After many official and unofficial statements in recent months and years that China was considering doing so, on September 16 China formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In this piece, we discuss: the CPTPP provisions that will guide the process; the government statements and media reports coming from China; the reactions of other governments; various aspects of the political context; the provisions of the USMCA that could have an impact on the approach of Canada, Mexico and the United States; and the prospects for China's application to succeed.
The CPTPP accession process: Key steps and legal provisions
The CPTPP accession provisions are found in three places. Article 5 of the main CPTPP text says only, “After the date of entry into force of this Agreement, any State or separate customs territory may accede to this Agreement, subject to such terms and conditions as may be agreed between the Parties and that State or separate customs territory.” A subsequent Decision refers to detailed rules on the accession process set out in an Annex. The Annex explains certain key parts of the beginning of the process as follows:
1.2 Aspirant economies must notify New Zealand, as CPTPP depositary (‘Depositary’) of their formal request to commence negotiations on acceding to the CPTPP (‘Accession Request’).
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2.1 The Comprehensive and Progressive Agreement for Trans‐Pacific Partnership Commission (Commission) will determine, in a manner consistent with Article 27.3 (Decision Making) and Article 27.4 (Rules of Procedure of the Commission), whether to commence the accession process with the aspirant economy within a reasonable period of time after the date on which the aspirant economy made the Accession Request.
2.2 For the purpose of smoothly carrying out subsequent Commission and Accession Working Group discussions, the aspirant economy is encouraged to have consultations with each Party, with a view to addressing each Party’s questions or concerns on interested areas. These consultations will not constitute a negotiation process.
2.3 If the Commission decides to commence the accession process with an aspirant economy, the Commission will establish a working group to negotiate the accession of the aspirant economy (‘Accession Working Group’).
2.4 If the Commission is unable to reach consensus on the commencement of the accession process, the aspirant economy may continue to engage in consultations with the Parties. The Commission may subsequently determine whether or not to establish an Accession Working Group for that aspirant economy.
On September 16, China's MOFCOM released the following statement on its website:
On September 16, China’s Minister of Commerce Wang Wentao submitted a written letter as China's official application to join the CPTPP to New Zealand's Trade Minister Damien O'Connor, the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (CPTPP) Depositary. The ministers of the two countries also held a teleconference to communicate on the follow-up work related to China's formal application for membership.
With China having submitted its written request to the depositary, the next step is that the CPTPP Commission must decide whether to commence the accession process. Pursuant to Article 27.1, the Commission is “composed of government representatives of each Party at the level of Ministers or senior officials.” Under Articles 27.3 and 27.4, all parties must agree to commence the accession process for a prospective new party (Article 27.3(1) states: “The Commission and all subsidiary bodies established under this Agreement shall take all decisions by consensus, except as otherwise provided in this Agreement, or as otherwise decided by the Parties”). With Australia, Canada, and Japan all in the midst of diplomatic tensions with China at the moment, it is possible that one or more parties would be reluctant to establish the working group, and therefore achieving consensus might be difficult here.
Article 2.1 of the accession process Annex says that the Commission should make the decision on “whether to commence the accession process with the aspirant economy within a reasonable period of time after the date on which the aspirant economy made the Accession Request.” It is unclear what “a reasonable period of time” means here. As a point of reference, the UK submitted its application for accession to the CPTPP on February 1, 2021, and the CPTPP Commission established the Working Group for UK accession about four months later, on June 2, 2021. Given the political, economic and legal challenges presented by China’s application, the CPTPP parties may take longer in this case, interpreting “reasonable period of time” somewhat flexibly. As suggested by trade expert Jeff Wilson of the Perth USAsia Centre, they could use the UK’s ongoing negotiation as an excuse to go slow with China.
If the accession request is accepted and the working group is established, the negotiations begin. The CPTPP provisions offer only general guidance and “benchmarks” on what is required. For example, Article 5.1(b) of the accession process Annex states that:
Aspirant economies must … undertake to deliver the highest standard of market access offers on goods, services, investment, financial services, government procurement, State-owned enterprises and temporary entry for business persons. These must deliver commercially‐meaningful market access for each Party in a well‐balanced outcome that strengthens the mutually‐beneficial linkages among the aspirant economy and the Parties, while boosting trade, investment and economic growth, and promoting efficiency, competition and development.
