China is filling an American vacuum in Pacific trade

Qianmen street, Beijing on September 21, 2021. AFP

The announcement of the new Australia-UK-US alliance, or Aukus, has had news wires around the world buzzing, not least because of the outrage from the French, whose own submarine deal with Australia was ditched as a result. Recalling his ambassadors from Washington and Canberra, as French President Emmanuel Macron has ordered, is unprecedented. French pique will subside eventually, but European worries about US President Joe Biden acting unilaterally and without consulting them, this time in the context of the Asia-Pacific, will persist.

But all the fireworks have obscured what may be a more significant story. And that was the day after Aukus was announced, China formally applied for membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. This free trade agreement between 11 countries on either side of the Pacific is not just about establishing high standards and rules affecting 13.4 per cent of global gross domestic product. It is also the successor to the Trans Pacific-Partnership, or TPP, which was to be the signature achievement of the Obama administration’s “pivot to Asia”.

When it was signed in 2016, Mr Obama was explicit about its purpose: “TPP allows America – and not countries like China – to write the rules of the road in the 21st century, which is especially important in a region as dynamic as the Asia-Pacific.” His successor Donald Trump, however, issued an executive order withdrawing the US from the TPP on his first day in office.

Despite previously speaking favourably about the CPTPP (which the remaining members had to reformulate after the US left), Mr Biden has so far shown no interest in (re)joining. For China now to be applying, with every chance that it will have a hand in “writing the rules of the road” in the region if it is allowed in, is quite the turnaround – and looks like a terrible own goal by the US.

Some doubt China’s intentions in signalling its wish to join the pact. Could it just be a bid to stop Taiwan, which Beijing regards as a renegade province, from trying to get in? Others suggest that the levels of liberalisation and market-driven reforms required by the CPTPP are just too much. “Japan believes that it's necessary to determine whether China is ready to meet its extremely high standards,” the Japanese Economy Minister Yasutoshi Nishimura said last week.

Still others point to serious disputes with current CPTPP members. Australia’s trade minister, Dan Tehan, says his government will oppose any discussions with China until Beijing is willing to discuss the punitive trade sanctions it imposed after Australia’s call for an investigation into the origins of Covid-19 last year. Canada is petitioning China over the detention of two of its nationals, Michael Kovrig and Michael Spavor, which Ottawa deems revenge for Canadian officials arresting Meng Wanzhou, the Huawei CFO, on a warrant from the US.

But these should not be long-term issues, and co-operation on one level can still continue while there are fierce disagreements on others. Witness how China and Australia – along with Japan, New Zealand, South Korea and the 10-member Association of Southeast Asian Nations – are working to bring the Regional Comprehensive Economic Partnership, the world’s biggest regional trade deal, into effect next year.

As to whether Beijing can meet the terms of what Stephen Olson of the Asia-based Hinrich Foundation calls "arguably the highest quality trade agreement ever negotiated", Mr Olson and others say yes. "Exceptions and wide loopholes would ease China’s compliance with the more challenging provisions," wrote Mr Olson in a paper in June. "And in those cases where the stipulated exceptions are insufficient, China has already demonstrated its immense skill in bending, evading and otherwise nullifying trade rules in other agreements."

So assuming China does want in, the question is: who would want or dare to stand in Beijing’s way? And what would be the logic given how closely the region’s economies are already bound to China’s?

All this makes Washington’s lack of interest in the CPTPP seem even more inexplicable. Sure, Mr Biden knows that there is strong domestic opposition to the US joining any more trade pacts on both the left and the right, mainly due to concerns about the possible loss of jobs or the weakening of labour standards and protections. But in the Asia-Pacific – or the Indo-Pacific, the term the US now prefers – the focus appears to be far too much on security, Aukus being just the latest example, and nowhere near enough on what fills rice bowls across the region.

As a Bloomberg editorial put it rather sternly this May: "However loudly US politicians vow to compete with China, they seem happy to quit the field and let Beijing win in one crucial area: trade. If President Joe Biden hopes to build a coalition in Asia to counterbalance China’s rise, he can’t afford such defeatism."

They were referring particularly to the CPTPP, and added, correctly: "Countries that want to reduce their economic dependence on China are less likely to try if the US isn’t offering an alternative." And it truly isn’t. Western countries keep talking about substitutes for China’s Belt and Road Initiative, such as the "Build Back Better World" or BW3 launched by the G7 in June, but when it comes to specific funding or concrete achievements, there is very little to show by comparison.

“As the United States works to restore its credibility and influence around the world and compete with China, it cannot afford to consign itself to the sidelines and let others hammer out the rules that will shape the future of the global economy,” wrote Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade negotiator, earlier this month.

By taking no steps to rejoin the CPTPP and watching China begin the process of applying, that is exactly what Mr Biden’s administration is doing. Quite what his old boss Barack Obama would have to say about the potential remaking of his cherished Asia policy pivot – to Beijing’s advantage – doesn’t bear thinking about. Perhaps it would be kinder not to ask him.