China officially applies to join CPTPP trade pact

China has formally moved to join a Pacific trade pact involving Japan, Australia, Malaysia and other regional economies, the Chinese Ministry of Commerce said Thursday.

Beijing seeks to join the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly called the Trans-Pacific Partnership. Chinese Commerce Minister Wang Wentao presented China's application to New Zealand counterpart Damien O'Connor and discussed the upcoming process by telephone. Documents were submitted to support the application.

New Zealand acts as the depositary for the CPTPP, the government that handles various administrative tasks for the pact, such as requests to join.

In a speech to the Asia-Pacific Economic Cooperation summit via video in November 2020, Chinese President Xi Jinping said China "will favorably consider" joining the CPTPP.

China is also pushing to meet the Jan. 1 target for the start of the Regional Comprehensive Economic Partnership, the 15-member trade pact that includes Southeast Asia. This and its application to join CPTPP are part of an effort by Beijing to expand its economic influence on the global order.

But China's bid to join the CPTPP faces trade friction with Australia and territorial disputes with Vietnam, another member. Consent from all 11 members is necessary to join.

It will also have to make domestic reforms to qualify. Practices such as subsidies to state-owned enterprises that distort competition are forbidden by the pact. Under Xi's leadership, China has been strengthening the state sector, so negotiations to join could hit a stumbling block from the start.

"As the role of the state becomes all the more prevalent in the Chinese economy, Beijing seems to moving even further away from the market-based, high-standard CPTPP rules," former Acting Deputy U.S. Trade Representative Wendy Cutler told Nikkei.

Cutler, who who now serves as vice president at the Asia Society Policy Institute, was involved in negotiating America's participation in the pact during the Obama administration. The U.S. withdrew its membership in 2017 under former President Donald Trump

"The onus is on the candidate to demonstrate its readiness to adhere to the existing high-standard CPTPP rules, as well as to be prepared to make comprehensive market access commitments," Cutler said. "China's application to join the CPTPP is one more data point on why Washington needs to step up its economic engagement in the Indo-Pacific, including on trade."

China's new data security law that took effect this month includes a ban on taking data out of the country, which could meet resistance from member countries.

The CPTPP has three principles that ensure transparency and fairness in the distribution of data, including a prohibition on forcing companies to disclose source code. In China, companies have been forced by local governments to disclose technology to obtain permits and licenses.

In addition, the CPTPP calls for an end to discrimination between foreign and domestic companies in government procurement. Beijing, on the other hand, has issued "buy-China" guidelines for government procurement for certain products. The road to membership will be difficult as China prioritizes its own interests.

Beijing's application comes a day after the U.S., U.K. and Australia formed a new defense-focused grouping in the Indo-Pacific called AUKUS intended to counter China.

The CPTPP's members also include Brunei, Canada, Chile, Mexico, New Zealand, Peru and Singapore. The U.K. has begun negotiations to become a member.

Source: Nikkei