China, Taiwan, the UK and the CPTPP: Global Partnership or Regional Stand-off? 9819931967, 9789819931965

Table of contents :
Contents
Notes on Contributors
List of Figures
List of Tables
1 Introduction
Notes
References
2 CPTPP Membership for Taiwan: Rationales, Challenges, and Outlook
Introduction
The Rationales of CPTPP Membership for Taiwan
Economic Importance
The Impetus for Regulatory Reform
Global Supply Chain Reform and the Value of CPTPP
Unique Opportunity Rationale
Challenges and Outlook
The CPTPP Process
The China Conundrum
Challenges Concerning the Level of Readiness
Conclusion
Notes
References
3 Not a Fast Pass for China at CPTPP
Introduction
Chapters and Verse
CPTPP’s Trade Appeal to China
Elephant in the Room
The Politics of China’s Membership
Conclusion
Notes
4 Regulatory Constraints and the Political Economy of the UK’s Joining the CPTPP
Introduction
The UK’s Motivations for Joining the CPTPP
Limited Economic Impact of Joining the CPTPP for the UK
Regulatory Constraints and Societal Implications
Regulatory Divergence Between the Asia Pacific and the UK as a Former EU Member
Digital Trade
Food Standards and Safety
Conclusion
Notes
Bibliography
5 Perspectives of CPTPP Membership Expansion and Its Implications on a Shifting Paradigm of Economic Integration in Asia Pacific
Introduction
UK as the First-Perspective New Member of CPTPP
China’s Membership at the CPTPP
Taiwan’s Membership at the CPTPP
Conclusion
Appendix: Liberalized and Non-Liberalized Bilateral and Multilateral Free Trade Agreements of the CPTPP-11 and the First Three Applicants
Notes
References
6 Australia’s Perspective on the Applications from the UK, China, and Taiwan to Join the CPTPP
The Evolution of Australian Trade Policy
Australian Trade Policy in the 2020s
Australia–UK Relations
Australia-China Relations
Australia–Taiwan Relations
Expanding the CPTPP
The May 2022 Australian General Election
Conclusions
Notes
References
7 Gatekeeper’s Dilemma: Japan Facing CPTPP Applications from China and Taiwan
Introduction
Politics of Free Trade Agreement Enlargement
Japan's Road to the CPTPP with the US Lead and China as a “Shadow” Negotiator
China's Interests in the TPP
Taiwan Factor
In the Gate-Keeper's Dilemma
Japan Between the US and China: Economic Gains Versus Economic Security
Maintaining the CPTPP Standards: Accession and Enforcement of Rules
Conclusion: Balancing the Pros and Cons: Gate-Keeper's Dilemma
Notes
References
8 Divergent Interests for Taiwan’s CPTPP Bid from Washington and Tokyo
A Trade Deal as a Means as Well as an End
Bending to U.S. and Japanese Pressure for Liberalization
Cashing in the Chips
Limited Window of Opportunity for Global Presence
IPEF and the Unknown
Coordination on Economic Security
Maximizing the Window of Opportunity Beyond CPTPP
Notes
9 Not Quite Déjà Vu All Over Again: CPTPP Accession and Taiwan–China–US Relations
Introduction
Taiwan
China
United States
A Protracted Contest Over an Elusive and Shrinking Prize?
Notes
References
Index

Citation preview

TAIWAN AND WORLD AFFAIRS

China, Taiwan, the UK and the CPTPP Global Partnership or Regional Stand-off? Edited by Chun-yi Lee · Michael Reilly

Taiwan and World Affairs

Series Editors Chun-yi Lee, University of Nottingham, Nottingham, UK Michael Reilly, University of Nottingham, Nottingham, UK

Taiwan is a significant world economy. A major trading nation, but for geopolitics it would most likely be a member of the G20. Taiwanese companies supply more than half the world’s total production of semiconductors and are crucial to the global value chain especially China and South East Asia. While there are already some book series devoted to Taiwan, these focus on domestic matters, such as Taiwanese politics and society and to date there is no series that looks at Taiwan’s contribution to, or place in the world more broadly. Despite, or because of, its diplomatic isolation, interest in this is growing, however, and this series is intended to fill a lacuna in the current academic coverage of Taiwan.

Chun-yi Lee · Michael Reilly Editors

China, Taiwan, the UK and the CPTPP Global Partnership or Regional Stand-off?

Editors Chun-yi Lee Taiwan Research Hub, School of Politics and International Relations University of Nottingham Nottingham, UK

Michael Reilly Taiwan Research Hub, School of Politics and International Relations University of Nottingham Nottingham, UK

ISSN 2731-9334 ISSN 2731-9342 (electronic) Taiwan and World Affairs ISBN 978-981-99-3196-5 ISBN 978-981-99-3197-2 (eBook) https://doi.org/10.1007/978-981-99-3197-2 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover credit: Andrew Haimerl from Pexels/Canva This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Contents

1

Introduction Michael Reilly and Chun-yi Lee

2

CPTPP Membership for Taiwan: Rationales, Challenges, and Outlook Roy Chun Lee

3

Not a Fast Pass for China at CPTPP George Magnus

4

Regulatory Constraints and the Political Economy of the UK’s Joining the CPTPP Minako Morita-Jaeger

5

6

7

Perspectives of CPTPP Membership Expansion and Its Implications on a Shifting Paradigm of Economic Integration in Asia Pacific Peter C. Y. Chow

1

19 47

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Australia’s Perspective on the Applications from the UK, China, and Taiwan to Join the CPTPP Richard Pomfret

117

Gatekeeper’s Dilemma: Japan Facing CPTPP Applications from China and Taiwan Saori N. Katada

141

v

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CONTENTS

8

Divergent Interests for Taiwan’s CPTPP Bid from Washington and Tokyo Shihoko Goto

165

Not Quite Déjà Vu All Over Again: CPTPP Accession and Taiwan–China–US Relations Jacques deLisle

181

9

Index

217

Notes on Contributors

Peter C. Y. Chow is a professor of economics at the City University of New York (CUNY). He was a visiting professor at the Academic Sinica, Nagoya National University, and National Taiwan University. He published more than 60 papers in referee articles and chapters of book. He wrote and edited more than 10 books in trade, development and economic integration and served as a contractual consultant at the World Bank. During 1998–2021, he served as the Executive Director of the American Association for Chinese Studies. In the recent past, he was in testified to testify at the U.S.-China Economic and Security Commission and at the hearings at the joint session of USTR, Treasury and Commerce Departments on the US-China -Taiwan economic and trade relations. Jacques deLisle is Stephen A. Cozen Professor of Law, Professor of Political Science, and Director of the Center for the Study of Contemporary China at the University of Pennsylvania, and Director of the Asia Program at the Foreign Policy Research Institute. His writings, on China’s engagement with the international order, Chinese law, US-China relations, and China-Taiwan and China-Hong Kong issues have appeared in Journal of Contemporary China, Asia Policy, Orbis, China Review, Administrative Law Review and other journals and edited volumes. He is the co-editor of, and contributor to The Party Leads All: The Role of the Chinese Communist Party in China’s Politics, Governance, Society, Economy, and External Relations (2022), After Engagement: Dilemmas in U.S.-China Security Relations (2021), Taiwan in the Era of Tsai vii

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Ing-wen (2021), To Get Rich is Glorious: Challenges Facing China’s Reform and Opening at Forty (2019), China’s Challenges (2014) and Political Changes in Taiwan under Ma Ying-jeou (2014). Shihoko Goto is the Acting Director of the Asia Program and Deputy Director for Geoeconomics at the Wilson Center Asia Program. She is also a columnist for The Diplomat magazine and contributing editor to The Globalist. Prior to joining the Wilson Center, she was a financial journalist covering the international political economy with a focus on Asian markets for Dow Jones News Service and United Press International. She was also formerly a donor country relations officer at the World Bank. She received the Freeman Foundation’s Jefferson journalism fellowship at the East-West Center and the John S. and James L. Knight Foundation’s journalism fellowship for the Salzburg Global Seminar. She received an M.A. in international political theory from the Graduate School of Political Science, Waseda University, Japan, and a B.A. in Modern History, from Trinity College, University of Oxford. Saori N. Katada is Professor of International Relations and the director of the Center for International Studies at University of Southern California. Her book Japan’s New Regional Reality: Geoeconomic Strategy in the Asia-Pacific was published by Columbia University Press in July 2020. She has co-authored two recent books: The BRICS and Collective Financial Statecraft (Oxford University Press, 2017), and Taming Japan’s Deflation: The Debate over Unconventional Monetary Policy (Cornell University Press, 2018). She holds a Ph.D. is from the University of North Carolina at Chapel Hill (Political Science), and her B.A. from Hitotsubashi University in Tokyo. Before joining USC, she served as a researcher at the World Bank in Washington D.C., and as International Program officer at the UNDP in Mexico City. Chun-yi Lee is Associate Professor at the School of Politics and International Relations, University of Nottingham. She is also the director of the Taiwan Research Hub at Nottingham. Chun-yi’s first single authored book was published by Routledge in 2011: Taiwanese Business or Chinese Security Asset. The book is under Leiden Series in Modern East Asia History and Politics. The most recent co-edited book Chun-yi worked on was with Professor Gunter Schubert, entitled Taiwan During the First Administration of Tsai Ing wen, published in October 2021 by Routledge. In March 2021, Chun-yi co-edited a book

NOTES ON CONTRIBUTORS

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with Dr. Michael Reilly, A New Beginning or More of the Same? The European Union and East Asia After Brexit, published by Palgrave Macmillan. Chun-yi is working on her second manuscript, titled as: Sticky decoupling? Geopolitics and semiconductor supply chain. Roy Chun Lee has been Taiwan’s Deputy Foreign Minister since February 2023. Previously, he was the senior deputy director of the Taiwan WTO and RTA Centre at the Chung-hua Institution for Economic Research (CIER). Dr. Lee specialised in liberalization policy, WTO, regional integration, regulatory reform and global supply chain. His recent main research agendas include digital trade, the economic implications of US-China rivalry, economic security, global supply chain diversification, and the new dynamics of regional integration, especially Taiwan’s participation of the CPTPP. In this capacity, Dr. Lee serves as a policy advisor on Taiwan’s liberalization and trade policy for both the public and private sectors. In other capacities, Dr. Lee is a frequent column writer and commentator on trade and economic policy for major media outlets in Taiwan. Dr. Lee received his Ph.D. in Public Policy from the Crawford School of Public Policy, Australian National University in 2006. George Magnus is an economist and commentator, and Research Associate at the China Centre, Oxford University, and at the School of Oriental and African Studies, London. From 1995–2016, he was the Chief Economist, and then Senior Economic Adviser at UBS Investment Bank. He had previously worked as the Chief Economist at SG Warburg (1987–1995), and before that at Bank of America in London and San Francisco. George writes, is cited regularly and contributes to media outlets such as the Financial Times, Times, New Statesman, The Spectator, Bloomberg, and South China Morning Post, the BBC, Sky, Deutsche Welle and other international TV and radio programmes. His public work can be found on his website at www.georgemagnus. com. George’s current book, Red Flags: Why Xi’s China is in Jeopardy examines China’s contemporary economic, political and commercial challenges in the light of Xi Jinping’s controlling and authoritarian governance system and the harshest external environment for China since the Mao era. Minako Morita-Jaeger is a Senior Research Fellow in International Trade of University of Sussex Business School and a Policy Research

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Fellow of the UK Trade Policy Observatory (UKTPO). She is an international trade policy expert who has been working for international trade policy across the globe. Prior to her research work at the University of Sussex and the LSE, she was intensively engaged in trade policy in practice as an Economic Affairs Officer at the UNCTAD in Geneva, a WTO services trade negotiator at the Japanese delegation in Geneva, and a Principal Trade Policy Analyst at the Japan Business Federation (Keidanren) in Tokyo. She studied international political economy, economics and international economic law and applies the inter-disciplinary approach for her research in order to elaborate multi-dimensional factors that shape today’s world trade. Her areas of research include FTAs, WTO, regulatory cooperation, services trade and UK trade policy. Richard Pomfret was Professor of Economics from 1992 to 2020 at the University of Adelaide, and is now Professor Emeritus. Before moving to Adelaide, he was Professor of International Economics from 1979 to 1991 at the Johns Hopkins University in Washington, Bologna, and Nanjing, and since 2006 he has been Senior Adjunct Professor in International Economics at Johns Hopkins SAIS Europe (in Bologna). He has acted as adviser to the Australian government and consultant to the World Bank, Asian Development Bank, OECD and UNDP. In 1993 he was seconded to the United Nations for a year, advising the Asian republics of the former Soviet Union. His books include The Economics of Regional Trading Arrangements (Oxford UP, 2001), The Age of Equality: The Twentieth Century in Economic Perspective (Harvard UP, 2011), The Central Asian Economies in the Twenty-first Century (Princeton UP, 2019), and The Economics of European Integration (Harvard UP, 2021). Michael Reilly has been a Senior Fellow in the Taiwan Research Hub of the School of Politics and International Relations at the University of Nottingham since 2015. A former British diplomat, his final position was as the British representative in Taiwan from 2005–2009. He has also held a senior position as the chief representative in China for one of the UK’s largest manufacturing companies, was a Visiting Fellow in the Institute for European and American Studies at Academia Sinica in Taipei in 2016 and 2019 and is a member of the Advisory Board of the Global Taiwan Institute. His most recent book, The Great Free Trade Myth: British Foreign Policy and East Asia Since 1980, was published in 2020.

List of Figures

Fig. 2.1 Fig. 4.1

Fig. 4.2

The two-step accession process of CPTPP (Source Author based on CPTPP Decision on Accession Process) CPTPP shares of UK trade with the world, 2019 (Source Gasiorek et al. [2022]. The value of the CPTPP for the UK, UKTPO blog, 3 February 2021. At: The value of the CPTPP for the UK « UK Trade Policy Observatory [sussex.ac.uk]; ONS data on international trade; author’s calculations. Note Shares calculated as the total value of UK trade with CPTPP countries divided by the total value of UK trade with the World; CPTPP-FTA are those CPTPP countries the UK already has an FTA with) UK’s total trade with CPTPP countries, 2019 (Source UN Comtrade and ONS combined data. Note Shares calculated as the value of UK trade with a CPTPP country (or countries) divided by the total value of UK trade with the CPTPP)

34

74

74

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LIST OF FIGURES

Fig. 4.3

Fig. 7.1

Top concerns on the CPTPP selected by different respondent groups (DIT consultation) (Data Source DIT [2019]. Public consultation on the UK potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Summary of responses, Table 7: Top concerns selected by different respondent groups. https://assets.publishing. service.gov.uk/government/uploads/system/uploads/att achment_data/file/817865/Public_consultation_on_the_ UK_potentially_seeking_accession_to_CPTPP.pdf. Note The figure was created by the author based on the data) Indo-Pacific regional trade arrangements (Source Author’s compilation)

77 147

List of Tables

Table 2.1 Table Table Table Table

2.2 2.3 2.4 2.5

Table 2.6 Table 2.7 Table 2.8 Table 4.1 Table 5.1

Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 7.1

Bilateral trade between Taiwan and CPTPP members (2021) FTA coverage rate among selected East Asian Economies Tariff structure of Taiwan’s Exports to CPTPP countries Tariff structure for selected sectors Examples of discriminatory tariff treatment in selected CPTPP markets Result of the legal gap analysis and relevant legislative actions Taiwan’s Global Value Chain (GVC) participation index, 2018 Taiwan’s average trade-weighted tariff rates (2014–2020) UK’s bilateral relations with CPTPP members Income, population, export and import for CPTPP-11, United States, China, United Kingdom, and Taiwan (Estimated 2021) Chapter structure of TPP compared to RCEP and the EU-Canada agreement CPTPP and RCEP Signatories’ average ad valorem applied tariffs, 2020 Australia’s top ten two-way trading partners, 2019–2020 Recommendations of the joint standing committee Composition of Australian Parliament before and after the 2022 election Gate-keeper’s dilemma for Japan: pros and cons

21 23 24 25 26 28 32 38 73

91 121 122 123 131 133 158

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CHAPTER 1

Introduction Michael Reilly and Chun-yi Lee

Not just US trade policy, some might say. In November 2022, a former British agriculture minister criticised his own government’s trade deal with Australia, announced to much fanfare the previous December, as having given away ‘far too much for far too little in return.’1 British citizens could be forgiven for wondering why the government had even negotiated a free trade agreement with Australia, the economic benefits of which were admitted to be minuscule, while being so keen to walk

‘Sometimes international diplomacy is so inept that it becomes genuinely entertaining: Recent US trade policy is a case in point.’ Alan Beattie: The US doesn’t need CPTPP to assert itself in the Asia–Pacific, Financial Times, 2 February 2022. M. Reilly (B) · C. Lee Taiwan Research Hub, School of Politics and International Relations, University of Nottingham, Nottingham, UK e-mail: [email protected] C. Lee e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_1

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away from a far bigger and more comprehensive free trade agreement with its neighbours in the European Single Market. That agreement was the brainchild of Margaret Thatcher, a former leader of the same ruling party and still a heroine to many in it. Liz Truss, the chief negotiator of the agreement with Australia, also went on to lead her party and serve as prime minister but in contrast to Thatcher’s eleven years in office, her premiership collapsed amidst chaos after just 44 days. The common thread in recent US and British trade policy, inept or otherwise, has been the focus on trade with countries in the Pacific Basin, more specifically the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, more usually and easily known by its initials as the CPTPP. The original driving force behind the agreement was the USA, keen to secure an ambitious, wide-ranging free trade agreement with like-minded countries around the Pacific Basin. Promoted first by President George W Bush then by his successor, Barack Obama, the deal was finished only for Donald Trump to pull the USA out as part of his populist ‘Make America Great Again’ approach. Meanwhile, under its mantra of ‘Global Britain,’ a similarly populist government in the United Kingdom (UK) chose to pull the country out of the vast EU Single Market, preferring to seek trade deals with countries on the other side of the world to easier trade with its neighbours. To suggest that doing so is a misplaced priority is surely a polite understatement. To most neutral observers, judged by trade and economic benefits alone the policy defies all logic. In 2018, the UK’s combined exports to all eleven members of the CPTPP were not even three-quarters those to Germany. It was widely assumed that following American withdrawal, the original Trans-Pacific agreement would collapse. Instead, it was resuscitated by Japan which had, ironically, been only a reluctant early partner (Warren 2021), while China, Taiwan, and South Korea have all since applied to join, along with the UK, Ecuador, and most recently Costa Rica. Thailand is also expected to submit a formal application. At one level, this interest in joining a regional trading arrangement is simply an inevitable consequence of the failure to make progress with further multilateral trade liberalisation after the collapse of the Doha Round negotiations in 2005. Amongst the academic works on the subject, Whalley offered six reasons why countries would opt for joining or establishing regional trade agreements (Whalley 1998: 71–74).

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First, by lifting or removing tariff barriers they aggregate the gains to trade; secondly, they can be a good opportunity to improve domestic trading or financial markets by exposing them to higher standards and more competition. Much has been made of this in respect of China, with accession to the WTO having improved its domestic market openness, transparency, and accountability (Breslin 2004: 664–669) although the argument is also applicable to Taiwan, South Korea, and other countries. Third, membership of a regional agreement should increase the leverage and bargaining power of members, especially for smaller and mediumsized economies. The best example is surely that of the EU, whose members have gained hugely, not only from the abolition of internal barriers to trade in the Single Market but also from the power and influence this has brought the European Commission in international trade negotiations. In Asia, the evidence so far is less clear-cut. The Association of South East Asian Nations (ASEAN) wields international political influence far greater than its members could hope to achieve individually. In the 1990s, for example, the South Korean economy was larger than that of all the then-ASEAN members combined, but it had only a fraction of the global influence. Although the ASEAN Free Trade Agreement was signed by the original members in 1992, ostensibly to serve as a ‘building block’ for members to expand global trade (Calvo-Pardo et al. 2011: 182), until the Regional Comprehensive Economic Partnership Agreement (RCEP) was established in late 2020, and except for a free trade agreement (FTA) with China, ASEAN countries had opted to pursue individual bilateral FTAs, for example with the EU, rather than pan-ASEAN agreements. At the time of writing only four ASEAN states are members of the CPTPP. The ASEAN–China FTA reflects the fourth reason for pursuing regional agreements, the desire to guarantee access to resources. ASEAN members could be confident of easier access to the Chinese market for their semi-manufactured goods and raw materials, and China to ASEAN markets for its finished goods (Wong and Chan 2003: 507). Some, or all, of these reasons help explain why South Korea, Thailand, and some smaller countries such as Ecuador wish to join the CPTPP. But they hardly explain the UK’s interest, or China’s, and only partially that of Taiwan. Here Whalley’s final two reasons for pursuing regional trade agreements are the most interesting. These are, respectively, the ability to link to or strengthen security linkages through an associated trade agreement, and to use membership of a regional agreement in pursuing to

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advantage broader multilateral agreements and vice versa. Trade, in other words, is a means to an end of building political influence and linkages rather than an end in itself. In the original TPP, the implicit linkage between trade and security was clear. In return for persuading other members to accept American positions on intellectual property rights, investment protection, disputes settlement, subsidies and regulatory regimes in areas ranging from agricultural produce to culture (access for Hollywood producers to domestic film markets, for example), other members would not only get preferential access to the huge US market for their products but reassurance over continued US security guarantees. For Asian members, worried by an increasingly assertive China, the latter was important, for Latin American members and Canada the preferential access undoubtedly weighed more heavily, or at least a fear of being left behind if neighbours joined and got the benefits, but they did not. US withdrawal from the TPP therefore becomes hard to understand as anything more than a populist knee-jerk reaction. The overall benefits to the USA were considerable, but not appreciated at the micro-level of those who felt they were losing out. Too many in the USA felt they were the victims of their country’s openness to a protectionist rest of the world, oblivious to the fact that much of the rest of the world saw matters in reverse. As the then British foreign secretary put it in 2001: the USA has the rhetoric of free trade but is protectionist in practice.2 Belatedly recognising the impact withdrawal from the TPP would have on its wider influence and standing, the USA has since launched an alternative, the Indo-Pacific Economic Framework (IPEF), in a bid to recover or maintain its influence in the Pacific. From this perspective, China’s application to join the CPTPP seems only secondarily related to the presumed trading benefits. It is a founding member of the RCEP, which is shallower in the depth of its measures but broader in its membership than the CPTPP, and its commitments require much less by way of adjustment to free market strictures than those of the CPTPP. But underlying the original concept of the TPP was the status of the USA as the dominant power in the Pacific Basin, a position increasingly open to challenge by a rising China. China was not therefore included in the TPP, one reason for its enthusiasm for the RCEP. With the USA not a member, it may well feel able to influence the development of the CPTPP in line with its own hegemonic ambitions, assuming current members agree its application.

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The economic arguments for joining the CPTPP may look more persuasive for Taiwan than for China but the absence of diplomatic relations with all but a handful of mostly tiny states means that membership of any such agreement becomes important to it as a means of projecting its own sovereignty (Magcamit and Tan 2015). That in turn risks bringing it directly into conflict with China, which has long resisted all attempts by Taiwan not just to try to assert its sovereignty but even to expand its international space. Precedents exist for dealing with bids from China and Taiwan in their near-simultaneous accessions to the WTO and to APEC (Asia–Pacific Economic Co-operation).3 In common with both APEC and the WTO, statehood is not a prerequisite for membership of the CPTPP, so there should be no political barrier to Taiwanese membership. But China in 2001, when it joined the WTO, was not the global economic powerhouse it is today, and even then the WTO deal had taken years of wrangling to achieve, with the USA insisting that Taiwan must be allowed to join too. It is far from clear that the USA enjoys similar influence today, even if it decided to use it. One former senior American diplomat with wide experience in East Asia told one of the editors that while the USA would speak out in support of Taiwan joining the CPTPP, it would not do anything more. It lacks the leverage to do so and is probably reluctant to expend much effort in supporting Taiwan’s bid. If such a view seems at odds with the rhetoric of American leaders, let alone support for Taiwan in the US Congress, one need only look at the USA’s hitherto lukewarm attitude even to discussing a bilateral trade agreement with Taiwan (although that now seems to be changing). That leaves the UK. In pure trade terms, its application is surely the least likely and least logical of the three. Not only is its bilateral trade with most CPTPP members far smaller than that with its neighbours in Europe, but it also has bilateral FTAs with Japan, South Korea, and Canada, all three largely legacies of its membership of the EU, plus a new agreement with Australia. The trade gains from CPTPP membership will be so modest as to be scarcely noticeable. But could there be a strategic motive to the bid? Implausible though it may seem, since Brexit the UK has been building up its security relationship with Japan. To date it remains modest, and question marks must remain over its long-term sustainability given geography, affordability, and the different strategic threats both countries face. CPTPP membership would help underpin that and allow the British government to claim that its ‘Global Britain’

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campaign was more than just a memorable strapline. Furthermore, former Japanese Prime Minister Shinzo Abe once suggested that Japan’s bilateral FTA with the EU could be aligned with the CPTPP. Were the UK already to be a member of the CPTPP, this would allow it a degree of leverage over the shape of any subsequent CPTPP agreement with the EU. None of the three bids can be considered in isolation on their individual merits, another factor that distinguishes them from other applications. While British membership could have a bearing on whether China’s application will succeed, undoubtedly the most consequential relationship is that between the Chinese and Taiwanese bids. There is a widespread assumption that Taiwan’s application is doomed to fail in the face of strong Chinese opposition. But this may not be as clear-cut as often assumed. Many observers seem to have forgotten or choose to overlook the fact that Xi Jinping was the first Chinese leader to meet a leader of Taiwan, when he met then Taiwan president Ma Ying-jeou in Singapore in November 2015. China and Taiwan also have a bilateral trade agreement (the Economic Co-operation Framework Agreement or ECFA), negotiated while Ma was president, but which has largely survived since, despite some unilateral measures taken by China to bar the import of certain Taiwanese products. Since the 2016 election victories of the Democratic Progressive Party (DPP) and President Tsai Ing-wen, China has consistently made them the focus of its ire, rather than Taiwan generally. Precedent suggests that should the Kuomintang (Chinese Nationalist Party, KMT) win a future presidential election, China could react positively and ease its hostility towards Taiwan. Should the KMT win the next presidential election in Taiwan in 2024, it is therefore plausible that China might react by lowering, or even dropping, its opposition to Taiwan joining the CPTPP, in much the same way as its attitude changed after the KMT won the 2008 presidential election. If that improved China’s chances of being admitted too, so much the better. Nor should it be assumed that Chinese accession to the CPTPP would only benefit its own interests. To do so is to overlook the enormous changes in the patterns of international trade that have taken place since China and Taiwan joined the WTO at the end of 2001. For most of the 1990s, Taiwan was a more important trading partner for many EU countries than was China, while the USA was the primary export market for Japan, Taiwan, and South Korea. For all three, as well as for most of their neighbours in Pacific Asia, indeed for the majority of members

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of the CPTPP, China is now a more important market than the USA, even though they continue to look to the latter for security assurances. In contrast to Australia and Canada, however, whose exports to China are mainly of agricultural produce and raw materials, much of the Asian trade with China has been a direct result of investment in China from other Asian countries, especially Japan, Taiwan, and South Korea. In many manufacturing sectors, China remains little more than the final assembly point of components from other countries in the region and there is a strong mutual interest in facilitating such trade further. Thus, for the UK, China, and Taiwan, wider strategic reasons appear to be the factors driving their membership applications to the CPTPP rather than potential trade gains, although one cannot rule out ideologically driven knee-jerk ‘anti-EU’ attitudes or a lingering and long outdated imperial nostalgia as the factors driving the UK’s bid.4 This was the context for a conference held under the auspices of the Taiwan Studies Programme at Nottingham University in June 2022, with some of the papers and subsequent discussion forming the basis of this book. The conference built on a previous one, also at Nottingham, which considered how Brexit might affect or influence the European Union’s (EU) relations with East Asia in which trade is foremost. The underlying assumption, to which participants broadly if not wholly subscribed, was that for China, Taiwan and the UK, their applications to join the CPTPP were indeed driven primarily by broader strategic reasons rather than by potential trade gains. This set them apart from other applications for which, while strategic aspects were not negligible, the trade gains were relatively more important. Consideration of South Korea’s application during the conference did nothing to dispel this assumption, although its own position is far from straightforward. It had not applied to join the TPP when it was under US auspices despite its security relationship with the latter, but has now felt compelled to apply to join the CPTPP, notwithstanding its often difficult political relationship with Japan. The ‘exam question’ for participants to discuss therefore was how CPTPP members will respond to these three applications. (That by South Korea was generally agreed to be more straightforward.) Participants in the conference were widely drawn, from the applicants, from current CPTPP members and from the USA, whose influence on the outcome may yet be decisive, even if it is not actively engaged in the process. For most participants, it was apparent that the applications, principally those from China and Taiwan, have created tensions within the CPTPP and in

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turn pose a dilemma for its members. Do they accept both applications, one but not the other, and if so, which, or neither? The British government would be naïve to think its own application would be immune from this dilemma, however. It may lack the controversy surrounding the bids from China and Taiwan but with its application now accepted ahead of those of the other two, it will be able to influence the outcome of them, while its membership of the EU for forty years means that its regulatory tradition is different to that of USA, whose approach has hitherto been the guiding principle of the CPTPP. Those hoping that reading this book will provide ready answers to the question of membership are likely to be disappointed, for not even CPTPP members themselves seem sure of the answer at this stage. Both the following chapters and the conference discussions suggest that while the applications for membership may not align neatly with Whalley’s rationales as outlined above, nor are the ultimate decisions likely to be taken solely, or even primarily, based on perceived trade benefits. In contrast to the applications from China and the UK, in the following chapter Roy Lee argues that there would be a straightforward economic benefit for Taiwan from accession to the CPTPP. Of the three countries, Taiwan also seems the most likely to accept CPTPP regulatory standards without question. In response to the argument that even for Taiwan the trade gains may not be as great as might be assumed, given that its exports are dominated by those of the ICT sector, semiconductors and computer-related products especially, which are already almost entirely free of tariffs under the WTO’s Information Technology Agreement (ITA), Lee explains that membership would allow Taiwan to integrate further into regional trade. He makes a very strong case for Taiwan’s application to be judged purely on objective criteria, namely its actual compliance or willingness to comply with CPTPP standards. Even for Taiwan however, the process is not straightforward. Although the country already has a free trade agreement with Singapore, signed in 2013, together with one with New Zealand, both CPTPP members, the latter is primarily an agreement to reduce or remove tariffs and both are much less comprehensive in scope than the requirements of the CPTPP. Taiwan has in the past shown considerable reluctance to ease or remove non-tariff barriers to trade, although recent developments in this regard are considered further by Shihoko Goto in Chapter 8. In short, Taiwan’s application is also underpinned by strategic motives which must be considered.

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If we consider the case of China, by contrast, it already enjoys close trading relationships with most CPTPP members either through bilateral agreements, or joint membership of the RCEP, or both. (Seven members of the CPTPP are also members of the RCEP.)5 It is difficult at this stage to know whether its application to join the CPTPP is driven by strategic ambitions, namely to expand its influence in the formulation of multilateral trade policy as well as its influence in the Pacific region more generally, simply a spoiling tactic to ensure that both its and Taiwan’s applications are put in the ‘too difficult’ tray and left for future leaders to try to resolve, or a combination thereof. In Chapter 3, George Magnus argues the first: the application is less about enhancing China’s economic growth and more an opportunity to influence the shape, scope, and future direction of the CPTPP. Its success in doing just this in other international organisations lends weight to this view. A key thrust of Magnus’ argument is that an important aim of the CPTPP, and one which survived the exit of the USA from the original TPP agreement, is the promotion of the market economy. But China is not a market economy as understood by the EU and USA. Under Xi Jinping, it is steadily moving in the other direction, with renewed emphasis on the role of State-Owned Enterprises (SOEs) as the leading engines of growth. It is also difficult to envisage China under Xi signing up to CPTPP standards of protection for foreign investors, commitments to reducing subsidies, or tolerating independent trade unions. This presents CPTPP members with a dilemma. That wider geopolitical circumstances are more adversarial now than when China joined the WTO in late 2001 only heightens the dilemma. In Chapter 7, however, Saori Katada is careful not to dismiss the market economy aspect in respect of China, pointing to domestic voices there advocating membership of the CPTPP to help liberalise and reform the economy. She also argues that for China, membership of the CPTPP should be seen as a defensive measure to protect it better against the sorts of unilateral measures imposed by the Trump administration. Nor, it should be remembered, was a lack of market economy status an impediment to Vietnam being admitted to the CPTPP. The key difference according to Magnus is not, or not only, that the Chinese economy is several times larger than that of Vietnam, bigger indeed than the economies of all current CPTPP members combined, but that it probably seeks membership to change the rules to the benefit of its own

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political economy. The dilemma for existing members is that its current importance to them in trade terms makes its application hard to refuse. From this perspective, UK membership of the group becomes attractive. At the time of writing, it is the world’s sixth largest economy and its accession to the CPTPP makes the combined economic size of the group greater than that of China, albeit by only a narrow margin. Its application to join was submitted well before that of China and its accession could prove problematic for China as it will allow the UK to scrutinise its bid along with other members and add to the number of ‘China hawks’ within the agreement. That does not mean China’s application is doomed to fail but it does increase the likelihood of it being scrutinised thoroughly, reduce the likelihood of it being allowed any exemptions to the membership criteria and make it harder for China to rewrite the rules to its own benefit. This assumes that the UK’s policy, and that of other ‘China hawks,’ does not change but this assumption might be dangerous. Before it left the EU, for example, the UK was a stand-out in supporting the granting of market economy status within the WTO to China. The current bilateral relationship is much cooler than it was a decade ago but that does not mean the pendulum could not swing back, although that does seem unlikely while Xi Jinping remains in power. Of the three applications, the UK’s appears most obviously driven by domestic politics and a knee-jerk anti-EU attitude of many in its governing political party, seemingly oblivious to the damage this is doing to the economy.6 In Chapter 4, Minako Morita-Jaeger argues that the real motive for the UK’s application was indeed strategic, but not in respect of its relations with countries in the Asia–Pacific region. Rather, she argues, it was seen as an important stepping stone to a bilateral Free Trade Agreement (FTA) with the USA. Given former President Trump’s aversion to multilateral deals, and withdrawal from the TPP, plus the Biden administration’s lack of interest in a bilateral deal with the UK, such a strategy surely looks quixotic—if so, it is consistent with much of UK policy more generally since Brexit. Certainly, the objective of a bilateral FTA with the USA is not one that will be achieved by the current British government. The UK may have been surprised, even irritated, to find its own regulatory standards placed under scrutiny as part of its membership application process, but notwithstanding the oft-professed desire of some of its ruling politicians to make a ‘bonfire’ of EU regulations and to pursue a ‘lighttouch’ regulatory approach, there does appear to be a growing awareness

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in the country’s government of the importance of adhering to internationally recognised standards. On the other hand, Morita-Jaeger argues that had the country been required to move to a regulatory regime more closely based on American norms, as would have been the case had the TPP remained in force, the reaction from British society generally may well have been negative. She cites domestic opposition to plans for a Transatlantic Trade and Investment Partnership (TTIP), promoted under the Obama administration in the USA, with especially strong differences over matters such as food-safety standards and genetically modified crops. With discussions over a possible transatlantic trade deal now dormant those concerns may no longer apply, but the UK is likely to remain uncomfortable with the CPTPP’s approach to rules on data sharing, especially if China is also a member (Sabbagh, October 2022). Like Roy Lee in Chapter 2, Peter Chow argues in Chapter 5 that Taiwan meets the regulatory criteria for membership. He also suggests that Taiwanese accession will have a strong positive effect on trade creation in the region. But he argues that Taiwan’s motives in applying are driven less by economic factors or attempts to protect or enhance its international sovereignty and more by a desire to lessen its dependence on China. (Given China’s own reliance on Taiwanese investment it is surprising that the issue of whether Taiwan could leverage this dependence to its own advantage does not receive more attention.) This is a key aim of President Tsai Ing-wen’s flagship ‘New Southbound Policy’ which has faced hurdles and opposition in South East Asia from China’s Belt and Road Initiative (BRI) (Black 2019), especially in attempts to increase Taiwanese investment in the region. Membership of the CPTPP would help circumvent this, facilitate wider market access and, according to Chow, encourage more foreign direct investment (FDI) in countries in the region by Taiwanese companies, further boosting their economies. Chow is clear that whether or not China, Taiwan and the UK fulfil the economic and regulatory criteria of membership, in all cases the final decision will almost certainly be a political not economic one. How the current members of the CPTPP feel about the applications, and how they might be influenced by other members, by the applicants and by third countries such as the USA therefore becomes of crucial importance. Taiwan’s application is less a matter of it meeting the regulatory benchmarks and more one of overcoming Chinese opposition. Can it do so successfully? Wider attitudes towards China have been undergoing a rapid reassessment since the start of Xi Jinping’s second

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term of office in 2016. This was most immediately noticeable in the USA with the clear shift in attitude under Donald Trump, its allies only gradually falling into line, and sometimes then only reluctantly. The UK was a case in point. Here the official government position on China has swung from a ‘golden era’ in bilateral relations when Xi paid a state visit to London in autumn 2015, to China being a ‘systemic challenge’ seven years later and the previous attitude dismissed as naïve, all it should be noted, under the same ruling party.7 China’s reactions to the shift in British policy have so far been largely confined to rhetoric. That has not been the case, however, in its reactions to similarly shifting attitudes in Canada and Australia, both CPTPP members, which have suffered high-profile backlashes from China. In retaliation for Canada’s arrest on a US extradition request of Meng Wanzhou, daughter of the Huawei founder, two Canadian citizens were arbitrarily detained in China and temporary Chinese embargos were placed on certain Canadian agricultural exports. Australia has also felt Chinese wrath in the form of trade embargos as bilateral relations deteriorated. Thus, both Canada’s and Australia’s positions on China’s application take on an even greater interest. Richard Pomfret explains in Chapter 6 that Australia has been a traditionally strong proponent of an open multilateral trading regime but that in recent years this approach has been over-ridden by foreign policy considerations, creating in his words ‘a combustible mixture.’ He draws comparisons with the dramatic shifts in US policy under Donald Trump, notably a more aggressive attitude towards China, its largest trading partner. At the time, Australia, the UK, and USA all had populist leaders who enjoyed a good personal rapport between themselves—one factor perhaps in the signing of the tripartite AUKUS defence agreement, aimed very directly at countering Chinese assertiveness (and as Magnus reminds us, signed just before China applied to join the CPTPP). Pomfret suggests the personal rapport was one reason why the then Australian prime minister seemed inclined to rubberstamp the UK’s application to join the CPTPP. All three leaders have since been replaced, although the hawkish approach towards China has survived so far largely unscathed in the three countries. Australian attitudes towards China’s application also seem bound to be affected by the ongoing disputes between the two countries in the WTO arising from the unilateral actions taken by China. In short, Australia seems set to continue to take a rigorous stance on China’s application

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while examining the UK’s bid more carefully without, however, changing its support for this. Pomfret does say that Australia has so far shown little political interest in Taiwan’s application. While one can presume that this might change if the USA itself were to lobby members on Taiwan’s behalf, Taiwanese hopes for support are therefore likely to rely heavily on Japan, whose probable stance is analysed by Saori Katada in Chapter 7. She suggests that the burden of expectations puts Japan in an uncomfortable position, the ‘dilemma of the gatekeeper state’ as she describes it, forced to strike the right balance between expanding membership of the group and maintaining the coherence of its organisational characteristics. Get them right and Japan’s influence and standing would increase; get them wrong and they would be weakened, together with the CPTPP itself. She notes that while Japanese politicians and businesses have so far taken a cautious line on China’s application, Japan would be uncomfortable in taking a lead in opposing it, not least because some smaller CPTPP members such as Singapore and Vietnam are believed to support it. But Japan must balance this against its deep security and economic relationship with the USA. Furthermore, she suggests that Japan has not yet abandoned the hope that the USA might decide to re-enter the CPTPP, a move that would be unlikely if China had become a member in the interim. Her conclusion is that Japan is therefore likely to place great emphasis on adherence to the formal requirements of the CPTPP and expect all new applicants to demonstrate convincingly their ability and willingness to meet and respect them. In Chapter 8, Shihoko Goto explains what Taiwan has done in this respect and how recent geopolitical developments may have helped its cause. At home, the Taipei government showed its willingness and determination to face down domestic opposition to joining the CPTPP in January 2021, then again in February 2022. In the first case it lifted a ban of many years’ standing on the use of the ractopamine additive in pork. Although primarily at the behest of the USA, which for many years had insisted on it as a prerequisite for even considering opening discussions about a possible bilateral trade agreement, doing so sent an important wider signal about Taiwan’s willingness to sign up to internationally agreed measures. The second was its lifting of a ban on agricultural produce from the Fukushima region of Japan, first imposed after the nuclear disaster there

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in 2011. Japan had made clear that its support for the CPTPP application was dependent on the ban being removed. After this, any additional adjustments to comply with CPTPP standards should be less contentious, although in Taiwan’s divided politics one should never underestimate the tendency of the opposition party to make life difficult for the government just because it can. But as both Roy Lee and Peter Chow argue, Taiwan is already a member of the WTO and has taken many, if not all, of the measures necessary to comply with CPTPP standards, so there should be no legal or economic constraints upon it joining. Goto also considers the potential impact of geopolitical reactions to the Covid pandemic on Taiwan’s application. She argues that this has both highlighted the island’s exclusion from key international organisations, in this case the World Health Organisation, and the valuable contributions it could make if it was a member, and its critical role in the supply of semiconductors to the rest of the world. Paradoxically, the very importance of the latter means that it may not be to Taiwan’s ultimate long-term benefit, for Goto points to agreements between Japan and the USA to co-operate in the development of new technology for semiconductors and other critical components. In other words, the strategic considerations of Taiwan’s ostensible allies may not align with those of Taiwan itself, and Goto therefore feels that it has only a short-lived window of opportunity in which to try to exploit these advantages. Katada’s analysis also shows clearly how the position of the USA will remain influential, even while it is no longer a member of the CPTPP, and even though it may not play an active role in deciding on the applications. Consistent with this, in Chapter 9, Jacques de Lisle argues that the USA will be more pro-active in supporting Taiwan’s bid than often assumed, including by the former American diplomat cited in the opening of this chapter. He concedes that US influence today is less than it was when it brokered the near-simultaneous accession of China and Taiwan to the WTO in 2001. It remains considerable, however. In security fields, including formal guarantees, Freedom of Navigation Operations in the South China Sea, intelligence sharing and more, and its domination of the world financial system and consequent ability to use financial sanctions as a weapon, American influence in the Pacific remains strong. De Lisle argues that the US position owes less to diminished influence and more to a lack of political will. He sees the US as having moved away

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from the liberal, high-minded values of the Obama era and a desire to set the rules for the global economy, towards adopting measures it once criticised, including subsidies and protectionist barriers. As one columnist has separately observed, perhaps the magnitude of the perceived China threat has caused the US to decide that it cannot afford the laissez-faire approach to private sector decision-making when it affects the national interest.8 One upshot in de Lisle’s eyes has been that while the USA is more than ever willing to signal its support for Taiwan through statements, or occasional gestures, it has been unwilling or unable to include it even in quite limited multilateral initiatives such as the Indo-Pacific Economic Framework (IPEF). While the USA might be reluctant, or no longer command the influence, to persuade CPTPP members to support Taiwan’s bid for membership, however, it does retain the ability to block China’s application and de Lisle feels that Chinese accession would be such a blow, both politically and economically, to American prestige and influence that it will ensure it does not happen. De Lisle’s conclusion therefore is that neither China nor Taiwan— nor the USA for that matter—will join the CPTPP in the near or even medium term. Instead, ‘the can will be kicked down the road’ for future leaders to grapple with, perhaps when economic and political circumstances have changed. This was a view with which no one in the conference demurred. That does not mean it will never happen. Populist leaders in the USA, Australia and UK have already been succeeded by more pragmatic leaders although growing unease about Chinese policy and behaviour remain. But Chinese self-confidence has been battered by its stumbling response to the Covid pandemic, especially its adherence to a ‘zero Covid’ policy and mass lockdowns followed by a sudden, unheralded, and unplanned abandonment of the policy, and the damage this has done to the country’s economy. The hubris that followed its response to the 2008 global financial crisis may yet be followed by nemesis. The election of a new president in Taiwan in 2024 will give China a face-saving opportunity to adjust its policy towards Taiwan should it so wish. Even without China and Taiwan as members, the CPTPP could undergo a major change now that the UK is a member although it is surely fanciful to imagine, as some Brexiters seem to, that membership will lead to a fundamental realignment of British trade from Europe to the Pacific Basin. Geography and relative economic size alone will preclude that.

