INSIDE GLOBAL ISSUES

Policy Brief No.201408 , April 3rd , 2014 

China needs to be in at ground floor of new rules

Li Chunding

The Trans-Pacific Partnership (TPP) free trade talks were confronted with another failure in Singapore in late February. The negotiations ended up in a standoff between Washington and Tokyo. Both of them put their own interests first and were unwilling to compromise.

The TPP talks have arrived at the last phase, and the tough fight between the US and Japan is the last demanding challenge. However, the challenge is unlikely to be surmounted with no sweat. It will still take time for both sides to come to terms.

With a strong ambition to advance the partnership but a reluctance to meet the other side half way, neither Washington nor Tokyo has given any positive signals to each other so far. Market entries and tariff issues concerning agricultural products and autos are the main points of contention.

Besides Japan, the US also has disagreements with some Southeast Asian countries such as Vietnam and Malaysia with regard to intellectual property protection and whether state-owned enterprises should be involved in full competition with private and foreign enterprises.

Although there are still obstacles, the TPP negotiators still hold high expectations, and it is estimated that the agreement will be reached in the first half of the year. The TPP talks, according to Akira Amari, Japan's head negotiator for the TPP, have come 70 to 80 percent of the way. Considering the willingness of both sides to make the deal solid, agreement is just a matter of time.

Besides, Washington's vigorous push will accelerate the process of conclusion. US President Barack Obama's visit to Asia, especially to Japan, in April, will probably herald a turning point for the negotiation. 

The conflict between Washington and Tokyo is only a temporary face-off as the TPP is now used as leverage in the contention among major powers that are eager to acquire more benefits. It delays the process, but the result is determined.

The conclusion of the TPP will have a far-reaching and deep influence over all walks of life. It will also impact the current global trade system from which emerging economies such as China are benefiting.

The TPP may form new rules that dominate the world trade system. When the foundation is laid, and more countries start to join in the new system, its rules will be widely adopted and be rolled into a new globally recognized framework. When that happens, developing countries such as China will have to passively accept the new rules, and their benefits will be redistributed or even snatched away. If so, emerging economies including China will be much reduced in terms of their international influence and discourse power. 

The past decade has witnessed the world trade pattern transforming so fast that it has even been beyond the expectation and control of the developed countries. As the risk of losing their dominance over the global economy is increasing, developed countries, represented by the US, have come up with a new set of trade rules led by the TPP to safeguard their position in the system of world trade and to make a dent in the emerging economies.

China has been hovering outside of the TPP talks, which will probably incur more challenges and pressures. As more countries have been engaged in the TPP negotiations and the new free trade zone is taking shape, China's foreign trade will very likely bear the brunt of the impact of the new regulations about global trade. 

It is time that China should seek the chance to get involved in the negotiations and actively influence the formulation of the new rules. 

Although it might cause some initial negative influence to the Chinese economy, it is only in this way that China can take the initiative in the new framework.