Beijing’s former top trade negotiator has dismissed as “groundless” claims that China would not meet strict criteria to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in the long term.
President Xi Jinping said two weeks ago the country was “actively considering” joining the formerly American-backed trade pact, setting off debate as to whether China would meet its terms of entry, including on state-owned enterprises (SOEs), labour rights and e-commerce.
Long Yongtu, who helped negotiate China’s entry to the World Trade Organization (WTO), pointed to the strong state sectors of current member nations to suggest China, should it “accelerate SOE reform”, could also become eligible for the Pacific Rim trade pact abandoned by Donald Trump in his first week in office.
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Vietnam and Singapore, they also have very strong state-owned industries, if they can meet the terms of CPTPP, why not China?
“People say that China cannot meet the terms of CPTPP, but I think this is groundless,” said Long, speaking exclusively via video link at the South China Morning Post’s China Conference on Wednesday.
“Vietnam and Singapore, they also have very strong state-owned industries, if they can meet the terms of CPTPP, why not China?” Long asked, saying there was already “very strong” reform under way in China.
Long spent 11 years as director general of the Ministry of Foreign Trade and Economic Co-operation, a precursor to the Ministry of Commerce, working on China’s entry to the WTO. He is described as one of the more reform-minded figures advising the Chinese government and is a long-time advocate of China joining the CPTPP.
Long hoped a push to meet the terms of the CPTPP could have a similarly transformative effect on the Chinese economy as its WTO accession did.
“By participating in CPTPP, we can get some new ideas, even put some pressure on participation to accelerate China’s SOE reform,” Long said. “That’s a good thing for China, just like we did in accession to WTO. It exerted a lot of pressure in China to accelerate economic reform.”
The CPTPP is seen as the highest class of multilateral trade deals, covering modern issues such as digital trade and e-commerce, as well as social issues such as the environment and labour rights.
Originally known as the Trans-Pacific Partnership (TPP), it was negotiated under the Obama administration and subject to intense domestic debate in the run up to the 2016 US presidential election, before Trump withdrew in January 2017.
It was subsequently tweaked and signed by 11 members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
China’s renewed interest in the pact comes after it joined 14 other Asian countries to sign the Regional Comprehensive Economic Partnership (RCEP) in November.
RCEP deals mainly with tariff reduction and is viewed as a lower-calibre agreement than the CPTPP, membership of which would bar China from offering its SOEs preferential treatment over companies from other member states.
Long said Xi’s statement signified that China considered the CPTPP “a serious initiative” because it was a “high standard trade agreement”.
John Gong, a professor of economics at the University of International Business and Economics in Beijing, said that “China has been having internal discussions on joining the deal over the last few years, there are voices calling for CPTPP as a means to opening up and reforming” the economy.
Jayant Menon, a senior fellow at Singapore’s Institute of Southeast Asian Studies, said that because the original TPP text had been “diluted substantially to accommodate several original members, especially Vietnam, Malaysia and Singapore”, the SOE issue would “not be a stumbling block for China’s accession” in the long term.
However, others remain sceptical both as to whether China would meet the criteria, and of comparisons with Vietnam and Singapore, the economies of which were 479 per cent and 285 per cent smaller than China’s last year, respectively, according to the Post’s calculations.
Wendy Cutler, who helped lead the US negotiating team on the original TPP, said that “unlike China, Vietnam was on a path of privatising many of its SOEs during the original TPP negotiations, a development which paved the way for it to take on bold obligations”.
An Asia Society Policy Institute study from September polled opinions from a dozen CPTPP nation trade officials, finding that many were “unsure what to make of Beijing’s interest”, particularly its compatibility and mixed messaging on multilateralism.
While Xi’s speeches have consistently supported open markets and free trade, a push to strengthen state firms has happened in tandem.
Beijing has also adopted a more aggressive stance against trading partners, including CPTPP members Australia and Canada, both of which would have to assent before China could even start negotiating to join the deal.
“If you read major party documents, they include messages both ways,” said Henry Gao, a professor in trade law at Singapore Management University. “On the one hand, they say we need to further open up and push for trade liberalisation.
“On the other, they say we need to strengthen the role of SOEs. All these self-contradicting messages mean that you cannot look at words alone, you have to look at actions.”
Asked about the incoming Joe Biden administration, Long hoped it would improve bilateral ties between the world’s two biggest economies. But he said his experience told him policymakers in Beijing would not be looking too closely at who Biden appointed to senior trade roles.
“During my term as the chief negotiator I survived three, or four, or five US Trade Representatives (USTR). And it didn’t make much difference to me whether they change the USTR, because they basically are consistent in their trade interest,” said Long, whose involvement in WTO talks ran from 1992 until China joined the WTO in December 2001, during which there were four USTRs.
“Of course, there is some difference in style, some difference in emphasis, but I do not think it will change the USTR, it will play a fundamental part in changing the whole trade policy.”
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