Some of the major challenges in negotiations with China are likely to be the chapters on SOEs, procurement, digital trade, and labor (as law professor Julian Ku points out here in relation to labor). Agreement on these issues might be a challenge, but is not impossible. On SOEs, for example, other CPTPP parties with significant SOEs largely carved them out of the obligations. However, China will face difficult negotiations in all these areas, and would likely have to concede a lot in order to convince the current parties to let it join.
Trade experts and commentators have different views on whether China will reach an agreement with other CPTPP parties and ultimately be able to join. “It’s extremely difficult, if not impossible, to see how [China] could embrace the CPTPP rules governing state-owned enterprises, labor, e-commerce, the free flow of data, among others, as well as comprehensive market access commitments,” according to Wendy Cutler, vice president of the Asia Society Policy Institute and a former acting deputy U.S. Trade Representative. Shannon Tiezzi of The Diplomat also thinks the chances are slim: “China is exceedingly unlikely to actually be able to join the CPTPP. The agreement by design includes high standards that go far beyond tariff removal, including regulations guiding market access, labor rights, and government procurement.”
Henry Gao, associate professor of Law at Singapore Management University, offers a more positive view, stating that, “[i]n the long term, they will be able to work out some of the differences, especially as these countries realize that China is going to be the biggest market for them and the U.S. is not going to join anytime soon,” but it “would probably drag on for a couple of years.” He and University of New South Wales law professor Weihuan Zhou explained their cautious optimism in a longer op-ed here.
Chinese government statements and reactions by experts
Chinese government officials have been talking about joining the CPTPP for a long time. At the 27th Asia-Pacific Economic Cooperation (APEC) Economic Leaders' Meeting on November 20, 2020, for example, President Xi Jinping said that China “will favorably consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).” The decision to apply has now been made, and Chinese officials and trade experts have offered the following explanations and context.
During the Ministry of Foreign Affairs press conference on September 17, spokesperson Zhao Lijian said, “I want to emphasize that China is a staunch advocate for trade liberalization and facilitation, and an important participant in cooperation and economic integration in the Asia-Pacific. China's official application to join the CPTPP again demonstrates China's firm resolve in opening up and promoting regional economic cooperation.” Zhao also stated that “[w]e believe that, built on RCEP's conclusion, China joining the CPTPP would help promote economic integration in the Asia-Pacific, and facilitate post-COVID economic recovery, trade development and investment growth in the world.”
Along the same lines, Zhang Jianping, director of the Regional Economic Research Center of the Chinese Academy of International Trade and Economic Cooperation, a think tank associated with MOFCOM, said during an interview (link in Chinese) that “China being part of the CPTPP is a necessary path to move towards the future Asia-Pacific Free Trade Area and to promote the integration of the Asia-Pacific economy.” “Similar to RCEP, CPTPP will provide broader external markets for China to build a new development model of 'dual cycles', promote trade and investment facilitation, and help enterprises to participate in the division of labor in the international industrial chain at a lower cost,” Zhang said.
Zhao Ping, vice director of the Academy of China Council for the Promotion of International Trade, which also plays the role of China’s chamber of commerce, said (link in Chinese) that "China’s active consideration of joining the CPTPP means that it will promote domestic reform and development with a higher level of openness. It not only points out the direction of China’s expansion of the free trade zone network, but also reflects the spirit of China’s openness. Furthermore, it shows that China’s opening to the outside world will continue to be larger, broader, and deeper.”
At the same time, Chinese scholars seem to be in agreement with their foreign counterparts that China does not meet the requirements of the CPTPP just yet.
Yu Miaojie of the National School of Development of Peking University said during an interview (link in Chinese) that to facilitate acceding to the CPTPP, China should reduce tariffs on goods trade, push for a nation-wide negative list in services trade, orderly carry out a nation-wide negative list and pre-establishment national treatment for foreign investments, as well as protect intellectual property and encourage innovation to narrow the gap with developed countries in key technologies.
Wang Huiyao, Chairman of Chinese think tank CCG, said (link in Chinese) that China joining the CPTPP will “bring huge opportunities in the future for China's service industry, high-tech industry and digital economy.” In a February article (link in Chinese), he said that major technical obstacles for China to join the CPTPP remained in intellectual property protection, environmental protection, data security, and SOEs, but these obstacles “are not insurmountable.”
And Zhang Jianping believes (link in Chinese) that compared to the CPTPP rules, China still lags behind in its openness in the service sectors and goods trade, and to narrow these gaps, China should go through another round of reforms and opening.
