Toward a real regional FTA

In March 2013, the US Trade Representative suggested that the door to TPP is open for China, as long as Beijing “is capable of meeting the high standards that we’re negotiating.” While the effort to impose U.S. standards in the region does not serve Chinese interests, the real question is not whether China should join the current TPP, but whether it should participate in the process to shape the future TPP.

Beijing’s official position is to be open to all efforts to promote regional economic integration while promoting its own free trade negotiations. China has FTA pacts with several ASEAN nations, as well as Hong Kong, Taiwan and New Zealand. It is in talks with half a dozen others, including Australia. It also hopes to achieve an FTA in East Asia with Japan and South Korea.

Negotiating Chinese entry into the TPP would be challenging, due to the high threshold. The TPP would impose advanced-country rules in intellectual property, generic pharmaceuticals, local content requirements and liberalization of services, which would not serve current Chinese interests. As a result, China has played more active role in the Regional Comprehensive Economic Partnership (RCEP), the FTA between the ASEAN members and their FTA partners, which offers a more flexible path to regional cooperation.

If, however, Beijing would seek TPP membership, it could participate in the TPP incrementally and monitor the final template. In this scenario, membership would only follow “eventually” when the Chinese economy stands to gain greater benefits from the TPP. Such an approach could serve the mainland’s longer-term interests because it would allow Beijing to accelerate structural reforms domestically, while facilitating the shift from cost-efficiencies to innovation-driven competitiveness.

Geopolitically, China’s participation in the process would weaken containment policies strategically and U.S. bargaining position economically. In the long-term, however, it would serve U.S. interests by leading to a more cohesive final pact.

The current TPP vision is based on exemptions and exclusive bilateralism, which risks splitting the region into exclusive rival blocs. In the incremental scenario, however, China could achieve greater transparency in the process and greater multilateralism in the outcome.

After all, the original TPP concept rested on inclusive, rule-based multilateralism to align the Asia Pacific together – not apart.

Dr. Dan Steinbock is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China). For more, see www.differencegroup.net

This article was first published at Chinausfocus.com To see the original version please visit: http://www.chinausfocus.com/finance-economy/should-china-join-the-trans-pacific-partnership-talks/