n September 16, China formally applied to join the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP). Formerly known as the Trans-Pacific Partnership (TPP), the trade agreement with 11 members was initiated under the leadership of former US president Barrack Obama and intended to advance US leadership in trade and counter China’s influence in the region.
Although China has been sending signals of its interest in joining the pact since last year, the decision to lodge a formal application came as a surprise to many. For observers abroad, the irony lies in that the trade agreement, with its touted “gold standard,” was specifically designed to keep China out. Within China, the pact has long been perceived as a threat to China’s position in the region.
But given the intensifying rivalry with the US and ongoing realignment of the global supply chain, joining the CPTPP has become more attractive as China tries to address growing challenges both at home and abroad.
First, Chinese membership of the CPTPP would yield significant economic benefits for China and other members. According to a 2019 estimate by Peter Petri and Michael Plummer, researchers from the Peterson Institute for International Economics, China’s joining the CPTPP would generate global income gains of US$632 billion annually with the pact, quadruple the amount currently. China’s gain in income is estimated at US$298 billion annually.
But to join the CPTPP, China would have to undertake unprecedented reforms on a variety of issues, such as transparency and State-owned enterprises (SOE), intellectual property protection, labor rights protection and restrictions on foreign investment and cross-border data transfer.
China has resisted these changes for a long time. But with the ever-changing geopolitical and economic dynamics in the region, the CPTPP’s higher standards have increasingly become more desirable.
In the past years, as the US has strengthened its alliance with other countries to support its anti-China agenda, trade disputes have become a major rallying point of the US. If China does not adopt a more proactive approach to address these disputes, there is a genuine risk that China will be excluded from the rule-making process of the global trade governance in the future. Applying to join the CPTPP will provide a very good platform for China to address the discrepancy between its policies and the CPTPP standards on these issues.
Domestically, joining the CPTPP could inject new vitality into China’s economy. In the past decades, the country’s economic growth has been largely driven by what many call “reform dividends.” While the opening-up policy launched in the late 1970s kickstarted China’s economic take-off, China’s joining the WTO in 2001 is considered a new starting point for its growth, as it helped the Chinese leadership overcome strong resistance to some of the reforms.
But after 20 years, the reform dividends brought by WTO accession have been largely exhausted, and the country’s reforms pertaining to SOEs, market access, labor rights and intellectual property protection have stagnated. From this perspective, the CPTPP rule book can serve as a guidebook for future reforms, and joining the CPTPP could provide new momentum and bring new policy dividends to sustain China’s economic growth in the following years.