The existing gaps are the reason that China wants to join the trade pact, according to He Xiaoyong, director of the Free Trade Zone Legal Research Institute of the East China University of Political Science and Law. He believes that the application for the CPTPP, just like China’s accession to the WTO 20 years ago, is meant to push for domestic reform through obligations in international treaties.
Reactions to the Chinese application from other governments
There has been a range of reactions to the Chinese application from officials with several of the CPTPP parties (some of which still need to ratify the agreement domestically).
Starting with Japan, early statements from Japanese officials seem to take a tough approach to China’s prospects. Japanese Economy Minister Yasutoshi Nishimura offered the following statement: “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.” Japan’s Deputy Minister of Finance Kenji Nakanishi said in a tweet (link in Japanese) that “China ... is far removed from the free, fair and highly transparent world of TPP, chances that it can join are close to zero.” Riley Walters, the Japan Chair Deputy Director at the Hudson Institute, suggested that Japan is unlikely to put forward a direct “no” to China’s application. What it might do, however, is allow the process to drag on for a while before ultimately stating that China’s offer is not up to CPTPP standards, which is along the lines of what Nishimura said.
In Australia, trade minister Dan Tehan expressed some reservations about China's application: “CPTPP parties would also want to be confident that an accession candidate would fully implement its commitments under the agreement in good faith. As we have conveyed to China, these are important matters which require ministerial engagement.” In a TV interview, he also stated: “any country that wishes to accede to it would have to abide by all the rules and the standards. So whichever country seeks accession will need to make sure that they abide by their WTO commitments, their bilateral free trade agreement commitments, their regional commitments.” (The full exchange from this interview is at the end of this piece.) And Independent Australian senator Rex Patrick recently tweeted: “China must cease trade coercion before there can be any dialogue.” He also told the FT that China would need to “behave properly” before entering the CPTPP and stop “throwing out trade sanctions here, there and everywhere.” “You can’t make bogus claims about some of our products, like that we were selling wine into Chinese markets below the market-price. It’s clear we weren’t doing that,” Patrick added.
By contrast, the Malaysian Ministry of International Trade and Industry seemed more positive: “Malaysia is particularly encouraged with the recent move by China to formally apply for accession into the CPTPP.” And New Zealand Deputy Prime Minister and Finance Minister Grant Robertson offered a general statement of support for applications to the CPTPP: “we welcome any countries wanting to join in a high functioning trade agreement.” Mexico’s official response was along the same diplomatic lines.
The reaction from the United States, which famously is not a party to the CPTPP even though it was the country pushing the negotiations initially, addressed two issues: 1) the prospect of China joining, and 2) the chances of the U.S. rejoining. On the first issue, White House Press Secretary Jen Psaki said, “as it relates to China’s interest in joining, we’d leave it to those countries to, certainly, determine.” On the second issue, Psaki said, “[t]he President has been clear that he would not rejoin the TPP as it was initially put forward. He’s also being clear that we have to join with the 40 percent of the world that we had with us for the deal, and make sure environmentalists and labor are at the table. ... And if there’s an opportunity to renegotiate, then that could be a discussion we could be a part of.” (The full exchange from the press conference on this issue is at the end of this piece.)
Political context
Several interesting political issues arise as a result of China’s application. First, there is the timing of the application. The day before China's announcement, the United States, the United Kingdom, and Australia had announced a brand new security alliance (AUKUS). There has been speculation that China’s application at this particular moment was intended in part as a response, as the Washington Post editorial board suggested (“now China — as part of its response to AUKUS — has applied to join [CPTPP]”). However, a Chinese Foreign Ministry spokesperson denied that, stating during a press conference that, “I have just elaborated on the background of China's official application to join the CPTPP, which has no connection with the agreement among the US, the UK and Australia.” (See the full exchange at the end of this piece.) New Zealand Deputy Prime Minister and Finance Minister Grant Robertson also expressed skepticism about this possibility when asked about it. (See the full exchange at the end of this piece.)
Some commentators have noted that China’s move could have an impact on the ability of other governments to join the trade pact. Trade expert David Henig of ECIPE has suggested that China’s application might slow down the recently filed UK application to join the CPTPP. In addition, if China were to accede, it would then have significant leverage over any future U.S. application.