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If a consensus is emerging from these contributions therefore, it is that the application and decision-making process for China and Taiwan is likely to be protracted, perhaps as long as the one that preceded their entries into the WTO. With the USA not being a member of the CPTPP, however, and after four years of the administration of Donald Trump, the linkages and tradeoffs between US trade interests and security guarantees are no longer so obvious, despite the efforts of the Biden administration to reassure allies that for the USA it is ‘back to business as usual.’ At the time of writing, it is still possible that Donald Trump could return as the next American president, a possibility that is no doubt causing a degree of caution and hedging of bets in the policy planning of many other governments. Chinese hegemonic ambitions are also under threat, not from external factors but from the downturn in its economy following its mis-handling of the response to the 2020 pandemic and the domestic impact this has had. In these circumstances it would take a brave person to argue against de Lisle’s view. But we live in uncertain times.

Notes 1. UK risks being too soft in India trade talks says ex-minister, Financial Times, 16 November 2022. 2. British Foreign Secretary Robin Cook in conversation with Canadian Foreign Minister John Manley, 2001, private record. 3. China became a member of the WTO on 11 December 2001 and Taiwan (formally, ‘The separate customs territory of Taiwan, Penghu, Kinmen and Matsu’) on 1 January 2002. They were both admitted to APEC, along with Hong Kong, in 1991. 4. See for example Daniel Hannan: Free Britain to trade with the World, Financial Times, 21 June 2016. 5. Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam are members of both RCEP and CPTPP, while China has bilateral FTAs with CPTPP members Chile and Peru. 6. Chris Giles: Brexit and the economy: the hit has been ‘substantially negative’, Financial Times, 1 December 2022. 7. Aubrey Allegretti: Rishi Sunak signals end of ‘golden era’ of relations between Britain and China, The Guardian, 28 November 2022. 8. Leo Lewis: Is US trade policy undergoing Japanification? Financial Times, 30 September 2022.

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References Black, L.O., 2019, Evaluating Taiwan’s new southbound policy: going south or going sour? Asian Survey, 59(2): 246–271. Breslin, S., 2004, Globalisation, international coalitions, and domestic reform, Critical Asian Studies, 36(4): 657–675. Calvo-Pardo, H., C. Freud, E. Ornelas, 2011, The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers, in R. J. Barro and J.-W. Lee eds., Costs and Benefits of Economic Integration in Asia, Oxford: Oxford University Press. Magcamit, M.I., Tan, A.C, 2015, Crouching tiger, lurking dragon, International Relations of the Asia-Pacific, 15(1). Sabbagh, D., October 11, 2022, UK to designate China a ‘threat’ in hawkish foreign policy shift, the Guardian, https://www.theguardian.com/politics/ 2022/oct/11/uk-to-designate-china-a-threat-in-hawkish-foreign-policy-shift, accessed on 24 October 2022. Warren, D., 2021, The Japanese Government’s response to Brexit, in M. Reilly and C.-Y. Lee eds., A new beginning or more of the same? The European Union and East Asia after Brexit, Palgrave 2021. Whalley, J., 1998, Why do countries seek regional trade agreement? in J. Frankel ed., The Regionalisation of the World Economy, University of Chicago Press, 63–90. Wong, John and Sarah Chan, 2003, China-ASEAN Free Trade Agreement.

CHAPTER 2

CPTPP Membership for Taiwan: Rationales, Challenges, and Outlook Roy Chun Lee

Introduction Taiwan formally applied for CPTPP membership in September 2021. Since the conclusion of the Trans-Pacific Partnership Agreement (TPP) in 2015, Taiwan has started its application preparation; the preparation continued as TPP was transformed into CPTPP in 2018. Taiwan’s strong interest comes from the following rationales. First, international trade is crucial to Taiwan’s economic development. With the current surplus accounting for 14.84% of Taiwan’s GDP in 2021,1 reducing tariff and non-tariff barriers and receiving treatments of trade terms visa-vis competing economies are critical to Taiwan. Second, Taiwan has significant and growing investment footprints in the Asia–Pacific region. Participating in mechanisms such as CPTPP is vital to improving stability

R. C. Lee (B) Chung-Hua Institution for Economic Research (CIER), WTO and RTA Centre, New Taipei, Taiwan e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_2

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and protection and providing better market access opportunities. Considering the growing pressure for supply chains to increase resiliency through diversification, the value of investment facilitation mechanisms offered by the CPTPP becomes even higher for Taiwanese companies seeking new manufacturing locations in the Asia Pacific region. Third, CPTPP disciplines, notably those relating to regulatory coherence, transparency, and digital trade, provide an external impetus to lock in its commitments to regulatory reform. More broadly, CPTPP provides a strategic opportunity for Taiwan to escape from the regional integration exclusion deadlock. Although due to the Cross-Strait political situation between Taiwan and China, Taiwan often encounters strong political opposition from Beijing when seeking to engage in trade negotiations to the contrary, the CPTPP is a regional undertaking with multiple members, and the original accession clause (CPTPP Article 30.4(a)) expressly welcomes all APEC economies and separate customs territory that are ready to comply with the obligations in the agreement to apply. As such, Taiwan’s agreed participation in the CPTPP as an APEC economy, in tandem with the CPTPPs collective decision-making process, is considered one of the few feasible opportunities to alleviate the political hurdle. Following Taiwan’s former application in September 2021, critical challenges remained. Taiwan has relaxed the controversial ban on Japanese food in 2022, yet other bilateral concerns require solutions. Under the CPTPP, Taiwan also needs to face the most significant tariff liberalisation effort of the agricultural sector since WTO accession in 2002. The surprise decision by China to apply for CPTPP membership in 2021 also creates uncertainties for Taiwan, as China has already openly opposed Taiwan’s participation.2 This paper will start with a review of key policy rationales for Taiwan’s CPTPP accession, followed by an analysis of crucial challenges and impediments and discussions on the prospect of CPTPP membership for Taiwan.

The Rationales of CPTPP Membership for Taiwan Economic Importance Taiwan has a close trade relationship with CPTPP Members. In 2021, for instance, CPTPP accounted for a quarter of Taiwan’s global trade value, with 21% of global exports and 29% of total imports (Table 2.1).

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Table 2.1 Bilateral trade between Taiwan and CPTPP members (2021) CPTPP members

Bilateral trade total

Export value

Import value

Share of Taiwan’s total trade (%)

Japan Singapore Malaysia Vietnam Australia Mexico Canada Chile New Zealand Peru Brunei Sub Total trade CPTPP share

85,315 37,794 25,125 20,106 19,571 5386 5364 2283 1646

29,209 25,720 13,328 13,968 4809 3747 3010 255 642

56,106 12,075 11,797 6139 14,762 1640 2355 2028 1004

10.30 4.56 3.03 2.43 2.36 0.65 0.65 0.28 0.20

627 173 203,391 827,914 24.57%

281 24 94,992 446,393 21.28%

346 148 108,398 381,521 28.41%

0.08 0.02 – – –

Unit US$ Million Source Bureau of Foreign Trade, https://reurl.cc/ER31Y1 (Accessed 23 September 2022)

Moreover, Taiwan’s outbound investment in the CPTPP area has grown steadily, from 24% of total outbound investment in 2017 to 31% in 2019. Likewise, investment from CPTPP members to Taiwan is also rising: from 15.4% of total inbound investment in 2017 to 20.6% in 2019. Such a close relationship warrants positive gains for Taiwan and CPTPP members through removing trade and investment barriers and better coherence of regulatory measures. Petri et al. (2012) support this observation and conclude that CPTPP membership, similar to other Regional Economic Integration (REI) undertakings, provides an opportunity for Taiwan and all participating countries to expand trade and investment growth, and non-participating will result in a decrease in trade and investment due to diversion effects. On the other hand, Ciuriak et al. (2017) find that positive gains will be limited for Taiwan under CPTPP, with just a 0.16% increase in export to CPTPP members and no increase to the rest of the world. As a result, Taiwan will experience a negative real GDP growth of 0.005% under

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the CPTPP membership.3 Even the Taiwan government’s own simulation suggests that CPTPP membership can only increase Taiwan’s GDP by a nominal 0.52%.4 One possible explanation for this expected outcome is that tariff rates are already low for Taiwan’s main export products, and thus the trade creation effect will be smaller vis-vis other CPTPP members. Trade statistics appear to support this scenario. In 2021, semiconductor and computer-related products accounted for 40.5% of Taiwan’s total export value,5 and they face no tariffs in CPTPP markets because all 11 countries are also members of WTO’s Information Technology Agreement (ITA) and have committed to eliminating tariffs for the majority of semiconductor and computer related products. There is also a possible technical reason. Under a general equilibrium simulation model adopted for trade effect simulation in the literature discussed above, trade and other resources will be directed toward members with larger gains under CPTPP. As such, Taiwan’s export structure renders a relatively lower benefit. These discussions suggest that the economic benefits of CPTPP membership for Taiwan are limited, yet they fail to reflect some of the main economic reasons for Taiwan to apply. First, for most trading countries in the Asia Pacific region, CPTPP is just an additional REI undertaking to their existing, in many cases, multi-layered, preferential trade relations in the region. On the contrary, Taiwan has effectively been excluded from meaningful participation in REI activities in the last two decades. CPTPP appears to be the only possible solution to address this limitation. The value of the unique opportunity nature of CPTPP is not captured in the analysis. Second, the limitation on the benefits is an observation made from a macro/aggregate perspective. Yet, for many non-ITA exporting sectors, the discriminatory tariff treatments are significant and widening for many CPTPP markets, creating serious competitive disadvantages vis-a-vis their competitors. Furthermore, there is a benefit of numbers. Lloyd et al. (2018) find that while the proliferation of preferential trade agreements only has a very weak effect on changes in trade patterns, the size of participating members of a given agreement, however, does contribute to the increase in the level of bilateral trade flows among group members.6 To illustrate the first challenge, Table 2.2 denotes the seriousness of Taiwan’s disadvantaged situation by comparing the Free Trade Agreement (FTA) coverage rate—the indicator that measures the proportion

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Table 2.2 FTA coverage rate among selected East Asian Economies Countries

FTA Coverage rate in 2020 (%) FTA relationships with (2022)

Singapore (SGP)

95.01

South Korea (ROK) Japan (JPN) China (PRC) Taiwan (CT)

73.58 50.08b 34.02a 12.08

ROKa , JPNb , PRCa , CT SGPa , JPNc , PRCa SGPb , ROKc , PRCc SGPb , JPNc , ROKa SGP

a Both bilateral FTA and as a member of RCEP. b Bilateral FTA and as members of both RCEP and CPTPP. c Only as members of RCEP

Source CIER, author

of exports that enjoy preferential tariff treatment under a country’s FTA to total exports without considering the actual utilisation rate— between Taiwan and Singapore, Korea, Japan and China. Amongst all five economies, Taiwan’s FTA coverage stands at only 12.08%, significantly below other exporting countries in this region. Next to Singapore, Korea’s FTA coverage stands at 73.58%; even China considered a later comer in FTA negotiation, has an FTA coverage rate of 34%. Because all four countries are RCEP members, the agreement only came into force in 2022, and the gap in FTA coverage will continue to grow. Among this group of countries, with Taiwan as the exception, there is also a complex network of free trade relationships between them. For instance, Singapore’s exports will be able to receive a cascade of preferential treatments offered by Japan through the pair’s bilateral FTA, RCEP and CPTPP commitments. While the trilateral FTA between China, Korea and Japan has been stalled due to geopolitical disputes, there is still a free trade relationship among them under the auspice of RCEP. The impact of non-participation for non-ITC sectors is obvious. Table 2.3 provides an overview of tariff structures faced by Taiwan in CPTPP countries. On average, over 59% of Taiwan’s exports are already tarifffree under WTO’s Most-Favoured Nation (MFN) tariff commitments, while 41% of exports face an average tariff rate of 7.05%. Among the 11 CPTPP countries, there are more zero-tariff items than non-zero-tariff for Singapore (100%), Malaysia (62.06%), Canada (71.32%), New Zealand (100%), Peru (66.30%) and Brunei (80.06%). Still, regarding non-zero tariffs, the average tariff rates faced by Taiwan in Vietnam, Malaysia and

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Table 2.3 Tariff structure of Taiwan’s Exports to CPTPP countries CPTPP Country

Australia Brunei Canada Chile Japan Malaysia Mexico New Zealand Peru Singapore Vietnam Average

Zero tariff

Non-zero tariff

Tariff lines

Ratio (%)

2467 4167 3712 10 2595 3230 2197 5204

47.41 80.06 71.32 0.19 49.87 62.06 42.21 100.00

3451 5205 1700 3085

66.30 100.00 32.66 59.28

Tariff lines

Ratio (%)

Average tariff rate (%)

2737 1038 1493 5195 2609 1975 3008 0

52.59 19.94 28.68 99.81 50.13 37.94 57.79 0.00

4.72 5.75 8.11 5.99 6.19 13.32 11.90 –

1754 0 3505 2119.455

33.70 0.00 67.34 40.72

7.31 – 14.23 7.05

Source WTO IDB database

Mexico are punitively high. The average tariff rates stand above 13% for Malaysia and Vietnam and nearly 12% for Mexico. Even exports to Japan face an average of 6.19% tariff rate. As for individual sectors, the top five exporting sectors from Taiwan to CPTPP members measured in terms of import values are7 electrical machinery and equipment (at H.S. two-digit level, which includes semiconductors, information and communications products and other electronic parts and components), machinery and mechanical appliances, plastics and their products and steel. The benefits of removing tariff restrictions seem limited at the aggregated level because a major part of Taiwan’s export to CPTPP markets are already tariff-free. Moreover, as reflected in Table 2.4, less than 3% of products belong to electrical machinery and equipment, which is by far the largest exporting product category from Taiwan to CPTPP, accounting for over 60% of total CPTPP-bound exports. The same applies to exports under the machinery and mechanical appliances category. On average, only 15% of Taiwan’s exports face tariffs at the MFN level. Yet the sectoral benefits for those categories still subject to ultra-high tariff treatment, in particular plastics, textile, paper and proceed foods and other sectors where over 40% of their exports face an average tariff rate of 10%, remain significant.

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Table 2.4 Tariff structure for selected sectors Sectors

Electrical machinery and equipment Machinery, mechanical appliances Chemicals Plastics Steel Textile Optical display Articles of iron or steel Vehicles Metal products Paper and products Processed food Glass and products Sub Total

Average Import value from Taiwana

% of export Subject to tariffs

Distribution of tariff rates 0–5% (%)

5–10% (%)

10% and above

56,245,833

2.70

19.29

34.88

45.83

7,503,854

9.30

28.10

55.03

16.87

4,908,039 4,309,713 3,155,097 2,761,453 2,577,610 1,871,087

25.77 73.66 33.40 88.46 6.71 42.96

70.73 62.47 3.68 10.57 4.94 31.35

20.90 27.21 30.60 14.49 46.60 50.47

8.37 10.32 65.73 74.94 48.46 18.18

1,457,295 1,367,445 560,284 461,373 333,912 87,512,995 96,187,554

43.17 51.40 59.14 60.96 19.25 15.01 16.47

0.12 62.04 0.44 31.47 51.00 34.13 34.06

74.23 17.86 30.06 34.65 18.82 30.49 32.17

25.66 20.10 69.50 33.88 30.18 35.38 33.76

a Average export value for the three years of 2017, 2018 and 2019

Source CIER, author

To further highlight the impact of discriminatory tariff treatment faced by different sectors, Table 2.5 compares tariff rates applied to Taiwanese exports to those from main competitors. In the case of synthetic fibres export to Vietnam, Taiwan’s import market share currently ranks second next to China, with a tariff rate of 12% for both economies, yet exports from Korea are receiving zero-tariff treatment under the South KoreaVietnam FTA; of note is that China’s tariff will also be moved at the end of the 7-years transition period under Vietnam’s RCEP tariff schedule.8 For Malaysia, Taiwan is currently the largest source of import of “other steel products,” with a tariff rate of 15%, followed by Japan with the same rate. However, Japan’s 15% tariff rate will be removed under Malaysia’s CPTPP commitment. The situation is even more challenging for electrical machinery and equipment export from Taiwan to Malaysia, with

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Table 2.5 Examples of discriminatory tariff treatment in selected CPTPP markets Importing country

Products

Main exporting countries (share ranking)

Tariff rates (2020)

Vietnam

Electrical devices for connection with line V ≤ 1000

Japan (1) China (2) Taiwan (6) China (1) Taiwan (2) S. Korea (3) Taiwan (1) Japan (2) Vietnam (5) Taiwan (1) S. Korea (2) China (3) China (1) Taiwan (2) Thailand (3) Taiwan (1) S. Korea (2) Malaysia (3)

6 (to 0a ) 0 17.22 12 (to 0b ) 12 0 15 15 (to 0a ) 0 20 0 0 3.1 (to 0b ) 3.1 0 3 3 (to 0b ) 0

Dyed other knitted or crocheted articles of synthetic fibres Malaysia

Other steel products

Other Electrical machinery and equipment and parts Japan

PET plastic

Refined copper foil, unlined

a Under CPTPP commitments b Under RCEP commitments

Source CIER

major competitors such as Korea and China already enjoying a tariff rate preference of 20%. CPTPP membership provides a playground for especially non-ITA sectors and enhances the Taiwan government’s ability to pursue a balanced industrial structure beyond ITA products. Another economic benefit of CPTPP membership is to mitigate the threat of the hollowing-out of Taiwan’s manufacturing sector. As reflected in Table 2.6, there is a continued decline in the number of Taiwanese companies delivering their export orders from Taiwan; in 2010, less than half of the export contracts were delivered from Taiwan, and by 2020 the share reduced to 46%. China is by far the largest recipient of the offshoring capacity from Taiwan. Yet, with the rising costs and the ongoing US-China trade and technology rivalry, its share has been declining. Vietnam is one of the popular destinations for relocating

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Taiwanese firms. Its attractiveness comes from the lower cost, qualified workforce, and Vietnam’s ASEAN, CPTPP, RCEP and Vietnam-EU FTA memberships.9 Taiwan’s continued exclusion from REI activities will exacerbate the “exodus” of Taiwan’s manufacturing capacity in the long run. The Impetus for Regulatory Reform Since the inception stage of Taiwan’s preparation for TPP/CPTPP accession, one key effort is the mandate for relevant government agencies to undertake reviews of regulatory consistencies and divergencies against CPTPP obligations. Referred to as “regulatory gap analysis,” it was one of the key elements of the “TPP Promotion Strategies Action Plan,” first published in late 2014. The objective was to identify discrepancies between Taiwan’s current domestic regulations and CPTPP obligations.10 The outcome of the exercise is an ambitious legislative package of 12 laws and by-laws that require amendments to eliminate inconsistency. As summarised in Table 2.6, all amendments will have completed the relevant legislative processes by 2022. These amendments are part of the regulatory reform process to update and calibrate Taiwan’s regulatory regimes in line with the CPTPP disciplines. To this end, CPTPP membership is an external impetus for Taiwan’s regulatory reform agenda. In particular, enhancing the evidencebased administrative decision-making process and elevating administrative transparency and regulatory coherence are two key areas where Taiwan is set to benefit from CPTPP membership. One good example is the reform of food safety regulatory practices in Taiwan. CPTPP’s chapter on Sanitary and Phytosanitary Measures (SPS; Chapter 7) builds upon and reinforces the WTO SPS agreement. The main elements of the SPS chapter include adherence to international standards, science-based risk analysis, least trade restrictive consideration in deciding regulatory approaches, transparency, and consultation on draft SPS regulations. There are also rules on recognition of equivalence, certification and emergency measures. Most obligations are binding as they are subject to dispute settlement mechanisms. The set of rules is clearly defined, but Taiwan has been questioned by trading partners, including the U.S. and Japan, for its failure to observe them; there is a long-standing issue between Taiwan and U.S. on zerotolerance policy on pork meat additive bans,11 and Japan has repeatedly

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Table 2.6 Result of the legal gap analysis and relevant legislative actions Relevant legislations

Key amendments

Related CPTPP chapter

Year of legislative approval

Statute for Distant Water Fishing Regulation on Investment in the Operation of Foreign Flag Fishing Vessels The Fisheries Act Patent Act

Preventing overfishing and limiting excess fishing capacity

Environment (Article 20.16)

2016

Stipulating a basis for patent litigation in response to the introduction of patent linkage (Extending grace period from 6 to 12) • Extending data exclusivity to new indications of an existing medicine • Strengthening/Establishing a patent-linkage system Extending the protection of rights in plant varieties to cover plants protected by international conventions like UPOV Removing the requirement of the labelling permit number and registration number for cosmetics to get a marketing permit Defining postal mail (post monopoly) items by value or weight

Intellectual Property (Article 18.83) (note: suspended under CPTPP) Intellectual Property (Article 18.53)

2016

Intellectual Property (Article 18.7.2(d))

2018

Annex D of the TBT chapter

2018

Cross-Border Trade in Services (Annex 10-B): Express Delivery Services Intellectual Property (Article 18.47) Intellectual Property (Article 18.77.6(g)) Intellectual Property (Article 18.77.3)

2018

Pharmaceutical Affairs Act

The Plant Variety and Plant Seed Act Cosmetic Hygiene and Safety Act

Postal Act

Agro-pesticides Management Act Copyright Act

Trademark Act

Source Executive Yuan

Extending the length of protection for data exclusivity from 8 to 10 years Empowering prosecutors to actively bring charges against severe copyright infringement Stipulating criminal penalties for counterfeiting trademarks or collective trademarks labels

2018

2018

2022

2022

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asked Taiwan to remove the total ban on agricultural products from five specific prefectures.12 As discussed below, in both cases, the debates in Taiwan are highly politicised and divorced from the evidence. The calls from U.S. and Japan convey similar requests: review the bans based on scientific evidence and follow international guidelines. The ability of Taiwan to move away from political-based decisions and observe WTO/ CPTPP rules in these two high-profile cases becomes a major test for Taiwan’s qualification to apply. With a view of reforming the food safety regime in Taiwan to be consistent with CPTPP disciplines, Taiwan removed both bans in 2020 and 2022 based on scientific evidence, which unsurprisingly brought about political controversies. The liberalisation of the U.S. pork ban triggered a referendum motion by the opposition party to sustain the zeroresidual restriction on ractopamine in imported pork (the ractopamine pork motion) in December 2021. The Maximum Residual Level (MRL) of ractopamine, a feed additive used mainly by the U.S. pork farming industry, has been at the centre of food safety and political controversies in the past 15 years. The U.S. has constantly asked Taiwan to observe the obligations under the WTO SPS Agreement, which require members intending to regulate imports based on health concerns to follow international standards. The restrictions must be underpinned by risk assessments with science-based evidence. Pressure grew after the Codex Alimentarius Commission (Codex) formally adopted the international standard for ractopamine MRL in 2012.13 Taiwan adopted the Codex standard for beef muscle cuts in the same year after risk assessments that considered Taiwanese dietary habits demonstrated no significant food safety risk; other beef products (e.g., offal) and pork were carved out due to strong industrial and political opposition.14 The commitment of President Tsai Ing-wen in 2020 to add pork to the list of ractopamine MRL, also based on a second risk assessment undertaken in 2019, was, in essence, an effort to demonstrate that Taiwan is committed and able to adhere to the aforementioned international trade obligations and to bring closure to the enduring dispute with the U.S.15 The opposition party initiated and led the motion on sustaining the zero-residual restriction for pork meat (the pork motion) to pass the referendum threshold (i.e., 1.5% of eligible voters) for the 2021 National Referendum.16 As in any society, people always refuse to believe in scientific evidence and prefer a “precautionary” approach to food

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safety issues. Unfortunately, food safety concerns were again manipulated in the pork motion for political objectives, as the opposition party campaigned to use the ractopamine pork motion to “teach the government a lesson.”17 Had the motion passed, not only would there have been likely unfavourable reactions from the U.S., but Taiwan’s ability to deliver on WTO and CPTPP obligations would also have been discredited. The Taiwanese people rejected the pork motion, with 51.2% of the votes against the motion.18 The rejection has several implications. First, it denotes a new paradigm in which politically motivated policy motions unsupported by valid evidence seem increasingly difficult to convince society. Second, it demonstrates the consensus in Taiwan regarding the importance of adhering to and implementing international trade rules and the support of reforms to remove regulatory practices inconsistent with international obligations. Third, it provides a positive foundation for Taiwan to consider removing other food safety-related restrictions that have led to trading partners’ complaints as inconsistent with international disciplines. The new consensus reflected in the rejection provided President Tsai’s administration confidence to swiftly remove the total ban targeting agricultural products from five Japanese prefectures in March 2022. The ban was first imposed after the 2011 Japan nuclear incident as part of the emergency measures. While agricultural products from most cities and prefectures were subsequently allowed to enter as long as they passed radiation and other tests, products from Fukushima and four surrounding prefectures remained restricted. The restriction was mandated by a similar motion led by the opposition party in the 2018 National Referendum when the government indicated its intention to consider removing the ban. Japan had always requested Taiwan to reconsider the ban based on scientific evidence and practices adopted by other importing countries. It implicitly indicated the removal as a prerequisite for supporting Taiwan’s CPTPP application.19 Similar to the pork ractopamine case, the decision to remove the prima facie discrimination is also based on scientific evidence and risk assessment, which show no additional risks associated with products from the five prefectures.20 There were sporadic political protests against the decision, but they did not attract wider attention and support from society this time. The contribution of these reform efforts towards CPTPP accession remains to be seen. Still, the benefits of bringing Taiwan’s regulatory practices in line with WTO and CPTPP disciplines, including a

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higher level of predictability and consistency, as well as less regulatory arbitrariness and political distortions, can already be enjoyed by Taiwan. Global Supply Chain Reform and the Value of CPTPP Taiwan is deeply interconnected with the Global Supply Chain (GSC). According to the “Trade in value-added and global value chains country profiles” index established by the World Trade Organization (WTO) in 2019, Taiwan has one of the highest global value chain participation rates worldwide. As demonstrated in Table 2.6, Taiwan’s total participation rate stood at 60.8% of gross exports in 2018. All participation indices are significantly higher than the regional average for all global regions. In addition, the relatively high level of backward participation vis-a-vis other parts of the world strongly indicates Taiwan’s linkage with the GSC. Moreover, the continuation and broadening of the U.S.-China economic and technology rivalry indicate that it is now beyond disputes regarding technical issues of unfair economic practices. As reflected in its first Interim National Security Strategic Guidance, the Biden administration has formally maintained the “strategic competition” with China.21 Elements of the strategic competition are relatively vague in substance, but it is not a new concept; the European Commission already defined the strategic relationship with China in 2019 as “a cooperation partner with whom the E.U. has closely aligned objectives, a negotiating partner with whom the E.U. needs to find a balance of interests, an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.”22 Although the trade war only applies directly to products from the U.S. or China, Taiwan’s high dependence on offshore manufacturing in China indicates that the impact on Taiwan’s economy is equally significant. As reflected in Table 2.5, the overall ratio of Taiwan companies having offshore production in China dropped from 49.8% in 2016 to 45.2% in 2020. Return to Taiwan appears to be an effective option adopted by many Taiwanese firms, yet this approach tends to focus on expanding existing production facilities.23 ASEAN (especially Vietnam, Thailand and Malaysia) is the hotspot for investment in new production capacities, with 60% of the companies choosing the region as their preferred location for next-generation production base (Table 2.7).24 Considering the GSC reform development, CPTPP membership offers a unique opportunity to facilitate the migration of Taiwanese firms from

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Table 2.7 Taiwan’s Global Value Chain (GVC) participation index, 2018 Participation Rate

Taiwan

S. Korea

Japan

Total Forward participation Backward participation

60.8 20.9

53.5 21.5

42.7 25.5

39.8

32

17.2

China

Regional average Asia

Europe

North America

South America

36.3 19.3

44.4 20

48.8 21.2

37.8 22

36.5 23.5

17.2

24.4

27.6

15.8

13

Unit % share of total gross export Source WTO, “Trade in value-added and global value chains: statistical profiles”: https://www.wto. org/english/res_e/statis_e/miwi_e/countryprofiles_e.htm

China to ASEAN, with Vietnam and Malaysia already a member or a signatory of CPTPP, and Thailand having signalled its interest.25 In addition to the benefits of market access and liberalisation commitments, the facilitation effect mainly comes from liberalisation. First, CPTPP disciplines on the non-tariff measure, trade and investment facilitation, regulatory harmonisation and transparency increase ex-ante certainty and confidence concerning the quality of the domestic regulatory environment. Second, CPTPP’s requirements for creating focal and communication points in most chapters elevate the effectiveness and efficiency in conveying and solving issues new investors often face. Unique Opportunity Rationale Given the importance of CPTPP and other REI activities, the direct and intuitive solution for Taiwan is unquestionably to engage in all possible undertakings. One of the primary reasons that prevents Taiwan from doing so is the strong opposition from China, which considers official contact between Taiwan and other countries, including negotiating and signing of trade agreements, to involve sovereign connotations and to be of an official nature.26 At the height of cross-strait political interaction during President Ma Ying-jeou’s administration (denoted by the first-ever cross-strait leaders’ summit in 2015), Taiwan could conclude FTAs with two important yet small APEC economies, namely Singapore and New Zealand, with some special arrangements.27 China’s approach at that time was to “discuss the appropriate and feasible way to link the

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common development of the cross-strait economy with the process of regional economic cooperation path.”28 This vague approach implies at least three prerequisites for Taiwan’s REI participation. The first is that the deepening of cross-strait economic integration between Taiwan and China must take place before discussing the “linkage” with regional REI. The second is that Taiwan’s engagement in REI is an issue that needs to be discussed bilaterally with China. Finally, the term “link” suggests that China might require a special modality (e.g., under China’s sponsorship) for Taiwan to join any REI mechanisms. During the Ma administration, Taiwan repeatedly expressed interest in joining TPP and RCEP between 2013 and 2014 during high-level crossstrait meetings. China responded with a reiteration of this approach.29 However, during the same period, China opposed Taiwan’s proposal to engage with Malaysia and Australia to undertake a feasibility study of a potential FTA in 2014.30 Several factors suggest China’s prerequisites are increasingly unlikely to be achieved. First, with the acceleration of the strategic competition between the U.S. (and E.U.) and China, economic policies are now dominated by economic security and global supply chain agenda in Taiwan and elsewhere; diversification rather than deepening integration with China is now the key policy and business consideration alike. Second, the growing political tension between Taiwan and China indicates that China is unlikely to make any concessions on Taiwan’s REI participation. Third, the sentiments and consensus in Taiwan suggest accepting that Taiwan’s REI participation has to be “linked” to China’s will be politically challenging. Considering these geopolitical situations, CPTPP membership appears to be the only option for Taiwan to join the REI bandwagon. Moreover, article 5 of CPTPP states that after the date of entry into force of CPTPP, any state or “separate customs territory” may accede to the agreement, subject to such terms and conditions as may be agreed between the parties and that state or separate customs territory. The WTO certified Taiwan’s status as a separate customs territory in 2002.31 Therefore, there is no legal debate concerning the qualification of Taiwan to apply for CPTPP membership. Furthermore, CPTPP is the only regional undertaking to which some current members have openly welcomed Taiwan to apply; in addition to Japan’s official welcome statement made by its foreign minister, the Joint Standing Committee on Foreign Affairs, Defence and Trade of

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the Australian parliament also recommended the Australia government to “encourage and facilitate the accession of Taiwan to the CPTPP” in 2022.32 Finally, CPTPP is the only regional undertaking in which China is not a formal member or signatory. With the collective decision-making process of the CPTPP, in theory, it would potentially lower the political threshold if there were positive support from some current members.

