MNI EXCLUSIVE: China's CPTPP Interest A Test Balloon: Advisors

China's expression of interest in joining the Trans-Pacific trade deal is a trial balloon to assess whether it might obtain exceptions and grace periods for complying with the pact's rules in areas like state-owned companies, policy advisors told MNI.

Economic reforms, together with China's Phase One trade pact with the U.S., have made it more feasible for the world's second-largest economy to consider joining the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership, advisors said.

President Xi Jinping's statement that China is "actively considering" joining the CPTPP comes as the signing of the Regional Comprehensive Economic Partnership adds momentum to Beijing's drive to establish itself as a champion of free trade after a protectionist turn by the U.S., they noted. China was not party to CPTPP's U.S.-led predecessor, from which the U.S. later withdrew under President Donald Trump.

In general, CPTPP rules align with China's own policy objectives for opening up its economy, said Zhang Qi, head of the Foreign Economic Research at the Development Research Center of the State Council. The question now is whether member countries accept Beijing's intent to liberalise and give it a multi-year period to comply, as they did with Vietnam, said Tu Xinquan, Dean of China Institute for WTO Studies at the University of International Business and Economics.

Beijing is also positioning itself for a change in the U.S. stance on CPTPP. Should the U.S. decide to join the pact, China will gain another platform for dialogue, said Tu.But Washington's membership would also make negotiating with the group more difficult, a former trade official said.

NEGOTIATIONS

Before China formally applies to join CPTPP, it must consult with member countries including Canada, Australia, Japan, and Singapore, advisors said.

Besides the high-profile issue of whether Beijing is prepared to level the playing field for foreign companies by giving up preferential treatment for SOEs, it will also have to strengthen intellectual property rights, a point of contention between the U.S. and China, and permit cross-border data flows.

According to Tu, China will be open to negotiations. While the messaging on SOEs has been muddled by political priorities, Beijing has made it clear in multiple documents that it intends to liberalise them, the former trade official said. Late in September, the State Council said it would implement a three-year SOE reform plan that includes mixed ownership and fair market competition.

CPTPP membership could even supply the external pressure that China needs to push it over the line on SOE reform, advisors said. Another argument for joining the pact is that the World Trade Organization could eventually adopt CPTPP-type rules in areas like e-commerce and environmental standards, advisors said.

Rules such as these "are not insurmountable barriers for China," said Song Hong, head of international trade research at the Chinese Academy of Social Sciences' Institute of World Economics and Politics.

UNIONS

The U.S.-China trade deal and implementation of the Foreign Investment Law have already enhanced intellectual property rights for foreign investors, said Wang Huiyao, founder of the Center for China and Globalization and an advisor to the State Council. China also plans to achieve carbon neutrality by 2060, Wang said.

Among the more challenging CTPP provisions are guarantees of the rights of workers to start unions and rules committing members not to force businesses to physically store data on their territory. Negotiations on data localisation would be more difficult if the U.S. were involved, Tu said.

In September, China put forward a Global Data Security Initiative, which promised no surveillance or forced data handovers. But a policy advisor familiar with the matter said the initiative suggested Beijing will not compromise on its stance that Chinese data must remain subject to its administration.