Trade politics get very messy

Trade politics get very messy

Geopolitics in Asia Pacific have become increasingly complex and drawn growing interest from outsiders since the US, the UK and Australia announced a new alliance known as AUKUS to enable Australia to build nuclear-powered submarines.

The partnership, formed this month in response to China’s expansionist drive in the South China Sea and increasing belligerence toward Taiwan, prompted Canberra to scrap a US$90-billion deal for 12 new diesel-electric submarines from France.

An infuriated France withdrew its ambassadors from Washington and Canberra but the storm blew over after President Emmanuel Macron spoke on the phone with his US counterpart Joe Biden last Wednesday. Washington has also ruled out the possibility of Japan and India joining AUKUS.

India, for its part, has sought to allay concerns that AUKUS could undermine the Quadrilateral Security Dialogue, which groups India, Japan, the US and Australia. In Delhi’s view, the Quad has a broader agenda to promote a free and open Indo-Pacific beyond just defence.

China then made a move that observers viewed as a response to the latest round of US-led diplomacy. Beijing has formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the huge trade deal once pushed by Washington as a way to solidify American influence in the region and keep China at bay.

Initiated by former president Barack Obama, the TPP nearly collapsed when his successor Donald Trump pulled the US out of the deal in 2017. Japan led the revised and renamed pact to a successful conclusion the following year. China is the second country to apply to join the 11-country group, after the UK applied earlier this year.

But here’s where it gets interesting: Taiwan last Thursday said that it too wants to join the CPTPP. Cabinet spokesman Lo Ping-cheng said his country “can’t be left out in the world” — but Beijing insists it can and must be.

“We firmly oppose any country having official exchanges with Taiwan and firmly oppose the Taiwan region’s accession to any official treaties or organisations,” Chinese foreign ministry spokesman Zhao Lijian warned.

Vietnam, meanwhile, has offered to share information with China about joining the pact that groups Vietnam with Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore.

Taipei has lobbied for years to join the CPTPP, whose members are now divided with democracies such as Japan, Australia and Canada pushing for Taiwan’s accession. But Southeast Asian nations, keen to remain in China’s good graces, are vulnerable to pressure from Beijing.

China is already a member of the Regional Comprehensive Economic Partnership (RCEP), which also includes the 10 Asean states plus Japan, South Korea, Australia and New Zealand and is on track to come into force early next year.

Among free trade agreements (FTAs), the CPTPP ranks third behind the US$26-trillion RCEP and the $21.1-trillion US-Mexico-Canada Agreement. China’s addition to the CPTPP would make it the biggest.

For CPTPP members, ignoring the fact that the huge Chinese market is driving the economic recovery would be very hard, and the cost of rejecting Beijing’s application will be high. Nevertheless, discussions won’t be simple given the tensions between Beijing and some current members, notably Japan. Beijing has a growing military presence around islands that both nations claim, while Tokyo also takes a dim view of Chinese threats to Taiwan.

China and Australia are already in the throes of a bitter economic and trade dispute, despite the two nations having an FTA. Still, China has publicly lobbied Canberra for its support to join the CPTPP.

Canada is another CPTPP member that has rocky relations with China, which has jailed one Canadian for 11 years for “spying” while another is awaiting sentencing. Those cases are seen as linked to Canada’s arrest of the daughter of the founder of Huawei Technologies.

Then there is the potential for huge loss of face for Washington, given that it was the original champion of the TPP and now could be outside looking in at a pact that includes the one country it wanted to sideline. So far, the Biden administration hasn’t announced any concrete trade policies for the region.

But the biggest concern perhaps is that China’s bid could widen divisions among CPTPP members. If a common response to Beijing can’t be found, this coalition of like-minded countries could be weakened, affecting implementation efforts and accessions in the future, I’m sure.