Challenges and Outlook The CPTPP Process Taiwan formally notified its intention to join CPTPP in September 2021.33 As a result, Taiwan and all CPTPP applicants face a two-step negotiating process (Fig. 2.1). This paper refers to the first step as the “acceptance of application phase,” with creating a working group as the endpoint. The second step is the accession negotiation phase, with the signing of an accession agreement at the end of the process. According to the Decision by the Commission of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership regarding the Accession Process of the CPTPP (hereinafter the Accession Process Decision) and its annexe, it encourages interested parties to engage informally with all CPTPP Signatories regarding their interest in joining the CPTPP. In addition, aspirant economies must notify New Zealand, serving as CPTPP depositary, of their formal request to commence negotiations on acceding to the CPTPP. Bilateral consultation and current members

Application

1

1st meeting of the WG

2 Creation of a Working Group (WG) based on consensus

Acceptance of application phase

3

Negotiation

4 Initial offers on tariffs, investment and government procurement

6

5

Accession

Approval of accession

Accession negotiation phase

Fig. 2.1 The two-step accession process of CPTPP (Source Author based on CPTPP Decision on Accession Process)

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In accepting the application phase, Article 2.2 of the Accession Process Decision “encourages” the aspirant economy to consult with each Party to address each Party’s questions or concerns on interested areas. However, these consultations will not constitute a negotiation process. Schott et al. (2016) describe this step as the “down payment” phase, whereby current members require reform commitments on addressing current bilateral issues before accepting the aspirant economy’s request to start the accession negotiation. The CPTPP Commission will then determine, based on consensus,34 whether to commence the accession process with the aspirant economy within a reasonable period after the date on which the aspirant economy made the Accession Request. For the acceptance of the application phase, Taiwan faces two critical challenges: opposition from China and the ability to commit and deliver a “down payment” in addressing the current trade dispute with CPTPP members. The China Conundrum Taiwan and China previously submitted accession requests to New Zealand in September 2021. Historically, there were two precedents where Taiwan and China applied for membership to the same international economic organisation at a close time range. The first occasion was the Asia Pacific Cooperation (APEC); the next was the WTO. On both occasions, Taiwan convinced members to accept its application in tandem with China’s. The final accession times were carefully arranged to minimise China’s objections.35 In the case of APEC, the decision to accept the entry of both China and Taiwan (as well as Hong Kong) was announced at the APEC Ministerial Meeting in 1991. A “China-first” approach was adopted for WTO accession, whereby China acceded to the WTO in December 2001, followed by Taiwan’s accession in January 2002. In this regard, despite the relatively welcoming nature of the CPTPP accession rules and comments by some current members, the China factor as a roadblock to Taiwan’s CPTPP membership remains critical. In addition to expressing outright opposition to Taiwan’s application at the outset, China can effectively block Taiwan’s accession by the following two approaches. First, with the growing economic (the largest trading partner for most CPTPP members except Canada and Mexico) and political power, China could easily achieve this objective by convincing some current members to disagree in reaching the consensus of forming a

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working group for Taiwan at the acceptance of the application phase. Alternatively, China could also call on current members to decline Taiwan’s request for bilateral consultations. In a second and relatively light-handed approach, China could request that CPTPP members follow the “China-first” precedent, whereby the working group to process Taiwan’s application must be deferred until a consensus is reached to create a working group for China. Both scenarios could undermine the prospect of Taiwan’s accession. Even under the relatively accommodating second scenario, it could still seriously delay Taiwan’s application. While CPTPP members such as Singapore have expressed their support for China,36 Japan, Australia, and other CPTPP members appear to be sceptical towards China’s application due to both the strategic consequences and China’s readiness to meet CPTPP standards.37 There are also ongoing trade and maritime territorial disputes between China, Australia, Japan, and Vietnam. This suggests that it could be a lengthy process for China to satisfactorily address the concerns and reservations of current members even at the acceptance of the application phase. Schott et al. (2016) recommend that considering the growing number of countries entering the admission process, CPTPP members could introduce approaches to avoid a “traffic jam” at the acceptance of application stage by pairing applicants who can receive consensus to move on with the accession process. There is a possible “safety in numbers” scenario for Taiwan, suggesting that Taiwan could team up with other applicants with a similar degree of readiness to avoid being trapped by China’s complexity. Unfortunately, as suggested by Singapore Prime Minister Lee Hsien Loong, the actual development appears to be heading towards a situation unfavourable to Taiwan. In a May 2022 media interview, Lee indicated that for Taiwan’s application process, “the consultation will take a while. Individual countries will have different views.”38 It is not clear the exact content of the “different view” expressed by CPTPP members. Yet, it is plausible that it is intertwined with issues regarding China’s position and admission process. Interestingly, the sixth CPTPP commission meeting in October 2022 did not reach any decisions on new applications except for a progress report on the U.K.’s accession negotiation. Officially, CPTPP members wanted to focus on concluding the negotiations with the U.K. to create a precedent.39 However, the precious content of the precedent that

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CPTPP members have agreed on is unclear. Still, the group had previously declared its commitment that “the CPTPP is open to accession by economies committed to the Agreement’s objectives,” including meeting and adhering to CPTPP’s high standards and ambitious market access commitments and having demonstrated a pattern of complying with trade commitments.40 Yet, developments are already derogating from the U.K.’s accession experience. For instance, the decisions to create a working group for the U.K. and to commence the negotiation process were reached four months after U.K.’s formal request to initiate the accession process.41 On the contrary, thirteen months had elapsed since both Taiwan and China lodged their accession request by the time of the sixth CPTPP commission meeting, and still no decision was made. Moreover, Singapore’s prime minister openly admitted after the Commission meeting that there was no consensus on China’s application.42 In a best-case scenario, the U.K. precedent can support the “safety in numbers” theory discussed above. Taiwan’s advancement will be based on the same factors and merits as applied to all applicants. This suggests that the conclusion of the U.K. negotiations will be a decisive development, and Taiwan needs to work harder with key supporters to facilitate this scenario. Still, the reality that a growing number of countries in the region are cautiously not making decisions that would be interpreted as ‘taking sides’ will be a major roadblock for Taiwan.43 Challenges Concerning the Level of Readiness One of the most critical bilateral issues that Taiwan had to address before accepting the application phase was removing the agricultural products ban from five Japanese prefectures. The removal of the ban in March 2022 underscored a major milestone in elevating readiness. Other, less contentious, bilateral issues, such as SPS testing of agricultural products from Australia and Vietnam, also require solutions. Still, they are unlikely to create substantial impediments to the acceptance of the application phase. For domestic liberalisation readiness, the most challenging issue will be removing tariff protection for the agricultural sector. As summarised in Table 2.8, the average trade-weighted tariff rate of manufactured goods entering Taiwan is only 1.49%; to the contrary, the rate for agricultural imports stands at 9.44%. As a rule of thumb, CPTPP aims to eliminate

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Table 2.8 Taiwan’s average trade-weighted tariff rates (2014–2020) Year

2016

2017

2018

2019

2020

Average

Agricultural goods Manufactured goods

9.89 1.57

9.40 1.49

9.54 1.43

9.47 1.41

9.79 1.48

9.44 1.49

Unit % Source Tariff database, Ministry of Finance

tariffs for all members with a very limited list of exceptions. On average, zero-tariff coverages are 100% and 96.2% for manufactured and agricultural goods, respectively, for current CPTPP members. This implies that most of the tariff protections for Taiwan’s agricultural sector must be phased out. Taiwan’s Council (ministry level) of Agriculture identifies a list of 20 “sensitive agricultural products,” including rice, peanuts, red beans, garlic, pineapples, mangoes, bananas, chicken and pork belly, that are currently protected not only by high tariff rates but also tariff-rate quotas and special safeguard measures for the most vulnerable.44 In preparation, the Council of Agriculture vowed to accelerate the reform process, elevate the support level, and pursue a negotiation strategy of maintaining the maximum level of protection.45 For the manufactured sector, the only sector identified as sensitive is the “whole-car” production sub-sector under the automobile industry, which is currently protected by a 17.5% tariff against imported cars, and preparations are underway for complete removal.46

Conclusion There is ample evidence to support the economic importance and valueadded benefits for Taiwan to join the CPTPP. Moreover, the CPTPP accession clause’s language suggests that Taiwan’s inclusion was envisioned at the outset. On the other hand, the most critical impediment to Taiwan’s CPTPP admission is China’s objection as part of its strategy to prevent Taiwan from official engagements with trading partners. To this end, the future of Taiwan’s CPTPP accession depends on the following factors. First, regardless of the potential political obstacles, Taiwan must demonstrate that it is fully prepared and ready to undertake commitments

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consistent with the standard of the CPTPP and to lock in support from key CPTPP members such as Japan and Australia. To this end, strategic competition between the U.S. and China creates new geopolitical dynamics for Japan, Australia, and Canada, creating both opportunities and uncertainties. One potential opportunity is the recent call for collective action against China’s economic coercions voiced by Canada, Australia, and Japan. As the effectiveness of China’s objection depends critically on the threat and enforcement of economic coercion, this development could potentially provide a chance for Taiwan to work with key supporters to limit the impact of the China conundrum. To achieve this, Taiwan and its supporters need to advocate positively that ensuring openness and the inclusiveness nature of the CPTPP is fundamental to defining the values of the CPTPP. Like the WTO and other experiences, trade and economic merits should dominate the accession process rather than geopolitical considerations. This is not only for Taiwan’s benefit but also to save CPTPP from future political dilemmas.

Notes 1. (Taiwan) National Development Council (NDC), 2022. Handbook of Key National Statistics, NDC, September 2022, Table 3. 2. Staff writers, “Taiwan Joining WTO Is Not a Precedent for CPTPP, China Says,” Bloomberg News, 29 September 2021, https://www.bloomb erg.com/news/articles/2021-09-29/taiwan-joining-wto-is-not-a-preced ent-for-cptpp-china-says?sref=HFaHEoGx (accessed 23 September 2022). 3. Dan Ciuriak, Jingliang Xiao and Ali Dadkhah, 2017. “Quantifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,” East Asian Economic Review 21(4), December 2017, pp. 343–384. 4. (Taiwan) Bureau of Foreign Trade (BOFT), 2022. Frequent Questions on CPTPP Impact Assessment (in Chinese), BOFT, Ministry of Economic Affairs, April 2022, https://cptpp.trade.gov.tw/Information/Detail?sou rce=Xw2cYGaxxFKgyPxKRZHH%20srTZeku2kiGjQW4vp914Fg. 5. https://cuswebo.trade.gov.tw/FSC3020F/FSC3020F. 6. Peter Lloyd et al., 2018. Is World Trade Becoming More Regionalised? The Asia-Pacific Research and Training Network on Trade (ARTNeT) Working Paper No. 176, 2018. 7. Using importing value instead of exporting value is for the benefit of analysing the tariff structure of the importing country. 8. J. Y. Kao, “The Short- and Long-Term Impact of RCEP’s Tariffs Liberalization on Taiwan,” Economic Outlook Bimonthly (經濟前瞻) No. 197, September 2021 (in Chinese).

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9. J. Y. Wu, 2020. Vietnam Remains the Top Investment Choice in ASEAN Post the Pandemic, KPMG Taiwan, https://home.kpmg/tw/zh/home/ media/press-releases/2020/06/tw-invest-in-vietnam-seminar-2020.html. 10. https://www.ey.gov.tw/Page/9277F759E41CCD91/2b6ec745-633d4105-9eaf-669de14a973a. 11. See for instance the Office of the United States Trade Representative (USTR). The 2018 National Trade Estimate Report on Foreign Trade Barriers, USTR, March 2018. 12. Madoka Fukuda, 2021. “Recent Developments in Japan & Taiwan Relations,” in Yuki Tatsumi and Pamela Kennedy (eds.), Japan-Taiwan Relations, Opportunities and Challenges, Stimson Center, March 2021. 13. USTR, 2020 National Trade Estimate Report on Foreign Trade Barriers, pp. 462–463. 14. Id., at p. 463. 15. Executive Yuan, 2021. Taiwan Eases Rules on US Pork, Beef Import, Department of Information Services, Executive Yuan, https://english.ey. gov.tw/News3/9E5540D592A5FECD/b935c5ed-2476-4f95-8d9c-dd0 58791570a. 16. The motion reads: “Do You Agree That Government Should Put a Ban of the Importation of Pork, Internal Organs and Pork Products Containing Ractopamine (β-Adrenergic Receptor Agonists)? 17. W. T. Wang, 2021. KMT: Say Yes to Referendum to Teach the State Machine a Lesson, Radio Taiwan International, November 29, 2021, https://www.rti.org.tw/news/view/id/21180980 (in Chinese). 18. Kathrin Hille, 2021. “Taiwan Voters Back Government on US Pork Referendum,” Financial Times, December 19, 2021, https://www.ft.com/con tent/cee59ee9-f549-47fb-baf3-d2c3942f99b0. 19. K. Shin, 2022. Taiwan Finally Lifts Japan Food Import Restrictions, The Diplomate, March 8, 2022, https://thediplomat.com/2022/03/taiwanfinally-lifts-japan-food-import-restrictions/. 20. Executive Yuan, 2022. Updating Control Measures for Japanese Food Imports, Department of Information Services, Executive Yuan, https:// english.ey.gov.tw/News3/9E5540D592A5FECD/cdb519ae-a692-4082a136-0ca9938f128f. 21. The White House, Interim National Security Strategic Guidance, March 2021, www.whitehouse.gov. 22. European Commission and HR/VP, EU-China: A Strategic Outlook, Joint Communication to the European Parliament, the European Council and the Council, JOIN (2019) 5 final, 12 March 2019. 23. Department of Statistics, 2020 Annual Survey of Offshore Manufacturing Activities for Export Orders, Ministry of Economic Affairs, August 2021. 24. Id.

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25. S. Hayden and J. Heine, 2022. “CPTPP: Can We Expect Additional Southeast Asian Members Soon?” The Diplomat, March 10, 2022, https://thediplomat.com/2022/03/cptpp-can-we-expect-add itional-southeast-asian-members-soon/. 26. Staff writers, 2022. “China ‘Firmly’ Opposes U.S.-Taiwan Trade Initiative,” Reuters, June 2, 2022, https://www.reuters.com/world/chinasays-opposes-us-taiwan-trade-initiative-2022-06-02/. 27. M. Okano-Heijmans, S. Wit and F. P. van der Putten, Cross-Strait Relations and Trade Diplomacy in East Asia: Towards Greater EU-Taiwan Economic Cooperation? Clingendael Report, Clingendael, March 2015, https://bit.ly/36Qi8sP (accessed 23 June 2021). 28. C. D. Tso and Y. C. Lai, 2017. “Taiwan’s Journey to Free Trade Agreements: From the Proposed Taiwan-US FTA to the Cross-Strait ECFA,” Review of Social Sciences Vol. 11(1), June 2017, p. 72. 29. Id., pp. 59–82. 30. J. Y. Chiu, and Y. S. Wang, 2014. “Economic Ministers Confirms the Opposition from China Against Taiwan’s FTA Talk with Australia,” China Times, October 5, 2014, https://www.chinatimes.com/newspapers/201 41005000363-260108?chdtv. 31. World Trade Organization (WTO), 2001. Protocol of Accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu to the Marrakesh Agreement Establishing the World Trade Organization, WTO Document No. WT/L/433, November 23, 2001. 32. Parliament of Australia Joint Standing Committee on Foreign Affairs, Defence and Trade, 2022. Expanding the Membership of the Comprehensive and Progressive Trans-Pacific Partnership, https://www.aph.gov.au/Par liamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_ Trade/CPTPPMembership/Report. 33. Department of Information Services, Taiwan Applies to join CPTPP, Executive Yuan, September 23, 2021, https://english.ey.gov.tw/Page/61B F20C3E89B856/4ba3bc36-9a82-41eb-b00a-e8d0532edf5a. 34. Article 27.3 (Decision Making) and Article 27.4 (Rules of Procedure of the Commission) of the CPTPP. 35. Jeffrey J. Schott, Cathleen Cimino-Isaacs, Zhiyao (Lucy) Lu, and Sean Miner, Prospects for Taiwan’s Participation in the Trans-Pacific Partnership, PIIE Briefing 16–7, 2016, Peterson Institute for International Economics. 36. D. Loh, 2022. “Singapore to join Biden Indo-Pacific pact, back China’s CPTPP entry: Lee,” Nikkei Asia, May 23, 2022, https://asia.nikkei. com/Editor-s-Picks/Interview/Singapore-to-join-Biden-Indo-Pacificpact-back-China-s-CPTPP-entry-Lee.

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37. T. Ebuchi, I. Kawate and T. Hoyama, “China’s CPTPP bid greeted with skepticism and caution,” Nikkei Asia, September 18, 2021, https://asia.nikkei.com/Economy/Trade/China-s-CPTPP-bid-gre eted-with-skepticism-and-caution. 38. D. Loh, 2022. “Singapore to Join Biden Indo-Pacific Pact, Back China’s CPTPP Entry: Lee,” Nikkei Asia, May 23, 2022. 39. Staff writers, 2022. “Japan Says Britain May Join CPTPP Free Trade Pact This Year,” Japan Times, October 9, 2022, https://www.japantimes. co.jp/news/2022/10/09/business/japan-britain-trans-pacific-free-tradepact/. 40. CPTPP Commission, 2021. Joint Ministerial Statement on the Occasion of the Fifth Commission Meeting, September 1, 2021, https://www.dfat.gov. au/trade/agreements/in-force/cptpp/commission-meetings. 41. CPTPP Commission, 2021. Decision by the Commission of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership regarding the United Kingdom’s Formal Request to Commence the Accession Process, June 2, 2021, https://www.dfat.gov.au/trade/agreements/inforce/cptpp/commission-meetings. 42. CPTPP Commission, 2021. Decision by the Commission of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership regarding the United Kingdom’s Formal Request to Commence the Accession Process, June 2, 2021, https://www.dfat.gov.au/trade/agreements/inforce/cptpp/commission-meetings. 43. Don’t Make Us Choose: Southeast Asia in the throes of US-China rivalry, Brookings Institute, October 2019, https://www.brookings.edu/wp-con tent/uploads/2019/10/FP_20191009_dont_make_us_choose.pdf. 44. (Taiwan) Council of Agriculture. Common questions regarding the impact on joining the CPTPP, https://www.coa.gov.tw/ws.php?id=2503923 (in Chinese). 45. Id. 46. (Taiwan) Office of Trade Negotiation, Ministry of Foreign Affair, Ministry of Economic Affairs and Council of Agriculture, Impact Assessment and Adjustment Strategies in Relation to CPTPP Accession, Written Communications to the Legislative Yuan, December 2021, https://www.ey.gov. tw/File/B324D1648F4CC9C0.

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References (Taiwan) Bureau of Foreign Trade (BOFT), 2022. Frequent Questions on CPTPP Impact Assessment (in Chinese), BOFT, Ministry of Economic Affairs, April 2022, https://cptpp.trade.gov.tw/Information/Detail?source=Xw2cYG axxFKgyPxKRZHH%20srTZeku2kiGjQW4vp914Fg (Accessed 19 October 2022). M. Okano-Heijmans, S. Wit and F. P van der Putten, Cross-Strait Relations and Trade Diplomacy in East Asia: Towards Greater EU-Taiwan Economic Cooperation? Clingendael Report, Clingendael, March 2015, https://bit.ly/ 36Qi8sP (Accessed 23 June 2022). (Taiwan) National Development Council (NDC), 2022. Handbook of Key National Statistics, NDC, September 2022 (Accessed 19 October 2022). (Taiwan) Office of Trade Negotiation, Ministry of Foreign Affair, Ministry of Economic Affairs and Council of Agriculture, Impact Assessment and Adjustment Strategies in Relation to CPTPP Accession, Written Communications to the Legislative Yuan, December 2021, https://www.ey.gov.tw/File/B324D1 648F4CC9C0 (Accessed 14 October 2022). C. D. Tso and Y. C. Lai, 2017. “Taiwan’s Journey to Free Trade Agreements: From the Proposed Taiwan-US FTA to the Cross-Strait ECFA,” Review of Social Sciences 11(1), June 2017 (Accessed 11 October 2022). CPTPP Commission, 2021. Decision by the Commission of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Regarding the United Kingdom’s Formal Request to Commence the Accession Process, June 2, 2021, https://www.dfat.gov.au/trade/agreements/in-force/cptpp/ commission-meetings (Accessed 11 October 2022). CPTPP Commission, 2021. Joint Ministerial Statement on the Occasion of the Fifth Commission Meeting, September 1, 2021, https://www.dfat.gov. au/trade/agreements/in-force/cptpp/commission-meetings (Accessed 11 October 2022). D. Ciuriak, J. L. Xiao and A. Dadkhah, 2017. “Quantifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,” East Asian Economic Review 21(4), December 2017. Department of Statistics, 2020. Annual Survey of Offshore Manufacturing Activities for Export Orders, Ministry of Economic Affairs, August 2021. European Commission and HR/VP, EU-China: A Strategic Outlook, Joint Communication to the European Parliament, the European Council and the Council, JOIN (2019) 5 final, March 12, 2019. Executive Yuan, 2021, Taiwan Eases Rules on U.S. Pork, Beef Import, Department of Information Services, Executive Yuan, https://english.ey.gov.tw/ News3/9E5540D592A5FECD/b935c5ed-2476-4f95-8d9c-dd058791570a (Accessed 19 October 2022).

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Executive Yuan, 2022. Updating Control Measures for Japanese Food Imports, Department of Information Services, Executive Yuan, https://english.ey. gov.tw/News3/9E5540D592A5FECD/cdb519ae-a692-4082-a136-0ca993 8f128f (Accessed 19 October 2022). J. Schott, C. Cimino-Isaacs, Z. (Lucy) Lu, and S. Miner, Prospects for Taiwan’s Participation in the Trans-Pacific Partnership, PIIE Briefing 16-7, 2016, Peterson Institute for International Economics. J. Stromseth, Don’t Make Us Choose: Southeast Asia in the Throes of US-China Rivalry, Brookings Institute, October 2019, https://www.brookings.edu/ wp-content/uploads/2019/10/FP_20191009_dont_make_us_choose.pdf (Accessed 22 October 2022). J. Y. Kao, “The Short- and Long-Term Impact of RCEP’s Tariffs Liberalisation on Taiwan,” Economic Outlook Bimonthly (經濟前瞻) No. 197, September 2021 (in Chinese) (Accessed 20 October 2022). J. Y. Wu, 2020. Vietnam Remains the Top Investment Choice in ASEAN Post the Pandemic, KPMG Taiwan, https://home.kpmg/tw/zh/home/media/ press-releases/2020/06/tw-invest-in-vietnam-seminar-2020.html (Accessed 19 October 2022). K. Shin, 2022. Taiwan Finally Lifts Japan Food Import Restrictions, The Diplomate, March 8, 2022, https://thediplomat.com/2022/03/taiwan-finallylifts-japan-food-import-restrictions (Accessed 12 October 2022). M. Fukuda, 2021. “Recent Developments in Japan & Taiwan Relations,” in Y. Tatsumi and P. Kennedy (eds.), Japan-Taiwan Relations, Opportunities and Challenges, Stimson Center, March 2021. P. Chow, “Taiwan in International Economic Relations,” Orbis 60(4), 2016, pp. 531–549. P. Lloyd et al., 2018. Is World Trade Becoming More Regionalised? The AsiaPacific Research and Training Network on Trade (ARTNeT) Working Paper No. 176, 2018. P. Petri, M. Plummer, and F. Zhai, 2012. The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment, Peterson Institute for International Economics (PIIE), June 2012, Chapter 4. Parliament of Australia Joint Standing Committee on Foreign Affairs, Defence and Trade, 2022. Expanding the Membership of the Comprehensive and Progressive Trans-Pacific Partnership: https://www.aph.gov.au/Parliamen tary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/CPT PPMembership/Report (Accessed 19 October 2022). S. Hayden and J. Heine, 2022. CPTPP: Can We Expect Additional Southeast Asian Members Soon? The Diplomat, March 10, 2022, https://thediplomat. com/2022/03/cptpp-can-we-expect-additional-southeast-asian-memberssoon (Accessed 13 October 2022).

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T. H. Thian and K. C. Yeh. “Determinants of Taiwan’s Outward Investment in Southeast Asia: Economic Factors and Institutional Issues,” Pacific Economic Review (2020), October 2020, https://onlinelibrary.wiley.com/doi/epdf/ 10.1111/1468-0106.12348 (Accessed 7 October 2022). The Office of the United States Trade Representative (USTR). The 2018 National Trade Estimate Report on Foreign Trade Barriers, USTR, March 2018. The White House, Interim National Security Strategic Guidance, March 2021, www.whitehouse.gov (Accessed 13 October 2022). World Trade Organization (WTO), 2001. Protocol of Accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu to the Marrakesh Agreement Establishing the World Trade Organization, WTO Document No. WT/L/433, 23 November 2001.

CHAPTER 3

Not a Fast Pass for China at CPTPP George Magnus

Introduction In September 2021, China announced that it would apply to join the CPTPP, a decision which China had flagged a year earlier when it also signed up with other Asian countries to form the Regional Comprehensive Economic Partnership (RCEP).1 In the world of trade area acronyms, RCEP is unquestionably a panAsian grouping, but the CPTPP, while currently smaller in terms of population, trade and GDP, is a Pacific Rim construct, and in many ways, it throws a greater focus on geopolitics, leadership and statecraft. The term Indo-Pacific is also used to describe CPTPP members and their interests, but with new applicants including China, Taiwan and Ecuador, and South Korea, Thailand, the Philippines, Indonesia, and Colombia among possible applicants in the future, Pacific Rim may be better parlance.

G. Magnus (B) The China Centre, Oxford University, London, UK e-mail: [email protected] The China Institute, School of Oriental and African Studies, London, UK

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_3

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Even though China’s CPTPP application is not flippant or opportunist, the timing was interesting. The application came just a day after the United States, United Kingdom and Australia, under the acronym, AUKUS, announced a decision to supply the technology to Australia to build nuclear-powered submarines, and a few days before Taiwan also applied to join CPTPP. Politics and trade are two sides of the same coin, as we shall see in this chapter. A lively discussion has ensued about both the technical and political aspects of China’s application. CPTPP chapters provide for compliance with high standards in important areas such as labour markets, competition rules governing state enterprises, market access, intellectual property protection, information, data and communications management and usage, and the environment. CPTPP members that have ratified the agreement, in accepting new applicants, must agree unanimously to a sequencing that starts with the establishment of a working party to draw up a negotiation framework, sets the terms and provisions of the subsequent negotiations, and then concludes with a judgement on whether the terms have been fulfilled or that a direction of travel has been formulated according to which full compliance can be expected over an acceptable timeframe. Trade integrationists inside and outside China wonder if CPTPP membership might offer China a WTO-type template to spur liberalising economic reforms, for example to state enterprises, which might otherwise be difficult. Others think it naïve to imagine China would choose to meet many of the required standards, given the momentum in its own regulatory and governance system under its current leadership. There is no question, then, that China’s application will present CPTPP members with awkward issues, not the least of which is trust in China’s sincerity and intent with regard to pledges and commitments to align with CPTPP chapter provisions, especially after the last few years in which trust relations with several countries have become badly frayed. Canada, Japan, and Australia are three large CPTPP members with which China has difficult, if not hostile relations. Others, especially in Asia, are torn between economic and defence-security interests, in which China and the United States, respectively, are centre-stage. The decision as to how to deal with China’s application, alongside that of Taiwan, was going to be tough even before Russia’s invasion of Ukraine In February 2022.

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Political tensions have been exacerbated, though, by the aftermath of the summit meeting in Beijing at the start of the 2021 Winter Olympics at which Xi Jinping and Vladimir Putin issued a more than 5000 word statement, proclaiming a ‘friendship without limits’. China’s support for Russia has turned out to have limits after all, but even so, there is no question as to where China’s sympathies and support lie. This has not only undermined some nations’ perceptions of China, but also jolted many around the Pacific Rim to wonder that what happened to Ukraine in Europe, might one day happen to Taiwan. Amidst talk of Western countries, defined politically rather than according to their geography, reducing their dependence on China, and vice versa, how might CPTPP members then weigh the benefits of more trade on the one hand, and the prospect of China joining and becoming the largest and most influential, perhaps controlling, member on the other? Whatever governments may decide, moreover, how will the behaviour and strategies of regional and global companies change in this new era of strategic competition between China and the U.S. in which they will increasingly be drawn into the cross-hairs of conflicting laws and regulations? China’s application to join CPTPP reminds us of the way in which the American thinker, Edward Luttwak, reflected more than 30 years ago on the European and Japanese trade threat to the United States, namely as ‘the logic of conflict in the grammar of commerce’.2 The description is even more apt now than it was then. In the 1980s, the severe tension in US-Japan trade and commercial relations sent US politicians and thinkers into a tailspin in which they extrapolated economic and technological panic, political crises and the formation of power relations in Asia that never came to pass.3 Today, though, the leaders of the world’s two largest autocracies, China and Russia, seek to exploit a moment in which they see the United States and the West in terminal decline, and stand shoulder to shoulder in wanting to re-shape and restructure the global system to suit their interests and values. China’s CPTPP application, therefore, has to be considered not just as an illiberal and nationalistic China seeking access to a liberal and perhaps globally important state-of-the-art trade agreement, but also as a political strategy to control, influence, and shape it in adversarial circumstances that did not exist when China was preparing to join and then exploit its membership of the World Trade Organisation in the 1990s and 2000s.

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This doesn’t necessarily mean its application will fall at the first hurdle, but it serves notice about the nature and implications of the negotiations that might lie ahead.

Chapters and Verse It is important to note some of the principal features of the CPTPP agreement and what signing up means to them. Bear in mind that the original TPP agreement, the bulk of which is embedded in CPTPP, was written with a strong US hand, predicated on the view that trade in goods and services should be liberalised, unless specifically ruled out for some reason. CPTPP aims to promote a market-driven economy. It provides for the elimination of tariffs and other trade barriers in a broad range of manufacturing and agricultural commodities. It seeks the liberalisation of services trade by removing cross-border restrictions and protection against discrimination. It establishes rules to open markets to foreign investment and protect investors, lays out guidelines for e-commerce, intellectual property protection, labour market and environmental standards, and spells out rules and standards for the digital and communications sectors, and for transparency in business, state enterprises, competition, and procurement. It differs from TPP mainly in respect of some excisions.4 China is deemed to be a non-market economy, certainly as far as the United States and the EU are concerned for world trade regulation purposes, even though it has over the years tried to blend some market mechanisms and discipline into its own Communist Party- and state-driven economy. This pragmatism lay at the heart of China’s willingness to reform laws and regulations resulting in economic success and opportunities to take advantage of integration into global institutions and the world economy. The big issue for China and for CPTPP members today is the extent to which China’s economy has changed under the stricter ideological and regulatory control of Xi Jinping, even to the point of weakening its suitability for admission to CPTPP. On labour rights, for example, the agreement emphasises the ILO declaration of principles and rights at work, including freedom of association, the right to collective bargaining, the elimination of forced, compulsory and child labour, and labour conditions that have to be met for government procurement.5 China is in a murky area, because while it has passed significant legislation to frame and develop labour

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and social insurance law,6 enforcement is often lax, there are no independent trades union, there is no rule of law as commonly understood, and government policies also conflict with many CPTPP labour standards and requirements. China might point to trades union and labour law that came into being in the mid-1990s, not least because of requirements provided for as China sought membership of the WTO. It could also cite even greater efforts to enact the Labour Contract Law in 2008, and 2013.7 Nevertheless, the contentious area to which many lawyers will draw attention revolves around allegations of the use of forced labour and other policies both in Xinjiang Province, and in internal Chinese supply chains of which it is a part. On state enterprises and monopolies, the agreement seeks to eliminate ‘non-commercial assistance’ and market distortions, for example, subsides, cheap finance, credit and resources, including land, and to establish a level playing field in which state firms do not get unfair advantages in relation to imports and investment. This could also be a big issue for CPTPP members, not in the least because Article 7 of China’s state constitution states that the ‘state sector of the economy, that is, the sector of the socialist economy under ownership by the whole people, shall be the leading force in the economy’.8 Under Xi Jinping, the already strong state sector accounts for a quarter of the $17 trillion economy and dominates sectors such as finance, telecommunications, defence, aviation, transportation, energy, and advanced technologies. This state sector is receiving even more emphasis and priority. Digital trade could be another of the more sensitive areas for negotiations if China’s application is taken up. CPTPP promotes free cross-border data flows, prohibits data localisation requirements, forces disclosure of source codes, and sets high thresholds for government interventions to meet public policy objectives by applying WTO-type general exception clauses. China’s state-led digital governance regime regards data as national security, and a commodity owned by the state, and is insistent about data sovereignty and control. The Personal Information Protection Law does provide tighter personal information protection against processing activities conducted by the state, but in handling data, the state does not differentiate between personal and other data, according to the

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Data Security Law. China also imposes data localisation requirements, according to the Cybersecurity Law. How these conflicts might be resolved is not clear, despite there being clauses under which China and others can claim exemption, for example, national security grounds. Yet national security is a very woolly term and used widely, especially by China, to embrace a wide array of activities and operations. One interesting clue might be found in China’s application in 2021 to join New Zealand, Singapore, and Chile in the Digital and Economic Partnership Agreement (DEPA).9 DEPA self-evidently has a strong focus on data usage, management, storage, and export issues, which are also central to CPTPP. It seems unlikely on one level that China will be allowed to join DEPA unless it first changes, or vows to change its own laws governing data openness and transparency, in particular existing provisions of the Personal Information Protection, Cybersecurity and Data Security Laws.10 These laws are quite specific about, for example, the localisation of data storage and cross-border transfers of data, which contrast strongly with DEPA provisions. On another level, there are exceptions and clauses in DEPA to which China might have recourse, and it will certainly want to press claims that its own data laws do align with principles expressed in the DEPA provisions. In August 2022, a special task force was set up to help negotiate China’s application but it is unclear if it will be able to overcome the stumbling block of the compatibility of any carve-out clauses for China’s data and cybersecurity regime with the standards applied for other members and acceptability by global firms. Drawn-out political negotiations on these and many other matters are likely as all sides seek to make their positions clearer. These negotiations will be worth noting as a guide to similar and broader discussions within CPTPP if China’s application proceeds. There are plenty of devils in the details of these data agreements. Yet the details are also subordinate to the more thematic and political issues of setting standards, and defining systems and procedures. These lie at the heart of trade deals, and confer political advantages on those who dominate in setting them. Alignment with the labour, state enterprise, digital and other chapters of the CPTPP is designed to be a challenge for countries with very different approaches to economic, financial and industrial policies, such as China, but is not a pass/fail option. So much ground is covered in the agreement that China might find itself compliant on some things and not

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on others. There is flexibility also built into the text of the agreement, and there are get-outs and exceptions in the provisions for example, of foreign investment, intellectual property protection, rules affecting trademarks, copyrights and patents, and even digital governance. In some areas, such as data privacy and protection, China might well be able to pitch, based on its own recent laws and governance, that it is not only moving towards CPTPP but that it may already be compliant. What we can say for sure is that in CPTPP, member states and China will put to the test the notion that free trade reduces the potential for conflict and worse, for war. This commonly accepted notion overlooks the argument that most of the conflicts and confrontations that have occurred in the last decades have involved countries that were members of either the WTO or its predecessor and of other regional free trade agreements. Russia and Ukraine were both members of the WTO before Russia invaded. China and India clashed on their border in 2020, while the former has also had significant trade conflict with Australia, Lithuania, Canada and in the past Korea, Japan, and the Philippines. Several conflicts in Sub-Sahara Africa, the Middle East and Western Asia have involved nations bound by trade agreements. The key then is not so much trade, per se, but trust in the governments and institutions that govern trade and that are responsible for negotiations. Trust is fundamentally about playing by the rules. The problem with China’s application to join CPTPP is that it probably wants to change the rules to better its own political economy. Assuring other member states about the direction of travel in terms of policy settings and future changes is important to each applicant’s case, and perhaps none more so than to China. Several members will certainly have reservations about China’s policies in recent years. They may have profound reservations about China’s intent when it comes to setting out new policies and whether they can trust the government in Beijing now committed to an infrastructure of illiberal policies that has been in the making for several years including Made in China 2025, the 14th Five Year Plan, Dual Circulation Strategy, and the current Common Prosperity campaign. In the end, the plethora of technical trade issues, agreements, fall-outs and get-outs that are part and parcel of complex trade agreements like CPTPP may simply follow the politics. China has its own political drive to want to get into CPTPP and settle down inside it to shape Asia– Pacific and global economic relations, and may want to appear sufficiently

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compromising to at least get out of the starting block. Equally, individual members may balk at the prospect of being seen to refuse China initially, knowing that protracted negotiations mean that it is their successors, not they, who will have to make the tough decisions. Then again, one or more may think China’s application in current circumstances is a bridge too far.

CPTPP’s Trade Appeal to China As things stand, the eleven members of CPTPP make up a free trade bloc that is nowhere as large as the RCEP area comprising fifteen countries, which also include China, Japan, South Korea, Australia, and Indonesia.11 CPTPP members account for about 13% of world GDP, compared with about 29% for RCEP members. The population of RCEP members is five times as large as that for CPTPP members, and RCEP countries do twice as much trade. One might ask then what China might hope to gain by also joining CPTPP, especially as nine of the eleven CPTPP members also have bilateral free trade agreements with China, and seven of those nine are in the RCEP as well.12 From a strictly trade standpoint, RCEP is an inferior and much less comprehensive arrangement. CPTPP is important and compares favourably because it not only sets much higher and more pervasive standards, but also epitomises the significance and inter-connectedness of supply chains. China ships about a fifth of its exports to CPTPP members, of which about a half are intermediate goods that are subsequently processed for final consumers. A slightly higher 27% of Chinese imports comes from CPTPP members, of which about three quarters are intermediate goods, again processed further for final consumers inside or outside China.13 These supply chain links are a large part of an even larger Asian phenomenon in which Asia–Pacific countries supply two-fifths of world exports and imports, but about 70% of the former are used as inputs in production processes elsewhere, while the remainder represent final foreign demand, that is consumer goods.14 The institutional and interlocking structure of trade relations in the Asia–Pacific, therefore, gives China a prima facie reason to join CPTPP, and also because the United States is not in it. Given the comprehensive nature of CPTPP, and its high standards, it is easy to see through a trade

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lens both why China is attracted to CPTPP, and why China’s size makes it a difficult case to refuse. It has been suggested, for example, that if China joined the CPTPP, the risk of trade conflict, now perversely enjoying a heyday, might be mitigated, and lead instead to greater co-operation and constructive agreements.15 In a recent book about China and the WTO, for example, it was argued that the existence of a web of multilateral rulesbased systems and agreements has cemented international relations into concrete legal obligations, and that by increasing interdependence, these have increased significantly the cost of unilateral, bellicose behaviour.16 There is an extensive literature surrounding the controversial discussion as to whether trade integration reduces the potential for conflict that lies beyond the scope of this paper. It is important and relevant, however, to consider another argument about why the Chinese membership of CPTPP might appeal to both China and other protagonists. The argument is that just as China used the goal of WTO membership to make the case for extensive and difficult economic and financial reforms at home that persevered into the 2000s, it could also now use its CPTPP application and the need to comply with high standards and principles as a vehicle to facilitate the introduction of, or re-energise the process towards, new liberalising reforms of state firms, labour markets, market institutions and access, and governance practices. This reasoning is highly contentious, to say the least. China’s CPTPP application probably has roots that go back to Xi Jinping’s celebration of the Shanghai International Import Expo in 2019, which placed a big emphasis on pilot free trade zones, and improved market access, and to the 2020 articulation of Dual Circulation Strategy. At the time, CPTPP would certainly have been seen, and possibly still is, by more liberal policy-makers as a vehicle to advance domestic economic reforms, using trade policy as a sort of Trojan Horse to change the state enterprise and industrial policy regimes, including policies on subsidies and market access. So much has happened to economic and industrial policies and to governance since then, however, that it is hard to view China’s CPTPP application simply in terms of checking boxes and drawing up policy adjustment schedules. Ultimately, CPTPP members may end up doing this, but they will also be looking at China differently from the way they viewed Vietnam. China is not a relatively poor country seeking access to a wider regional and global economic set-up, but the world’s second largest

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economy looking to influence and control the economic and governance system in the Pacific Rim. To what extent is China’s WTO experience even relevant? Over 30 years ago, China was still poor and unsophisticated, and relatively naïve on global trade matters, inclined to accept principles of market access and market mechanisms, and it was in no mind to stipulate or defy the rules of world trade or the ethos of globalisation. The goal of joining the WTO was used to frame a strategy that helped China develop market-oriented, law-based agreements requiring, for example, to make progress towards greater transparency, adherence to level playing fields, wider market access, and fewer controls over state enterprises. Yet even by 2016, the date that accompanied China’s WTO accession process to become a market economy, China was still a long way from resembling what we understand by the term. Xi Jinping had already turned away by then from what might have been a last attempt to promote market-oriented reforms, and set China firmly on course for an ideological shift back in time and a recalibration of both industrial policies and social and political goals. There is nothing about China’s economy today or its policy and governance regimes that bears any resemblance to the 1990s or to WTO accession in 2001, and it is based upon a tired reasoning that still tries to draw parallels. Trade integrationists in the Chinese Communist Party and in state institutions, who are prepared to talk to the world, argue how China could and should benefit from the kind of reforms that CPTPP membership might herald but they do not really speak for China’s leadership. Integrationists outside China, moreover, have a blind spot for the sharp lurch in Chinese political discourse and governance that has characterised the government of Xi Jinping, and which is laying a heavy burden on China to choose between the statism that it is prioritising today, and the flexibility and more productive growth it had in the past under different political conditions.17 For now at least, politics are in command as Xi Jinping’s system takes Chinese policy-making both backwards in time, and further away from the ideals and standards of the CPTPP. The Communist Party’s insistence on the concentration of power and control at home, and the heightened sensitivity of nations to contemporary geopolitics and international statecraft, exacerbated by the consequences of China’s support for Russia’s war in Ukraine, mean that China’s CPTPP application is first and foremost, a political decision.