Another trade expert, Jeff Wilson of the Perth USAsia Center, raised Taiwan as an issue here. Wilson argued that by submitting its application, China is trying to block a move by Taiwan to join the CPTPP. “By jumping in first,” Wilson said, China makes Taiwan’s bid “almost impossible,” because it forces the existing members “to choose between the 'two Chinas'.” Whether this would work is unclear, but regardless, Taiwan’s Minister of Economic Affairs Wang Mei-hua said on Friday that the island would continue informal consultations with the CPTPP parties, with a strategy to “line up allies in a low-key manner and work on building consensus before pursuing any official application.” Taiwanese Professor Chang Kuo-cheng dismissed concerns that China’s application would affect Taiwan’s course. It is interesting to note in this regard that the final stage of the WTO accessions of China and Taiwan were linked in time, with China becoming a Member on December 11, 2001 and Taiwan doing so on January 1, 2002.
All of this is speculative, though, and it is hard to say why China chose this moment to apply. For whatever reason, regardless of whether it sees a great likelihood that it will ultimately join the CPTPP, China saw a benefit in submitting an application when it did.
Role of Canada, Mexico and the United States through the USMCA
When thinking about the positions of Canada and Mexico, and the reaction of the United States, it’s worth considering USMCA Article 32.10, which is entitled “Non-Market Country FTA.” The provision defines “non-market country” as a country: “(a) that on the date of signature of this Agreement, a Party has determined to be a non-market economy for purposes of its trade remedy laws; and (b) with which no Party has signed a free trade agreement.” Assuming the U.S.-China Phase One deal is not a “free trade agreement,” this provision would apply here.
Paragraphs 2, 3, and 4 of Article 32.10 outline the obligations of notification and the provision of information when a party negotiates a free trade agreement with China. Paragraph 2 of the provision states that “[a]t least 3 months prior to commencing negotiations, a Party shall inform the other Parties of its intention to commence free trade agreement negotiations with a non-market country.” This notification provision is not likely to impose much of a burden. Paragraphs 3 and 4 then require information to be provided as follows: “3. Upon request of another Party, a Party intending to commence free trade negotiations with a non-market country shall provide as much information as possible regarding the objectives for those negotiations. 4. As early as possible, and no later than 30 days before the date of signature, a Party intending to sign a free trade agreement with a non-market country shall provide the other Parties with an opportunity to review the full text of the agreement, including any annexes and side instruments, in order for the Parties to be able to review the agreement and assess its potential impact on this Agreement. …”
The more significant provision here is paragraph 5, which says: “Entry by a Party into a free trade agreement with a non-market country will allow the other Parties to terminate this Agreement on six months’ notice and replace this Agreement with an agreement as between them (bilateral agreement).”
In theory, this provision gives the United States some power over Canada and Mexico in terms of whether they support China’s accession. A Taiwanese official raised the possibility that the United States would use the provision to push Canada and Mexico to block the accession, stating: “If that clause applies to multilateral free-trade agreements such as the CPTPP — which Mexico and Canada are members of — that might be cause for the two countries to oppose China’s membership.” In practice, however, the impact may not be very significant, especially in the short term. The authorization for the United States to terminate the USMCA comes only upon China’s “entry” into the CPTPP, which is a long way off at this point.
At the same time, the provision may have implications for the negotiations between China and Canada/Mexico. According to University of Arizona law professor Sergio Puig, as it did with China's WTO accession, Mexico may try to delay China's accession to the CPTPP and extract extra concessions. Article 32.10 may be useful for it in this regard.
Prospects for China’s entry into the CPTPP
We are at the very early stages of China’s accession process, and it is hard to say with any great certainty how things will go. There are likely to be some broader political conflicts between China and other CPTPP parties that could get in the way, or whose resolution could speed things along. And while we can identify areas of conflict over substantive obligations, how the negotiations will proceed in these areas is difficult to say at this point. It is worth watching a number of related issues: The UK’s CPTPP application process; the ongoing U.S. review of its China trade policy; and political and economic tensions between China and various CPTPP parties. Developments in these areas may all provide clues as to the prospects for the CPTPP parties allowing the accession process to begin, and for China’s eventual accession.
Annex:
Press Briefing with White House Press Secretary Jen Psaki on September 16
Q Right after AUKUS, China said that it wants to join the Trans-Pacific trade deal. Does the administration have a response to that?
And secondly, does President Biden’s — would he still like to join that if it could be renegotiated?
MS. PSAKI: Well, on their second question — let me take that first: The President has been clear that he would not rejoin the TPP as it was initially put forward. He’s also being clear that we have to join with the 40 percent of the world that we had with us for the deal, and make sure environmentalists and labor are at the table. So, obviously, there would be a lot of steps for that to be taken in order for that to be a viable option to the President.
