A better CPTPP would include both the U.S. and China

How did the stars align to make the Trans-Pacific Partnership a reality? The path toward the TPP’s conclusion has taken many dramatic twists and turns.

In October 2015, negotiations between 12 countries generated the basic outline of an agreement. This was the first act in the TPP drama.

Shortly after this, I visited Beijing at the invitation of a Chinese think tank. At a banquet, my seatmate — an important Chinese guest — could not conceal his amazement at the success of the TPP negotiations. Why did Japan agree to such extensive market liberalization? How did the Liberal Democratic Party convince Japanese rice farmers to go along with the agreement? Had Japan and the United States secretly made some kind of strategic pact? He could not make sense of it at all.

As the Obama administration’s efforts to build consensus for the TPP legislation in Congress stalled, however, the U.S. plunged into the 2016 presidential election. In January 2017, just three days after taking office, President Donald Trump announced that the U.S. would withdraw from the TPP.

The TPP could not go into effect without the U.S.

The remaining 11 countries thus began a new round of negotiations in May 2017, and in March 2018 finally signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This concluded the second act in the history of the TPP.

Tokyo was the one to spearhead this second effort. Japan had consistently been on the defensive in postwar multilateral trade negotiations, so this demonstration of leadership was met with surprise.

And now, China has asked to join the CPTPP. With this request, the curtain has risen on the TPP’s third act.

The Biden administration seems to have determined that the U.S. cannot return to the CPTPP. Thus, China’s decision to seek membership is likely an attempt to craft a narrative in which China is the new standard-bearer of “free trade” — drawing a stark contrast with the U.S. and its “America First” agenda.

However, all of the CPTPP’s 11 member countries must approve China’s request. China must also meet the rigorous criteria for membership. For example, it must observe a variety of rules and norms, including:

• Guaranteeing neutrality in competition with state-owned enterprises
• Transparency in subsidy allocations
• Guaranteeing workers’ rights, including the prohibition of forced labor
• Maintaining high standards for digital transactions and data, including a ban on all requests for source code disclosure
• Restraint in the use of economic coercion

In Xi Jinping’s China, the centralization of state authority, the prioritization of state-run enterprises and the exploitation of the private sector has further entrenched the phenomenon of guo jin min tui (The state enterprises advance, the private sector retreats). China uses economic sanctions to coerce countries it views as political or military threats.

Given the growing fear of China and disgust with its actions, strong opposition should be expected to it being admitted into the CPTPP. Domestic factors sometimes prompt the Chinese government to assume remarkably rigid stances toward the outside world. Those with experience negotiating with Beijing fear that if China joins the CPTPP, it will derail efforts to establish regional rules and order and lead to a failure in governance.

Nevertheless, Japan should deal with China’s application sincerely and perform some “diplomatic jujitsu” by using China’s request to build an open and durable international order in the Asia-Pacific region. Incorporating China into the framework of Asia-Pacific trade according to rules set by the CPTPP — not rules set by China — is to the advantage of not only Japan, but the entire region.

First, however, it makes sense to complete negotiations with the United Kingdom, which has already put forward an application for membership in the CPTPP. It would be advisable for CPTPP negotiators to use the U.K.’s application as a model case for demonstrating the exacting rules of membership — and as an opportunity for the 11 existing members to reconfirm their shared position and strengthen cooperative ties.

Furthermore, all 11 members should jointly call on the U.S. to rejoin the partnership. In particular, Japan, Australia, Canada and Mexico should coordinate their efforts around this goal. Mexico and Canada risk being removed from the United States-Mexico-Canada Agreement concluded under the Trump administration through a “poison” pill clause that allows the U.S. to expel any partner who concludes a free trade agreement with a “nonmarket economy” — in other words, China. The clause was intended to block any movement toward a China-Canada FTA.

The U.S. should not be allowed to exercise this right; instead, the clause should be used as a means of drawing the U.S. back into the CPTPP. Only after the U.S. has agreed to negotiate its return to the group should membership discussions begin with China. If the 11 member states can work together to ensure that both China and the U.S. join the CPTPP, this would be an immeasurable contribution to the peace and prosperity of the Asia-Pacific region in the 21st century.

At present, this is nothing more than a pipe dream.

When considering the aggressive economic coercion, disregard for international order and the exclusive economic nationalism that China has demonstrated during the coronavirus pandemic, it is easy to wonder whether Beijing has a real interest in playing a constructive role within the international order. In the end, China’s request to join the CPTPP may be nothing more than an attempt to drive a wedge between the U.S. and Japan, Australia, Canada and Mexico. The real poison pill could well be the Asian giant’s capture of a fertile market of 500 million people through its membership in the CPTPP.

All the same, the opportunity should not be wasted to negotiate with China on regional rule-building. The CPTPP is one of Japan’s greatest diplomatic assets, second only to the U.S.-Japan security alliance. This third act in the TPP saga may well offer one final, crucial opportunity for Japan to step into the spotlight: Tokyo must exert its influence over Beijing’s involvement in building regional rules and order and convince Washington to return to a multilateral trade framework in Asia.

Yoichi Funabashi is chairman of the Asia Pacific Initiative and a former editor-in-chief of the Asahi Shimbun. This is a translation of his column in the monthly Bungei Shunju.