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Elephant in the Room In the 2010s, when the United States was in the original TPP, it certainly conceived of it as a tool of economic integration to counter China’s rising influence in Asia, but it didn’t rule out the possibility that China might join it one day if it were able to meet stringent standards for trade liberalisation and transparency.18 President Trump had different ideas. Yet even though he pulled his country out of the TPP in 2017, the United States in the wings certainly has strong interests in CPTPP strategy discussions, and in the geopolitics surrounding China’s application. Trump’s trade war, which was initially only about punitive tariffs against China, evolved into something quite different, which has spilled over into and been developed by the Biden Administration and the Congress. All of America’s trade partners, whether bound bilaterally or multilaterally, have to acknowledge Washington’s whole-of-government infrastructure of restraint, much of which is aimed at China. Thus, the Commerce Department’s Bureau of Industry and Security oversees technology and export controls, the Treasury’s Office of Foreign Assets Control administers sanctions, including on individuals and entities in Xinjiang and Hong Kong, the interagency Committee on Foreign Investment in the United States polices foreign direct investment, especially involving high technology, and the Justice Department’s National Security Division authorises criminal prosecutions in the event of theft of trade secrets and intellectual property. Washington has enacted legislation aimed at China including, for example, the Uighur Forced Labour Prevention Act which aims to restrict imports from Xinjiang, the Holding Foreign Companies Accountable Act, which aims to enforce standard accounting practices on all companies or delist them (aimed at China), and passed in 2022 both the America Competes Act, which commits the country to take actions at home and abroad as part of its strategy to stand up to China19 and the CHIPS and Science Act which provides significant resources to fund domestic research and manufacturing of semiconductors in the United States.20 The Biden Administration is not only focused on security and defence ties with other members of the ‘Quad’—Japan, India, and Australia—but is also trying to reach out again to existing allies and potential friends in the Indo-Pacific region, especially South Korea and members of ASEAN, with all of whom it has on-going bilateral trade and commercial ties.

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These countries know that there is no substitute for the United States in their region when it comes to security and the balance of power against China, in which trust relations are generally low. However, they are also recognising China as the more influential economic power. For the time being, the chances of the United States re-applying to CPTPP are considered very low, much to the disappointment and annoyance of several of Asian nations, but the United States does at least acknowledge that it has to do something to compensate. President Biden’s Indo Pacific Economic Framework, to which 14 countries have signed up, was launched in 2022, and comprises about two-fifths of global GDP. It involves all the CPTPP nations except for Canada, Mexico, Chile, and Peru, but also has India, Indonesia, the Philippines and Thailand. It is focused on trade and supply chains, clean energy and decarbonisation, infrastructure, and tax and anti-corruption. If, from its embryonic form, it matures into something more substantial, it could rival or overtake CPTPP. The United States will doubtless monitor China’s application to CPTPP closely and any developments in which third parties’ trade links and agreements might contravene its own commercial rules and laws. This applies increasingly to sanctions legislation and orders that might involve US firms, and its security and businesses presence in the Indo-Pacific. There may be a particular CPTPP focus on the actions of Canada and Mexico, both of which are in the United States-Mexico-Canada Agreement (USMCA), a free trade pact that replaced NAFTA that came into force in 2020, and which requires any of the three to inform the others if it intends to initiate talks towards a free trade agreement with a ‘nonmarket economy’. Technically, Canada and Mexico wouldn’t be signing up to any new agreement as such but even so, if USMCA expulsion provisions were invoked in current circumstances, it could prove highly disruptive for all three members –an outcome none of them would want, given the much higher levels of trade integration between them than with China. It is worth pointing out also that the United States is self-evidently not an enthusiast of China-based foreign policy initiatives. It was not enthusiastic about the China-led Asian Infrastructure Investment Bank, and is trying, along with Japan, Australia and India, to offer different economic ties and relationships to other nations, including in Asia, to those propagated by China under the Belt and Road Initiative and the newer Global Security Initiative. Motivated by the entanglement of trade, defence and

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national security in the rivalry for leadership in the region, it probably wants China’s CPTPP application to be kicked into the long grass, if not actually refused. The United States could, of course, bolster its case if it were to persuade members either that IPEF might bear real economic and commercial fruit, or that it might yet re-apply to CPTPP at some point in the future.

The Politics of China’s Membership While the United States should want to boost its relevance to Asian countries as regards economics and trade, China is certainly keen to exploit any vacuum for as long as it exists. Economically, CPTPP could confer advantages that neither RCEP nor China’s several bilateral free trade agreements do. Politically, joining CPTPP would give China serious bragging rights as an integral and the largest member of the world’s newest and broad ranging free trade area, but also a major opportunity to shape its governance, and ultimately lead it. We can imagine that this means different things to different members. The question of China’s CPTPP membership comes with a lot of political baggage at a time when many governments and multinational firms want to lessen their dependence on China, diversify investment and supply chains away from China, or even regionalise supply chains, which is to say, build new ones closer to home. China too is pursuing strategies to de-americanise its own supply chains, and build economic and financial infrastructure and institutions to insulate itself form an American and US dollar-dominated global system, Or it is at least intent on trying to do so, even if the realties are more sobering. It has no qualms, moreover, of using coercion, including in trade, to pressure countries into complying with its wishes. Singapore, which chairs the CPTPP from 2022, and, Malaysia, when it has ratified CPTPP, are likely to support the inauguration of negotiations with China, as might Vietnam. Smaller countries in Southeast Asia are indeed conflicted between their economic interests, which have been shaped increasingly by their involvement with China, and their security interests, which have tended to be aligned with the United States. Typically these nations bemoan the rise in Sino-US tensions and insist they do not want to take sides, or cause displeasure to either side. The likelihood, though, is that smaller CPTPP members, perhaps even including Peru and Chile, once the latter has also ratified, will feel that there is no harm in at

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least voting to start talks. Mexico’s position is more complicated, bound as it is by its FTA with the United States and Canada. Perhaps in time, if or as national security concerns come to dominate normal trade and commercial interests, their behaviour will also alter. For now, however, tough decisions can be deferred for some time, and there may be little mileage for these countries in standing up to oppose China, unless they do so as one. For larger developed countries typically associated with the politically defined ‘West’, such as Australia, Canada and Japan, the decision about China is more nuanced and laden with political and trade conflicts. Canada and Australia will chair the CPTPP in 2024 and 2025, respectively, after New Zealand in 2023. As far as Australia is concerned, especially, it is noteworthy that its own decision to join with the United States and the United Kingdom in a decision to share nuclear powered submarine technology lead immediately to China’s announcement formally to join CPTPP in 2021. China certainly saw fit to contrast its own ‘peaceful and commercial interests’ with ‘AUKUS’ as the promotion or encouragement of aggressive intent and potentially war. China’s peaceful and commercial interests are in any case not always agreed upon. The government and people of Taiwan, which applied to join CPTPP a few days after China, might have something to say about this. The government and people of both Australia and the United Kingdom, whose CPTPP application is first among new applicants and progressing well, can also be expected to take a view on this, in particular, and on China’s application in general. It seems that the British government’s position on China has, if anything, become more hawkish, especially since Beijing’s alignment with Russia over Ukraine, and if the British government has ratified CPTPP when China negotiations have to be approved, it is likely to be on the sceptical side. Similarly, Australia, which retains a much less enthusiastic position regarding China’s proposed entry than do either the United Kingdom or Taiwan. The reasons are principally political rather than trade-related, specifically. In any event, it is quite clear that the virtually simultaneous applications of China and Taiwan present member states with a delicate and highly sensitive political problem. Taiwan is pretty much oven-ready for CPTPP, certainly compared to China, and its status is even more centre-stage than normal, geopolitically, in the wake of Russia’s invasion of Ukraine. The United States is naturally keen to support Taiwan in whatever ways it can, short of recognising its

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independence formally. Australia, Canada, and Japan have all reached out to deepen their ties to Taiwan, along with the EU.21 CPTPP members, therefore, will have to consider how they are going to approach China’s application if Taiwan is pretty much ‘good to go’. It is possible that both could be offered working party negotiations as a starter, or neither, but it is hard to imagine that one could be offered and not the other. There seems little question that negotiations would be conducted separately and it is highly probable that those with Taiwan would be concluded sooner than those with China. Ultimately, the ‘safest’ thing for negotiators to do at the outset might be to decide not to decide ‘in or out’, and to offer negotiations to China, hoping to kick them into long grass, and for others to pick up the harder decision in the future. Perhaps CPTP members will collectively come up with more administratively innovative solutions to avoid any one China-reluctant member taking political flak, but they will, in any event, have to ask questions, now and in the future, as to what it might mean for CPTPP if China were to be admitted. Would Beijing stigmatise Taiwan, regardless of CPTPP rules, or other countries with strong US ties or that supported Taiwan or refused to comply with Chinese naming and cartographical preferences? China does, after all, propagate a narrative about itself as a defender of free trade, and of rules-based institutions, but does itself no favours with its track record of using trade measures and punishments against countries and companies with which it disagrees, or which do not support its narratives and preferences. China acted in 2010 against imports of Norwegian salmon over the Nobel Prize awarded to Chinese dissident, Liu Xiaobao, and implemented a rare-earth export embargo against Japan and other western nations, related to a dispute over the disputed Senkaku or Diaoyu islands. It encouraged anti-Japan protests in 2012 and acted against Japanese companies again over the same islands. It also curbed tourism to and banana imports from the Philippines over the disputed Scarborough Shoal in the South China Sea. In 2016, angry about the visit of the Dalai Lama to Mongolia, it imposed punitive fees on the country’s commodity exports. It restricted tourism with South Korea in 2017 as a protest against Seoul’s adoption of a controversial US-supplied missile shield. More recently, of course, China and the United States have been engaged in a trade war that has spilled into technology, investment, finance, human rights, and tit-for-tat sanctions. In 2018, a number of global firms and brands were threatened or punished for using the name

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‘Taiwan’ on their websites, or marketing or product information.22 The pandemic and China’s support for the Russian invasion of Ukraine have added further to international trade and commercial tensions, restraints and sanctions. In 2021, the tiny European state of Lithuania incurred China’s displeasure and trade sanctions by announcing the opening of a Taiwanese representative office in its capital, Vilnius. Japan, Canada, and above all, Australia have all been at the sharp end of China’s disapproval. Australia, which initially demanded an independent inquiry into the causes of Covid, has lost tens of billions of dollars of export revenues as a result of Chinese trade bans, regardless of the bilateral free trade agreement and both being members of the WTO. It has been grappling with alleged Chinese interference in Australian politics and academia, and become embroiled in regional security tensions, most recently over arrangements between China and the Solomon Islands. China’s relationship with Canada was soured over the extraditionrelated detention at Vancouver airport of Huawei’s Chief Financial Officer in 2018 in response to which China incarcerated two Canadian citizens then in China. Even though they were all released as part of a deal in 2021, relations between the two countries are not good, and Canada’s own free trade agreement with the United States and Mexico could be at risk if any of the parties agree to another free trade agreement with a ‘non-market economy’, or China. The circumstances are complex, and the fear might be exaggerated, but it is quite likely to cause political frictions to which both Canada and Mexico will be sensitive as they do much less of their trade (less than 10%) with China. Japan seems to cycle through phases of competition and cooperation with China, but there is little question that under Prime Minister Kishida Fumio, the former is in the ascendant. Relations with China matter a lot to Japan not only because of their history and geographic rivalry, but because despite this, their integration has gone a long way. China takes about 22% of Japanese exports. Nevertheless, Japan, as a staunch economic and security ally of America, has become increasingly wary of China, and been lukewarm about China’s application. It has re-emphasised a commitment to defence spending and to the protection of human rights, passed legislation, aimed principally at China to protect sensitive Japanese technologies and strengthen critical supply chains from being overly dependent on China, and has become much more anxious about the security of the Taiwan Strait and of Taiwan, including supporting Taiwan’s CPTPP application.23

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There is a sort of consensus view that Japan, driven predominantly by its China and Asian economic interests, will be sympathetic to China’s application, and as a nation that wants to try and maintain good relations with both the United States and China, wouldn’t want to be singled out as the country that said ‘no’ to China. Whether Japanese and others’ scepticism about China is usable as an instrument of leverage to get China to change its economic policy ways is a moot point, and probably one that won’t be readily taken on trust. However, it may also be that the politics of at least starting the process are too awkward not to proceed, in particular since the decision to kick things off has to be unanimous. By the name token, of course, that might mean no decision is made for quite some time.

Conclusion That trade and politics are two sides of the same coin is beyond question. China’s application to join CPTPP is being considered at a trenchant moment in the outlook for both. In trade matters, CPTPP is a state-of-the-art, modern trade arrangement that stretches around the Pacific Rim, and is likely to acquire a European member in the form of the United Kingdom. It may have a future that increases its global appeal and leaves its more stuck-in-time and inflexible WTO peer in the shadows. Seen in this light, China’s application, market economy caveats and reservations notwithstanding, might be hard to refuse though negotiations might be protracted, difficult and with no certainty about the outcome. Member states will be under few illusions that CPTPP will open pathways to reforms that Xi Jinping is unwilling to implement, or consider, but technical negotiators on relatively loose reins, will be minded to try and find ways of making possible some form of agreement. The question is how loose those reins will be because in terms of politics and geopolitics, the circumstances and arguments are quite different. It is impossible, moreover, to ignore the role of the United States. Trade experts are all too quick to point out that the American decision to abandon TPP was a decisive blow to its influence in and among Asian and Asia–Pacific countries, opening the door to China. It was decisive in the sense that America did cede economic advantage to China, but this is neither a sufficient nor necessary reason to doubt that America’s presence and interest in the Pacific Rim will continue to be strong, or that for most

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counties involved, its presence is also welcomed and needed, and its voice heard. CPTPP members are all cognisant of this, to a greater or lesser degree. US multinationals and brands, especially in advanced technologies and financial services, carry important flags for the United States, regardless of CPTPP. The US dollar system, with its sanctions leverage, will remain at the heart of global finance. The Indo Pacific Economic Framework may evolve into a modern commercial agreement, which even if it doesn’t confer ready access to the US market, provides for important developments that signatories value. America’s defence, intelligence and security umbrella, moreover, is worth more to many countries in current circumstances than many of the small (in terms of GDP) advantages that much of CPTPP’s chapters offers. Further, trade deals can’t protect against a determined coercive power, as for example, Australia is discovering about China. Politics suggest then that as members consider and weigh the competing appeals and drawbacks of their relations with China and the United States, the case for refusing or at least delaying China’s application or initial negotiations has considerable substance. Or, at the very least, we can imagine that if negotiations did start, they would set high thresholds for compliance with high standards for all the principal areas that make CPTPP attractive. The bottom line is that China’s application to join CPTPP is about much more than tweaking data, labour, enterprise and environmental laws, or procurement provisions, to accommodate and integrate a large new member. Fundamentally, it is first, about whether to believe that an illiberal China intends to and has the will to adhere to important CPTPP’s liberal requirements, and second, about a vital judgement call between the rules-oriented governance system members have worked hard to establish, and the more ideological, coercive and mercantilist system that Xi’s China presents and would doubtless want to pursue as it does at home.

Notes 1. Premier Sends ‘Powerful’ Signal for China to Join Asia–Pacific’s Largest Trade Pact. Caixin Global Limited, 9 May 2020, https://www.caixinglo bal.com/2020-05-29/premier-sends-powerful-signal-for-china-to-joinasia-pacifics-largest-trade-pact-101560855.html.

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2. Edward Luttwak, From Geopolitics to Geo-economics: Logics of Conflict in the Grammar of Commerce, National Interest, Summer 1990. 3. George R. Packard, The Coming US-Japan Crisis, Foreign Affairs, Winter 1987/88, https://www.foreignaffairs.com/articles/asia/198712-01/coming-us-japan-crisis. 4. CPTPP versus TPP, New Zealand Foreign Affairs and Trade, https:/ /www.mfat.govt.nz/nl/trade/free-trade-agreements/free-trade-agreem ents-in-force/comprehensive-and-progressive-agreement-for-trans-pacificpartnership-cptpp/understanding-cptpp/cptpp-vs-tpp/. 5. Integrated Strategy on Fundamental Principles and Rights at Work 2017– 2023, ILO, https://www.ilo.org/wcmsp5/groups/public/@ed_norm/ @ipec/documents/publication/wcms_648801.pdf. 6. ICLG.com, Employment and Labour Laws and Regulations in China 2022, 25 March 2022, https://iclg.com/practice-areas/employmentand-labour-laws-and-regulations/china#:~:text=ICLG%20%2D%20Empl oyment%20%26%20Labour%20Laws%20and,leave%20rights%20and%20b usiness%20sales. 7. China Labour Bulletin, Workers’ Rights and Labour Relations in China, 30 June 2020, https://clb.org.hk/content/workers%E2%80%99-rightsand-labour-relations-china. 8. Constitution of the People’s Republic of China, National People’s Congress of the People’s Republic of China, http://www.npc.gov.cn/ zgrdw/englishnpc/Constitution/2007-11/15/content_1372963.htm. 9. See for example, https://www.mfat.govt.nz/cn/trade/free-trade-agreem ents/free-trade-agreements-in-force/digital-economy-partnership-agreem ent-depa/. DEPA, signed in 2020, is designed to facilitate digital trade, enable cross-border data flows, and create a system of trust in which data are shared equitably, and personal and online consumer data are protected. South Korea has applied to join, and Canada is also expected to lodge an application. 10. See for example, https://www.skadden.com/Insights/Publications/ 2021/11/Chinas-New-Data-Security-and-Personal-Information-Protec tion-Laws. 11. CPTPP = Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. RCEP = Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. 12. Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam, which are in both free trade blocs, plus Chile and Peru in CPTPP. Only Canada and Mexico in CPTPP do not have free trade agreements with China, but in both cases, the volume of China trade is relatively small.

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13. Minako Morita-Jaeger and Guillermo Larbalestier, The economics and politics of China’s accession to the CPTPP, UK Trade Policy Observatory, Sussex University, 7 October 2021, https://blogs.sussex.ac.uk/ uktpo/2021/10/07/chinas-accession-to-the-cptpp/. 14. Asia Pacific Trade and Investment Trends 2020/21, Economic and Social Commission for Asia Pacific, 20 December 2020, https://www.unescap. org/resources/trade-goods-outlook-asia-and-pacific-20202021. 15. Peter Petri, Michael Plummer, Why the CPTPP could be the answer to the US-China trade war, VoEU, 30 October 2019, https://voxeu.org/ content/why-cptpp-could-be-answer-us-china-trade-war. 16. Petros C. Makroidis and André Sapir, China and the WTO, Princeton University Press, 2021. 17. Dan Rosen, The Age of Slow Growth in China, Foreign Affairs, 15 April 2022, https://www.foreignaffairs.com/articles/china/2022-04-15/ age-slow-growth-china. 18. Obama: China may join trade deal eventually, Politico, 6 April 2015, https://www.politico.com/story/2015/06/barack-obama-chinajoin-trade-deal-tpp-118598. 19. America Competes Act 2022, Key points, https://www.speaker.gov/ sites/speaker.house.gov/files/America%20COMPETES%20Act%20of% 202022%20HR%204521.pdf. 20. Fact Sheet: The CHIPS and Science Act 2022, The White House, https://www.whitehouse.gov/briefing-room/statements-releases/2022/ 08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-str engthen-supply-chains-and-counter-china/. 21. European Commission, Questions and Answers: EU Strategy for Cooperation in the Indo-Pacific, 16 September 2021, https://ec.europa.eu/ commission/presscorner/detail/en/QANDA_21_4709, and European Parliament, EU-Taiwan relations: MEPs push for stronger partnership, 21 October 2021, https://www.europarl.europa.eu/news/en/press-room/ 20211014IPR14926/eu-taiwan-relations-meps-push-for-stronger-partne rship. 22. China warns Western firms over Taiwan, BBC, 29 June 2018, https:// www.bbc.co.uk/news/business-44614106. 23. Victor Lin, What the 2022 Diplomatic Blue Book Reveals About Japan’s Taiwan Policy, The Diplomat, 4 May 2022, https://thediplomat.com/ 2022/05/what-the-2022-diplomatic-blue-book-reveals-about-japans-tai wan-policy/.

CHAPTER 4

Regulatory Constraints and the Political Economy of the UK’s Joining the CPTPP Minako Morita-Jaeger

Introduction The UK formally applied for accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in February 2021. The UK has reached an agreement in principle to join this plurilateral mega-FTA on 31st March 2023. Following the UK, China, Taiwan, Costa Rica and Ecuador applied for a new CPTPP membership, and South Korea officially decided to join the CPTPP.1 These countries are watching the UK’s accession process with great interest. On the surface, the UK’s accession to the CPTPP does not seem difficult since the country stands on democracy and is a highly developed open economy. However, the fact that the UK is a European country located geographically far from the Asia–Pacific and that its regulatory culture

M. Morita-Jaeger (B) Senior Research Fellow in International Trade, University of Sussex Business School, Brighton, UK e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_4

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is very different from regulatory regimes in CPTPP countries cannot be overlooked. Existing International Political Economy (IPE) literature has analysed the CPTPP from the geopolitical context, such as the evolution from the TPP to the CPTPP and the strategic value of the CPTPP compared with the Regional Comprehensive Economic Partnership (RCEP). Concerning the UK’s joining the CPTPP, existing academic literature is mostly about economic impact assessment contributed by economists. To date, little contribution has been made from the IPE perspective. This chapter aims to create a political and economic narrative of the UK’s joining the CPTPP. We aim to answer the three questions: (I) How did the UK get motivated to join the CPTPP, and how were its motives evolving? (II) Can the UK government’s economic opportunism of joining the CPTPP be justified from the trade policy perspective? and (III) What are the domestic constraints of the UK’s joining the CPTPP? To answer these questions, we first look at political factors that shaped UK’s trade policy strategy from pre-Brexit to post-Brexit and analysed how the UK government’s rhetoric of ‘Global Britain’ and ‘Indo-Pacific tilt’ strategy shaped its motive of joining the CPTPP. Second, we examine whether the CPTPP can produce economic gains for the UK by looking at UK’s FTA relations with CPTPP members and trade relationships with them. Third, we examine domestic constraints and societal implications by shedding light on regulatory and ideological challenges in the field of digital trade and food standards and safety. In conclusion, we address implications for future accessions and areas of future research.

The UK’s Motivations for Joining the CPTPP We first analyse major political and economic factors that shaped the UK’s strategy of joining the CPTPP. The UK’s ambition towards independent trade policy evolved after the 2016 United Kingdom European Union membership referendum (23 June 2016). Six months after the referendum, Prime Minister Theresa May introduced the rhetoric of ‘Global Britain’—the opportunity to boost trade by striking Free Trade Agreements with countries worldwide. Theresa May’s government argued that leaving the EU was a great opportunity for the UK to exercise independent trade policy while creating a new relationship with the EU based on an FTA.2 ‘Independent’ trade policy was sold to the British public as one

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of the tangible gains from Brexit (Holmes and Rollo 2020). The appeal was made that the UK could make quick progress in striking tailor-made trade deals suited to the UK at a speed that cannot be achievable inside the EU (HM Government 2017). The UK government saw ‘Global Britain’ as an opportunity to reengage with the British Commonwealth. But the UK’s core economic ambition was striking a trade deal with the US immediately. Given that the US is the UK’s most significant trade and investment partner by country (the EU is the largest if counted as a single partner), a trade deal with the US was politically promoted as a replacement for the EU. Then Foreign Minister Boris Johnson stated that “Britain was first in line” for a trade deal.3 Once the Trump administration was inaugurated, the differences between the US and UK’s views on the world became clear. While the populist nationalism drove Brexit, the UK denied the Trump administration’s protectionism given that it took the political rhetoric of promoting liberal world order (Schuyler and Raymond 2017). In addition, the UK government faced the British public’s strong concerns on lowering food standards and the impacts of allowing American companies access to the National Health Service (NHS) (Heron and Sile-Brugge 2021). The UK was forced to shift away from promoting the particular trade relation with the Trump administration. In addition to the US, the UK government included Australia and New Zealand and the CPTPP in its FTA priority list. The Trump administration’s protectionism prompted the UK’s action to seek to join the CPTPP. Since Boris Johnson inaugurated a new Prime Minister in July 2019, the Johnson government promoted a free trade project by setting the target that 80% of trade be covered by new trade deals by 2022.4 However, the Biden administration’s America first approach further diminished the UK government’s ambition of starting the FTA negotiation with the US during his presidency. The UK’s political motive of joining the CPTPP became much more robust as prospects of a trade deal with the US faded. The UK’s rationale for joining the CPTPP was officially claimed as the Indo-Pacific tilt strategy. In 2021, the UK’s post-Brexit security, defence, development and foreign policy strategy in Integrated Review revealed the UK’s strategic choice of tilting from Europe to the Indo-Pacific region.5 The Government underlined the strategic value of building deeper engagement in the area since the geopolitical and economic importance of the region will be growing for the coming decades. The CPTPP

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was set as a core policy framework to strengthen the UK’s strategic diplomatic ties with the Indo-Pacific. The political motive behind the “Indo-Pacific tilt” approach appeared to be UK’s antagonism towards the EU and recouping economic loss incurred by leaving the EU if not by a trade deal with the US in a foreseeable future. Then Prime Minister Johnson took the antagonism approach since his ‘get Brexit done’ campaign successfully achieved his parliamentary majority in 2019.6 Through the negotiations for Trade and Cooperation Agreement negotiation and the Northern Ireland Protocol, and the implementation of the Post-Brexit arrangements, mistrust between the EU and the UK deepened.7 From the Leave campaign to the antagonism approach, it was difficult for then Prime Minister Johnson to change his political tactic towards rebuilding a positive relationship with the EU (Niblett 2022). The UK government’s expectation for the CPTPP market seems further growing given the low likelihood of striking a trade deal with the US in the foreseeable future and growing mistrust between the EU and the UK. The UK government highlighted that joining the CPTPP will open an opportunity of accessing a dynamic Indo-Pacific market that will generate 56% of global growth between 2019 and 2050 (Department for International Trade 2021b). The UK government underlined that economic power shifts from West to East in the coming decades and emphasised the economic importance of the Indo-Pacific as follows. Currently, four regions, Europe, North America, China and the Asia Pacific, are major global trade players. In the future (2019–2050), 44% of the growth in global import demand is expected to come from the Indo-Pacific, increasing from 42% (2005–2019). In comparison, the EU’s global import demand is expected to decrease from 30% (2005–2019) to 19% (2019–2050). The CPTPP (current 11 members) import market size is estimated to go up from 48% (2019) to 54% (2050) of the EU 27 market (DIT 2021b, pp. 23–24).

Limited Economic Impact of Joining the CPTPP for the UK Although the “Global Britain” rhetoric and independent trade policy including joining the CPTPP appears to promise a tremendous economic opportunity, the UK’s FTAs are unlikely to offset trade losses incurred by leaving the EU customs union and single market (Brakeman et al. 2018).

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Leaving the EU, which incurs trade diversion away from the EU and trade creation with non-EU countries, will be trade and welfare-reducing for the UK (Van Tongeren et al. 2021). According to the Office for Budget Responsibility assessment in October 2021, Brexit will reduce UK imports and exports by 15% lower than had the UK stayed in the EU.8 And GDP will be reduced by 4%.9 To date (May 2022), the UK successfully achieved 35 ‘continuity agreements’ (rolled-over agreements of the EU’s FTAs) with 67 countries. Since these agreements are replicas of the EU’s FTAs, positive economic impacts cannot be expected. Apart from the ‘continuity agreements’, the UK concluded the three new FTAs. In precise, the FTA with Japan (entered into force in January 2021) was almost a copy and paste of the EU-Japan FTA except for some improvements in rules, such as the digital trade chapter. Thus, no economic impact or just a minor impact at most is expected. The UK government’s estimate was 0.07% gain relative to no FTA (a failure of succeeding the EU-Japan FTA). The two FTAs, which were signed with Australia (December 2021) and New Zealand (February 2022) were the UK’s tailor-made FTAs. Even though the economic impacts of these two FTAs projected by the UK government itself—Australia: 0.01–0.02 (revised estimate was 0.08%) and New Zealand: 0.00% show economic gains from these agreements are negligible. Even a trade deal with the US is projected to produce only 0.07–0.16% GDP gains. Although the Johnson government conveyed to the public that joining the CPTPP could create enormous economic opportunities,10 potential financial gains looked slim. The UK government projected that joining the Agreement could increase UK GDP by an extra £1.8 billion and boost trade by £3.3 billion, which is about 0.08% GDP increase in the long run (Department for International Trade 2021a). The UK government’s own estimates indicate that trade and welfare increase driven by the ‘Global Britain’ FTA project will be far below the loss incurred by the UK leaving the EU, which is the UK’s largest and closest trade partner. The significant economic reason why the UK’s FTAs with the IndoPacific region are likely to make a little economic contribution is that geographic proximity matters for trade. Although pro-Brexit government ministers claimed that distance does not matter for trade in their ‘Global Britain’ discourse, there are a plenty of strong theoretical and empirical work that support the gravity equation, which is a country’s trade exports proportionally reflect economic size and inversely reflect

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geographic distance. The evidence well explains today’s international trade (Chaney 2018; Borchert and Yotov 2017). For the UK, according to some economic studies, the EU is overwhelmingly like to remain as the most important trade partner in the future (Kaczmarczyk 2018). For example, services trade and even digitisation of trade are strongly affected by distance (Kimura and Lee 2006; Spring and Lowe 2018). This indicates that the UK as a services economy accounting for 80% of total economy output with a comparative advantage in services trade would continue to export services to its neighbour, the EU, even if volumes of exports will be reduced from the current level (40% of total UK service exports in 2020).11 Also the distance effect still matters for global value chains even Information and Communications Technology (ICT) develops (Baldwin 2016). Furthermore, it is worth noting that the future trade environment is full of uncertainties as the world has been going through China-US decoupling, Covid-19 pandemic, and is experiencing Russia’s invasion in Ukraine. In fact, many governments shifted to promote reshoring or friend-shoring to avoid unpredicted risks (Gasiorek 2022). In addition to the strong economic theory and evidence of the gravity equation as well as increasing geographical uncertainties mentioned above, there are two specific policy reasons why the CPTPP’s economic value is very limited for the UK. First, the UK already has the bilateral FTAs with nine countries (Canada, Chile, Japan, Mexico, Peru, Singapore, Vietnam, Australia (signed) and New Zealand (signed)) out of eleven (Table 4.1). Although the FTA with Canada and Singapore are continuity agreements, which is a replica of the EU’s FTAs, these are EU’s ‘New Generation’ FTAs that provide for regulatory cooperation in a wide range of areas. The FTA with Japan is almost same as the EUJapan FTA, but its digital chapter goes beyond the CPTPP. Australia is a completely new FTA negotiated from scratch and reflects the UK’s interest of promoting cooperation in technology and innovation. The coverage of these FTAs is comprehensive, and the level of liberalisation commitment is high. The CPTPP, which was negotiated in 2010s, is no longer a novel FTA in comparison with the UK’s tailor-made new FTAs. Thus, the Agreement does not seem to bring added values to the UK. The second reason is that the UK’s major trade partners among CPTPP member countries are the ones with which the UK has a bilateral FTA. For example, goods exports accounted for 7.92 of UK’s total exports, among which, 5.99% are to the countries which the UK has

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Table 4.1 UK’s bilateral relations with CPTPP members New bilateral FTA with the UK Continuity agreement plus

Continuity agreement (to be renegotiated)

Australia

New Zealand

Japan (EUJapan EPA (2019?) Canada

Continuity agreement No bilateral FTA

Mexico

Singapore

Vietnam

Chile

Peru Malaysia and Brunei (Brunei not yet ratified the CPTPP)

Note The figure was created by the author

already have an FTA. In the case of services, 9.05% of UK’s total exports went to the CPTPP, among which, 6.20% were to the countries with the FTA relation. 5.66% out of 7.03% of UK’s total goods imports and 6.31% out of 7.91% of UK’s total services imports are from the CPTPP countries with the FTA relations. Note that these figures do not include Australia and New Zealand as the FTAs are not yet ratified. If these two countries are included, these shares would become a slightly higher (Fig. 4.1).12 Among the CPTPP member countries, the UK’s major trade partners are Canada, Japan, Australia and Singapore. The four countries account for 87% of services exports, 80% of goods exports, and 84% of services imports and 75% of goods imports (Fig. 4.2). Potential economic gains depend on the CPTPP’s future expansion, such as China, with which the UK has a strong trade relation (13.3% of total goods imports and 5.8% of total goods exports). Because the CPTPP is a plurilateral agreement, efficiency gains through regulatory cooperation among the 11 CPTPP members can be expected.

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Fig. 4.1 CPTPP shares of UK trade with the world, 2019 (Source Gasiorek et al. [2022]. The value of the CPTPP for the UK, UKTPO blog, 3 February 2021. At: The value of the CPTPP for the UK « UK Trade Policy Observatory [sussex.ac.uk]; ONS data on international trade; author’s calculations. Note Shares calculated as the total value of UK trade with CPTPP countries divided by the total value of UK trade with the World; CPTPP-FTA are those CPTPP countries the UK already has an FTA with)

Fig. 4.2 UK’s total trade with CPTPP countries, 2019 (Source UN Comtrade and ONS combined data. Note Shares calculated as the value of UK trade with a CPTPP country (or countries) divided by the total value of UK trade with the CPTPP)

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For example, the CPTPP’s rules of origin arrangements allows for the full cumulation of inputs from the CPTPP partner countries. However, as the empirical evidence of gravity equation shows, companies may not get strong incentives to increase trade, such as exporting or importing intermediate inputs for global supply chains, with geographically distant CPTPP members only because of the CPTPP rules of origin arrangements.

Regulatory Constraints and Societal Implications Regulatory Divergence Between the Asia Pacific and the UK as a Former EU Member This section examines regulatory constraints and potential societal implications of the CPTPP in the UK. Unlike bilateral FTAs which the UK has previously concluded, the UK has to unconditionally accept all CPTPP rules to become a new member. The CPTPP rules on accession process require an acceding country to demonstrate that its relevant domestic laws and regulations are all compatible with the CPTPP rules.13 In practice, CPTPP members use what is called ‘side letters’ to derogate specific legal obligations under the Agreement. However, to what extent the UK will be allowed to use such a mechanism is unknown (Morita-Jaeger 2021a). Depending on ways the UK accedes, the CPTPP would potentially cause frictions to UK’s public interests and its regulatory environment. The origin of the CPTPP is the Trans-Pacific Partnership (TPP), the negotiations of which were driven by the Obama administration and signed in February 2016. The Agreement strongly reflects the US’s economic interests that time by resembling the US’s existing FTAs (Schott 2018; Elms 2016). This means that the CPTPP is the trade agreement adopted the US style regulatory approach and regulatory cooperation. There is a regulatory divergence between the EU and the US. Their regulatory approaches are different, reflecting political, economic, institutional and other societal values (Bercero et al. 2018; Young 2015). In general, the EU esteems its public policy objectives, such as protection of individual rights, environment, health, safety and consumer rights, in designing its regulatory policies. In comparison, the US takes the marketdriven approach and regulations are administered at the state level in many areas.

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It is worth recalling that regulatory differences between the EU and the US caused the civil society opposition to the Transatlantic Trade and Investment Partnership (TTIP) negotiations. Consumer and environmental civil society organisations and the general public in the EU were concerned that the regulatory cooperation between the EU and the US under the TTIP would lower the EU’s safety and environmental protection. Also, civil society organisations expressed a vital concern about the investor-state dispute settlement (ISDS). They claimed that ISDS has a chilling effect on social regulations such as environment, human rights and worker rights protection as transnational corporations (TNCs) can challenge hosting countries’ social regulations (De Ville and Siles-Brugge 2016). In the case of the UK, a group of British civil society organisations, which consists of about 50 organisations, formed a coalition with some civil society organisations in the EU member states and organised demonstrations (Van Loon 2018). The presence of non-business stakeholders as well as the general public, played an influential role in the TTIP negotiations instead of conventional export-oriented interests versus import-competing actors (Young 2016). Although a trade negotiation for the UK-US FTA is unlikely to be materialised due to the US’s lack of interest, the British public has already expressed strong concerns that such a trade deal might lower UK’s high regulatory standards (Heron and Siles-Brugge 2021). The UK was an EU member for almost a half-century since 1973, until it left the EU customs union and single market in January 2020. Thus, its regulatory culture and ideology are deeply rooted in the EU style societal norms and ideology. British stakeholders’ concerns about the CPTPP accession mirror concerns about the TTIP negotiation and the potential UK-US FTA. Regarding the export-oriented and import-competing interests in the UK, it is almost only the agricultural sector that has a concern about an increase of imports in agricultural and food products. Other significant concerns are concentrated in the CPTPP’s rules. The British public and civil society organisations’ main problems lie in regulatory issues, such as ‘product standards, regulation and certification’, ‘intellectual property’, and ‘labour and environment’ according to the UK government’s public consultation (Fig. 4.3). At the domestic level, the UK government has a strong appetite for regulatory sovereignty to permit a regulatory divergence from the EU or deregulation (Duncan et al. 2021). However, the substance of the regulatory sovereignty exercise lacks clarity.14 After a series of consultations

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Fig. 4.3 Top concerns on the CPTPP selected by different respondent groups (DIT consultation) (Data Source DIT [2019]. Public consultation on the UK potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Summary of responses, Table 7: Top concerns selected by different respondent groups. https://assets.publishing.ser vice.gov.uk/government/uploads/system/uploads/attachment_data/file/817 865/Public_consultation_on_the_UK_potentially_seeking_accession_to_CPTPP. pdf. Note The figure was created by the author based on the data)

with the UK stakeholders, the UK House of Lords International Agreement Committee reported that the CPTPP agreement conflicts with the UK’s regulatory environment, such as intellectual property, food standards, data protection, professional qualifications, ISDS and environment standards (House of Lords 2021). British stakeholders, especially the agriculture sector and non-business stakeholders, such as consumer organisations and civil society groups, are expressing concerns that the CPTPP can be used as a footstep towards lowering high regulatory standards amid unclarity in the domestic policy (DIT 2019). For example, the British consumer organisation, ‘Which?’ identified health and safety standards for food and products, data security and protecting’, and digital consumer rights as the areas of importance (Which? 2021).