In terms of China — China’s interest in joining: You know, we — we — and I — just let me just add one more thing — we’re looking at a range of options, of course, to forge stronger economic partnerships in the Indo-Pacific. Trade does not — is not the only one. There’s a range of ways that we can forge those relationships and those partnerships.
Obviously, as it relates to China’s interest in joining, we’d leave it to those countries to, certainly, determine. We’re going to continue to work with other countries in the region on economic partnerships and relationships. And if there’s an opportunity to renegotiate, then that could be a discussion we could be a part of.
Chinese Foreign Ministry Spokesperson Zhao Lijian's Regular Press Conference on September 17, 2021
Bloomberg: China has applied to join the CPTPP. Is China willing to talk to Australian ministers about their bid to join the pact? And if so, when would that take place?
Zhao Lijian: Almost a year ago, China expressed its readiness to actively consider joining the CPTPP. Over the past year, China had informal contacts with the pact members in accordance with CPTPP regulations. On the basis of comprehensive study and assessment of the terms of the agreement and following relevant procedures and steps, Minister of Commerce of China Wang Wentao submitted China's official application to join the CPTPP in a letter to Trade Minister Damien O'Connor of New Zealand, the depositary of the agreement.
We believe that, built on RCEP's conclusion, China joining the CPTPP would help promote economic integration in the Asia-Pacific, and facilitate post-COVID economic recovery, trade development and investment growth in the world.
As for you specific question, China will follow relevant procedures of the CPTPP to have necessary consultations with the members.
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Reuters: As you already mentioned, China filed an application to join the CPTPP. Is there any significance to the timing of this application, which was shortly after the new alliance announced by Australia, the UK and the US this week?
Zhao Lijian: I have just elaborated on the background of China's official application to join the CPTPP, which has no connection with the agreement among the US, the UK and Australia. I want to emphasize that China is a staunch advocate for trade liberalization and facilitation, and an important participant in cooperation and economic integration in the Asia-Pacific. China's official application to join the CPTPP again demonstrates China's firm resolve in opening up and promoting regional economic cooperation.
You just tried to build a connection between the two issues. People can tell what China works for is economic cooperation and regional integration. What the US and Australia push for is wars and destruction.
Q: Is New Zealand inclined to take up the Chinese invitation to join the CPTPP?
Grant Robertson: Well, we're already in it. Yeah look, I mean, we welcome any countries wanting to join in a high functioning trade agreement, and it's not just China who has expressed interest in this, other countries have in the past. This you know is a very solid regional agreement that New Zealand exporters benefit from and anything we can do to enhance a rules based trade system around the world, we're always happy to look at. Any country wanting to join the CPTPP obviously has to sign up to the rules within it.
Q: And what do you make of the timing of it?
Grant Robertson: I don't make anything of it.
Q: Do you think that New Zealand was asked because you're a soft touch to China?
Grant Robertson: No, not at all. I think that is both a mischaracterization of New Zealand, and also probably a lack of appreciation of the place of the CPTPP. It's a trade agreement that many countries around the world are interested in.
Q: Do you think it's not connected to AUKUS at all?
Grant Robertson: No I don't think it is.
Fran Kelly: Minister, on the very day Australia announced it was buying nuclear subs from the US and the UK, China formally applied to join the Trans-Pacific Partnership. You've said Australia won't allow it to do so until it resumes high level dialogue on issues such as the barley and wine trade strikes which are now before the WTO. But it might help ease tensions if Australia agrees to let China in and if China's admitted, it would have to abide by the rules for international commerce. Wouldn't China's bad behaviour be constrained?
Dan Tehan: So, Fran, one of the things about negotiating the accession process of any country into the CPTPP is that you have to be able to sit down and talk about that accession process. We're going through this at the moment with the United Kingdom and what we've agreed with the United Kingdom is that the bilateral free trade agreement between Australia and the United Kingdom will form the major part of their accession to the CPTPP as far as the individual negotiations with Australia goes.
Now you have to be able to have those discussions at ministerial level to work through those issues and we've made sure that China understands that we would need to be able to sit down and work through issues with them for their interest to accede to the CPTPP. And in the same way the CPTPP is the gold standard agreement in the Indo-Pacific. So all countries have made it very clear that given that it's a gold standard agreement, any country that wishes to accede to it would have to abide by all the rules and the standards. So whichever country seeks accession will need to make sure that they abide by their WTO commitments.
Fran Kelly: Okay.
Dan Tehan: Their bilateral free trade agreement commitments, their regional commitments.
