Australian Parliamentary Inquiry Considers China and Taiwan Accession to CPTPP

As part of an inquiry by the Australian Parliament into expanding the membership of the CPTPP, both China and Taiwan came up as potential new members. The Chinese Embassy and the Taiwanese Chamber of Commerce made written submissions, indicating an interest in joining. During the related hearings, when pressed by members of parliament, Australian officials seemed non-committal on the prospects of accession for either country, while representatives of Australian business seemed warmer to the idea based on the financial value they could envision.

In October 2020, the Australian Minister for Trade, Tourism and Investment asked the parliament's Joint Standing Committee on Foreign Affairs, Defence and Trade - Trade Sub-committee to inquire into expanding the membership of the CPTPP. The terms of reference for the inquiry included an examination of "the opportunity for freer trade between Australia and potential new members." A brief review of the submissions and the hearings follows.

Submissions

As part of the inquiry, the Sub-committee solicited submissions from the public. There were 69 submissions, including ones from the Economic and Commercial Office of the Embassy of the People’s Republic of China in Australia and from the Taiwanese Chamber of Commerce in Australia.

The Chinese Embassy submission noted that "China is actively researching on joining the CPTPP, and looking forward to exchanging views with CPTPP members." It also said that: "The signing of the Regional Comprehensive Economic Partnership Agreement (RCEP) will foster a more enabling platform for China-Australia cooperation." And finally, it stated that: "China’s accession to the CPTPP would significantly bring down the cost of investment and trade between China and CPTPP members, leading to a more efficient allocation of resources and more optimized regional supply and industrial chains. These would benefit all CPTPP members and the rest of the world."

The Taiwanese Chamber of Commerce submission stated: "Even before CPTPP has taken effect, Taiwan already took legislative actions to harmonize its domestic regulation to those of the CPTPP standards; accompanied by its declaration to forgo special and differential treatment granted to developing country members in future negotiations in the WTO. Taiwan has demonstrated its willingness and capability to meet the highest standards of free trade." It concluded as follows: "The Taiwanese Chamber of Commerce in Australia firmly supports the Committee’s decision to conduct this inquiry and requests the Committee to give special consideration to accept Taiwan as member of CPTPP."

Hearings

In addition, the Sub-committee organized two days of hearings. At the June 17 hearing, members of parliament discussed the prospects for both China and Taiwan entering the TPP with Elizabeth Bowes (First Assistant Secretary, Regional Trade Agreements Division, and Chief Negotiator for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Department of Foreign Affairs and Trade):

Ms VAMVAKINOU: I'm interested in the aspect of some of the countries that have expressed interests? One of them in particular—or two: China and Taiwan. Taiwan has an intention. Is there any thinking around where that may lead? I know you indicated there's no obvious pipeline of readiness, but there's certainly a pipeline of intention. So I wondered what our views there would be and what things would be of particular nuance to Australia, especially in relation to China and Taiwan, that we would have to be aware of,  foresee or prepare for.

Ms Bowes: We are certainly aware of a number of economies' interest more generally in accession to the CPTPP, including China and Taiwan. There have been public statements to that effect. In terms of our particular processes, we are very much focussed, as are the other CPTPP parties, on the current accession process of the UK and getting that right before we consider the accession of other countries. That's the focus at the moment.

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CHAIR: So there's the UK, China, Taiwan, Thailand and the Republic of Korea, and then in the other category there's Indonesia and the Philippines. Of those, which have undertaken more serious examination?

Ms Bowes: There are various ways, as you can determine from this submission. For example, Thailand has undertaken a parliamentary inquiry. Perhaps 'serious' is the wrong word. But you can see from some of the statements we've set out here what steps or statements have been made by each country. I referred to Thailand and a parliamentary inquiry, for example. In the case of the Republic of Korea, there have been statements by President Moon. And, of course, in the case of China, there have been statements by President Xi. I would really emphasise that the strongest demonstration is a formal accession request. So, while there are perhaps indications of varying levels of interest, until we actually get a formal accession request we really can't say which would be the next cab off the line.

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Mr DRUM: Taiwan creates a very, very interesting case in point just because there is this dark thing in the background that seems to be wanting control. Where do you see that type of progress with Taiwan?

Ms Bowes: We are aware of Taiwan's interest in acceding potentially to the CPTPP. But in terms of the process, as I said, we're really concentrating on the UK with this.

At the June 24 hearing, there were discussions of these issues with Brett Hosking (Grain Growers Ltd); Chris Tinning (First Assistant Secretary, Trade, Market Access & International Division, Department of Agriculture, Water and the Environment); and Rachel Triggs (Wine Australia):

Senator McCARTHY: I just have a few more questions. This is to everyone, so feel free, but I'll largely go to you, Mr Tinning. Would you welcome China showing interest in joining the CPTPP?

Mr Tinning: If they're coming with a discussion around those issues that we mentioned, then we welcome the participation of any party that is prepared to engage on those substantive issues that would benefit trade.

Senator McCARTHY: How would you view their willingness to follow the CPTPP's trading rules and market access commitments to secure membership?