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Digital Trade Digital trade, defined as ‘all trade that is digitally ordered and/or digitally delivered’,15 is a critical policy area of 21st-century trade. While governments find potential opportunities to support the digital economy and promote innovation and new technologies, they are learning to manage markets at national and international levels. CPTPP countries, such as Australia, New Zealand and Singapore, are actively creating a comprehensive digital chapter in their FTA or a digital economy agreement. But these societal impacts are still unknown (Aaronson 2021). The UK government is trying to set its national agenda of leading digital trade policy. It set out a vision that the UK secures a position as a digital and data hub. To achieve this vision, promoting FTAs and digital economy agreements is framed as a significant policy tool (HM Government 2021). The UK government argues that becoming a rulesetter in digital trade is economically rational as digital trade is significant for the UK economy. Eighty per cent of UK economic output is services, and more than half of UK trade (67% of imports and 52% of exports in 2018) are digitally delivered. Also, the UK will be the third largest investment destination for tech venture capital in 2020 (UK Board of Trade 2021). On the policy front, the UK’s policy journey of signing FTAs shows a clear trend that the UK is shifting towards the Asia–Pacific style digital trade governance from the EU style digital governance. The Asia– Pacific countries, including the US, takes a market-driven and open rules approach, whereas the EU aims to ensure public policy objectives, such as protecting human rights. The UK signed the FTAs that include a comprehensive digital trade chapter with Australia, New Zealand, and Japan and a digital economy agreement with Singapore. The digital agreements which the UK recently concluded used these four countries’ previous agreements, including the Japan-US Digital Trade Agreement, the Chile-NZ-Singapore Digital Economy Partnership Agreement, and the Australia-Singapore Digital Economy Agreement, as a template (Morita-Jaeger 2021b). Given that the CPTPP was negotiated in 2010s, its e-commerce chapter is not so ambitious in terms of scope and depth compared with the UK’s latest FTAs and the digital economy agreement that reflect current digital innovation and technological development such as Artificial Intelligence (AI) and algorism. However, the CPTPP e-commerce

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chapter constrains the UK since the rules oblige the UK to promote free data flow with countries with lower levels of data governance. In this context, it should be noted that there is a divergence in data governance among CPTPP members and the countries which applied for its membership. The UK is the best performer of data governance and other European countries show strong performance in digital governance, according to the Global Data Governance Map.16 While some CPTPP countries, such as Australia, New Zealand, Japan and Canada, are showing good performance, other CPTPP countries, especially Chile, Malaysia and Vietnam, show weak performance (Morita-Jaeger 2022). The above indicates the two significant policy implications for the UK. First, the UK may not be able to maintain a high standard data protection under the UK GDPR regime since the UK has to commit free cross-border data to flow with CPTPP members, including the countries with lower levels of data protection. Although the CPTPP members are required to ensure free cross-border data transfer (Article 14.11), the approach taken for personal data protection is weak (Article 14.8). The provision only recommends each Party consider the principles and guidelines of relevant international bodies for developing a legal framework without any specific reference. It should be noted that international standards, such as the APEC Cross-Border Privacy Rules system, take a self-regulatory regime and cannot provide a high-level data privacy protection than the UK’s GDPR does. To promote compatibility among CPTPP members, the CPTPP only listed autonomous recognition and mutual arrangement or broader international frameworks as possible mechanisms (Morita-Jaeger 2021b). Given the divergence of data governance among CPTPP members, ensuring regulatory compatibility looks legally and technically very difficult.17 Second, UK’s commitment of cross-border data flow with countries with lower data protection may endanger the EU’s adequacy decision to the UK. The EU sets its adequacy decision as a condition of free data flow. Among the CPTPP countries, only three countries, Canada, Japan and New Zealand, have received adequacy decisions from the EU.18 Suppose the UK commits free data flow with the rest of CPTPP members that do not obtain an adequacy decision from the EU without any legal and technical safeguarding mechanism. In that case, EU citizens’ data transferred through the UK cannot be protected under the GDPR equivalent condition. Since the EU’s adequacy decision to the UK has a four-year sunset clause that makes the decision automatically expire in 2024, the UK may

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not be able to receive a new adequacy decision in the future. Or the EC might revoke the adequacy decision anytime if the EC finds the UK’s divergence from the EU data privacy standards.19 Business fears losing the EU’s adequacy decision as the potential economic cost of losing the EU’s adequacy decision for the UK firms was estimated at £1 billion to £6 billion.20 Given that the UK government intensively negotiated and concluded the bilateral FTAs with Australia and New Zealand and digital economy agreement with Singapore within a limited period after the leaving the EU, the discussions of digital trade agreement is not yet fully discussed at the national level (International Trade Committee, House of Commons 2021). As for the CPTPP, both UK business stakeholders and non-business stakeholders shared the concern that CPTPP’s provisions constraint UK’s ability to regulate cross-border data flows.21 They especially expressed a vital concern about how British citizens’ data protection and privacy is ensured once private data is transferred to a CPTPP member country with lower data privacy standard. For example, according to the consumer survey conducted by the UK consumer organisation, 88% of people said that the UK’s future trade deals should not reduce the level of data and digital protection (Which? 2021). The Scottish government requested the UK government to apply a digital rights-based approach to digital trade and balance economic and social considerations (Scottish Government 2021). Food Standards and Safety Increased competitive pressure on the UK farm sector from tariff removal is linked to concerns about a reduction in UK animal welfare and environmental standards. Food standards and safety is an area of regulatory threats as to the UK’s joining the CPTPP. Although the US adopts science-based risk assessment approaches that requires governments to take decisions based on scientific evidence, the EU’s approach is more ex-ante that reflects ‘precautionary principle’, under which precautionary measures can be justified where safety is uncertain (Bercero et al. 2018). The UK is, like the EU, an international outlier in its ‘precautionary’ approach to risk arrangement. The CPTPP’s Sanitary and Phytosanitary (SPS) system is different from UK’s continuity agreements (so as EU’s FTAs). Its SPS chapter was strongly driven by the US’s exports interests and its strategy of future SPS

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governance. Thus, the SPS chapter takes the approach that risk assessment is based on scientific evidence and relies more upon international standards (Wagner 2017). The CPTPP provisions (Article 7.9(2)) basically narrow the scope of using precautionary principle under the WTO when scientific evidence is uncertain. It is warned that the CPTPP SPS rules could lead to lowering the level of UK food standards in the future (Lydgate 2021). During the CPTPP public consultation conducted in 2019, UK stakeholders, both business associations and non-business associations shared concerns about lower SPS standards and regulations in CPTPP countries. And they requested the UK government to maintain the current UK food standards and regulatory alignment with the EU. Some business stakeholders are worried whether joining the CPTPP would still allow business to adhere to EU standards and potential regulatory divergence may create additional administrative burden for accessing the EU market (or vice versa). Civil society organisations are concerned that the CPTPP provisions might limit the UK’s ability to deploy the precautionary principle, which could undermine public health and safety. Also, concerns on potential imports of chlorine-washed chicken, hormone-fed beef, and GMOs from CPTPP countries were expressed from individual and civil society organisations during the government consultation (DIT 2019) and the parliament scrutiny process.22 The domestic political environment surrounding food standards in the UK looks uncertain. The Johnson administration desired regulatory divergence from the EU exercising its post-Brexit regulatory freedom. On the other hand, the Department of International Trade promised that the UK would maintain the current high-level food standards without providing how to avoid legal conflicts between the UK’s precautionary approach and CPTPP’s science-based approach (House of Lords 2021). The current intensifying political tensions between the UK and the EU over the Northern Ireland Protocol indicates that the UK abided by the CPTPP’s SPS rules might endanger maintaining the UK level statutory protection in the area of animal welfare. The different regulatory approach in the CPTPP constrains the UK’s regulatory alignment with the EU. In other words, the less the UK aligns itself with EU rules, the more frictions there will be at the border between the EU and the UK (Holmes 2022).

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Conclusion Each country has different motives for joining the CPTPP and the domestic and international environments surrounding an acceding country are different. This chapter tries to make an academic contribution of creating a narrative of the UK’s case. We analysed how the UK’s motivations for joining the CPTPP were shaped and examined potential economic and social implications from the political and economic perspective. The UK’s joining the CPTPP was motivated by the Global Britain agenda and was strategically integrated into the Indo-Pacific tilt project. From the foreign policy perspective, the CPTPP is a critical step for the UK to advance its historical geo-strategic project, which is a shift of its focus from Europe to the Asia–Pacific region. As a chance of striking a trade deal with the US, which was once the UK’s strongest desire, was much diminished due to a lack of US’s interest, UK’s political and economic expectations to the CPTPP grows. In spite of the UK government’s motive, which is to use the CPTPP for recouping trade loss incurred by leaving the EU, the CPTPP seems to have little economic value. Likely economic benefits depend on CPTPP’s future expansion. While economic value looks very slim, there are potential regulatory constraints and societal impacts. British stakeholders have strong concerns of sacrificing its high regulatory standards for food safety, environment, consumer protection and human rights. Since the UK takes the EU style regulatory approach that esteems public policy objectives, the CPTPP, which strongly reflects the US’s market-driven regulatory approach, may create domestic policy constraints. Digital trade and food standards and safety are the major areas where we see possible regulatory conflicts. In the case of digital trade, ensuring free cross border data flow with some CPTPP countries which have lower data privacy protection regimes are causing concerns on how British citizens’ private data is protected under the CPTPP rules. The UK accepting such a rule also risks the EU’s adequacy decision on data privacy for the UK. As for food standards, the CPTPP’s narrow scope of using precautionary principle may permit lowering the UK’s food standards in the future. This paper created a narrative of UK’s joining the CPTPP by focusing on a regulatory issue, which is a contradiction between willingness of the Johnson’s administration to diverge from the EU regulatory framework (possibly towards the Asia–Pacific style regulatory framework) and British

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public’s desire to retain the high level of regulatory standards and regulatory alignment with the EU. The UK accession to the CPTPP is the first case that a country outside the Asia–Pacific region joins the CPTPP. Although there are always devils in detail in trade negotiations, we can conclude that the UK’s joining the CPTPP is unique case as the UK is an European country which stands on the different regulatory regime reflecting its history, ideology and culture. Future research could further extend discussion on other areas of policy that have potential conflicts with the CPTPP. These include Investor-State Dispute Settlement (ISDS), patent rights (a direct conflict between CPTPP Art. 13.38 and the UK’s participation in the European Patent Office (EP) and European Patent Convention (EPC)), and NHS (a potential conflict between the CPTPP Article 18.53 and Costs of generic medicines). From the international perspective, UK’s accession would create a dynamism to the CPTPP -changing the CPTPP from a like-minded regional FTAs to a cross-regional mega-FTA and creating synergy for further expansion. How the UK’s joining could contribute to CPTPP’s development from the institutional perspective would be another area of future study.

Notes 1. To date (September 2022), Colombia Indonesia, Thailand, and the Philippines expressed interest in joining the CPTPP. 2. Speech by Prime Minister Theresa May, “The government’s negotiating objectives for existing the EU”, January 2017, The government’s negotiating objectives for exiting the EU: PM speech—GOV.UK (www. gov.uk). 3. US wants post-Brexit free trade deal with UK ‘fast’, says Boris Johnson | Politics News | Sky News. 4. UK wants 80% of trade covered by new trade deals by 2022 | Reuters. 5. HM Government (2021). Global Britain in a competitive age -The integrated Review of Security, Defence, Development and Foreign Policy, March 2021: Global Britain in a Competitive Age: The Integrated Review of Security, Defence, Development and Foreign Policy—GOV.UK (www. gov.uk). 6. Get Brexit done and unleash Britain’s potential (conservatives.com). 7. Politico, EU and UK struggle to overcome Brexit bad blood, February 3, 2021: EU and UK struggle to overcome Brexit bad blood—POLITICO. 8. Office for Budget Responsibility, Economic and fiscal outlook -October 2021, The initial impact of Brexit on UK trade with the EU: The

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9. 10. 11. 12.

13.

14. 15.

16. 17.

18. 19. 20.

21. 22.

initial impact of Brexit on UK trade with the EU—Office for Budget Responsibility (obr.uk). Office for Budget Responsibility: Economic and fiscal outlook, October 2021: CCS1021486854-001_OBR-EFO-October-2021.pdf. UK applies to join huge Pacific free trade area CPTPP—GOV.UK (www. gov.uk). House of Commons Library, Statistics on UK-EU trade, 3 December 2021: CBP-7851.pdf (parliament.uk). The value of the CPTPP for the UK, UKTPO blog, 3 February 2021; The value of the CPTPP for the UK « UK Trade Policy Observatory (sus sex.ac.uk). Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Accession Process, Annex to CPTPP/COM/2019?D002; Accession-Process.pdf (mfat.govt.nz). Financial Times, ‘Across the board industries from cars to chemicals are craving clarity’, by Peter Foster, May 19, 2022. OECD, WTO and IMF (2020). Handbook on measuring digital trade version 1, https://www.oecd.org/sdd/its/Handbook-on-Measuring-Dig ital-Trade.htm. See: Global Data Governance Map; https://datagovhub.letsnod.com/. House of Commons International Trade Committee, Oral evidence: Digital trade and data, HC 1096; https://committees.parliament.uk/ora levidence/2062/pdf/. Each country has special technical safeguard arrangements for the EU. Commission adopts adequacy decisions for the UK (europa.eu). New Economics Foundation and UCL European Institute (2020). The cost of data inadequacy—The economic impacts of the UK failing to secure an EU data adequacy decision, November 2020; ucl_nef_data-ina dequacy.pdf House of Lords, 2021. For example, concerns about the SPS provisions in the CPTPP and its impacts on the UK food standards and safety can be seen in the written evidence to the House of Lords, International Trade Agreement Committee from the RSPCA (CPT0014), Greener UK (CPT 0027), Trade Justice Movement (CPT0008), Trade & Animal Welfare Coalition (CPT0020) and the Scottish Government (CPT0045).

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Bibliography Aaronson, S. A. (2021). Listening to users and other ideas for building trust in digital trade, CIGI papers no. 258, September 2021. https://www.cigion line.org/publications/listening-to-users-and-other-ideas-for-building-trust-indigital-trade/. Baldwin, R. E. (2016). The great convergence: Information technology and the new globalization. Cambridge, Massachusetts: The Belknap Press of Harvard University Press. Bercero, I. G. et al. (2018). EU-US engagement on regulatory issues: Lessons learnt, notably in the context of the TTIP negotiations. European Foreign Affairs Review, Vol. 23(2), 149–165. Board of Trade. (2021). Digital trade—A board of trade report, November https://assets.publishing.service.gov.uk/government/uploads/sys 2021; tem/uploads/attachment_data/file/1035370/digital-trade-a-board-of-tradereport.pdf. Borchert, I. and Yotov, Y. (2017). Distance, Globalisation, and International Trade. Economics Letters, 153(C), 32–38. Brakeman, S., Garretsen, H., and Kohl, T. (2018). Consequences of Brexit and options for a ‘Global Britain’. Regional Science, Vol. 97(1). Chaney, T, C. (2018). The gravity equation in international trade: An explanation. The Journal of Political Economy, Vol. 126(1), 150-177. De Ville, F., and Siles-Brugge, G. (2015) TTIP: The truth about the transatlantic trade and investment partnership. Cambridge: Polity Press, 2016. Department for International Trade. (2019). Public consultation on the UK potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) summary of responses. https:/ /assets.publishing.service.gov.uk/government/uploads/system/uploads/att achment_data/file/817865/Public_consultation_on_the_UK_potentially_see king_accession_to_CPTPP.pdf. Department for International Trade. (2021a, April). UK accession to CPTPP: The UK’s strategic approach. https://assets.publishing.service.gov.uk/govern ment/uploads/system/uploads/attachment_data/file/1027860/dit-cptppuk-accession-strategic-approach.pdf. Department for International Trade. (2021b, September). Global Trade Outlook. https://assets.publishing.service.gov.uk/government/uploads/sys tem/uploads/attachment_data/file/1036243/global-trade-outlook-septem ber-2021b.pdf. Duncan Smith, I., Villiers, T., and Freeman, G. (2021, May). Taskforce on innovation, growth and regulatory reform. https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/994 125/FINAL_TIGRR_REPORT__1_.pdf.

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Elms, D. (2016). The origins and evolution of the Trans-Pacific partnership trade negotiations. Asian Survey, Vol. 56(6). Financial Times. (2021). Why striking trade deals abroad is creating hedaches for Johnson at home. May 20. Gasiorek, M. (2022, April). Supply chain resilience: The dangers of ‘pick n mix’, UKTPO briefing paper 67. https://blogs.sussex.ac.uk/uktpo/files/2022/ 04/67.pdf. Heron, T., and Siles-Brugge, G. (2021, October–December). UK-US trade relations and ‘Global Britain’. The Political Quarterly, Vol. 92, No. 4. HM Government. (2017, February). The United Kingdom’s exit from and new partnership with the European Union. https://assets.publishing.service.gov. uk/government/uploads/system/uploads/attachment_data/file/589191/ The_United_Kingdoms_exit_from_and_partnership_with_the_EU_Web.pdf. HM Government. (2021, March). Global Britain in a competitive age—The integrated review of security, defence, development and foreign policy integrated review. http://www.gov.uk/. Holmes, P. (2022, May). How to salvage something from the wreckage of Brexit. Progressive Economy Forum. https://progressiveeconomyforum. com/publications/reviewing-the-tca-how-to-salvage-something-from-the-wre ckage-of-brexit/. Holmes, P., and Rollo, J. (2020). EU-UK Post-BREXIT trade relations: Prosperity. European Foreign Affairs Review, Vol. 25, No. 4. House of Lords. (2021, November). UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): Scrutiny of the government’s negotiating objectives, House of Lords International Agreement Committee, 10th Report of Session 2021–22. https://committees.par liament.uk/publications/7859/documents/81612/default/#page=13. International Trade Committee, House of Commons. (2021, June 23). Digital trade and data, First report of session 2021–22. https://committees.parlia ment.uk/publications/6451/documents/70389/default/. Kaczmarczyk, P. (2018, February 23). Why distance matters in trade, LSE Brexit Blog 2015–2021. https://blogs.lse.ac.uk/brexit/2018/02/23/whydistance-matters-in-trade/. Kimura, F., and Lee, H. (2006). The gravity equation in international trade in services. Review of World Economics, Vol. 142(1), 92–12. Lydgate, E., and PAN UK Sustain (2021, June). Toxic trade—How joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) threatens to weaken US pesticide standards. Pesticide Action

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Network UK and Sustain. https://coherent-commons.s3.amazonaws.com/ artifacts/file/file/testpresigned/f55cd25a-e491-4757-8c02-075124aec6fc. pdf?X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIA23 B6R4NTBYK5TUNC%2F20220516%2Fus-east-2%2Fs3%2Faws4_request& X-Amz-Date=20220516T122439Z&X-Amz-Expires=3600&X-Amz-Signed Headers=host&X-Amz-Signature=4335d3a4b9caf5be062e6625dfc3be344 7a5833abd2a9cb9aabfa66082aa02b1. Morita-Jaeger, M. (2021a, April). Challenges ahead for the UK to join CPTPP, UKTPO blog, https://blogs.sussex.ac.uk/uktpo/2021a/04/16/challengesahead-for-the-uk-to-join-cptpp/. Morita-Jaeger, M. (2021b, July). Accessing CPTPP without a national digital regulatory strategy?—Hard policy challenges for the UK. UKTPO Briefing Paper 61. https://blogs.sussex.ac.uk/uktpo/files/2021b/07/Briefing-paper61.pdf. Morita-Jaeger, M. (2022, May 4). What a digital divide and divergence of data governance in the Asia-Pacific mean for the UK, UKTPO Blog. https://blogs.sussex.ac.uk/uktpo/2022/05/04/what-a-digital-divideand-divergence-of-data-governance-in-the-asia-pacific-mean-for-the-uk/. Niblett, R. (2022, March). Global Britain in a divided world—Testing the ambitions of the integrated review. Chatham House Research Paper. https://www.chathamhouse.org/sites/default/files/2022-04/202203-29-global-britain-in-a-divided-world-niblett_1.pdf. Schott, J. J. (2018). The TPP: Origins and outcomes. In Handbook of International Trade Agreements: Country, regional and global approaches, edited by Robert E. Looney, London: Routledge. Schuyler, F., and Raymond, R. (2017). The US-UK ‘special relationship’ at a critical crossroads, Atlantic Council. http://www.jstor.org/stable/resrep 03496. Scottish Government. (2021). Written evidence (CPT 0045), House of Lords International Agreement committee. https://committees.parliament.uk/wri ttenevidence/39865/html/. Springford, J., and Lowe, S. (2018, February 5). Britain’s service firms can’t defy gravity, alas, Centre for European Reform. https://www.cer.eu/insights/bri tains-services-firms-cant-defy-gravity-alas. Van Loon, A. (2018). Diverging German and British governmental trade policy preferences in the Transatlantic Trade and Investment Partnership (TTIP) negotiations. Journal of Contemporary European Studies, Vol. 26 (2), 165-179. Van Tongeren, F., Arriola, C., Mourougane, A., and Benz, S. (2021). Trade impacts of the Trade and Cooperation Agreement between the European Union and the United Kingdom, OECD Economics Department Working

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Papers, No. 1698, Paris: OECD Publishing. https://www.oecd-ilibrary.org/ docserver/eeeea3ec-en.pdf?expires=1654036502&id=id&accname=guest& checksum=73B291697D40E5DBFBA1998EF4EC524D. Wagner, M. (2017). The future of sanitary and phytosanitary governance: SPSPlus or SPS-Minus? Journal of World Trade 51(3), pp. 445–470. Which? (2021). Written evidence (CPT0049), House of Lords International Agreement committee. https://committees.parliament.uk/writtenevidence/ 40748/pdf/. Young, A. R. (2015). Liberalising trade, not exporting rules: The limits to regulatory co-ordination in the EU’s ‘new generation’ preferential trade agreements. Journal of European Public Policy, Vol. 22(9), 1253–1275. Young, A. R. (2016). Not your parents’ trade politics: The Transatlantic Trade and Investment Partnership negotiations, Review of international political economy, Vol. 23(3), 345–378.

CHAPTER 5

Perspectives of CPTPP Membership Expansion and Its Implications on a Shifting Paradigm of Economic Integration in Asia Pacific Peter C. Y. Chow

Introduction After the collapse of the Doha Round of multilateral trade negotiation in 2005, economic integration in Asia Pacific regained momentum generated ever since the proliferation of preferential trade accord in the 1990’s. Yet the momentum was undercut by the inward-looking policy

The author would like to thank Tun-Jen Cheng, Christopher Dent, Yung-Hsing Guo and Wei-Chin Lee for their constructive comments on an earlier draft of this paper. He also likes to thank the editor’s comment as well. However, the usual caveats apply. P. C. Y. Chow (B) City University of New York, New York, NY, USA e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_5

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undertaken by the Trump Administration. After President Donald Trump withdrew the U.S. from the Trans Pacific Partnership (TPP) in 2017, the remaining 11 countries led by Japan signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreement in February 2018 (hereafter CPTPP-11). As indicated in Table 5.1, CPTPP-11 accounts for 12.53% of world GDP, 17.72% of global exports, and 11.58% of global import trade, with a population of 513 million in the increasing dynamism of the Asia Pacific region in 2021. In spite of freezing several chapters such as delaying the requirement of intellectual property rights and narrowing the mechanism on the investor and state dispute settlement mechanism (ISDS) from the original trade pact, CPTPP is still one of the highest quality trade agreements with a high degree of trade liberalization and covers many new rules-based trade related issues such as labor and environment standards, trade-in services and regulation on state-owned enterprises (SOEs) for fair competition, etc. It is a ‘WTO-plus’ trade accord which deepens commitment on trade liberalization beyond WTO and a ‘WTO-extra’ one which covers many new areas beyond the WTO (Chow, 2016, p. 9). TPP and Regional Comprehensive Economic Partnership (RCEP) were considered as the pathway to a Free Trade Area of Asia Pacific (FTAAP) during the APEC meeting in 2014. Hence, membership enlargement in each trading bloc will enhance their respective sphere of influence moving toward the path of free trade in the Asia Pacific (Chow, 2016, pp. 15–21). Therefore, CPTPP is aggressively expanding its membership by inviting “like-minded” members of the APEC to join. Even though the UK is not a member of the APEC, the UK applied for its membership in February 2021. China filed its application on September 16, 2021, and Taiwan followed suit six days later. Whether or not all these three applicants will be admitted to the CPTPP depends on their respective qualifications to be decided by the incumbent CPTPP members. It is not the purpose of this study to predict which country will be accepted or rejected by the CPTPP-11. Instead, this study examines the significance of these three perspective new members in the trade bloc as they had officially applied for the accession to this trade bloc and their respective implications for the shifting paradigm of economic integration in the Asia Pacific. Section “UK as the First-Perspective New Member of CPTPP” addresses the geopolitical significance of UK membership at the CPTPP. As China is the second largest

1610.56 15.686

Australia Brunei Darussalam Canada Chile Japan Malaysia Mexico New Zealand Peru Singapore Vietnam TPP11 World CPTPP11 Share UK World CPTPP11+UK CPTPP11+UK Share China World

1427.264 30.317

10,511.34 19,090.228

398,103.29 522,841.77

46,200.26 48,693.183

52,791.23 53,089.455 16,799.37 26,513.324 40,704.30 44,934.938 10,231.34 29,048.363 9967.39 20,820.363 48,348.99 45,879.609 6676.52 13,410.254 66,263.42 107,677.221 3522.51 11,607.891 351,903.03 474,148.58

38.188 19.718 125.37 32.939 128.972 5.122 33.829 5.714 97.406 513.44 7900.00 6.50% 67.281 7900.00 580.72 7.35% 1414.35 7900.00

25.72 0.462 2.35445E+11 73,479,930,615 2.5906E+12 4.67862E+11 1.66793E+12 38,877,144,400 38,757,234,044 3.73684E+11 2.81441E+11 6,264,775,835,355.00 3.53544E+13 17.72% 1.58277E+12 3.53544E+13 7,847,544,181,693.00 22.20% 2.5906E+12 3.53544E+13

4.90092E+11 6,608,177,852

GDP per Population Export capita, PPP Millions International$

62,618.59 55,492.205 33,979.37 65,674.961

GDP, PPP GDP per International$capita Current US$

2015.98 2027.371 331.25 522.79 5103.11 5633.505 337.008 969.039 1285.52 2685.253 247.64 234.992 225.858 453.652 378.645 615.293 343.114 1141.3 11,894.37 15,740.78 94,935.114 144,636.38 12.53% 10.88% 3108.42 3276.143 94,935.114 144,636.38 15,002.79 19,016.92 15.80% 13.15% 14,866.74 27,071.959 94,935.114 144,636.38

GDP Current US$ Billions

Country

(continued)

6.36622E+11 59,215,009,302 7.72276E+11 3.79404E+11 1.53192E+12 37,098,380,733 36,064,030,332 3.28624E+11 2.61309E+11 4,320,971,538,390.00 3.73127E+13 11.58% 2.5367E+12 3.73127E+13 6,857,671,019,137.00 18.38% 2.5906E+12 3.73127E+13

2.73096E+11 5,342,500,814

Import

Table 5.1 Income, population, export and import for CPTPP-11, United States, China, United Kingdom, and Taiwan (Estimated 2021)

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GDP Current US$ Billions

(continued)

23.519 7900.00 536.96 6.80% 330.659 844.10 7900.00 10.68% 2349.25 7,900.00 29.74%

56,160.76 33,401.71 12.02 408,063.79 507,550.29

69,375.38 69,375.375 421,278.41 543,523.96 12.02

2.8649E+11 3.73127E+13 4,607,461,538,390.00 12.35%

1.43025E+12 2.40538E+12 7,695,029,458,844.00 6,726,353,096,057.00 3.53544E+13 3.73127E+13 21.77% 18.03% 12,213,678,471,647.00 12,140,143,243,269.00 3.53544E+13 3.73127E+13 34.55% 32.54%

3.4528E+11 3.53544E+13 6,610,055,835,355.00 18.70%

8,855,376,501,820.00 6,911,572,204,855.00 25.05% 18.52%

Import

Sources http://imf.org/world.economic.outlook.databases, UN Comrade database at: comtrade.un.org; google.com/Taiwan total export/import 2020 Note Those figures in bold values are the sum of different trade groups calculated by the author based on the original data in the data source under the table

534,150.77 644,709.08

1927.79 24.40%

GDP per Population Export capita, PPP Millions International$

362,414.37 493,238.81

GDP, PPP GDP per International$capita Current US$

CPTPP11+China 26,761.11 42,812.74 CPTPP11+China 28.19% 29.60% Share Taiwan 785.589 1443.41 World 94,935.114 144,636.38 CPTPP11+Taiwan 12,679.96 17,184.19 CPTPP11+Taiwan 13.36% 11.88% Share USA 22,939.58 22,939.58 CPTPP11+USA 34,833.95 38,680.36 World 94,935.114 144,636.38 CPTPP11+USA Share 36.69% 26.74% CPTPP+UK+CH+TW+US 53,594.70 70,471.87 World 94,935.114 144,636.376 CPTPP+UK+CH+TW+US 56.45% 48.72% Share

Country

Table 5.1

92 P. C. Y. CHOW

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economy in the world, its membership at the CPTPP will have a significant impact on the trade bloc and regional integration. Section “China’s Membership at the CPTPP” addresses China’s possible accession under various scenarios of admission conditions to the trade bloc in regional perspective. Taiwan is a vital actor in the global supply chain. Yet, it has only signed two free trade agreements (FTA) with two members of the CPTPP-11. Taiwan’s accession to the trade bloc will have significant trade creation effect.1 Yet its entry to this trade bloc is based more on geopolitical than geo-economic rationales. Section “Taiwan’s Membership at the CPTPP” will deal with the complicated political economy of Taiwan’s accession to the CPTPP. The final section is for summary and conclusions.

UK as the First-Perspective New Member of CPTPP In the new era of great power competition in a globalized economy, no country can afford not to seek partnership and alliance with others for its national interest. A seamless trade and investment environment among countries is the key to economic growth in the globalized economy. No country can naively expect to maintain its growth and prosperity while being marginalized from the emerging trade blocs. After the Brexit in 2020, UK has been deliberately seeking more preferential trade agreements to complement with its Trade and Cooperation Agreement with European Union (EU). The UK first expressed its interest in a bilateral FTA with the U.S. soon after Brexit and signed a trade accord with Japan in October 2020. The UK applied for CPTPP membership in February 2021. Initially, APEC wished to invite “like-minded” APEC members to join, and even rejected the aspiration of Colombia to participate in the TPP negotiation because it was not a member of the APEC. UK is not a member of the APEC. If UK is admitted to the CPTPP, then it means that the trade bloc will extend its geographic horizon beyond Asia Pacific. Under such circumstance, the UK may serve as a bridge to link the free trade regime in the Atlantic and Pacific Oceans, at least symbolically. Hence, the decision on whether to accept the UK as a new member will have strong implication on the DNA of CPTPP’s membership enlargement, even an expansion beyond the Asia Pacific region. It will also offer the UK with an opportunity on its effort of pursuing “Global Britain” after the Brexit.2 As reported in the Appendix, UK has bilateral trade accords with seven of the 11 countries in the CPTPP and is negotiating with Australia and

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New Zealand for preferential trade deals as well. If the UK is admitted to the CPTPP, then it will benefit from “tariff free” on nearly 99% of its exports to all those member countries. Moreover, the perspective growth of service trade is even more fascinating than that of merchandise trade for UK. As the second largest exporter of service trade in the world, the UK definitely will enjoy the trade creation effect in its service trade with the CPTPP countries. Citing a report from the Brooking Institution, Department of International Trade of UK is enthusiastic about the potential service market in the Asia Pacific region which will account for 65% of the world’s 5.4 billion middle class consumers by 2030 (Department of International Trade, 2021). Generally speaking, when income increases, demand for service will grow more proportionally than food and beverage consumption as dictated by the Engle’s law.3 As the “middle class” is projected to grow fascinatingly in the dynamic Asia Pacific region, the UK is counting its strong service export after its aspired CPTPP membership is achieved. Department of International Trade projected that the UK’s trade with CPTPP countries will increase 65% by 2030. With its perspective membership of this trade bloc, it will grow ever more than that projection. Moreover, as the CPTPP set up the rules-based system for digital trade, it will enable the UK to benefit from opening up trade in financial and professional services, which will further enhance its development in cutting-edge technology. However, the significance of UK’s membership at the CPTPP is more geopolitics than geoeconomics. The economic benefit of membership for the UK is relatively smaller than its impact on the geopolitics of economic integration. The UK’s trade with current CPTPP-11 is less than its trade with Germany. It is not realistic to anticipate that the UK’s membership in CPTPP will be able to compensate its loss of market access to EU if the Trade and Cooperation Agreement with EU could not generate the same benefit as its EU membership. The market share of CPTPP-11 for UK’s total export to the world is averaged at 8.3% in 2016–2020.4 Hence, the possible gain of market access from CPTPP may not be able to compensate the possible loss from Brexit. The UK’s motivation of joining the CPTPP is more for geo-politics than economics. The UK, if admitted, will be the second largest economy after Japan in the trade bloc. As reported in Table 5.1, the UK will add $ 3.1 trillion of GDP to this trade bloc and raise the share of CPTPP plus UK in the global economy to 15.8% (the 18th row in column 1 on Table

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5.1). The UK may play a more proactive role in the Asia Pacific region after it is admitted to the CPTPP; the UK can play a role of ‘middle power’ to promote the free trade principle amid the rising protectionism implemented in the two big powers. Different from the inward-looking policy under the “make America great again” in the U.S. and dual circulation which downplays foreign trade as the engine of growth in China, the UK can level the playing field in the global economy by advocating free trade policy beyond the Asia Pacific region. This is a significant contribution that UK can do to promote the free trade framework for the global economy. The CPTPP is a high-quality trade agreement under which not only 95% or more of the trading commodities will be tariff-free, but also there will be a setup of a rules-based regulatory regime on service trade. Hence, there is a strong implication in the ongoing competitive paradigm shift of the digital trade regime. At present, there are three different regulatory regimes of digital trade which deal with issues such as restrictions on cross-border data flows and requirements of data localization. They are (a) the firm-sovereignty model adopted in the U.S., (b) the state sovereignty model adopted in China and (c) the individual sovereignty model in EU (Gao, 2022). Trade agreements may not be able to completely resolve the differences of data regulations among these three regulatory regimes (Mishra, 2022). Under the UK-Japan Comprehensive Economic Partnership Agreement (CEPA), the UK has already made a policy shift from EU-style digital trade governance—that treats the protection of data as a fundamental right—to the US/Asia–Pacific market-driven approach of firm sovereignty such as CPTPP. In March 2022, EU reached an agreement known as “Digital Market Act” which “is aimed broadly at limiting the ability of the biggest tech firms from taking advantage of their powerful presence in digital markets—including the app ecosystem, online shopping and online advertising” (Wall Street Journal, March 25, 2022).5 This development will be crucial for big tech companies to manage the digital trade under different regulatory regimes. In other words, the UK’s accession to the CPTPP, on top of UK-Japan CEPA, will imply that it is leaning toward the U.S. model of firm sovereign in the ongoing development of digital economy.6 In that regard, the UK may be the first European country to join the US model of digital trade. In June 2021, the Working Group Minister of CPTPP-11 agreed to begin the accession process for UK. The negotiation will take a while before a final decision is made. Reportedly, the CPTPP members wish

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to go through a thorough review process by demanding that all criteria be met before a final decision is made. The UK does not have many state-owned enterprises (SOEs) which cause unfair trade practices to foreign multinationals as what China had. The UK also has high labor and environmental standards which are compatible with the criteria of the CPTPP. Yet, negotiations on some tenuous issues such as disputes settlement mechanisms and economic empowerment for women are very time-consuming. Since the UK is the first applicant, the CPTPP-11 may wish to set up a rigid criterion for the UK to serve as a role model for other applicants. This is especially relevant to China’s application to be addressed in the next section. Another thorny issue is the UK’s attitudes on China’s membership application if the UK is admitted as the first new member. China’s tensions with Australia, Canada, and Japan could jeopardize Beijing’s bid. As admission to the CPTPP requires unanimous consent from its members, if the UK becomes the first new member, then the UK will have to spell out its position on China’s application. Before the US-China trade war, the UK welcomed China’s investment. But the UK boycotted Huawei and other Chinese tech-products in alliance with the Trump’s trade policy. UK’s reservation of China’s human rights records in Hong Kong and Xingjiang would make it difficult on its decision on China’s membership. The reluctance of the UK on China’s membership at the CPTPP could be aggravated by the on-going war in Ukraine because China did not collaborate with the U.S. and NATO on the sanction against Russia. The tension between Beijing and Washington, which was aggravated after US House Speaker Nancy Pelosi’s visit to Taiwan in August 2022,7 would make it even harder for the UK to make up its mind on China’s membership at the CPTPP. Therefore, UK’s accession to the CPTPP, if it gets into the CPTPP before China, will symbolize a new geopolitics competition beyond its economic interest.

