hankyoreh

Representatives of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) member countries pose for a photo while gathered for a meeting in Santiago, Chile, in May 2019. (AP/Yonhap News)

The stakes have gotten higher, and the moment of truth is approaching.

The simultaneous applications by China and Taiwan to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is the prelude to unbridled competition that could rattle the trading system in the Asia-Pacific region. It’s an open question who will get the last laugh.

It came as a global shock when China abruptly announced its bid to join the CPTPP on the evening of Sept. 16. The CPTPP dates back to the Trans-Pacific Partnership (TPP), which was pursued by the Obama administration in the US as part of its attempt to encircle China.

In April 2015, Defense Secretary Ashton Carter said that the TPP was worth as much “as another aircraft carrier.” The US’ goal in pursuing the TPP at the time was to rectify the trading system among TPP members as a way of countering China.

In fact, the CPTPP agreement’s 30 chapters fly in the face of China’s state-led model of economic development. Chapter 17 mandates annual disclosure of information about state-owned enterprises, defined as those in which the state holds at least a 50% stake or voting rights. That’s designed to preclude the possibility of governments meddling in fair competition by paying subsidies.

When Fortune magazine announced the world’s 500 biggest companies this past August, the list included 124 Chinese companies altogether, including those based in Hong Kong. State-owned enterprises accounted for 82 of the companies, while 49 are directly operated by the Chinese central government. State-owned enterprises are a central component of “socialism with Chinese characteristics.”

The text of the CPTPP agreement also includes detailed rules about rigorously protecting intellectual property rights (Chapter 18), guaranteeing labor rights (Chapter 19), and protecting the environment (Chapter 20).

The countries that remained in the negotiations after the US withdrew from the TPP negotiations following Donald Trump’s rise to the White House reached a revised agreement, but it maintained the rules about the trading system. China must know it won’t be easy to join the CPTPP.

So why has China applied to join the CPTPP? Some observers argue that the motivating factor was the US’ announcement of the formation of the AUKUS security alliance with the UK and Australia, just one day before China unveiled its application. But China immediately dismissed any connection with that.

Writing in Foreign Policy on Sept. 23, Wendy Cutler, former acting deputy US trade representative, said that China had nothing to lose, and in fact much to gain, from its decision to apply to become a CPTPP member.

First, there’s pretext. By applying for membership, China can demonstrate to the world that it values the rules-based trading order. Amid its trade dispute with the US, China has represented itself as a defender of free and open trade, while depicting the US as a leading advocate of selfish protective trade.

Following China’s application, Japan, Australia and Canada responded negatively, while Singapore and Malaysia welcomed the move. A rupture has formed inside the CPTPP. Six of the 11 CPTPP members depend upon China for at least 20% of their foreign trade. Overt opposition to China’s membership could spell trouble in their bilateral trading relationships.

And then Taiwan made a hasty appearance. It applied for membership on Sept. 22, one week after China. The self-ruled island had been working on its application by making various bilateral contacts and updating related legislation.

It’s worth noting that Taiwan submitted its application under the name “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.” That’s the same name that Taiwan used when applying to the General Agreement on Tariffs and Trade (GATT), the forerunner of the World Trade Organization (WTO), on Jan. 1, 1990.

When Taiwan applied to GATT, China protested vociferously on the grounds of the “one China” principle, but its argument was rejected. GATT Article 33 allows “a government acting on behalf of a separate customs territory possessing full autonomy in the conduct of its external commercial relations” to join the agreement.

The GATT system was reorganized as the WTO in 1995. Taiwan was admitted as the 144th member of the WTO on Jan. 1, 2002 — 21 days after China became the 143rd member. The senior delegate to the negotiations for admission to the GATT and the WTO was an expert on international commerce who served as a senior legal advisor on international economic bodies and a trade researcher for the Ministry of Economic Affairs, under Taiwan’s Executive Yuan. That was Tsai Ing-wen, Taiwan’s current president.

China has made clear its opposition to Taiwan’s application for membership in the CPTPP, once again asserting the principle of “one China.”

“There is only one China in the world, and the Taiwan region is an inalienable part of China's territory,” said Zhao Lijian, spokesperson for the Chinese Ministry of Foreign Affairs.

“China firmly opposes all official interactions between Taiwan and any country [and] firmly rejects Taiwan's accession to any agreement or organization of official nature.”

Zhu Fenglian, spokesperson for the Taiwan Affairs Office of China’s State Council, said on Sept. 29 that Taiwan’s admission to the WTO as a “separate customs territory” did not serve as precedent for its admission to the CPTPP.

But China’s argument is undermined by the CPTPP annex that outlines the procedures for admission of new members. The agreement stipulates that interested economic bodies are eligible to apply for membership, which means that membership isn’t limited to sovereign states. In short, China won’t find it easy to block Taiwan’s admission to the CPTPP through the “one China” principle alone.

The problem is that China is much different than it was 20 years ago. Both in terms of economic scale and geopolitical standing, the China of today is hardly comparable to the China that joined the WTO.

The debate over the admission of China and Taiwan to the CPTPP could end up symbolizing the international community’s assessment of the new China. Given its insistence on the “one China” principle, China could never accept simultaneous admission to the CPTPP with Taiwan. And if only Taiwan is admitted, China would likely retaliate.

But if, on the other hand, only China is admitted, the trading system in the Asia-Pacific region might be fundamentally reorganized around China. That would compel action from the US, given its concern about the possible ramifications.

In the end, the US is the biggest variable in this debate. Joe Biden’s election as president led to calls from some quarters for the US to seek to rejoin the TPP (now CPTPP). Those calls have been gaining strength since China applied to join the agreement.

But there’s considerable opposition to free trade agreements inside the Democratic Party. Even if the US did gain admission to the CPTPP, ratification by US Congress wouldn’t be a walk in the park.

If China joins the trade pact that was originally created to contain it while the US stays on the sidelines, the US will have effectively been robbed of “another aircraft carrier.” That might represent the relocation of a hegemonic axis.

The US can’t just sit by and let that happen. The CPTPP is emerging as the front line of the competition between the US and China, and the systems that they champion.

By Jung In-hwan, Beijing correspondent

Please direct questions or comments to [english@hani.co.kr]