WHEN DONALD TRUMP pulled America out of the 12-country Trans-Pacific Partnership (TPP) five years ago, analysts and economists busied themselves writing obituaries for what was to have been the world’s biggest free-trade deal. The United States accounted for nearly two-thirds of the incipient bloc’s GDP, and had done most of the diplomatic heavy lifting.
The obituaries were premature. Led by Japan, the remaining 11 members regrouped and in late 2018 got going as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). With Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam as members, the grouping still accounts for nearly one-sixth of global GDP. Though the Regional and Comprehensive Economic Partnership (RCEP), which came into effect this year, is bigger, it holds to much lower standards. Signatories to RCEP have 20 years to eliminate 90% of their tariffs to each other. CPTPP insists, with a few exceptions, on zero tariffs from the start. Rules on openness to investment, environmental standards and protection of intellectual property make it one of the world’s most rigorous trade pacts.
More countries now want in. First is Britain, seeking to persuade itself and others of global ambitions after Brexit. Admittedly, Britain’s control of the Pitcairn Islands (population: 55) makes its territorial credentials as a Pacific power look skimpy. Still, adding the world’s fifth-biggest economy would greatly boost CPTPP’s size.
Not as much, though, as would adding the second-biggest. China submitted its application in September—a revealing irony given that America had once viewed the TPP as a counterweight to its rise. China sits at the heart of global supply chains, which is why some CPTPP members, wishing to deepen trade and investment ties with it, support the bid.
That prospect discomfits those suspicious of Chinese motives. Its economic system seems incompatible with parts of the CPTPP, notably rules curtailing state-owned enterprises. It pursues mercantilist policies in some sectors. It either shuts out foreign tech firms or takes intellectual property from them. And it is a bully: it is boycotting much trade with Australia for petty reasons. In Australia, Canada and Japan, its application is unwelcome.
That is in contrast to the application by Taiwan, submitted six days after China’s. Asia’s open societies share affinities with democratic Taiwan. And from a trade perspective, the country’s chipmakers are crucial to global tech.
China is vehemently opposed to Taiwan’s joining. It claims the island as its own and reserves the right to invade. How to deal with the two applications is a hot potato that CPTPP representatives attempted to handle as they met under Singaporean auspices as The Economist went to press (Ecuador’s bid for membership is less controversial). Singaporean officials are likely to advise their counterparts in China to sort out its differences with Japan and Australia first.
Yet kicking the potato down the road cannot work for ever. In Asia, trade trumps everything, and China’s clout suggests that sooner or later it will get its way. Already, some of the region’s officials are starting to claim that admitting China would be a way to curb its errant trade practices.
The trouble with that argument is that, even without new members, CPTPP lacks enforcement teeth. Deborah Elms of the Asian Trade Centre in Singapore, which works with governments and companies to fashion better trade deals, argues that the pact is weak when it comes to implementation. No one is really monitoring Vietnam’s obligations to meet CPTPP standards on state enterprises, e-commerce and cross-border data flows. Nor has the deal’s dispute-settlement mechanism ever been used—Asian governments are not in the habit of suing each other. Meanwhile, the brevity of the pact’s language on accession suggests the founding members gave insufficient thought to admitting new ones—and South Korea, a tech and industrial giant, also wants to join.
Both political and technical challenges underscore the CPTPP’s institutional shortcomings. Despite the complexity of its provisions, Ms Elms points out, few governments have officials working on the pact full-time. More striking, it lacks even a secretariat. Some of its supporters argue that CPTPP can take the lead from the WTO as the world’s chief promoter of free trade. If it lacks even an office, that remains a bold assertion.
Read more from Banyan, our columnist on Asia:
Kishida Fumio’s “new capitalism” is many things, but it is not new (Feb 12th)
Myanmar’s generals have a dubious role model in Thailand (Feb 5th)
How sanctions really can improve respect for human rights (Jan 29th)