China’s Membership at the CPTPP Among CPTPP-11, China has signed FTAs with Australia, Chile, New Zealand, Peru, and Singapore. Seven countries of RCEP, Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam have dual memberships in both RCEP and CPTPP. These two factors may provide Beijing with some advantages in its membership negotiations, even though the admission criteria for CPTPP is much higher than that of

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RCEP. Therefore, China has the advantage of having more allies within the CPTPP than both UK and Taiwan. As reported in Table 5.1, China will add $14.9 trillion of GDP to the CPTPP-11 and raise the share of CPTPP-11 plus China in the global economy to 28.19%. China is also the largest trading partners for most of the CPTPP countries. Among CPTPP-11, except for Canada and Mexico, all countries have greater shares of trade with China than with the U.S. If the CPTPP-11 admits China’s application, then the CPTPP will include the second and the third largest economies in the world to become a mega trade bloc. Hence, China’s application is important for CPTPP to increase its sphere of influence. However, the political economy for China to join the trade bloc is much more complicated than that for UK and Taiwan. President Xi Jinping expressed his interest in joining the CPTPP at the APEC Submit in 2020. It was reconfirmed at the National People’s Congress in March in 2021. But China applied its membership only shortly after the AUKUS-a trilateral security pact among Australia, the United Kingdom, and the United States was signed. Under the AUKUS, the U.S. will transfer technology, sell nuclear-powered submarines to Canberra, and collaborate with Australia on the hypersonic missiles against China. China may consider its entry to the CPTPP as a venue to circumvent the strategic alliance of AUKUS and Quad—a quadrilateral security among Australia, India, Japan, and the U.S. as well to overcome the damage caused from trade frictions with the U.S. In the past two decades, China has been benefitting from the WTO trading framework since its accession to the WTO in 2001; China’s GDP per capita increased more than 10 times in nominal terms and its total GDP surpassed that of Japan in 2010 as the second largest economy in the world. China also surpassed the U.S. and became the largest trading country in 2012. Therefore, China understands that membership at a multilateral free trade agreement such as the CPTPP, which has a freer trade regime within the bloc than that of WTO, will further foster its trade growth if it is admitted. However, many CPTPP members, especially those in Asia, are wary of China’s increasing assertiveness in its foreign policy, which is described as ‘wolf warrior diplomacy’ by many countries, and trade practice. Moreover, many countries question the commitments that China pledged when it applied for its WTO membership. Many western countries which supported China’s membership at the WTO anticipated that the

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rules-based trade regime under the WTO will expedite China’s further economic reform toward a market economy. Some naive policymakers even wishfully thought that a market economy with free enterprise would lead to political reform in China toward a democratic country. However, not only that China maintains its one-party rule, its SOEs still accounts for 25% of its total GDP (Borst, 2021). Moreover, the significance of SOEs on China’s economy is far beyond its percentage share in total GDP, but its control of strategic industrial sectors and banking industry. China has been pushing the ambitious “Made in China 2025” plan with heavy government subsidy in many key strategic industries to overpass the US. China also applied some unconventional practices in its trade with many of its trading partners such as Australia, Korea, the Philippines, and Taiwan in recent years. Twenty years down the road after its WTO membership proved that it is China which re-wrote the rules of world trade rather than the other way round as what was anticipated by many western countries. Among them, China’s trade friction with Australia is the most critical one on its CPTPP accession; the Sino-Australia trade war started in 2013–2015. It was aggravated after Australia supported a call for an international investigation into China’s handling of the Covid-19 when the pandemic became an international issue in 2020.8 China retaliated Canberra by imposing high tariffs on import of wine (107–212%), barley (80.5%) and applied rigid restrictions on import of lobsters, timber, red meat, and cotton from Australia.9 Though trade friction is a common phenomenon in the world, few countries weaponize tariffs and trade restrictions as a diplomatic instrument to manage dispute on international public health policy, which is a jurisdiction under the World Health Organization. As an Australian Parliament Report indicates, China will have to stop its coercive trade measures against Australia “to demonstrate its ability and willingness to commit to the CPTPP’s high standards, prior to supporting the commencement of an accession process.”10 Since CPTPP requires the consensus from all existing members, China would need to resolve its trade friction with Australia before Canberra can approve its application. Meanwhile, Japan’s position on China’s application is also significant in determining Beijing’s entry to the trade bloc. As the leader which wrapped up the CPTPP after the withdrawal of the U.S. from the original

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TPP, Japan would like to preserve the high-quality standard and rulesbased trade agreement and to algin more new members to the trade bloc without diluting the CPTPP standard. In a meeting between Minister Hagiuda of Economy, Trade and Industry and his counterpart in Singapore on January 12, 2021, both Japan and Singapore agreed that the membership of the CPTPP has to expand, but any new member must meet the admission criteria.11 In the joint statement between Prime Minister Kishida and New Zealand’s Prime Minister Jacinda Ardern on April 22, 2022, it reiterated that Japan and New Zealand “welcomed the future expansion of CPTPP to economies that are able to fully meet, implement and adhere to its high standards and with a demonstrated pattern of complying with trade commitments.”12 This can be considered an official statement from Japan and New Zealand that China cannot expect to become a new member without engaging in genuine reform of its economic system, especially on government subsidy on SOEs, labor and environment standards, as well as the regulation on cross-border data flows in E-commerce. Moreover, China still prohibits its import of food product from 10 prefecture surrounding Fukushima. This issue may complicate Japan’s decision on China’s accession as well.13 Many Asian countries rely on U.S. commitment for their security but count on China’s market as the major outlet of their export destinations. So far, the U.S. only offers its security commitment to those Asian countries but has no interest in rejoining the CPTPP, at least in the near future. Trade dependency on China’s market made it hard for those Asian countries, in spite of their reliance of security commitments from the U.S., to say ‘no’ to Beijing on its membership application up front. In accepting China’s application to the trade bloc, many CPTPP member, especially Australia and Japan have expressed their reservation on China’s qualification for the trade bloc. President Xi Jinping’s decision to partner up with Russian President Vladimir Putin just weeks before Russia’s invasion of Ukraine on February 24, 2022 could further undercut the willingness of CPTPP-11 to admit China to this trade bloc. How would the CPTPP members react to China’s membership application is a big challenge for them. Therefore, China’s qualification for the trade bloc is not without doubt. In addition to its lack of transparency under the one-party authoritarian system, China is so far away from the principles set up by the CPTPP; there is a chapter on SOEs which requires a fair competition

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between SOEs and multinational corporations (MNCs) in the host countries, and China has a long way to go to reach the CPTPP criteria. On the labor standard, CPTPP demands that members must comply with the standard of International Labor Organization under which labor can organize union and practice collective bargaining. Other chapters on the protection of intellectual property right also make it hard for China to comply with the CPTPP standard. On the digital trade, China’s state sovereignty model is in stark contrast with the US-led individual sovereignty model as noted in previous section.14 As the largest trading partner for many CPTPP-11, China may wish to use its market size to entice them to accept its application to the trade bloc in spite of its lack of qualifications. If the CPTPP waters down the criteria before China’s full compliance with its admission standard, then the high quality of the CPTPP will be undercut substantially. CPTPP will include an autocratic socialist economy with entirely different socio-political system and trading regime within the bloc. The damage of China’s entry to the CPTPP probably is much higher than the economic benefits from China’s accession to the trade bloc. The gold or platinum standard of the CPTPP-11 with WTO-plus and WTO-extra trade liberalization will be ridiculed as a metaphor rather than in actual practice. If China is serious to meet the CPTPP standard on the SOEs, labor and environmental standards, China can use its international commitment as a leverage to push for domestic reform.15 If Beijing really engages in a full-scale reform of its economic and trade system to comply with the criteria of the CPTPP, which is highly doubtful to many observers, then the significance of China’s accession to the CPTPP is far beyond regional economic integration. It will carry strong political economic implication in reforming a socialist economic system rather than reform within the socialist system through commitments made to a multilateral trade agreement. It will be an unprecedented development in world development history. This scenario based on “big ifs” is the most optimistic picture that liberal trade economist aspires. However, many people are rightly skeptical about China’s sincerity of fulfilling its promise. Shelton (2021) pointed out that, instead of fulfilling its pledge of systemic reform to make its economic system more transparent and closer to WTO norm of openness, non-discrimination, and market-oriented policies when China was admitted to the WTO in 2001, China under President Xi Jinping has increased the role of government and party in nearly all aspects of

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the economy. Maria Adele Carrai (2022) also argued that “in the current geopolitical world, where countries seem increasingly willing to sacrifice economic gains derived from globalization in the name of values and polarized political views, China’s quest to join the CPTPP will be even more strenuous, if not impossible” (p. 12). How likely will the CPTPP-11 entrust China’s promised reform remains to be seen in the future. Between these two scenarios, a third alternative is for China to pledge to the CPTPP for a long grace period to fulfill those requirements as what Vietnam and Malaysia did. But, as pointed by Kimura (2022) the new entrants may not be able to obtain the same levels of exception or exemption as the existing members as specified in the accession code.16 Moreover, international perception on China’s sincerity to honor its pledges and promises now is quite different from what it was in 2001 when China entered the WTO. The trade war between China and the US has made the global economy bifurcated. If some CPTPP members are still naive about China’s pledge of further reform to meet the CPTPP standard, they may be considered by Washington as siding with China in a bi-polarized hegemonic competition, which many CPTPP member cannot afford to annoy Washington. Even if CPTPP-11 is convinced by China’s pledge of further reform, then there must have a high monitor cost for them. If an additional clause of monitoring a trade accord is added, then it may be interpreted by Beijing as an insult to its national dignity. This is a thorny issue for the CPTPP to decide. The trade war between the U.S. and China and the tensions between Washington and Beijing may have ripple effect against China’s membership application; Theoretically speaking, the U.S. is not a member of the CPTPP-11, so the U.S. won’t have any leverage on China’s entry to this trade bloc. Yet, if the relations between Washington and Beijing further deteriorates, the U.S. may not wish China to expand its sphere of influence in Asia Pacific where the U.S. has strong strategic interest and has been a big actor for decades. As it is well known, the original TPP was designed by the U.S. to write the trade rule in accordance with the U.S. standard to undermine China’s increasing influence in the Asia Pacific. If China is admitted to the CPTPP, then the opportunity for the U.S. to rejoin it is gone even if Washington decides to come back. In geopolitics, it is hard to believe that Washington will take no action on China’s accession to the trade bloc which was originally designated to block China from joining in.

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In Section 32.10 of the United States-Mexico-Canada (USMCA) trade agreement, a revision of the North America Free Trade agreement (NAFTA), there is a ‘poison pill’ clause which mandates that if any signatory enters a trade deal with a “non-market country,” then the other two are free to quit in six months and form their own bilateral trade deal. China is not a market economy by American standard. Therefore, if Washington insists on the “poison pill” clause, then Canada and Mexico may be reluctant to approve China’s membership application for fear of losing their preferential trade status in the U.S. Whether Washington will block China’s CPTPP membership by applying the ‘poison pill’ clause under the USMCA depends on the US-China relations and how the US would calculate China’s expanding sphere of influence at the expense of the US in the region, which the US has strong strategic interest. It is also noted that President Biden announced a new Indo-Pacific Economic Framework (IPEF) which invited 12 Indo-Pacific countries to join in May 2022.17 Symbolically, it demonstrates that the US is linking its strategic interest with economic interest in the region. Of course, IPEF is not a substitute for the TPP as it does not include market access through trade liberalization between the US and those 13 countries invited in the first round. How would the IPEF functions and how would it affect China’s accession to the CPTPP will be an interesting development in the region.

Taiwan’s Membership at the CPTPP Taiwan has long aspired to join the CPTPP. It is a rare consensus between the ruling and opposition parties in Taiwan on joining the trade bloc. However, in 2018 election, the opposition party of Kuomintang (KMT) initiated a referendum on banning the import of food product from five prefectures surrounded in Fukushima, Japan. The bill was passed because of public concern of food safety due to Fukushima nuclear accident on March 11, 2011.18 There is a two-year period of moratorium whenever a referendum is passed. Taiwan government cannot revoke any policy resolution passed by the referendum in the two-year period. Understanding Tokyo’s reaction on the ban of food import, Taiwan government held up its application for CPTPP membership despite the amical relation between Taipei and Tokyo during the Abe-Suga Administration. Due to its election cycles, Taiwan waited for a long time to apply for its membership even after the two-year moratorium was over.

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President Tsai was re-elected for her second term with a great majority of 57% of popular votes in January 2020. But Taiwan submitted its application only until after China did in September 2021. Many commentators criticized that Taiwan might have missed the golden opportunity of strong support from Japan during the Abe-Suga Administration. However, after taking over the leadership, Prime Minister Kishida expressed his strong support for Taiwan’s bid for the CPTPP membership as well. Moreover, Japan has expressed its concern on the stability of the Taiwan Strait, and even openly supported Taiwan’s defense in case China invades Taiwan. CPTPP membership is one of the best ways to strengthen Taiwan’s international status, which China has been undermining (Fischett and Roth 2021). After Taiwan government declared to lift its ban on food product from the five prefectures surrounding Fukushima area on February 8, 2022, Taiwan’s membership is more promising than ever before though it is still an uphill battle for Taiwan in international politics. The major challenge is from China’s opposition. In power politics, the bargaining power of any negotiations including trade accord depends on the statecraft and national strength of the participating country. Taiwan has been an important investor and trading partners for many CPTPP countries. It has been playing an indispensable role in the global supply chain. Its role as the major chip manufacturer as evidenced in the global shortage of advanced chips will enhance its position in the membership negotiations. Among CPTPP-11, Taiwan has signed only two FTAs with Singapore and New Zealand. If Taiwan is admitted to the CPTPP-11, then the trade creation effect will greatly expand the trade and investment flows in the trade bloc. There are both static and dynamic effects of joining a multilateral trade accord such as the CPTPP. The static effect is the increased trade flows after trade barriers are removed. The dynamic effect is the ripple effect of trade liberalization on the increase of investment, both foreign and domestic. In a computable general equilibrium (CGE) model simulation, Chow and Guo (2020) found that, most of the CPTPP-11 will be benefitted from Taiwan’s accession under various admission conditions of trade liberalization for Taiwan’s accession.19 This empirical finding that all incumbent members of the CPTPP-11 will be benefitted and none of them will suffer from Taiwan’s accession to the trade bloc is very persuasive for Taiwan to solicit the supports from all CPTPP countries.

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Other than trade liberalization, most countries in the trade bloc will be benefitted from the increase of foreign direct investment under the investment-trade nexus. Therefore, economically, Taiwan will become a strong partner in the trade bloc if it is admitted. If Taiwan can capitalize its cutting-edge technology in semiconductor and other high-tech industries, and overcome its international political obstacles, then its membership at the CPTPP will be much smoother than that of China. Taiwan’s membership at the CPTPP is more geopolitical than geoeconomics for the CPTPP-11. Economically, it is hard for the CPTPP-11 not to accept Taiwan as a valued member because Taiwan’s membership is beneficial to them. But Beijing has never held its secret in opposing Taiwan to join any international organization and trade agreement at all. That is the major stumbling block for Taiwan to join this trade bloc. Nevertheless, many CPTPP members have been trying to overcome it20 ; First of all, Taiwan applied it as an independent Custom Territory of Taiwan, Penghu, Kinmen, and Matsu (TPKM) as what its status is at the WTO. The following report from Australian Parliament pointed out that the “One China policy” was not a ‘fundamental stumbling block’ for Taiwan due to: …the language of the agreement itself allows for non-state accession. It talks about separate customs, territories and the like. Taiwan is already a full member of the WTO, and that same sort of language, clearly, could be used to allow and promote the accession of Taiwan to the CPTPP. A similar point could be made of Taiwan’s membership in APEC, which it actually joined alongside of the PRC and Hong Kong.21

Australia has an FTA with China but its bilateral negotiation for an Australia-Taiwan trade accord is still pending. Nevertheless, Australia Parliament recommended its government to support Taiwan’s accession while concurrently engage in the bilateral negotiation on FTA with Taiwan. On the China’s objection of Taiwan’s accession, Australia Parliament cited the following statement from Dr. Richard Herr: if Australia retreats from the proposal to permit Taiwan’s accession solely— and I underscore ‘solely’ there—in the face of PRC objections, it really would damage our standing as an effective global middle power by making it fairly clear that another country’s interest has bent our interest to their will, and I don’t think it’s a good look for us to be seen to be sacrificing our own national interest in deference to another nation’s interest.22

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Given what is said, Taiwan still has to seek more allies such as Chile and Mexico to support its membership bid because those countries may be influenced by China’s active commerce diplomacy. China can entice those countries to boycott Taiwan’s application by offering them with fanciful economic aid. Taiwan may have to compete with China on its pursuit of the admission ticket to the trade bloc. A competitive commerce diplomacy between Taiwan and China have been a reality in the past. Taiwan will have to explore its statecraft intensively in pursuing any trade accords. It will be even more salient in the race of CPTPP accessions. Based on their respective qualifications, China seems to have to less chance and will have to wait for longer period than Taiwan before being admitted to the trade bloc. However, some commentators offer a WTO model of admission, under which China and Taiwan joined the WTO in 2021 almost simultaneously with a negligible time lag. However, it took 15 years for China to be admitted to the WTO. It may even take a longer time for the CPTPP to decide China’s application. It is unfair for Taiwan to suffer from an indefinite waiting period to delay its accession to the trade bloc just because of China’s prolong application process. Finally, if both China and Taiwan join the trade bloc, then there is another implication on the economic integration in the region; the Economic Cooperation Framework Agreement (ECFA) between China and Taiwan signed in 2011 will become obsolete because both of them are the CPTPP members. Taiwan’ asymmetric trade dependency on China may be mitigated because Taiwan can access to other markets in the trade bloc. The bilateral trade and investment across the Taiwan Strait will be ruled by an international trade accord rather than based on bilateral trading framework under the ECFA across the Taiwan Strait. Other than diversify its trade and investment flows, it will also generate some “political dividends” for Taiwan by enhancing its international status.

Conclusion From a regional and global perspective, each applicant, if admitted, will transform the CPTPP into a new trade bloc different from its current status. If UK becomes a new member of the CPTPP, then a freer trade regime will be integrated between the Atlantic and Pacific Ocean. APEC’s initiative to use CPTPP as the pathway toward the Free Trade Area in Asia Pacific region will be expanded to the Atlantic Ocean, at least symbolically. UK may also play the role of “middle country” power to become

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the second largest member in the CPTPP, which will highly enhance the sphere of influence of the trade bloc by deepening economic integration beyond the Pacific Ocean. In that regard, CPTPP will become the first inter-regional multilateral trade agreement. As the second largest economy in the world, if China is admitted to the trade bloc, the CPTPP will become a mega trade bloc in the global economy, compatible with EU and USMCA. If China engages in substantial reform in its economic system before becoming a CPTPP member, then trade agreement will unprecedently become an important instrument to transform a socialist economy into a market-oriented economy. On the contrary, if CPTPP waters down the standard by accepting China as a member before China fully comply with the ‘golden standard’ of the CPTPP, then it will downgrade the trade bloc as a role model of trade liberalization. It seems that CPTPP-11 encounters a big dilemma on China’s accession to the trade bloc. Geopolitically, it may not be easy for them to turn down China’s application. But, economically, for the CPTPP as a trade bloc and many members, they cannot and will not accept China as it is now. Taiwan is a vital actor in the global and the regional economy in Asia Pacific. If Taiwan is admitted to the trade bloc, then CPTPP will embed a dynamic economy with high tech producer. It will benefit all members of the trade bloc through trade creation effect on trade and investment flows in the region. It will also provide the CPTPP with a reliable supply of high-tech products. Taiwan’s accession to the trade bloc will enhance the role of CPTPP as the leeway for trade and economic collaboration and cooperation. Geoeconomically, it is hard for the CPTPP-11 not to accept Taiwan as a member of the trade bloc. But geopolitically, the CPTPP-11 has to overcome China’s objection on Taiwan’s application. If both China and Taiwan are admitted to the CPTPP, then the economic integration across the Taiwan Strait as it is now will be expanded to a greater geographic area under multilateral trade agreement. Taiwan will derive some political dividend from its membership at the trade bloc to overcome its isolation in the international community.

Appendix: Liberalized and Non-Liberalized Bilateral and Multilateral Free Trade Agreements of the CPTPP-11 and the First Three Applicants

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Australia Australia

Brunei

Canada

Chile

ASEAN-AustraliaNew Zealand CPTPP

CPTPP

Australia-Chile CPTPP

CPTPP

Trans-Pacific Strategic Economic Partnership CPTPP Canada-Chile CPTPP

Brunei

ASEAN-AustraliaNew Zealand CPTPP

Canada

CPTPP

CPTPP

Chile

Australia-Chile CPTPP

Japan

ASEAN-Japan Australia-Japan CPTPP ASEAN-AustraliaNew Zealand Malaysia-Australia CPTPP ASEAN-AustraliaNew Zealand CPTPP

Trans-Pacific Strategic Economic Partnership CPTPP Brunei-Japan ASEAN-Japan CPTPP ASEAN-China ASEAN-AustraliaNew Zealand CPTPP CPTPP

Malaysia

Mexico

New Zealand

Peru

ASEAN-AustraliaNew Zealand CPTPP ANZCERTA SPARTECA PACER Plus Zealand ANZCERTA Australia-Peru CPTPP

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CanadaChile CPTPP CPTPP

CPTPP

GSTP Chile-Malaysia CPTPP

CPTPP USMCA/ CUSMA/ T-MEC CPTPP

LAIA Pacific Alliance GSTP Chile-Mexico CPTPP Trans-Pacific Strategic Economic Partnership CPTPP

Trans-Pacific Strategic CPTPP Economic Partnership ASEAN-AustraliaNew Zealand CPTPP

CPTPP

Chile-Japan CPTPP

Canada-Peru LAIA CPTPP Pacific Alliance GSTP Peru–Chile CPTPP (continued)

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(continued) Australia

Brunei

Canada

Singapore Australia-Singapore CPTPP ASEAN-AustraliaNew Zealand

Trans-Pacific Strategic CPTPP Economic Partnership ASEAN-China CPTPP

Vietnam

ASEAN-AustraliaNew Zealand CPTPP

China Taiwan UK

Australia-China

ASEAN-Japan ASEAN-AustraliaNew Zealand ASEAN-China CPTPP ASEAN-China

Malaysia

Australia ASEAN-Japan Australia-Japan CPTPP

ASEAN-AustraliaNew Zealand Malaysia-Australia CPTPP

Brunei

Brunei-Japan ASEAN-Japan CPTPP

Canada

CPTPP

ASEAN-China ASEAN-AustraliaNew Zealand CPTPP CPTPP

Chile

Chile-Japan CPTPP

Japan

Trans-Pacific Strategic Economic Partnership GSTP CPTPP Vietnam-Chile GSTP CPTPP

CPTPP

China-Chile UK-Canada

Japan

Pacific Alliance GSTP Chile-Malaysia CPTPP

Japan-Malaysia ASEAN-Japan CPTPP

Chile

Mexico

CPTPP

CPTPP USMCA/ CUSMA/ T-MEC Pacific Alliance LAIA ChileMexico GSTP CPTPP JapanMexico CPTPP

UK-Chile

New Zealand ASEAN-Australia-New Zealand CPTPP ANZCERTA SPARTECA PACER Plus Trans-Pacific Strategic Economic Partnership CPTPP ASEAN-Australia-New Zealand CPTPP

Trans-Pacific Strategic Economic Partnership CPTPP

ASEAN-Japan CPTPP (continued)

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(continued) Japan Malaysia ASEAN-AustraliaNew Zealand ASEAN-Japan Japan-Malaysia CPTPP Mexico Japan-Mexico CPTPP New CPTPP Zealand

Peru

Japan-Peru CPTPP

Malaysia

Malaysia-New Zealand CPTPP ASEAN-AustraliaNew Zealand GSTP CPTPP

GSTP ASEAN-AustraliaNew Zealand CPTPP

Vietnam Japan-Vietnam CPTPP ASEAN-Japan

ASEAN-Japan ASEAN-China ASEAN-AustraliaNew Zealand CPTPP ASEAN-China

ASEAN-Japan

UK

UK-Japan

New Zealand

GSTP CPTPP

Malaysia-New Zealand CPTPP ASEAN-Australia-New Zealand

CPTPP

SingaporeSingapore-Japan CPTPP ASEAN-Japan

China Taiwan

Mexico

CPTPP CPTPP

Pacific Alliance LAIA PeruMexico GSTP CPTPP GSTP CPTPP

CPTPP

CPTPP

Trans-Pacific Strategic Economic Partnership New Zealand-Singapore CPTPP ASEAN-Australia-New Zealand ASEAN-Australia-New Zealand ASEAN CPTPP

Chile-New Zealand New Zealand-Chinese Taipei PTN UK-Mexico

CPTPP

Canada-Peru CPTPP LAIA GSTP Pacific Alliance Peru–Chile GSTP CPTPP Japan-Peru CPTPP

Brunei

Canada

Japan

Chile

Australia-Peru CPTPP

Australia

Peru

Singapore-Japan CPTPP ASEAN-Japan

GSTP Trans-Pacific Strategic Economic Partnership GSTP CPTPP

CPTPP

Australia-Singapore ASEAN-Australia-New Zealand CPTPP ASEAN-China Trans-Pacific Strategic Economic Partnership ASEAN-Australia-New Zealand CPTPP

Singapore

Japan-Vietnam CPTPP ASEAN-Japan

GSTP Chile-Vietnam CPTPP

ASEAN-Japan ASEAN-China ASEAN-Australia-New Zealand ASEAN-China ASEAN-Australia-New Zealand CPTPP CPTPP

ASEAN-Australia-New Zealand CPTPP

Vietnam

China-Chile

ASEAN-China

ASEAN-China Australia-China

China

Taiwan

UK-Japan

UK-Chile

UK-Canada

UK

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Pacific Alliance LAIA GSTP Peru-Mexico CPTPP CPTPP

Mexico

CPTPP

GSTP Singapore-Peru CPTPP

Peru

Singapore

New Zealand

GSTP CPTPP

Peru

Malaysia

(continued)

Trans-Pacific Strategic Economic Partnership New Zealand-Singapore CPTPP ASEAN-Australia-New Zealand Peru-Singapore GSTP CPTPP

GSTP ASEAN-Australia-New Zealand CPTPP CPTPP GSTP

Singapore

ASEAN-Japan ASEAN-China GSTP ASEAN-Australia-New Zealand CPTPP

GSTP CPTPP

ASEAN-Australia-New Zealand CPTPP

ASEAN-China ASEAN-Australia-New Zealand CPTPP CPTPP

Vietnam

ASEAN-China Singapore-China

Peru-China

ASEAN-China Chile-New Zealand

ASEAN-China

China

Chinese Taipei-Singapore

New Zealand-Chinese Taipei

Taiwan

UK-Singapore

US-Ecuador and Peru

UK-Mexico PTN

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Peru-China

China

UK

Taiwan

GSTP CPTPP

Peru

Vietnam

(continued)

ASEAN-Japan GSTP ASEAN-Australia-New Zealand CPTPP Singapore-China ASEAN-China Chinese Taipei-Singapore UK-Singapore

Singapore

UK-Vietnam

ASEAN-China

Vietnam ASEAN-China

China

Taiwan

UK-Vietnam

UK

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Notes 1. Trade creation refers to the increase of benefit from joining a free trade area. It occurs when trade liberalization, either reduction of tariffs or nontariff trade barriers or both leads to lower prices of trading commodities and resultantly the increase of consumer and producers’ surplus. 2. I am indebted to Christopher Dent for sharing his vision on this particular aspect with me. 3. Ernest Engels, a nineteenth century German statistician stated that as household income increases, the percentage of income spent on food consumption decreases whereas that spent on other such as luxury goods increases. It was further elaborated that luxury goods includes services. 4. From Office for National Statistics at the website: UK trade and investment with CPTPP countries—Office for National Statistics (https://www. ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/ukt radeandinvestmentwithcptppcountries2016to2020/2021-12-02). 5. Those big tech firms—the gatekeepers are defined as those firms with revenue exceeds 7.5 billion pounds in Europe and a capitalization of at least 75 billion pounds. The U.S. and EU also reached a Trans-Atlantic Data Privacy deal on March 25, 2022, which, if implemented, will “restore legal certainty for thousands of businesses that routinely transfer commercial data between the EU and U.S.” (Wall Street Journal, March 26, 2022. A2). 6. I am indebted to Christopher Dent for pointing out that about 60 to 70% of the text the UK-Australia FTA had verbatim or near verbatim similarity to the USMCA due to UK’s attempt in to parallel with the CPTPP. Meanwhile, Wheeler (2022) argued that the U.S. was behind the EU on regulatory actions of internet. 7. China suspended eight cooperation projects with the US including the climate crisis, anti-drug efforts and military talks on August 5, 2022. But after President Biden met with China’s President Xi Jinping before G 20 in Bali, Indonesia, some cabinet level contacts between the U.S. and China resumed. 8. I would like to thank the editor for pointing the sequential order of the trade war and Australia’s action on an international inquiry of China’s handling of the Covid-19 pandemic. 9. “Australia China Trade War And Its Implications” from https://www.int uition.com/australia-china-trade-war-and-its-implications/. 10. From Australia Parliament Report at Applications to the CPTPP: The United Kingdom, China, Taiwan and South Korea—Parliament of Australia (https://www.aph.gov.au/Parliamentary_Business/Commit tees/Joint/Foreign_Affairs_Defence_and_Trade/CPTPPMembership/ Report/section?id=committees%2freportjnt%2f024826%2f78218).

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11. Japan Times, Japan and Singapore vow to maintain TPP free trade pact’s high standards. January 12, 2021. https://www.japantimes.co.jp/news/ 2022/01/12/business/japan-singapore-tpp/. 12. From Japan-New Zealand Summit Meeting | Ministry of Foreign Affairs of Japan (https://www.mofa.go.jp/a_o/ocn/nz/page3e_001192.html). 13. For Japan’s concerns about China’s trade-related policies, see the following report from Ministry of economy, Trade and Industry at The 2021 Report on Compliance by Major Trading Partners with Trade Agreements-WTO, EPA/FTA and IIA (Tokyo: METI, 2021). (https:/ /www.meti.go.jp/english/report/data/2021WTO/gCT2021coe.html). 14. China passed three laws on digital trade: the Cybersecurity Law (2017), the Data Security Law (2021), and the Personal Information Protection Law (2021). But these laws are so divergent from the principles of “free cross-border data flows” and “no data localization” under the CPTPP (Kimura, 2021). 15. Armstrong (2021) “China’s bid to join Pacific trade pact a strategic opportunity for Canberra” East Asian Forum https://www.eastasiaforum. org/2021/09/20/chinas-bid-to-join-pacific-trade-pact-a-strategic-opport unity-for-canberra/. 16. Annex to CPTPP/COM/2019/D002, Jan. 19th, 2019 at the first TPP Commission (https://www.mfat.govt.nz/assets/Trade-agreements/ CPTPP/Accession-Process.pdf). 17. IPEF includes Australia, Brunei Darussalam, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam, but not Taiwan. Nevertheless, the Biden Administration initiated a “US-Taiwan Initiatives for the 21st Century Trade at a bilateral level.” It is noted that Fiji joined the first ministerial meetings in Los Angeles in September 2022. 18. In fact, the public concern of food safety was misled by the misinformation provided by the KMT. Many commentators pointed out that Taiwanese tourists to Japan purchased quite a lot of food products from the surrounding area of Fukushima. 19. There are five scenarios on Taiwan’s admission based on various degree of trade liberalization including the Taiwan-New Zealand model, liberalization of all trading commodities but phasing out agricultural protection to full scale comprehensive liberalization in all trading commodities. See Chow and Guo (2020). 20. A typical example can be found in Australia. Former Australian Prime Minister, the Hon Tony Abbott AC downplayed potential outrage from China: The only argument that occurs to me is that it might upset China, but given that China is not a member of the TPP, is unlikely to

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become a member of the TPP and is already in a state of high dudgeon against Australia and many other countries, I don’t see that China is going to be any more upset than it already is. (Source Applications to the CPTPP: the United Kingdom, China, Taiwan and South Korea—Parliament of Australia [https://www.aph.gov. au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_ Defence_and_Trade/CPTPPMembership/Report/section?id=com mittees%2freportjnt%2f024826%2f78218]) 21. From Applications to the CPTPP: the United Kingdom, China, Taiwan and South Korea—Parliament of Australia (https://www.aph.gov.au/Par liamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_ Trade/CPTPPMembership/Report/section?id=committees%2freportjnt% 2f024826%2f78218). Downloaded on March 29, 2022. 22. Ibid.

References Australian Parliament. 2021. Applications to the CPTPP: The United Kingdom, China, Taiwan and South Korea. Borst, Nicholas. 2021. Has China Given Up on State-Owned Enterprise Reform. The Intepreter. https://www.lowyinstitute.org/the-interpreter/haschina-given-state-owned-enterprise-reform Accessed 15 Sep 2022. Carrai, Maria Adele. 2022. Can China Succeed in Join the CPTPP? The Hinrich Foundation. April. Chinese Taipei (XXB) Exports, Imports, and Trade Partners | OEC—The Observatory of Economic Complexity. Chow, Peter C. Y. 2016. The Trans-Pacific Partnership and the Path to Free Trade in the Asia Pacific (eds.), Cheltenham, UK and Northampton, MA: Edward Elgar. Chow, Peter C. Y. and Yun-Hsin Guo. 2020. The Impact of Taiwan’s CPTPP Membership on Its Macroeconomy and Industries. A Research Report Submitted to Taipei Foreign Exchange Foundation (in Chinese). Department of International Trade. 2021. UK Accession to CPTPP: The UK’s Strategic Approach. C:\Users\pcych\Downloads\UK-CPTPP Accession_DIT (1).pdf. Fischetti, Andrea A., and Antonio Roth. 2021. China’s CPTPP Accession Bid: A New Dilemma for Tokyo. Tokyo Review, November 4, 2022. https://www.tokyoreview.net/2021/11/chinas-cptpp-accession-bid-anew-dilemma-for-tokyo/. Gao, Henry. 2022. Data sovereignty and Trade Agreements: Three Digital Kingdoms. The Hinrich Foundation, January.

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International Monetary Fund. http://imf.org/world.economic.outlook.dat abases. Japan Times. 2021. Japan and Singapore Vow to Maintain TPP Free Trade Pact’s High Standards, January 12. https://www.japantimes.co.jp/. Kimura, Fukunari, 2022. The Rules-based Approach to Cope with China: The Case of E-Commerce. In Strategic Japan 2022. https://www.csis.org/pro grams/japan-chair/projects/strategic-japan. Ministry of Economy, Trade and Industry. 2021. The 2021 Report on Compliance by Major Trading Partners with Trade Agreements-WTO, EPA/FTA and IIA. Tokyo: METI. https://www.meti.go.jp/english/report/data/202 1WTO/gCT2021coe.html. Ministry of Foreign Affairs of Japan. Japan-New Zealand Summit Meeting. http://mofa.go.jp/. Mishra, Neha. 2022. Can Trade Agreements Narrow the Global Data Divide? A Novel Agenda for Digital Trade. The Hinrich Foundation, January. Office for National Statistics. UK trade and investment with CPTPP countries— Office for National Statistics. http://ons.gov.uk/. Parliament of Australia. Applications to the CPTPP: The United Kingdom, China, Taiwan and South Korea. http://aph.gov.au/. Shelton, Joanna, 2021. Look Skeptically at China’s CPTPP Application. Center for Strategic and International Studies (CSIS), November 18. https://www. csis.org/analysis/look-skeptically-chinas-cptpp-application. New Zealand Ministry of Foreign Affairs and Trade. Annex to CPTPP/COM/ 2019/D002, January 19th, 2019 at the first TPP Commission. https://www. mfat.govt.nz/assets/Trade-agreements/CPTPP/Accession-Process.pdf. United Nations. UN Comrade Database. https://comtrade.un.org/. Wall Street Journal. 2022. EU Reaches a Deals on Law To Curb Tech Firms’ Power. March 25. A1 and A12. Wheeler, Tom. 2022. US Regulatory Inaction Opened the Door for the EU to set up Internet. Washington, D.C.: Brookings Institution, March 29. https:/ /www.brookings.edu/blog/techtank/2022/03/29/u-s-regulatory-inactionopened-the-doors-for-the-eu-to-step-up-on-internet/?utm_campaign=Brooki ngs%20Brief&utm_medium=email&utm_content=208527385&utm_source= hs_email.

CHAPTER 6

Australia’s Perspective on the Applications from the UK, China, and Taiwan to Join the CPTPP Richard Pomfret

The evolution of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP ) has been a combustible mixture. On the one hand, the CPTPP, as an international trade agreement that goes beyond WTO commitments, involved lengthy negotiations before consensus on the text could be reached and the CPTPP could be implemented. On the other hand, the CPTPP, as an instrument of domestic politics and of international relations, has been subject to dramatic coups de théâtre. The USA signed the Trans-Pacific Partnership after eight years of negotiations, but President Trump refused to ratify the agreement three days after taking office in January 2017. Both elements—careful negotiation of a legal text and grand political gesture—are visible in Australia’s approach to the CPTPP.

R. Pomfret (B) University of Adelaide, Adelaide, SA, Australia e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_6

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The chapter starts by reviewing the evolution of Australian trade policy, emphasizing the shift away from protectionism in the 1980s and subsequent establishment of Australia as one of the most liberal trading nations and supporter of WTO rules. The second section contrasts the careful and successful trade diplomacy with episodes in recent years when major political decisions have had negative impact on trade policy. The next three sections contrast negative and positive approaches to relations with China and with the UK since 2019 and review Australia’s shifting position towards Taiwan. The sixth section contrasts the political reactions with institutional aspects of the CPTPP accession process. The final section offers conclusions.

The Evolution of Australian Trade Policy For most of the twentieth century Australia had one of the most protectionist trade policies among high-income countries. Although a signatory of the 1947 General Agreement on Tariffs and Trade, Australia resisted tariff reductions and other trade-liberalizing measures even as other high-income countries reduced tariffs in rounds of multilateral trade negotiations (Pomfret, 2015, 2019). In 1983, major domestic and trade policy reforms were initiated. In the twenty-first century, Australia has been a strong supporter of the liberal international trade system, represented by the World Trade Organization (WTO) since 1995. Australia has almost eliminated tariffs on imports and has been keen to extend world trade law into new areas. Australia reduced tariffs to the extent that today about half of its mostfavoured nation tariffs are zero and half are 5%.1 Beyond longer-standing agreements with New Zealand and other Pacific islands, Australia signed twelve bilateral agreements between 2003 and 2020 that reduced or eliminated tariffs on bilateral trade.2 By 2020, the average applied tariff on imports into Australia was less than one per cent. Special measures to protect sensitive industries, notably car producers, were gradually terminated; the last three carmakers ended the manufacturing of motor vehicles in Australia in 2016 (Ford) and 2017 (Toyota and General Motors). Australia shed its defensiveness over trade negotiations and became more active in international economic diplomacy. The 1983 Closer Economic Relations Agreement with New Zealand was an early example of deep integration, not only extending WTO commitments but also including areas that the WTO did not yet cover.3 As leader of the Cairns

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Group of agricultural exporters, Australia played a key role in highlighting agriculture in the final round of GATT trade negotiations that started in 1986 and in reducing agriculture’s exceptional status in the WTO charter. Australia was also the founder in 1989 of Asia Pacific Economic Cooperation (APEC) whose open regionalism was a precursor of the Trans-Pacific Partnership (TPP). Australia initiated APEC as a forum to coordinate trade liberalization. At the 2002 APEC summit, New Zealand, Singapore, and Chile began negotiations towards a high-quality beyond-WTO agreement. They were joined by Brunei in the 2006 P4 agreement. In 2008 Australia, Peru, the USA, and Vietnam opened negotiations to extend the P4. The first formal round of TPP negotiations was held in Melbourne on 15–19 March 2010, with the participation of over 200 officials from Australia, the USA, New Zealand, Chile, Singapore, Brunei, Peru, and Vietnam. They were later joined by Malaysia, Mexico, Canada, and Japan. The twelve countries concluded the Trans-Pacific Partnership in 2016, but President Trump’s non-ratification meant that the TPP could not enter into force. Before the US withdrawal was even formalised, Japanese Prime Minister Shinzo Abe met Australian Prime Minister Malcolm Turnbull on 14 January 2017 in Sydney, where both governments agreed to salvage the deal. Australia and Japan led the remaining eleven countries in negotiating and ratifying the CPTPP.4 The CPTPP is the prime example of a modern megaregional trade agreement, whose emphasis is less on traditional trade barriers such as tariffs or quotas and much more about WTO+ and WTO-X agreements.5 Reasons for this development include the increased share of global value chains in international trade, new technologies for conducting trade, and the failure of the WTO to address new issues.6 At the 1996 ministerial meeting in Singapore, WTO members already recognized the desirability of extending WTO rules, and working groups were established in four areas: transparency in government procurement, trade facilitation (customs issues), trade and investment, and trade and competition. A quarter century later, the only progress had been the 2017 Trade Facilitation Agreement, and even this rather general agreement had been delayed by lack of consensus. An alternative approach within the WTO has been for subsets of members to sign plurilateral agreements, most notably the Information Technology Agreement, which entered into force in 1997 and now has 82 participants, accounting for 97% of world trade in IT products.7 Plurilateral agreements have, however, become a source of

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dispute as some members argue that they undermine the universality of WTO commitments. In an age when progress at the WTO is hampered by the consensus requirement, the CPTPP has become the benchmark for a modern trade agreement (Pomfret, 2021a). Other examples of beyond-WTO agreements include the Regional Comprehensive Economic Partnership (RCEP) between the ten ASEAN countries and five regional partners (Australia, China, Japan, Korea, and New Zealand), the European Union’s deep agreements with countries such as Canada and Japan (Pomfret, 2021c, 156–60), and the agreement between Canada, Mexico and the United States signed in November 2018 and in force since July 2020.8 Table 6.1 illustrates the similar chapter structures of the TPP/CPTPP, RCEP, and the EU-Canada Comprehensive Economic and Trade Agreement (CETA).9 The agreements are generally consistent although they vary in coverage and in depth of commitment; any inconsistencies or even lack of clarity in addressing new issues such as e-commerce and digitalization would increase the complexity and costs of international trade.10 The twenty RCEP chapters have similar coverage to corresponding CPTPP chapters, with slightly different ordering, a single chapter for services, and omission of seven chapters. Tariffs in RCEP countries are higher than in CPTPP countries (Table 6.2) and market access for goods and rules of origin were of greater importance in RCEP negotiations, but trade in goods still only occupies a small fraction of RCEP chapters.11 Some CPTPP chapters are not in RCEP—environment, labour, stateowned enterprises, competitiveness, development, regulatory coherence, and transparency and corruption—and RCEP is less comprehensive than CPTPP in sensitive areas such as trade in agricultural products and in services. Nevertheless, RCEP illustrates the usefulness of the chapter structure approach to trade agreements, following the pattern of CPTPP or EU deep agreements, while making weaker commitments and ignoring some controversial areas. In sum, in the twenty-first century Australia has been a strong proponent of the liberal multilateral trade regime.In the March 2020 trade policy review, WTO members praised Australian trade policies and adherence to WTO norms (Pomfret, 2021b).12 Moreover, Australia has been willing to push further in negotiating agreements on WTO+ and WTOX measures with like-minded countries. Australia played a leading role in

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Table 6.1 Chapter structure of TPP compared to RCEP and the EU-Canada agreement TPP/CPTPP

RCEP

CETA

TPP/CPTPP

RCEP

CETA

1. Definitions 2. Market access for goods 3. Rules of origin 4. Textiles & apparel 5. Custom administration 6. Trade remedies (AD&CVD) 7. SPS

1 2

1 2

16. Competition policy 17. SOEs & monopolies

13

17 18

3

A A

18. Intellectual property 19. Labor

11

20 23

4

6

20. Environment

7

3&7

5

5

8. TBTs 9. Investment 10. Services

6 10 8

4 8 9

11. Financial services 12. Temporary migration 13. Telecoms 14. e-commerce

8

13

9

10

8 12

15 16

15. Public procurement

16

19

21. Cooperation & capacity building 22. Competitiveness & investment facilitation 23. Development 24. SMEs 25. Regulatory coherence 26. Transparency & corruption 27. Administration & institution provision 28. Dispute settlement 29. Exceptions & general provisions 30. Final provisions

24 15

25

22 14 12&21 27 18

26

19 17

29 28

20

30

Notes A = included in annexes Source Australia’s Department of Foreign Affairs and Trade provides the text of the CPTPP at https:/ /www.dfat.gov.au/trade/agreements/in-force/cptpp/official-documents and for RCEP at https:// www.dfat.gov.au/trade/agreements/in-force/rcep/rcep-text. The text of CETA is available at: https:/ /trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf

negotiations for the TransPacific Partnership and especially in the transition to CPTPP after the US failed to ratify TPP, a positive role in concluding RCEP, and an active role since 2017 in negotiation of an agreement with the European Union.13 In some areas, Australia was willing to move faster than other CPTPP or RCEP partners, e.g. the Australia-Singapore Digital Economy Agreement that entered into force in December 2020 extended the digital trade component of the CPTPP.

