an internationalist like Tony Blinken as secretary of state.

Biden has already expressed his desire to do so. By re-entering a key Asian trade deal, Washington may aim to create the gold standard for free trade in the region, while bringing together its closest allies.

There are also potentially secondary benefits to current US policy, notably Washington’s desire to strengthen Taiwan.

Taipei has expressed its desire to join the CPTPP, and if the United States encourages this process from within the agreement, it could improve the chances of such an outcome.

The challenge, however, may be convincing a national audience of the benefits and persuading today’s Asian states that the United States is welcome again.

Christian Le Miere is a foreign policy advisor and founder and managing director of Arcipel, a London-based strategic advisory firm.