Mr Tinning: I think there's a lot of water would be required to go under the bridge, in terms of some of the conditions in the TPP, probably outside the agriculture space. My understanding is that some of the rules around investment and other issues would be barriers to China's entry, but they're matters more for DFAT than for us.

Senator McCARTHY: I'll just put this as a general question, going on from that: how much confidence do each of you have in the effectiveness of dispute resolution—with China, for example—and how would China's potential accession to the CPTPP make it any better or fairer in dealing with disputes? That's open to all of you, so, Ms Triggs, Ms Shaw and Mr Hosking, you're welcome to respond.

Mr Hosking: I think that, for whoever joins—take China's name out of it; whatever country—as an export nation, particularly of grains as an export industry, we rely on a rules-based trading system across the globe. So, for whatever countries that want to sign up to, whether it be the CPTPP or whoever else we want to do a free trade agreement with, we want to know that they play by fair, equitable and recognised rules of trade. Probably the best reference point for that is the World Trade Organization. There are some challenges there at the moment with China—as an example, between Australia and China—but we are going through that process. As a first point of reference, we would want a solid commitment that they adhere to those rules of trade and they maybe apply them in the same way as all of the other countries across the CPTPP as well. They're the sorts of discussions that I think need to be had with any country joining, whether it be the UK or whatever, just to make sure that they're supportive of that rules based system and that they interpret it the same, or that there's a mutual understanding—maybe that's a better way to say it—between us and them of how those rules are applied.

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CHAIR: I have a question for Grain Growers and Wine Australia. We're talking here about the importance of rules and compliance with very high standards. Ms Triggs, you were talking about China and the opportunities that might exist elsewhere—Taiwan, Korea and the like. China, of course, is introducing punitive tariffs and applying them to Australian product. When it comes to Australia considering the likes of China joining the CPTPP and signing up to a set of rules, how confident do you feel that they would comply, in light of the experience you've had? Then I'll go to Grain Growers with respect to barley.

Ms Triggs: We're very disappointed in what has ensued in relation to the punitive tariffs that have been applied to Australian wine in China. There is a process set out under WTO rules, and that process will be followed in due course. There is a rule based system that will be followed, and I'm not in a position here to comment as to which way that will go. Notwithstanding that, as an industry, we maintain that there have been no breaches of WTO rules by Australian wine exporters. That really needs to run its course. What I will say is that any additional rules that can be acceded to can only be a positive thing.

CHAIR: Thank you. Grain Growers?

Mr Hosking: I think that was a really good point. From our experience, when trade with China is good, it's really good. But when it goes bad, it goes really bad. That's been our experience. It's very similar to wine—we are in the midst of a process with the WTO in trying to resolve our differences with China. Only time will tell how China will engage in that process and will respond. Up to this point, they have engaged. But I guess their appetite for resolving the differences in a timely fashion would perhaps be a test, if that makes sense. And that's going to be really hard to judge until we've had that benefit of a little bit of time and a little bit of the process elapse to be able to understand that. Like with wine, we've struggled to find any basis for the allegations made against the Australian barley industry. In fact, even with their final documents, it's really difficult to understand their basis for making those allegations and their basis for coming up with the tariffs they've imposed on our industry. That has had a significant impact back on our growers and an enormous financial impact back on Australia.

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Ms VAMVAKINOU: I might just continue a little bit on that sensitivity and go to the geopolitics overlay of any trade agreements that we are entering. In relation to Wine Australia, it's possible buy Australian wine in Taiwan at a 7-Eleven—the equivalent of a 7-Eleven—which is most impressive. Taiwan's expressed a strong interest to be included in this agreement. Taiwan is a market, clearly, and this also goes to geopolitics. Do you have a view on supporting Taiwan's interest in joining the CPTPP?

Mr Hosking: As a grain grower myself, and representing the grains industry, I'm in a really blessed position, because I don't have to worry about the rest of the geopolitics. I can just speak purely for grain and talk about how there are opportunities into a market like Taiwan—understanding that there are geopolitics involved and somebody else has to address them. Certainly, there are opportunities. That was almost a political answer, wasn't it? There are opportunities, but, in the broader context of entering into agreements, I think there's a lot that needs to be discussed, outside of just the trade advantages.

Ms VAMVAKINOU: Anyone else?

CHAIR: Ms Triggs, would you like to—

Ms Triggs: I think the geopolitics piece really is a piece for DFAT. I don't think Wine Australia would proffer a comment in that regard.

Ms VAMVAKINOU: But I guess you'd find the Taiwanese market a lucrative market for Australian wines?

Ms Triggs : Yes, that is correct. The MFN rate is currently applied to Australian imports, and, as foreshadowed previously, the only one of our competitors that has managed to negotiate a zero-tariff rate, which gives them a significant advantage over Australian exporters, is New Zealand. That would be highly beneficial to Australian exporters. There are also some technical barriers to trade in Taiwan, relating to certification, labelling and oenological practices. Certainly, accession to the TPP by Taiwan would make excellent headway in resolving some of those market-access issues.