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Table 6.2 CPTPP and RCEP Signatories’ average ad valorem applied tariffs, 2020 CPTPP RCEP Canada Chile Mexico Peru

1.5% 0.4% 1.2% 0.7%

Australia Brunei Japan Malaysia New Zealand Singapore Vietnam

0.7% 0.0% 2.2% 3.6% 0.8% 0.1% 1.3%

Cambodia PRC Indonesia ROK Lao PDR Myanmar Philippines Thailand

6.2% 2.5% 2.0% 5.5% 1.0% 1.8% 1.7% 3.5%

Notes weighted average based on bilateral trade at HS 6-digit level Source World Bank at https://data.worldbank.org/indicator/TM.TAX.MRCH.WM.FN.ZS (accessed 3 September 2022)

Australian Trade Policy in the 2020s In contrast to the careful and successful trade diplomacy described in the previous section, in 2020 and 2021 Australian policy became characterized by major political decisions announced suddenly, with negative impact on trade policy.14 A striking example was the clumsily managed announcement in 2021 of the Australia–UK–US agreement that included tearing up a large contract for French submarines, stalling negotiations for an Australia-EU trade agreement that had been progressing since 2017. The most important example for the CPTPP has been the aggressive policy stance towards China, which is by far Australia’s largest trade partner (Table 6.3). After Prime Minister Morrison irritated China in April 2020 by advocating an inquiry into the Chinese origins of the COVID-19 virus, relations rapidly degenerated into a trade war with Chinese restrictions on Australian exports of wine and barley and Australian anti-dumping actions on several Chinese products. The Australian government justified its measures by highlighting the scale of Chinese government intervention in the domestic market and Morrison carried this on to the CPTPP stage by stating that China was not a suitable CPTPP member due to the extent of its non-market economy.

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The speed and simplicity of this reaction and of Australia’s immediate positive response to the UK application to join CPTPP (see Section “Australia-China Relations” below), contrasted to the detailed negotiations creating the CPTPP and anticipated for accession candidates. The Australian government has maintained a lower profile with respect to other applicants: Taiwan, which like China applied in September 2021, and Ecuador which applied in December 2021.15 An appropriate response would be to examine each applicant’s policies to ensure compatibility with CPTPP rules and make membership conditional on reforms to remove incompatible policies. A further reason for more measured responses to applications is the connection between the applications from the PRC and Taiwan. APEC managed this issue by preparing for simultaneous admission of the PRC, Taiwan, and Hong Kong in 1991. The WTO accessions of the PRC and Taiwan were approved on 11 and 12 November 2001. For the CPTPP to achieve a similar coordinated result would require subtler diplomacy than Australia was offering in 2021.

Table 6.3 Australia’s top ten two-way trading partners, 2019–2020 (A$ billion) Rank

Trading partners

Goods

Services

Total

% share

1 2 3 4 5 6 7 8 9 10

China United States Japan EU27 Republic of Korea United Kingdom Singapore New Zealand India Malaysia

232.4 55.4 73.0 35.9 36.5 22.8 21.7 17.6 15.7 18.2

18.7 25.4 6.1 6.1 2.4 13.9 9.6 11.1 10.6 3.4

251.1 80.8 79.1 42.0 38.9 36.7 31.3 28.7 26.2 21.6

28.8 9.2 9.1 4.8 4.5 4.2 3.6 3.3 3.0 2.5

Note Taiwan was Australia’s 12th largest trading partner, with two-way trade of $16.1 billion Source Department of Foreign Affairs and Trade: Trade and Investment at a glance at https://www.dfat.gov.au/publications/trade-and-investment/trade-and-investment-glance2021#exports (accessed 24 May 2022)

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Australia–UK Relations Australia has had close relations with the UK ever since the first European settlement in 1788. Before the 1960s, the UK was Australia’s main trade partner and source of foreign investment. Following the minerals boom of the 1960s and the rise of Japan and the newly industrializing Asian economies in the 1970s, the UK share of Australian trade fell rapidly as the Australian economy reoriented towards Asia. On a policy level, preferential access to UK markets ceased in 1973, when the UK joined the European customs union; until 2020, British trade policy was the EU common commercial policy. In 2019 Australian prime minister Morrison established a personal rapport with UK prime minister Boris Johnson that was maintained despite travel restrictions during the COVID pandemic. After Brexit was concluded on 31 January 2020, Australia moved to the head of the queue for negotiating a new trade agreement with the UK, as opposed to rolling over EU agreements. Negotiations were launched in June 2020, amidst mutual assertions that an agreement would right the historical wrong of the UK abandoning Australia for Europe in 1973. The friendship was reinforced by Johnson extending a special invitation to Morrison to attend the July 2021 G7 summit in Cornwall, although Australia seemed isolated when the G7 leaders adopted a cautiously worded communiqué about China. Negotiations for the Australia-UK trade agreement were concluded in December 2021. According to Australia’s Department of Foreign Affairs and Trade website: “The Australia-United Kingdom Free Trade Agreement (Australia–UK FTA), signed virtually on 17 December 2021, is a gold standard trade agreement that represents a once in a generation deal for Australia and an historic moment in our relationship with the UK”.16 Unlike the Australia-EU agreement for which negotiations had started in 2017, a positive outcome was never in doubt in view of the enthusiastic support of the two leaders. There was also no doubt in the Australian leader’s mind that the UK’s February 2021 application to join the CPTPP should be successful.

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Australia-China Relations Australia and the People’s Republic of China established diplomatic relations in December 1972. Economic ties strengthened during the 1980s and 1990s and especially after the turn of the century. During the global resource boom China was the main destination for Australian coal, iron ore and other minerals, as well as a major source of fee-paying students for Australian educational institutions. Australia supported China’s membership in APEC and the WTO. The China–Australia Free Trade Agreement entered into force on 20 December 2015. Economic matters were separated from political and security issues such as concerns about human rights and Australia’s alliance with the United States. However, such separation was harder to maintain when US relations with China deteriorated.17 Separation of economic and political relations became more difficult after 2013, when Xi Jinping became China’s president. In Australia, the 2013–2015 Abbott government was openly split over the response to Xi’s Belt and Road Initiative and the Asian Infrastructure Investment Bank, with some ministers focusing on the security implications and others on the economics. Official responses to these major Chinese initiatives were late and limited. Australia–China relations soured further during the government of Malcolm Turnbull (from September 2015 to August 2018). Both Turnbull and foreign minister Julie Bishop were openly critical of China’s record on human rights and actions in the South China Sea. Bishop did not visit China in the final two and a half years of her tenure. Turnbull’s successor Scott Morrison had a chance to reset the relationship, after meeting President Xi Jinping on the sideline of a G20 meeting in June 2019.18 Morrison also held a meeting with Chinese premier, Li Keqiang at the November 2019 East Asia Summit, and foreign minister Marise Payne met Chinese foreign minister Wang Yi in August and September. In 2019 Morrison appeared to distance himself from the widening rift between the USA and China. After a meeting in the Oval Office in September 2019, President Trump challenged Morrison to express his “very strong opinions on China” to which Morrison responded “We have a comprehensive strategic partnership with China. We work well with China […] we have a great relationship with China”. Trump, in contrast, went on to describe China as “a threat to the world” (Laurenceson, 2022a).

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Australia-PRC relations cooled rapidly in 2020 and became outright hostile in 2021. In what was seen as a direct attack on China’s reputation, in April 2020 Australia called for an independent investigation into the origins of the COVID-19 pandemic, and Australia echoed US criticism of the World Health Organization for its alleged pro-China bias. In contrast to Morrison’s distancing from Trump in 2019, as US–China relations became more strained in 2020 Australia took positions similar to those of the Trump administration and often seemed to be leading the charge against China. In November 2020, a leaked Chinese document listed fourteen grievances, starting with blocking Chinese investment in Australia and the Huawei decision, but mostly focused on political disagreements such as Australia’s intervening in China Sea disputes, interfering in China’s internal affairs, and spreading anti-Chinese propaganda.19 Meanwhile, Chinese authorities suspended the import licences of major Australian beef producers, instructed some power plants and steel mills to stop buying Australian coal, and imposed punitive tariffs on barley and wine. In December 2020, Australia challenged China’s barley and wine tariffs at the World Trade Organisation; WTO panels were established in May and October 2021 to adjudicate on the barley and wine disputes respectively, but they were unlikely to report before 2023. As Australia maintained its position, China retaliated. In the second half of 2020, many non-tariff measures targeted Australian exports; for example, new sanitary concerns halted Chinese imports of Australian rock lobsters, Chinese textile companies reduced purchases of Australian cotton, and ships bringing coal from Australia were prevented from unloading in Chinese ports. In March 2021, China announced that it would extend the 220% anti-dumping duties on Australian wines for the next five years. Australia launched new anti-dumping cases against Chinese exporters. In June 2021, China requested WTO consultations on Australian anti-dumping and countervailing duty measures on imports from China. Against a backdrop of security-related disputes, a trade war simmered. Facing a general election in May 2022 and behind in opinion polls, the Morrison government made standing up to China a central plank of its election strategy. In March 2022, a nadir in Australian diplomacy followed an airliner crash in southern China when 132 people died (Laurenceson, 2022b). In contrast to the leaders of other countries in conflict with China (e.g. the UK, Canada, and India), neither prime minister Morrison nor foreign minister Payne issued even a short statement of condolences.

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Unlike the government, shadow foreign minister Penny Wong took time to express her condolences. Wong’s action raised the prospect of better relations after the Morrison government’s defeat in the May 2022 general election.

Australia–Taiwan Relations Australia–Taiwan relations have fluctuated in response to Taiwan’s importance as an economic partner and Australian relations with the PRC. During the 1950s Australian relations with Taiwan were not close. Bilateral trade grew rapidly in the 1950s and 1960s, and in 1966 Australia established an embassy in Taipei. However, in 1971 Australia recognized the PRC as the sole legal government of China, acknowledging that Taiwan is a province of China. After this was confirmed in the Joint Communiqué with the PRC, diplomatic links with Taiwan were discontinued. Nevertheless, trade between Australia and Taiwan continued to flourish and unofficial institutions were strengthened in the 1980s and 1990s. The Australian Commerce and Industry Office (ACIO) was established in 1981 under the control of the Australian Chamber of Commerce. In the absence of formal diplomatic relations, the ACIO was operating as an unofficial embassy by the end of the decade. The 1989 Tiananmen massacre in Beijing and democratisation of Taiwan contributed to a warmer relationship, and in 1990, after a review of Australia’s policy towards Taiwan, Minister for Technology and Commerce John Button declared government support for closer Australia economic relations with Taiwan. In 1993 Taiwan was Australia seventh largest trade partner, with trade roughly equal to that with the PRC (just over five billion dollars). During the 1996 Taiwan Strait Crisis, Australia was perceived by the PRC to be supporting a US containment strategy. The Howard government reacted by trying to strengthen relations with the PRC while balancing this with US pressure to commit to supporting the USA in any Taiwan-PRC conflict. As trade and other economic relations between Australia and the PRC flourished in the twenty-first century, Australian relations with Taiwan were pushed into the background despite strengthening institutional arrangements.20 In 2020, Taiwan was Australia’s twelfth largest trade partner, far behind the PRC (Table 6.3). The situation changed as Australia-PRC relations rapidly deteriorated in 2020 and 2021. In late 2021, both PM Morrison and Defence Minister

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Peter Dutton, apparently playing up security issues for a domestic audience, asserted that Australia would follow the US lead if the PRC invaded Taiwan. The position was welcomed in Taipei but criticized by shadow Foreign Minister Wong for using Taiwan as a pawn in the Liberals’ opposition to the PRC (Stünkel, 2022).

Expanding the CPTPP In contrast to the rapid response of Prime Minister Morrison to the applications by the UK and PRC to join the CPTPP, the institutional response from CPTPP members has been more measured. The 2019 CPTPP Commission document Comprehensive and Progressive Agreement for Trans-Pacific Partnership Accession Process outlined the following benchmarks for accession: (a) demonstrate the means by which the applicant will comply with all of the existing rules contained in the CPTPP; and (b) undertake to deliver the highest standard of market access offers on goods, services, investment, financial services, government procurement, state-owned enterprises and temporary entry for business persons in an outcome that strengthens the mutually-beneficial linkages among the aspirant economy and the existing CPTPP members. Consensus among ratified parties (currently all members except Brunei, Chile, and Malaysia) is required to agree to the accession of any aspirant economy.21 The UK application was announced in February 2021 and formally lodged in June. This was followed by the CPTPP members establishing an accession working group and the UK submitting a 192-page report “outlining how we’d meet the high standards of the CPTPP”.22 A first meeting of the applicant and the eleven CPTPP countries was held virtually on 28 September 2021. This was followed by negotiations within smaller technical working groups, presumably focusing on individual chapters and on questions of whether the UK meets the commitments in the CPTPP.23 The UK accession process should be relatively easy. The UK has already rolled over EU agreements with CPTPP signatories Canada, Chile, Japan, Mexico, Singapore, and Vietnam, as well as having signed new agreements with Australia in December 2021 and with New Zealand in February 2022. Most of these are deep agreements. However, it is important to establish a thorough and transparent accession process for the first applicant before considering other outstanding applications.

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In September 2021, China applied to join the CPTPP. The PRC’s application faces resistance from CPTPP members concerned about Chinese competition in their markets or doubting market-opening commitments. Such doubts do not include PRC’s tariff barriers, which have declined substantially since 1978, and PRC has accepted elimination of tariffs in trade agreements with Singapore and New Zealand (Su and Zang, 2020). China has already signed RCEP, which contains many commitments in areas covered by the CPTPP, as well as bilateral agreements with Australia, Chile, New Zealand, Peru, and Singapore. However, many CPTPP chapters go further than RCEP commitments. For example, both the CPTPP and RCEP contain a chapter on ecommerce, but the CPTPP’s digital provisions are stronger (e.g. forbidding forced disclosure of source code), are subject to dispute settlement procedures, and do not permit self-defined national security exemptions. Moreover, unlike RCEP, the CPTPP has chapters on labour and state-owned enterprises that mandate freedom of association, elimination of all forms of forced labour, and establishment of disciplines on the commercial activities of public enterprises. In sum, there are areas where members can challenge China’s readiness to accept CPTPP commitments, but the process must be transparent. The UK accession negotiations can establish such a process and should not be rubber-stamped as Australian prime minister Morrison seemed to promise UK prime minister Johnson. A trickier balancing act will be to depoliticize the applications from China and Taiwan. The Australian government has shown limited interest in the Taiwan application, in contrast to its adroit support in the 1990s for linking PRC and Taiwan applications to APEC and the WTO. Australia’s official position on Taiwan’s bid was neutral. Trade Minister Dan Tehan stated: ‘Australia will work with the CPTPP membership to consider Taiwan’s application on a consensus basis, in accordance with the CPTPP Accession Guidelines’. However, Australia is aware of PRC opposition to the bid and to other potential problems (Lai, 2021). Taiwan made its accession request to the CPTPP as the ‘Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu’, which had been acceptable to the PRC in the WTO context. As Taiwan has not applied to the CPTPP as a sovereign state, its application need not be incongruous with China’s ‘One-China’ interpretation. Although Australian discussion of Taiwan’s application has been primarily through the prism of the PRC relationship, other obstacles

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lie on the horizon. Taiwan’s lack of experience with trade agreements, whose negotiation has been constrained by limited international recognition of Taiwan as a nation state, has left the government unaccustomed to dealing with trading partners’ insistence on binding commitments.24 Referenda in 2018 and 2021 highlighted popular opposition to imports that the exporting countries thought were unjustified. Following the 2011 Fukushima nuclear plant disaster, Taiwan imposed a ban on agricultural and food imports from five Japanese prefectures; despite efforts to lift the ban, in a November 2018 referendum almost four-fifths of voters supported maintaining the prohibition. In a December 2021 referendum, almost half of voters favoured banning pork imports with ractopamine residue, reflecting Taiwanese voters’ concerns on food safety issues even when foreign suppliers cited scientific evidence of the additive’s harmlessness. The ractopamine ban was vetoed in December 2021 and the ban on food imports from the five prefectures was lifted in February 2022, but they highlight the domestic political challenges that Taiwan may face during its CPTPP accession process. For example, if Taiwan accedes to the CPTPP, twenty Taiwanese agricultural products currently protected by tariff quotas and special safeguard measures will face increased competition from imports. In sum, beyond China’s opposition to its CPTPP accession bid, Taiwan will face a delicate balancing test between expectations of current CPTPP members and domestic politics. In contrast to the prime minister’s rapid responses in 2021 to the applications of the UK and PRC, the parliamentary approach to CPTPP expansion moved along more measured paths. In October 2020, trade minister Simon Birmingham referred the question of CPTPP expansion to the Joint Standing Committee on Foreign Affairs, Defence and Trade of the Parliament.25 The Committee invited relevant companies and organisations to make submissions; the Committee received 69 submissions and seven exhibits. Public hearings were conducted by the Committee in Canberra. The February 2022 report of the Joint Standing Committee included soundings of a wide variety of stakeholders and made eight recommendations (Table 6.4). Some submissions reflected predictable political preferences with respect to the applications of PRC and Taiwan, but the political need to recognize the connection between the two applications was generally acknowledged, despite the more positive slant of recommendation 5, compared to recommendation 4. Most submissions from trade bodies, think tanks and others emphasized the benefits from wider acceptance of

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Table 6.4 Recommendations of the joint standing committee26 1

2

3 4

5

6

7 8

The Australian Government continue to embrace an ambitious free trade agenda by working with other CPTPP members to expand the CPTPP to include new members that (a) support an open, transparent, and stable trading environment in the Indo-Pacific; (b) demonstrate an ability and willingness to meet the agreement’s high standards including a commitment to deliver against its rules and norms; and (c) offer export potential through enhanced market access The Australian Government work with other CPTPP members to leverage the process that applied to the United Kingdom as the first aspiring economy to formally request accession as a template for future aspirant economies while also learning lessons from the United Kingdom experience including the (a) benefits that accrue from negotiating a bilateral FTA with the United Kingdom while concurrently encouraging and facilitating its accession to the CPTPP; (b) importance of government-to-government engagement during the CPTPP accession process, including at the ministerial level; (c) value of clear guidance on the CPTPP accession process such as deal stages and related expectations The Australian Government work with other CPTPP members to encourage and facilitate the accession of the United Kingdom to the CPTPP The Australian Government work with other CPTPP members to encourage China to re-establish full trading relations including ending its coercive trade measures and reengaging in ministerial dialogue, and to demonstrate an ability and willingness to commit to the CPTPP’s high standards, prior to supporting the commencement of an accession process The Australian Government work with other CPTPP members to encourage and facilitate the accession of Taiwan to the CPTPP and to consider negotiating a bilateral Taiwan-Australia FTA concurrently, noting the benefit of a similar approach taken with the United Kingdom The Australian Government work with other CPTPP members to support South Korea in submitting a formal request to accede to the CPTPP, and to provide encouragement and facilitation of its accession upon a formal request being submitted The Australian Government work with other CPTPP members to encourage the United States to renew its interest in the CPTPP The Australian Government work with other CPTPP members to encourage informal discussions with Thailand, Indonesia, the Philippines, and other economies which have expressed an interest in acceding to the CPTPP

Source Joint Standing Committee on Foreign Affairs, Defence and Trade of the Parliament of the Commonwealth of Australia, Expanding the Membership of the Comprehensive and Progressive Trans-Pacific Partnership, Canberra, February 2022

CPPTP standards in reducing noodle bowl effects of differing regulations and in facilitating trade. In contrast, the submission by the Department of Foreign Affairs and Trade (DFAT) emphasized the market access benefits that Australia had already derived from CPTPP membership; in view of agriculture’s role in today’s Australian economy (1.9% of GDP and

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2.5% of employment in 2020–2021), improved market access in a handful of mainly farm products is unlikely to contribute large national benefits.27 Highlighting benefits to specific exporters is similar to the focus on market access in Taiwanese CPTPP debates (footnote 24), although such benefits are unlikely to be large for the economy as a whole and trade in goods is only one of the CPTPP’s thirty chapters.

The May 2022 Australian General Election The May 2022 general election resulted in a decisive rejection of the Morrison government, which won only 58 of the 151 seats in the House of Representatives (Table 6.5). The Labor Party’s majority of seats in the House of Representatives was sufficient for it to form a government under Anthony Albanese, but the majority is slim and in the Senate the government is dependent on the support of the Greens and at least one independent senator to pass legislation opposed by the Liberals (Table 6.5).28 The success of the Greens and independents was interpreted as reaction to the previous government’s grudging policy response to climate change. The new government’s priorities will be to increase focus on environmental matters (in the face of powerful mining and motoring lobbies) and to manage domestic economic and social challenges. During the election, the Labor Party was careful not to appear soft on security, although the expectation was that in government it would be less confrontational towards China than its predecessor. In their first months in office, PM Albanese and Foreign Minister Wong were careful to emphasize continuities in foreign policy (their first event was a Quad meeting) with fence-building in the South Pacific, Southeast Asia and the EU, apparently in that order of priority (Abbondanza, 2022).29 On trade policy issues, such as ratifying the Australia-UK trade agreement, there was little change as trade minister Don Farrell emphasized the importance of a rules-based international economic system. The new government was cautious in setting out its position on China or on CPTPP expansion, but the contrast between the political and institutional responses of Australia to the applications of the UK, PRC and Taiwan are likely be reduced after the May 2022 general election.

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Table 6.5 Composition of Australian Parliament before and after the 2022 election

Liberal/National Coalition Labor Greens Independents

House of Representatives (151 seats)

Senate (76 seats)

Before

After

Before

After

75 67 1 7

58 77 4 12

35 26 9 6

32 26 12 6

Notes in a general election all House seats are contested in single-member constituencies. Senators sit for six years with half facing re-election every three years; Senate results are determined by a form of proportional representation in each state or territory Source Australian Electoral Commission website at https://results.aec.gov.au/27966/Website/Hou seDefault-27966.htm

Conclusions Australia’s trade policy in the twenty-first century has been among the most liberal and progressive in the world. The country’s policies are, with a few minor exceptions, consistent with WTO world trade law. In areas where the WTO has been slow to progress since 1995, Australia has often been among the leaders, whether in WTO plurilateral agreements like the ITA or in bilateral trade agreements or in broader agreements like the CPTPP and RCEP. However, especially between 2020 and 2022, Australia became involved in diplomatic contretemps that had negative consequences for trade policy. A poorly managed shift in defence policy in September 2021 derailed negotiations for a trade agreement with the European Union and aggressive criticisms of China contributed to a trade war in 2020–2022. Australia’s position on CPTPP expansion will depend on whether the astute trade diplomacy of recent decades or the clumsy political diplomacy displayed in relations with France and with China dominates. The CPTPP agreement implies treaty-level compliance with trade rules beyond WTO commitments. Applications for membership should depend on the applicant’s willingness and ability to observe the CPTPP rules. Even if an applicant is a strategic rival with a distinctive economic system, the application should be measured against compatibility with CPTPP rules, and diplomacy should aim to dampen other considerations.

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In reaching a decision on applications to join the CPTPP, Australia would be best advised to work with like-minded CPTPP members than staking out an individual position without reflection or discussion. With respect to China’s position, Australia’s concerns should not differ much from those of other CPTPP members such as Canada, Japan and New Zealand who may worry about China’s strategic intentions and disagree with its internal policies. The result of the May 2022 Australian election offers the prospect of such an approach, although early signs are of the new government being most concerned with domestic issues such as inflation, disaster response and balancing demands of carbonintensive industries with climate change commitments, while maintaining an approach of general continuity to foreign policy.

Notes 1. Australia’s import-weighted average MFN tariff fell from 6.9% in 1996 to 2.7% in 2020; https://data.worldbank.org/indicator/TM.TAX.MRCH. WM.FN.ZS?locations=AU (accessed 3 September 2022). The same database estimates an average applied tariff of 0.7% in 2020. 2. Bilateral trade agreements were agreed with Singapore (in force 2003), the USA (2005), Thailand (2005), Chile (2009), the Association of Southeast Asian Nations (2010), Malaysia (2013), South Korea (2014), Japan (2015), China (2015), Hong Kong (2020), Peru (2020), and Indonesia (2020). 3. In addition to tariff reductions on bilateral trade, Closer Economic Relations between Australia and New Zealand covered non-tariff barriers to bilateral trade, including a timetable to eliminate all quantitative restrictions and to address subsidies and government procurement. Additional protocols in 1988 and 1992 extended the CER to services and to harmonization of business law and competition policy. 4. After the USA announced its intention not to ratify the TPP, the eleven remaining TPP countries agreed in May 2017 to renegotiate the agreement and in March 2018 they signed the CPTPP. The CPTPP is the same as the TPP apart from a list of twenty-two “suspended provisions”, primarily from chapters on investment, public procurement, and intellectual property rights, that were of primary interest to the USA. After ratification by Australia, Canada, Japan, Mexico, New Zealand, and Singapore, the CPTPP entered into force for those countries on 30 December 2018. Vietnam ratified the CPTPP in 2019 and Peru in 2021. Brunei, Chile, and Malaysia have yet to ratify.

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5. A distinction is often made between extending WTO commitments (WTO+ ), e.g. by strengthening rules about application of anti-dumping duties or about the scientific basis for sanitary and phytosanitary measures that restrict trade, and commitments in areas not covered by the WTO (WTO-X), such as e-commerce and digitalization. 6. An overarching factor has been the internet, whose implications for international trade were unobservable when the WTO was established in 1995 but had become significant by the end of the century (Freund and Weinhold, 2004). Chapters on e-commerce or digitalization are a prominent feature of modern trade agreements. 7. ITA participants commit to eliminating tariffs on the IT products covered by the Agreement. In December 2015, over 50 members, including Australia, agreed on expansion of the ITA to cover an additional 201 products. Australia was also a willing adopter of other optional or new WTO commitments, e.g. Australia ratified the 2017 Trade Facilitation Agreement with 100% implementation of commitments and in 2019 Australia joined the Plurilateral Agreement on Government Procurement. 8. The agreement called the United States–Mexico–Canada Agreement (USMCA) in the USA is in Canada officially known as the Canada– United States–Mexico Agreement (CUSMA) in English and the Accord Canada–États-Unis–Mexique (ACEUM) in French, and in Mexico as Tratado entre México, Estados Unidos y Canadá (T-MEC). 9. In addition to 30 chapters, CETA has three protocols (on rules of origin, on mutual acceptance of the results of conformity assessment, and on good manufacturing practices for pharmaceutical products), as well as annexes, which address topics like rules of origin and textiles and clothing. CETA chapters 11 (mutual recognition of professional qualifications) and 14 (international maritime transport services) could be included within the existing CPTPP chapter structure. 10. Consistency is not surprising; seven CPTPP signatories are also in RCEP, and CPTPP signatories Canada, Japan, and Mexico have deep agreements with the EU or USA. This aids drafting, as some clauses reappear verbatim in different agreements, but the need to write a legal text covering areas beyond WTO commitments explains the long negotiating process behind these agreements. 11. Negotiations leading to the RCEP included lengthy detailed bargaining on preferential tariff rates and rules of origin, especially with India, which ultimately withdrew from the negotiations. The text of RCEP, including the trade in goods chapters, is concise. However, the annexes specifying preferential tariffs and defining rules of origin run to thousands of pages. 12. The main criticisms concerned Australia’s frequent use of anti-dumping investigations (344 initiated between 1995 and 2018, and 156 antidumping measures imposed), use of sanitary and phytosanitary (SPS)

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14.

15. 16.

17.

18.

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restrictions, and country-specific concerns about Australia’s luxury car tax, wine equalisation tax and cigarette packaging rules. Although mostly valid, the product-specific criticisms do not represent huge overall trade barriers. The RCEP position was facilitated by existence of a 2010 agreement between Australia, New Zealand, and the Association of Southeast Asian Nations. The benefits from deep agreements are harder to predict than benefits from eliminating tariffs, but they could be substantial. Petri and Plummer (2018) estimated annual future gains to Australia of USD17 billion from CPTPP and RCEP and emphasized the benefits from joining global value chains. Trade policy was bipartisan for thirty years after 1983; although elections included colourful rhetoric, trade policy was scarcely an issue. Carbon pricing was a major issue in the 2013 election, and repeal of the carbon tax after the Liberal victory hampered future trade policy as other countries responded to climate change concerns (notably the EU’s move to adopt a Carbon Border Adjustment Mechanism announced in July 2021). Explicit politicization of trade policy or subjugation of trade policy to other concerns became clearer after the 2019 election. In April 2022, the Republic of Korea announced its intention to apply. Costa Rica applied in August 2022. At https://www.dfat.gov.au/trade/agreements/not-yet-in-force/aukfta (accessed 24 May 2022). Despite differences in background between the evangelical Morrison and the libertine Johnson, they shared a common penchant for the big announcement and lack of concern over details that was evident in both Johnson’s attitude towards the UK’s withdrawal from the EU and Morrison’s attitude towards the UK application to join the CPTPP. The fluctuating global background is illustrated in Australia’s engagement in meetings of the Quad (India, Japan, the United States and Australia) that began in 2007, under George W Bush and John Howard. Kevin Rudd, Australian prime minister after the 2007 election, pulled back because of concerns about America’s approach to China. In 2017, Prime Minister Turnbull revived the arrangement as concerns mounted about China’s military expansion in the South China Sea. In a March 2021 statement, the four leaders spoke of “The Spirit of the Quad” as a “rulesbased maritime order in the East and South China seas” that supported a “Free and Open Indo-Pacific”. In the week following the 2022 election, new prime minister Anthony Albanese and foreign minister Penny Wong made a point of attending the Quad meeting. A less positive augury was Morrison’s role as the Turnbull government minister (Treasurer and Acting Minister for Home Affairs) signing off in 2018 on banning Huawei from participation in Australia’s 5G rollout.

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19. Jonathan Kearsley, Eryk Bagshaw and Anthony Galloway, ‘If you make China the enemy, China will be the enemy’: Beijing’s fresh threat to Australia, Sydney Morning Herald, November 18, 2020. 20. The ACIO was renamed the Australian Office in Taipei in 2012 and operated more clearly as the de facto embassy. 21. The Accession Process starts when aspirant economies notify New Zealand, as CPTPP depositary, of their formal request to commence negotiations on acceding to the CPTPP. Following notification, if the CPTPP Commission decides to commence the accession process, it will establish an Accession Working Group comprised of government representatives from each party. The aspirant economy will negotiate with the Accession Working Group its market access offers and demonstrate how it will meet the benchmarks. After finalising negotiations, the Accession Working Group will submit a written report to the Commission on terms and conditions for the aspirant economy’s accession to the CPTPP. CPTPP Commission, Annex to CPTPP/COM/2019/D002: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Accession Process, available at https://www.dfat.gov.au/trade/agreements/inforce/cptpp/commission-meetings. 22. Natalie Black, UK Trade Commissioner for the Asia–Pacific Region, quoted by Hoang (2021). 23. Breen (2022) argues that the CPTPP accession process is incompatible with the UK government’s claim to have left the EU in order to implement an independent trade policy because an applicant must accept “the rules and standards already agreed to by existing members”. This is true (just as for applicants to join the WTO and other international institutions) but having agreed rules for the conduct of international trade is mutually beneficial. Breen’s argument, which emphasizes the “limited economic benefits”, misses the point that the CPTPP is about establishing rules for trade that go beyond the WTO rather than old-fashioned trading of preferential market access. 24. Taiwan’s WTO accession was accompanied by demonstrations against reduced restrictions on rice imports, and memories of those events remain strong. Debate within Taiwan has highlighted the benefits of preferential access to CPTPP members’ markets but considering those countries’ low MFN tariffs this is unlikely to be a major factor. A more important benefit is establishment of rules in areas such as digitalization that are crucial for efficient international supply chains. 25. Previous parliamentary committee inquiries into Australia’s free trade agreements by the Joint Standing Committee on Treaties included an inquiry examining the Trans-Pacific Partnership (tabled November 2016), a separate inquiry examining the newer Comprehensive and Progressive Agreement for Trans-Pacific Partnership (tabled August 2018), an

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27.

28.

29.

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inquiry into access to free trade agreements by small and medium enterprises (tabled February 2019), and an inquiry on the Regional and Comprehensive Economic Partnership Agreement (tabled August 2021). The primary focus of the inquiry was the applications of UK, PRC, and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu. Other areas of interest included major prospective applicants such as, but not limited to, the USA, the Republic of Korea, India, Indonesia, and the Philippines. Ecuador’s application to join the CPTPP was filed after the inquiry’s call for submissions and public hearings, and the Committee received no evidence on Ecuador’s application. DFAT highlighted the following improved market access: reductions in Japan’s tariffs on beef and elimination of beef tariffs in Canada within five years and Mexico within ten years, preferential access for some dairy products into Japan (cheese), Canada (milk protein) and Mexico (yoghurt), new sugar access into Japan, Canada and Mexico markets, tariff reductions and new access for cereals and grains exporters into Japan, elimination of all tariffs on sheepmeat, cotton and wool by all parties, elimination of Canada’s 2.5% tariff on salt, elimination of tariffs on seafood, horticulture and wine, and elimination of all tariffs on certain manufactured goods by all parties (Submission 49, page 5). DFAT also highlighted CPTPP benefits for Australian investors in areas such as mining and resources, telecommunications, and financial services. A striking feature was the success of teal (blue-green) independents, who identified with the principles of Liberals and Greens and criticized the misogyny and lack of integrity of the Morrison government. Teal candidates won seven previously safe Liberal seats; the seven winners were all women, and all but one of the losers were men. The EU has shown renewed urgency in concluding a trade agreement with Australia, recognizing Australia’s desire for trade diversification (reducing dependence on the PRC as a trade partner), new climate policies, and support for Ukraine. Tory Shepherd: “Australia-EU Free Trade Agreement back on Track with Albanese Government”, The Guardian at https://www.theguardian.com/australia-news/2022/aug/05/australiaeu-free-trade-agreement-back-on-track-with-albanese-government-ambass ador-says.

References Abbondanza, Gabriele (2022): Le Sei Sfide della Politiica Estera Australiana, Affari Internazionali, Istituto Affari Internazionali, Rome, posted on August 1 at - https://www.affarinternazionali.it/australia-politica-estera/.

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Breen, John Harley (2022): Prospects for the United Kingdom’s CPTPP Accession, East Asia Forum, February 1. Freund, Caroline, and Diana Weinhold (2004): On the Effect of the Internet on International Trade, Journal of International Economics 62(1), 171–89. Hoang, Lien (2021): UK ‘On Track’ to Join CPTPP by 2022, Trade Official Says, Nikkei, November 16 – at https://asia.nikkei.com/Editor-s-Picks/Int erview/U.K.-on-track-to-join-CPTPP-by-2022-trade-official-says. Joint Standing Committee (2022): Expanding the Membership of the Comprehensive and Progressive Trans-Pacific Partnership, Joint Standing Committee on Foreign Affairs, Defence and Trade of the Parliament of the Commonwealth of Australia, Canberra. Lai, Bernie (2021): Taiwan’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), on the Australian Parliament House website at - https://www.aph.gov.au/About_Parliament/Parlia mentary_Departments/Parliamentary_Library/FlagPost/2021/December/ Taiwan_CPTPP_bid (posted 20 December). Laurenceson, James (2022a): From Handshakes to Threats: Can the Election Bring a Fresh Start in Our Fractured Relationship with China? The Conversation, April 14, 2022a. Laurenceson, James (2022b): With a new Australian Government and Foreign Minister comes Fresh Hope for Australia-China Relations, The Conversation, May 22, 2022b. Petri, Peter, and Michael Plummer (2018). Australia Will Gain from Continued Asia-Pacific Trade Integration. Modelling Report, Australian Chamber of Commerce. Available at: https://minerals.org.au/sites/default/files/180 905%20Australia%20will%20gain%20from%20continued%20Asia-Pacific%20t rade%20integration.pdf. Pomfret, Richard (2015): Reorientation of Trade, Investment, and Migration, in Simon Ville and Glenn Withers (eds.) The Cambridge Economic History of Australia (Cambridge University Press, Port Melbourne), 397–418. Pomfret, Richard (2019): Australian Trade Policy in the Twenty-First Century, Australian Economic Review 52(4), 462–7. Pomfret, Richard (2021a): Regionalism’ and the Global Trade System, The World Economy 44(9), 2496–514. Pomfret, Richard (2021b): Trade Policy Review of Australia, The World Economy 44(12), 3507–15. Pomfret, Richard (2021c): The Economics of European Integration (Harvard University Press: Cambridge MA). Stünkel, Larissa (2022): Australia All Bark and No Bite on Taiwan, East Asia Forum, February 25.

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Su, Qingyi, and Chengwei Zang (2020): How Will the Implementation of Zero Tariffs affect Employment in China? China and World Economy 28(2), 123– 42.

CHAPTER 7

Gatekeeper’s Dilemma: Japan Facing CPTPP Applications from China and Taiwan Saori N. Katada

Introduction For more than a decade, the Transpacific Partnership (TPP) trade agreement has been a vital part of the Japanese government’s economic agenda. This mega free trade agreement encompassing the Asia Pacific has aimed not only at creating a large free trade area among the members, but also at installing the most advanced trade and investment rules in the region. The TPP can spread these rules by expanding its membership through accession.1 After Japan joined its negotiation in 2013, and especially after

This is a revised version (as of September 2022) of the conference paper drafted for the Nottingham Conference, “Racing to join the club: The implication of China’s, Taiwan’s, and the UK’s applications to join the CPTPP” 17–18 June 2022. I thank Mike Liu for his excellent research assistance. S. N. Katada (B) University of Southern California, Los Angeles, CA, USA e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_7

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the 2017 US exit from the agreement, the Japanese government has been taking the leading role in shaping and protecting this trade and investment institution. Once the revived TPP came into effect in late 2018, however, nothing has been as immense of a challenge for Japan as China’s application in September 2021 to join the TPP. A few days after China’s application, Taiwan also applied to join. China’s application to the CPTPP imposes a significant dilemma to its members, and particularly Japan, the largest member economy and with close ties to the United States. China’s participation in this highstandard agreement would open up more economic opportunities for the region, but it would also introduce economic security tensions, especially since the United States is now seriously working to counter China’s economic expansion. Meanwhile, the rules-based trade and investment order in the region continues to be an important factor for this highly integrated region with supply chains criss-crossing borders. How to both integrate China’s massive economy and maintain the important features of the institution defies the existing IR theory and a difficult policy proposition. That is what Japan and the other CPTPP members are grappling with. Due to the contemporary nature of the event, there is still uncertainty in ways to go until we reach the end point. Given that, this chapter examines how these two sides of Japan’s dilemma have been discussed so far as it struggles to play the role of “gatekeeper” and strives to shape regional economic order in the accession debate. The chapter starts first with the brief history of how Japan became the leading actor in guarding the TPP, and after briefly outlining how we see China’s interests in joining the TPP, which includes complex considerations involving the Taiwan factor, the chapter examines two aspects of Japan’s dilemma before concluding with the importance of Japan’s role in the process.

