Australia’s Asia-Pacific strategy endangered by UK CPTPP accession

Australia’s Morrison government has welcomed the UK’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In doing so, it risks undermining the positive results of more than half a century of diplomacy.

Over the years, Canberra has championed Asia Pacific regional economic integration, preferring it to the ‘East Asian’ approach favoured by many ASEAN countries and China. Including the United States in regional economic groupings served both economic and geopolitical purposes. Washington’s participation increased prospects for the grouping to set the rules of the game in international trade.

But trade agreements also have security dimensions. ‘Anchoring’ the United States in the region through institutionalised economic collaboration was expected to strengthen US alliances with regional partners and to discourage its longstanding isolationist tendencies.

The establishment of APEC in 1989 was an early success. It was followed by the Trans-Pacific Partnership (TPP) in 2016, and its reduced form — after the Trump administration withdrew the United States from the agreement — the CPTPP in 2018. The TPP was not intended to exclude China. Rather, by creating a template for an Asia Pacific free trade area, it would pressure Beijing to undertake domestic economic reforms so that it could eventually join the grouping.

The United Kingdom’s accession to the CPTPP would be transformational, but not for its economic effects. Although the United Kingdom would become the grouping’s second-largest economy after Japan, its economy is only one-fifth the size of China’s or one-seventh that of the United States in purchasing power parity terms. While the UK’s desire to deepen economic ties with the region is understandable, the question is what value it adds to the CPTPP. It has signed — or is finalising — bilateral trade agreements with all but two (Brunei and Malaysia) of the CPTPP’s 11 members. If it reaches a bilateral agreement with Australia, the economic benefits for Australia from its accession to the CPTPP will be minimal.

Rather, UK membership would transform the CPTPP from a template for realising APEC’s goal of creating an Asia Pacific free trade area to a club of ‘like-minded countries’ committed to deeper economic integration. Some have already suggested it should be a renamed, with one author proposing the ‘Comprehensive Agreement for International Partnership’.

Canberra’s Asia Pacific strategy rests on securing US participation in regional agreements. Under the Biden administration, US re-entry appears unlikely in the immediate future given its domestic preoccupations. Some argue that UK membership could revitalise the CPTPP, which has stalled since its signature in March 2018 with four members (Brunei, Chile, Malaysia, and Peru) yet to ratify the agreement. UK membership, it is suggested, might also encourage the United States to rejoin the agreement. But Washington’s decision on the TPP is unlikely to be affected by the UK’s accession; it clearly has little enthusiasm for rewarding ‘Global Britain’ for its exit from the EU.

Rather than revitalising the agreement, UK accession might lead to the unravelling of the CPTPP by removing its core raison d’etre as a template for regional free trade. The Malaysian government has always had doubts about the agreement, especially its provisions on government procurement and state-owned enterprises, which it fears will undermine its efforts to promote ‘Bumiputera’ (Malay) economic interests.

Malaysia has long been the champion of an East Asian alternative to regional economic cooperation, originally through the East Asian Economic Caucus (EAEC) — transformed over time into the East Asia Summit, whose economic dimension became the Regional Comprehensive Economic Partnership (RCEP), signed in November 2020. Compared to the CPTPP, RCEP’s rules are less demanding, making it attractive not just to Malaysia, but to most ASEAN states. Economic modelling indicates that, although its provisions are shallower than the CPTPP, its broader membership — even without India — will produce larger welfare gains than the CPTPP without China or the United States. The UK’s accession might unintentionally enhance the appeal of RCEP.

Should Canberra be concerned? After all, Australia is a founding member of RCEP. The grouping’s membership is far removed from Malaysia’s former prime minister Mahathir Mohamad’s original design for an Asian-only EAEC. But from economic, political and strategic perspectives, Australia should have concerns.

As former US president Barack Obama asserted, a significant objective of the TPP was to set the ‘rules of the game’ for economic interdependence in the Asia Pacific region. And these would be US rules (supported for the most part by Australia) — not China’s. Eight years of RCEP negotiations have resulted in an agreement with provisions far shallower than those of the CPTPP. China’s preferences on rules prevail.

Perceptions matter in politics. Australia’s support for UK entry to the CPTPP appears to be part of a retreat to an Anglosphere that brings together — in Gideon Rachman’s words — ‘a group of English-speaking countries, all of whom have adopted more confrontational policies towards Beijing’.

There is also the strategic dimension to regional economic agreements. While the CPTPP would not be the only factor influencing Washington’s engagement with the Asia Pacific, removing the regional dimension from the agreement significantly weakens the economics–security nexus.

Source: East Asia Forum