Politics of Free Trade Agreement Enlargement When states engage in establishing and expanding a free trade agreement, they pursue multiple objectives that can range from simple expansion of their market access without trade barriers and security guarantees to the establishment and diffusion of effective rules (Solís et al. 2009). For the smaller economies, the access to markets of larger states would dominate, while for larger and more powerful states, security incentives and rulesetting motivations are leading incentives (Stallings and Katada 2009).

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Once a free trade agreement forms and starts to function as an international institution and/or regional integration framework, its original members are faced with a trade-off between how to spread its scale and influence without undermining the feature of the agreement. Membership is an important feature of institutions. The European Union is known to apply its acquis communautaire and other norms to its aspiring members as its conditionality of membership (For example, Kelley 2004). The membership and accession challenge for preferential trade agreements, such as TPP, is also a crucial part of geoeconomics as these agreements define not only bilateral power relations (such as Gowa 1995; Wesley 2008), but also the structural power underpinning. In that sense, the inclusion and exclusion related to the membership derives from the dominant power’s (or powers’) political objectives. The membership itself is a critical factor. According to the existing theoretical discussions regarding international organization (IO) enlargement, accession of diverse members is not only unlikely (Mansfield and Pevehouse 2013), but also bound to lead to the long-term shifts in the organization’s characteristics (Gray et al. 2017). Meanwhile, many scholars have argued that international institutions and regional institutions are great forums to socialise diverse and new members (Checkel 2005; Bearce and Bondanella 2007), and even the rapidly rising power of China was bound to be socialised (Johnston 2008; Sohn 2008). Counting on the enforcing and socialising power of institutions, TPP’s goal has been to expand membership in order to disseminate liberal trade and investment rules. Of course, once such ambition faces the reality of China’s accession, the vetting process starts. It is in this context that the dilemma of the gatekeeper state––in this case, Japan––becomes serious, as it has to strike the balance between membership expansion and the coherence of organizational characteristics.

Japan’s Road to the CPTPP with the US Lead and China as a “Shadow” Negotiator The Japanese government often cites the success of regional free trade agreements––especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)––as a vital part of protecting rulesbased economic order. In the process, the Japanese government has always kept China in mind, not as an immediate member, but a “shadow

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negotiator” against which to shape the rules of trade and investment in the region (Solís 2012, 330). Japan’s long road to establishing regional trade and investment rules in the Indo-Pacific started at about the same time as the Japanese government began FTA promotion. Expanding ASEAN+3 framework into what the Japanese Prime Minister Koizumi called “expanded Asia” in 2005 became the core of the regional framework for Japan’s geoeconomic strategy in trade. In the context of China–Japan rivalry, the first host government of the East Asian Summit, Malaysia, was able to create ASEAN centric framework involving ten member countries of ASEAN as well as China, Japan, South Korea, Australia, New Zealand, and India (Terada 2010, 82–83).2 Based on this “ASEAN+6” format, the Japanese government proposed the Comprehensive Economic Partnership for East Asia (CEPEA) at the EAS second Summit held in the Philippines in January 2007. CEPEA was a proposal of a free trade area that would include all the major members of the Indo-Pacific except for the United States,3 whereas China advocated for the East Asia Free Trade Agreement (EAFTA) to be implemented among ASEAN+3 (China, Japan, and South Korea). The US Obama administration (2009–2016) focused on the TPP to enhance its influence in Asia’s trade governance. Asia’s high-standard free trade agreement originated from the Trans-Pacific Strategic Economic Partnership (P-4), signed by Brunei Darussalam, Chile, New Zealand, and Singapore in 2006. The main promoters of the P-4 were New Zealand and Singapore. The leaders from these small countries saw this FTA as a way to expand liberal economic order beyond what they can achieve bilaterally or through already stagnant WTO rounds. Additionally, they also hoped that such an FTA would engage the United States strategically and economically in the Asia Pacific region (Fergusson and Vaughn 2010, 3– 4; Lynch 2015). The TPP’s advent was also helped by the international climate of the period. Faced with the global financial crisis that started in mid-2007, the Bush administration (2001–2008) sought to pursue a higher degree of trade liberalization and placed this agreement at the center of creating a framework for economic partnerships in the Asia– Pacific region. The agreement included high-standard rules on trade and investment that were tailored to the twenty-first century global economy. In 2010, the US government officially started TPP negotiations, giving a heavy impetus to this process. The Obama administration saw TPP as a way to create a framework for regional FTAs, as it became the most

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important pillar of the US pivot to Asia. After the domestic political battle against joining the TPP in Japan led by the protectionist agricultural groups and their supporters, the Abe government officially joined the TPP negotiations in July 2013 as the twelfth and last negotiating member.4 Following a series of complex and difficult negotiations, the 12 countries finally reached an agreement in October 2015. February 2016, all 12 signed the agreement in Auckland, New Zealand, and they were awaiting ratification.5 The TPP was in line with the US rule-setting strategy and became vital in strengthening the Obama administration’s engagement with East Asia, with the purpose of countering China. This mega-trade agreement would help the United States rebuild its status and influence in the Asia– Pacific region, which was weakened by the war on terror under the Bush administration, the global financial crisis as well as by the rise of emerging economies competing for influence in the region, such as China and India. At the same time, the TPP also aimed at promoting structural reforms among Asian economies, where they house a high level of barriers to liberalization (Kikuchi 2015). The main objectives of the TPP were then to create a model of Asia–Pacific trade rules in line with US interests and to integrate China eventually into that orbit, instead of explicitly excluding China from the Asia–Pacific free trade order. For example, regulations on state-owned enterprises included in the competition policy domain of TPP negotiations were designed to control China’s economic competitiveness. In other words, President Obama was explicit in his intention that the US should write the rules of the global economy instead of China (Obama 2015), while it is more desirable for the US to pressure China to accept the US rulebook. The TPP turned to CPTPP (or TPP-11) when the new US President Donald J. Trump withdrew the United States from the 12-member TPP agreement on his third day in office in January 2017. The Japanese government swiftly managed to take the helm and led the remaining 11 countries to the CPTPP after freezing 22 items from the original TPP agreement.6 During the same time, a trade scheme originally following the CEPEA membership that included India, concluded its negotiation in 2020 and came into effect in January of 2022. This mega-FTA that included all the ASEAN members, China, Japan, South Korea, Australia and New Zealand, is the largest grouping so far covering a third of global GDP and a third of global trade. However, due to its diverse membership with many emerging economies resistant to rapid liberalization, the

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negotiated degree of trade and economic liberalization and the speed of rule adoption through RCEP have been adjusted to the participating countries’ stage of development both in terms of the level of tariff elimination and elimination of behind-the-border barriers (Petri and Plummer 2020, 6–9). Some of the high-standard rules on labor, environment and e-commerce are therefore not included in the RCEP. India, which was the RCEP’s negotiating member, constituted an important geostrategic component, but it withdrew from the RCEP negotiation in Fall 2019. Despite the country’s keen interest in engaging with the more economically vibrant East Asia since its “Look East Policy” of the 1990s and Prime Minister Narendra Modi’s more proactive “Act East Policy,” India was the most recalcitrant player throughout the RCEP negotiations (Sugawara 2018). In fact, RCEP negotiation was quite frustrating for India, and the reasons went beyond its fear of China’s dominating position in manufacturing. India proposed several issues important for its economy during RCEP negotiations including liberalization in service trade, a Special and Differential Treatment provision for India, higher rule-of-origin protection, special safeguard duties against surging imports, and different digital localization standards as well as movement of natural person; none of which were accepted by the RCEP members (Gaur 2020). India’s retreat was disappointing for many, but especially Japan, which was counting on its coalition with India to counter the power of China. As a way to make India’s re-entry to RCEP easier, all ministers of the RCEP members issued “Ministers’ Declaration on India’s RCEP” and installed an article (20.9) that has made it easier for India to rejoin the RCEP if it so chooses (Sugawara 2020). Throughout the establishment of the CPTPP and the RCEP, both of which are in effect as of 2022, the Japanese government played a major role. At present, the United States is left out from these two megaFTAs in the Indo-Pacific. Some countries in Southeast Asia (Singapore, Malaysia, Vietnam, and Brunei) and Oceania (Australia and New Zealand) are in both CPTPP and RCEP, while RCEP has connected the Japanese economy to two important Northeast Asian economies of China and South Korea (Fig. 7.1). Despite different “quality” or stringency of rules for trade and investment between the CPTPP and the RCEP, both are vital arrangements in shaping the future of regional economic order.

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Fig. 7.1 Indo-Pacific regional trade arrangements (Source Author’s compilation)

China’s Interests in the TPP In the early negotiation phase of the TPP, China was quite defensive, as it tended to interpret this mega-FTA as a means to “contain China” (e.g., Jin 2012). Indeed, it was deemed difficult for China to participate in this high-standard FTA at that point, since the rules included measures such as high-level intellectual property rights and labor protection as well as the regulation against special treatment of state-owned enterprises. Nonetheless, Chinese leadership’s attitude on the TPP visibly shifted to a more favorable stance since 2013, especially under its new leader Xi Jinping and after Japan’s participation in TPP negotiations in July of that year. China’s positive view on the TPP was clear in Premier

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Li Keqiang’s speech at the 2014 Boa Forum where he noted that “[a]s long as the TPP is conducive to the development of global trade and the fostering of an equitable and open trading environment, China is happy to see its conclusion.”7 Such counter-intuitively positive rhetoric on the part of China towards TPP is attributed to China’s internal and external politics. Internally, casting China’s great power ambition with the favorable portrayal of the TPP could entrap those who were opposed to domestic economic reform. By placing the TPP as an aspirational goal for China to become a great power, the reform-minded leaders can now constrain any opposition against liberal reforms (Lin and Katada 2022). Externally, the Chinese leaders were able to project their accommodation of follower nations, especially in Southeast Asia. China’s positive message on the TPP would allow these smaller countries to join this US-led initiative and others, as well as Chinese-led ones such as the Belt-and-Road Initiative or RCEP without having to choose between the two great powers in the region. By depicting the TPP as a part of the “win–win” or non-zero-sum initiative in relation to what China promotes, the Chinese leaders could not only avoid the backlash from the United States against China’s own initiatives, but also entice the follower states to continue to expand their dependence on China (Lin and Katada 2023). Nonetheless, no one had expected that Beijing was serious about or ready to join the TPP anytime soon. Hence, despite the fact that China’s President Xi Jinping already announced that China will “favorably consider joining CPTPP” almost ten months prior at the time of the 2020 APEC summit, China’s official application still came as a surprise. China clearly has mixed objectives for applying to join the CPTPP, ranging from economic to strategic goals. On the economic front as discussed above, China has been interested in using external levers to reform its domestic economy. Many developing countries had utilized external agreements to “lock-in” economic reforms resisted by domestic vested interests (see Baccini and Urpelainen 2014). With complex winners and losers from FTAs, large mega-FTAs have been useful for China’s reformist leaders in their efforts to liberalize the economy and make the country more productive and efficient. Chinese reformers such as Zhou Xiaochuan, the former Governor of the People’ Bank of China, pushed for China’s application to the CPTPP repeatedly since 2019, and China’s main economic journal Caixin Media published eight editorials between 2019 and 2021 in support of using CPTPP to liberalize and reform Chinese economy (Watanabe et al. 2021, 3).

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In addition, China’s concerns on trade diversion rose during this period not only due to the free trade agreements excluding China. Furthermore, the intensification of the trade war between China and the United States under the Trump administration’s push towards “decoupling” has forced China to scramble for ways to maintain its economic connection to the rest of global economy. Furthermore, supply chain disruption emerged either naturally-induced, such as in the aftermath of the 3–11 disaster in Japan or the Covid pandemic of 2020–2021, or man-made, such as the case of trade sanctions and export bans seen against Iran under the nuclear agreement or Japan’s use of similar strategies against South Korea’s semiconductor sector. The US government implemented reshoring and near-shoring policies in order to reduce the country’s production dependency on China, and recent discussion of “alliance shoring” and “friend shoring” emphasize how the countries should trade more with those sharing the fundamental values such as human rights, thus possess high trust. On the strategic side of China’s motivation, it would be important for China to join the CPTPP while the US is absent. If the US government is to come back to the table, the 22 frozen articles including stringent rules on IPR and rigorous investor protection through ISDS could be revived. Furthermore, the Biden administration could demand more strict conditions on China including possible introduction of topics covered by the newer United States–Mexico–Canada Agreement (USMCA), such as labor regulations and anti-currency manipulation (Su 2022). Furthermore, there has been considerable speculation regarding China’s geostrategic motives behind the timing of its application, which came at the heels of the announcement of the Australia–UK–US (AUKUS) pact. At this time, the RCEP ratification process was also getting close to conclusion among many members, which would make it more likely for the RCEP come into effect in early January 2022.8 Another forceful effort by the Chinese leadership in recent years is casted as its ambition to establish “institutional discourse power” first introduced at the 5th Plenum of the 18th Communist Party of China Central Committee in October of 2015 (Aoyama 2018, 17). By calling the establishment of ‘international order’ reflecting the Chinese power, the Chinese leadership is keen to defy the ‘global order’ dominated by the United States, which is often hostile to China’s role in shaping global rules (Watanabe et al. 2021, 14–18).

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Finally, China would support initiatives that would allow smaller regional economies to continue to hedge and increase their integration with the Chinese economy. China wants to appear reconciliatory to its neighbors by agreeing to support efforts towards fostering global economic order. As the international community began to alert against China’s challenge on the Liberal International Economic Order (LIEO), it became important for China to demonstrate its willingness to support global economic initiatives (Chen and Zhang 2020). With the time and economic size in its favor, the heavy dependence China projects among its neighbors will, sooner or later, enhance China’s power in the region and create potential, in the case of need, for China to use chokepoint effects of weaponized interdependence (Farrell and Newman 2019).

Taiwan Factor An additional and important factor for China’s decision to apply to join arose from the moves taken by Taiwan in the face of TPP development. Taiwan has aspired to join the TPP for quite some time. Its government has been preparing for its application for the last eight years under Tsai Ing-wen’s DPP administration by pre-emptively engaging in regulatory reforms so that Taiwan would meet the accession conditions for TPP entry (Lee 2022). In addition, the Taiwanese government, despite strong agricultural opposition against TPP, including high public sensitivity to food safety issues, removed two major hurdles to TPP in the area of Sanitary and Phytosanitary Measures in the last two years. One was the referendum to backtrack regulations requiring zero residual of ractopamine in imported pork (targeting US-imported pork products), and the other was the lifting of an import-ban on agricultural products produced around the contamination area of Fukushima, Japan, exposed to nuclear fallout during the March 2011 disaster (see chapters by Goto and deLisle in this volume). For Taiwan, TPP is one of the most effective tools to enhance its footing in regional economic integration, which will allow Taiwan to diversify its heavy economic dependence away from China. In that sense, CPTPP has constituted an important part of President Tsai’s New Southbound Policy, initiated in 2016, as the CPTPP includes several of Taiwan’s important economic partners such as Japan, Australia and Singapore despite the US absence. The urgency of strengthening economic ties with the region and diversifying away from China intensified in the 2020s,

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as Taiwan faced reversal of the trade diversity gains made in the last five years (Aggarwal 2021). The successful activation of the RCEP in January of 2022, which covers all the Western Pacific nations except Taiwan put added pressure. CPTPP, based on the institutional norm of the APEC, has the advantage for Taiwan to join as it does not follow a “states only” structure of most international organizations, and consciously opens its membership to “economies” (deLisle in this volume). Since CPTPP narrowly focuses on trade and investment issues, Taiwan can hope to join the agreement in the same way that it was able to join the APEC in 1991 and the WTO in 2002 alongside China. This could also reverse the intense marginalization that Taiwan has experienced, especially in the last two decades China’s campaign to direct diplomatic recognition away from Taiwan. Taiwan’s accession issue, overall, is closely and directly connected to that of China’s, as China has ways to block Taiwan’s entry from within or outside of CPTPP. In fact, some have reported that the very timing of China’s application to CPTPP right before that of Taiwan was China making its move in anticipation of Taiwan’s application and pre-emptively working to complicate Taiwan’s accession process (see chapter by deLisle in this volume).9 In the Gate-Keeper’s Dilemma Having received China’s CPTPP application on September 16, 2021 along with Taiwan’s six days later, Japan has encountered a thorny task. With the United States absent, Japan, the country that “saved” the TPP, became one of the focal members to work with the current CPTPP members to respond to Chinese and Taiwanese requests. At the time of Chinese and Taiwanese application announcements, Japanese leaders were clearly in support of Taiwan’s accession, while quite cautious about that of China. Right after China’s announcement, then-Minister of Economy, Trade and Industry Kajiyama Hiroshi noted that “we have to ascertain if China is ready to meet the high standards (of CPTPP).”10 During the LDP party presidential debate on the same day, three candidates (Kishida, Kono and Takaichi) were skeptical about China’s ability to meet such high standards, and only one (Noda) supported the bid.11 Even the Japanese businesses, which tended to support Japan’s economic engagement with China, were quite cautious. For example, Tokura Masakazu, the President

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of Keidanren (Japan Business Federation) noted that the high-level framework of TPP should not be compromised, and Mimura Akio, Chairman of the Japan Chamber of Commerce and Industry also emphasized the same point.12 Japan’s final position on China’s TPP accession is not at all clear due to the dilemma Japan faces. There are various pros and cons of including China into the CPTPP scheme. We can categorize Japan’s dilemma in two major aspects. The first is where Japan is caught between geoeconomic considerations of power and economic security on the one hand, and economic gains and prosperity of the region by integrating China, on the other. On this topic, Japan’s alliance relationship with the United States is critically important for the Japanese government in its evaluations. The second aspect is in relation to Japan’s role as a regional provider of public goods in the form of maintaining and promoting the rules-based economic order. Once CPTPP is becoming a vital basis for economic connectivity, trade, and investment in the region, the method to expand CPTPP’s rules for more members while keeping the existing high standards intact is a vital challenge.

Japan Between the US and China: Economic Gains Versus Economic Security Given TPP’s long history of being negotiated with China as the shadow negotiator, China’s accession to the CPTPP would have been an important milestone for Japan’s trade diplomacy and regional leadership. The economic impact of China’s entry into the CPTPP itself is significant. According to a widely-cited estimation by Petri and Plummer (2019), China’s membership will quadruple the global income gains from $147 billion annually to $632 billion. Despite the fact that trade between Japan and China is covered by the RCEP as of 2022, China’s CPTPP membership would integrate itself into the regional trade order under the higher standards, not available in the RCEP, ranging from rules on e-commerce, labor and environmental standard as well as rules on the State-Owned Enterprises. Furthermore, the Japanese government will surely accrue diplomatic gains in touchy Sino-Japanese relations to negotiate and support, at least in principle, China’s entry. Such a process will provide Japan with “a valuable platform for dialogue with China” (Tsugami 2022). Essentially, Japan would not want to be the one (seen

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as) blocking China as other nations that have already ratified CPTPP, such as Singapore and Vietnam, are in favor of China’s membership.13 By contrast, supporting China’s CPTPP accession would intensify the economic security challenge and put Japan in a difficult position vis-à-vis its important ally, the United States. As discussed, the Japanese government had taken a leading role in keeping the TPP alive since the US exit in 2017, but Japan was also anxiously waiting for a potential US return. The US has been left out in the cold in the Asia Pacific mega-FTAs as it is a member of neither the CPTPP nor the RCEP. Nonetheless, it has been difficult for the Biden Administration with its emphasis on middleclass jobs to take up the US market opening through the CPTPP. Even under strategic concerns when China officially applied to the CPTPP in September 2021,14 the Biden administration has been for the next 9 months quite clear that it would not come back to the TPP.15 The US government does not welcome Chinese entry into the CPTPP, however, especially after the conclusion of the RCEP with Chinese membership, since that will only propagate a China-centric regional economic order. In addition, if China manages to be a CPTPP member before the United States, it would be much harder and more unlikely for the US to return.16 The coronavirus pandemic, in addition to the US– China trade war, has cast a heavy shadow on the interdependent global economy and resilience of the extended supply chains from the start of the 2020s. The US government heightened its alarms on critical technology and began a campaign of “reshoring:” to bring US manufacturing back to the United States, and “friend-shoring:” where the production takes place among the members whom they can trust and cooperate. In addition, the US has focused on strengthening supply chain resilience among a number of Indo-Pacific member states excluding China, creating an implicit coalition against China. Finally, to demonstrate the US’ clear commitment to the IndoPacific after dodging to join the CPTPP, the US government officially proposed the Indo-Pacific Economic Framework (IPEF) in May 2022, whose negotiations started in September 2022. Currently (May 2023), the IPEF includes 14 countries around the Indo-Pacific, including four Quad members (Australia, India, Japan and the US), seven ASEAN members (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam), along with New Zealand, South Korea, and Fiji. With these members, the framework covers four pillars under the banners of connected (trade and investment facilitation), resilient (supply chain

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resilience and rules-based integration), clean (climate related issues), and fair economy (tax and anti-corruption). To the dissatisfaction of many Asian partners, missing from the scheme is US commitment to allow further market access in the United States, which would require the US Congressional approval.17 Although there is heavy emphasis on ecommerce and sustainability as well as rule-setting in the IPEF, the connection between the IPEF and CPTPP is uncertain. The IPEF does not include Taiwan as its member, but the United States and its trade representatives began to work with their Taiwanese counterparts in June 2022 to start the negotiation for strengthening mutual economic ties. Taiwanese products such as semi-conductors are crucially important for the US manufacturing sector and US national security (see Goto’s chapter in this volume). Even with heightened tensions around the Taiwan straits at the heels of US Congressional visits to the island, the US efforts to include Taiwan in its regional economic scheme. The heightened importance in increasing securitization of its national economy has intensified for Japan, too. The Japanese concern is reflected in the way that its government began to formulate institutions to tackle economic security issues during this period. First, the Economic Division within the National Security Secretariat was installed under Prime Minister Abe’s administration in April 2020. Prime Minister Kishida upgraded this function to the Economic Security Council with its proper Minister for the first time in Japanese history in November 2021 after his electoral victory, and the Council was upgraded to the Economic Security Office in March 2022. Other ministries also set up divisions focused on economic security issues in 2021.18 In addition, both the majority Liberal Democratic Party (LDP) and the LDP-led cabinet office put forward their respective strategic visions on Japan’s new economic security strategies.19 Finally, the Economic Security Promotion Act was passed by both the lower and house of the Japanese parliament to protect four areas of economic security, encompassing supply chain resilience, protection of critical infrastructure, public–private sector cooperation in technology development, and patent safety. Since a predominant part of Japan’s economic security concerns are targeted towards China, Japan’s current challenge is in balancing the prospect of enlarged economic integration through China’s possible access to CPTPP versus the efforts towards securitizing certain aspects of such integration.

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Maintaining the CPTPP Standards: Accession and Enforcement of Rules Despite possible benefits of China’s membership to the CPTPP through integration and socialization, there are concerns on the accountability and credibility of the Chinese government in respecting CPTPP rules after its accession into the agreement. Meanwhile, the analysis for an indication of China’s future behavior comes from its past track-record, which is provided by the World Trade Organization (WTO). After evaluating the last 20 years of China’s performance since its accession into the WTO in late 2001, the US Trade Representative’s office published a Report to Congress on China’s WTO Compliance and determined that China’s compliance record has been poor.20 The Japanese assessment was not as blunt, and has been quite mixed.21 With the WTO not functioning effectively especially since the late 2010s with its appalled body in paralysis (Petersmann 2019, for example), the CPTPP is an important entity to maintaining rules-based trade and investment order in the Indo-Pacific region. How it can sustain its soundness depends on both the accession conditions and the enforcement of the CPTPP rules on the members. CPTPP requires support from all member states to admit new members (unanimity accession rule), and this theoretically creates a high hurdle for any economies that apply to join to strictly follow CPTPP requirements (Schneider and Urpelainen 2012). Although this should benefit incumbent member states––especially a key actor like Japan––the asymmetrical power of China introduces multiple challenges. Evaluation of eligibility at the time of accession is one important way of making sure China will become a rule-abiding member of the CPTPP. The trade agreement came into effect in late 2018 with the seven members (Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam; while the eighth member Peru ratified in September 2021) ratifying. Then the first CPTPP Commission adopted an “accession process” to the CPTPP, which includes the principle “benchmark.“ That is that all aspirant economies must (a) demonstrate the means by which they will comply with all of the existing rules contained in the CPTPP; and (b) undertake to deliver the highest standard of market access offers on goods, services, investment, financial services, government procurement, state owned enterprises and temporary entry for business persons.22

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The United Kingdom became the first economy to formally apply to join the CPTPP on February 1, 2021, and an approval was granted by the CPTPP Commission to commence the accession process in June of that year. The Japanese government along with other members upheld high-standards to evaluate the UK case and plan to hold this case as the model for the future applications. As such, in the process of UK approval, the CPTPP members demonstrated strong commitment to adhering to the benchmark. The declaration notes: [The members] emphasized the need to maintain and advance the highstandard rules of the CPTPP, and they pointed to the United Kingdom’s experience with high-standard trade and investment rules; its clear commitment to promote transparency, predictability, and confidence in the rules-based trading system; and its affirmation of its intention and ability to meet the high standards of the CPTPP.23

Following such guidelines, Japanese politicians (above) and scholars reiterated the importance that Japan maintains the CPTPP’s high-level rules (Kawase 2021).24 Furthermore and moving forward, Japan and the CPTPP members have to make sure that the CPTPP rules are implemented properly and the actions of the members are monitored adequately. CPTPP’s Inter-State Dispute Settlement mechanism needs to be strengthened. The other component would be to make sure that the CPTPP maintains, into the future, strong enforcement of the rules against violation. There is no question that enforcement of CPTPP rules, under possible accession by a large economy with a questionable track-record such as that of China’s, put the onerous tasks of monitoring and enforcement on the member states’ shoulders without having the US on board. To supplement such political weight, Japan (and Australia25 ) have also advocated engaging the European Union (EU) in this matter. This is another method to secure the high-level rules in the CPTPP and maintain the implementation of such rules in the case of China’s access request. For such efforts, the op-ed written by Cecilia Malström, the former European Commissioner for Trade (2014–2019), for the Peterson Institute for International Economics advocating the EU to join the CPTPP resonated eagerly in Japan.26 Following the UK accession request submitted in 2021, the EU could put heft on the CPTPP and counter China’s room of potential abuse in the system (Tamura 2022). Given that Japan is already

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an EPA partner to the EU (effective February 1, 2019) and the UK (effective December 31, 2020), the Japanese government could play an active role in engaging with both European players.

Conclusion: Balancing the Pros and Cons: Gate-Keeper’s Dilemma For the last few decades, the Japanese government has put significant efforts into shaping the regional economic order under liberal and highstandard rules in multiple issue areas (Katada 2020). The US–China trade rivalries during this period have provided Japan with an opportunity to pursue its economic statecraft by adopting a new and proactive geoeconomic strategy in the region. The conclusion of the CPTPP has been the pinnacle of such strategic efforts and Japan has become a de facto gate-keeper to protect liberal economic order in the region. In a way, with requests from the UK, China, Taiwan and beyond, the CPTPP is reaching one of its main objectives: expanding membership to cover as many countries abiding by the high-standard rules of trade and investment in the region as possible in order to facilitate a cooperative regional trade structure. Meanwhile, possible accession of new members, especially China, has introduced a difficult challenge not only to the CPTPP as an institution but also to the major member like Japan as the gate-keeper of the arrangement. The Japanese government faces multiple dilemmas (Table 7.1). under this challenge. Geooeconomics and the nexus of politics and economics is the underlying dilemma. For Japan, China’s accession to the CPTPP is associated with the rising economic security concerns, and it relates to how to keep the United States engaged in the region as Japan tries to avoid isolating China at the same time. Because China is an important economic power in the region and will continue to be an essential source of economic growth and regional prosperity, decoupling from China is not an option for Japan or for many of the regional economies. The trends towards economic security have further complicated accession issues particularly when the Chinese government’s recent drive of national technology developments and its track-record of economic securitization raises increased concerns for the country’s commitment to the “free and open” rules. Furthermore, the other important factor lies in maintaining the high standard rules, as the grouping aims to expand further to where it would inevitably include countries that are not-so-like-minded such as

– Liberalize and reform of the Chinese market – Implement CPTPP standards on China, and protect Japanese businesses

Region’s rules-based order: Maintaining the CPTPP rules and standards

Source Author’s compilation

– Expanding market access and deepening regional economic integration with more members – Increase the prospect of simultaneous accession of China and Taiwan

Power and prosperity: Economic Security and engaging with the US

Pros and Cons of Permitting China’s accession

Pros

Gate-keeper’s dilemma for Japan: pros and cons

Table 7.1

– The US concern over Japan accommodating China – Taiwan’s accession could be delayed or even rejected by China – China can possibly revise or dilute high standard rules – Difficulty of enforcement

Cons

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China. Despite the IPEF initiative, the US presence and commitment in Asia look increasingly precarious and fickle. That is where it makes Japan’s role vitally important for the future of orderly trade and investment in the region. The Japanese government’s handling of China’s accession will provide a clear indication not only of its capability but also for its future direction.

Notes 1. That is why the TPP is called a “living agreement” (see for example, Elms 2013). 2. The ASEAN sat “in the driver’s seat” for the EAS process as governments that wish to join the Summit had to have close relations with ASEAN including the membership to the Treaty of Amity and Cooperation. 3. At that point, the United States was hoping that the 21-member APEC would continue to be the framework for the region-wide free trade area under the name of Free Trade Area of the Asia Pacific (FTAAP). 4. Until then, the TPP was negotiated by 11 countries, including the United States, Australia, Peru, Vietnam, Malaysia, Canada, and Mexico, in addition to the four original P-4 members. 5. According to Chapter 30 of the TPP agreement, it requires at least six countries whose combined GDP surpasses 85% of total TPP member GDP to ratify for the agreement to come into effect. It would have taken both the United States and Japan to ratify to reach this 85 percent threshold, as the GDP of the others combined would not reach 85%. 6. Negotiations began swiftly, and an agreement was reached within one year. Signed at Santiago, Chile, in March 2018, and then entered into force in December of the same year, less than two years after the U.S. withdrawal. CPTPP required six countries to ratify to come into effect. After that, remaining members can complete the ratification process and its agreement will come into effect within 60 days. 7. People’s Daily. 2014. “Full Text of Li Keqiang’s Speech at Opening Ceremony of Boao Forum.” People’s Daily, April 14, 2014 (http://en.people. cn/business/8594954.html). 8. Asahi Shimbun, September 15, 2021. After the ratification of Australia and New Zealand on November 1, 2021, the RCEP has reached the required number of country ratification.

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9. Also the quotes from the Taiwanese minister Deng Chen-chun on June 7, 2022 (https://tw.stock.yahoo.com/news/%E5%8F%B0%E7%81%A3% E4%BD%95%E6%99%82%E8%83%BD%E5%8A%A0%E5%85%A5cptpp-% E9%84%A7%E6%8C%AF%E4%B8%AD-%E5%8F%AF%E8%83%BD%E9% 82%84%E8%A6%81%E7%AD%89-%E4%B8%8B-013549366.html) I thank Yang Mingmin for providing me this quote. 10. Nihon Keizai shimbun September 18, 2021. 11. Nihon Keizai shimbun, September 18, 2021. 12. News Switch, October 19, 2021. 13. On Vietnam’s view on China’s entry see Tu Anh, “Vietnam willing to share information with China in its drive to join CPTPP,” Hanoi Times, September 23, 2021 (http://hanoitimes.vn/vietnam-willing-to-share-inf ormation-with-china-in-its-drive-to-join-cptpp-318799.html). On Singapore, “Singapore MTI welcomes any eligible economy to join CPTPP trade pact.” Strait Times, September 23 (https://www.straitstimes.com/ asia/east-asia/singapore-mti-welcomes-interest-of-any-economy-to-joincptpp-trade-pact). 14. For example, Jeffrey Schott “China’s CPTPP bid puts Biden on the spot,” September 21, 2021 (https://www.piie.com/blogs/trade-and-inv estment-policy-watch/chinas-cptpp-bid-puts-biden-spot). 15. One evidence of the US unwavering stance came when the Singaporean Prime Minister Lee Hsien Loong responded at the Press Conference (with New Zealand’s Prime Minister Jacinda Ardern) on April 19, 2022 after their visit to the United States that the US officials told them quite clearly that “[US joining TPP] is just off the table because their politics does not make it possible at present” (https://www.pmo.gov.sg/ Newsroom/PM-Lee-at-the-QnA-Segment-of-the-Joint-Press-Conferencewith-New-Zealand-PM-Ardern-April-2022). 16. Many US officials and former officials were telling Asian counterparts that it would shut the case for the United States to join the TPP if China is allowed in. 17. Inu Manak, Unpacking the IPEF: Biden’s First Big Trade Play, June 8, 2022. Council on Foreign Relations (https://www.cfr.org/article/unpack ing-ipef-bidens-first-big-trade-play). 18. At MOFA, the Emerging Security Challenges Division (renamed the Economic Security Policy Division later), and at METI, the Economic Security Division, as well as the Economic Security Information Planning Officer post at the Ministry of Defense (Igata and Glosserman 2021). 19. Cabinet Office published “the Basic Policy for Economic and Financial Management Reform” in July 2020, and the LDP Strategic Headquarters published “the Creating of New International Order” in September 2020. See Solís (2021).

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20. USTR, “Report to Congress on China’s WTO Compliance,” February 2022 (https://ustr.gov/about-us/policy-offices/press-office/pressreleases/2022/february/ustr-releases-annual-report-chinas-wto-compli ance). 21. For example, RIETI’s online discussion on the topic see “Chugoku to WTO kamei 20 nen wo furikaeru” June 8, 2022 (https://www.youtube. com/watch?v=iad6loPRb_g). 22. Decision by the Commission of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership regarding Accession Process of the CPTPP, CPTPP/COM/2019/D002, 19 January 2019. Available at https://www.mfat.govt.nz/assets/Trade-agreements/CPTPP/ Accession-Process.pdf. 23. 4th Meeting of the Commission of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. CPTPP/COM/2021/ R001, Available at https://www.cas.go.jp/jp/tpp/tppinfo/2021/pdf/ 20210602_cptpp_hokoku_en.pdf. 24. Also validated by interview with a trade expert in Tokyo, May 31, 2022. 25. For the view of Australia, see Peter Draper and Naoise McDonagh, “The missing anchor: Why the EU should join the CPTPP” October 20, 2021 (https://www.lowyinstitute.org/publications/missing-anchor-whyeu-should-join-cptpp. 26. Cecilia Malström “The EU should use its trade power strategically” January 4, 2022 (https://www.piie.com/blogs/realtime-economic-issueswatch/eu-should-use-its-trade-power-strategically).

References Aggarwal, Vinod. (2021). “Taiwan’s Trade Policies: Strategies and Constraints.” NBR Commentary, January 6 (https://www.nbr.org/publication/taiwanstrade-policies-strategies-and-constraints/). Aoyama, Rumi. (2018). “China’s Foreign Policy as a Rising Power.” in Leng, Tse-Kang, and Rumi Aoyama, eds. Decoding the Rise of China: Taiwanese and Japanese Perspectives. Springer, 11–38. Baccini, Leonardo, and Johannes Urpelainen. (2014). “International Institutions and Domestic Politics: Can Preferential Trading Agreements Help Leaders Promote Economic Reform?” The Journal of Politics 76(1), 195–214. Bearce, D. H., and S. Bondanella. (2007). Intergovernmental Organizations, Socialization, and Member-State Interest Convergence.”International Organization, 61(4), 703–733. Checkel, J. T. (2005). “International Institutions and Socialization in Europe: Introduction and Framework.” International Organization, 59(4), 801–826.

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Chen, Zhimin, and Xueying Zhang. (2020). “Chinese Conception of the World Order in a Turbulent Trump Era.”The Pacific Review, 33(3–4), 438–468. Elms, Deborah Kay. (2013). “The Trans-Pacific Partnership Trade Negotiations: Some Outstanding Issues for the Final Stretch.”Asian Journal of WTO and International Health Law and Policy, 8, 379–399. Farrell, Henry, and Abraham L. Newman. (2019). “Weaponized Interdependence: How Global Economic Networks Shape State Coercion.” International Security 44(1), 42–79. Fergusson, I. F., and B. Vaughn. (2010). “The Trans-Pacific Partnership Agreement.” Congressional Research Service, R40502. Gaur, Pankhuri. (2020). “India’s Withdrawal from RCEP: Neutralising National Trade Concerns.”Journal of the Asia Pacific Economy, 74(2), 1–19. Gowa, Joanne. (1995). Allies, Adversaries, and International Trade. Princeton; Princeton University Press. Gray, J., R. Lindstädt, and J. B. Slapin. (2017). “The dynamics of enlargement in international organizations.” International Interactions, 43(4), 619–642. Igata, Akira, and B. Glosserman. (2021). “Japan’s New Economic Statecraft.” The Washington Quarterly, 44(3), 25–42. Jin, J. (2012). RCEP vs TPP. Retrieved from Fujitsu Souken Opinion website: https://www.fujitsu.com/jp/group/fri/column/opinion/201211/ 2012-11-5.html. Johnston, Alastair I. (2008). Social States: China in International Institutions, 1980–2000. Princeton University Press. Katada, Saori N. (2020). Japan’s New Regional Reality: Geoeconomic Strategy in the Asia-Pacific. New York: Columbia University Press. Kawase, Takeshi. (2021). “Chugoku Taiwan no CPTPP kanyu shinsei to Nihon no taiou: Koushijun na ruru wo ijishi FTAAP keisei ni mukau senryaku [Entry Application of China and Taiwan to the CPTPP and Japan’s Response: Strategy to Maintain the High Standard Rules and build the Road to Form FTAPP]. Gaiko, Vol. 70, Nov. Dec. 2021. Kelley, Judith. (2004). “International Actors on the Domestic Scene: Membership Conditionality and Socialization by International Institutions.” International Organization, 58(3), 425–457. Kikuchi, T. (2015). Ajia Taiheiyo no Tsusho Chitsujo to TPP [Trade Order in the Asia Pacific and the TPP]. America-Pacific Research, 15 (Special Issue on Economic Order of the Asia Pacific and the United States: Will a New Order Emerge?), 79–95. Lee, Roy. (2022). “CPTPP Membership for Taiwan: Rationales, Challenges, and Outlook.” Taiwan Insight. June 30, 2022 (https://taiwaninsight.org/2022/ 06/30/cptpp-membership-for-taiwan-rationales-challenges-and-outlook/).

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Lin, Alex Y., and S. Katada. (2022). “Striving for Greatness: Status Aspirations, Rhetorical Entrapment, and Domestic Reforms.” Review of International Political Economy, 29(1), 175–201. Lin, Alex Y., and S. N. Katada. (2023). “Manufacturing Consensus: China’s Information Warfare and Geoeconomic Competition.” Mimeo. Lynch, B. (2015). New Zealand and Asia-Pacific Integration: Sailing the Waka in Ever-Widening Circles. Center for Strategic Studies: New Zealand, Victoria University of Wellington. Discussion Paper, No. 17/15. Mansfield, E. D., and J. C. Pevehouse. (2013). “The Expansion of Preferential Trading Arrangements.” International Studies Quarterly, 57(3), 592–604. Obama, Barack. (2015). Statement by the President on the Trans-Pacific Partnership at the US Congress, October 5 (Available: https://obamaw hitehouse.archives.gov/the-press-office/2015/10/05/statement-presidenttrans-pacific-partnership). Petersmann, E. (2019). “How Should WTO Members React to their WTO Crises?” World Trade Review, 18(3), 503–525. Petri, P. A., and M. Plummer. (2019). “China Should Join the New TransPacific Partnership.” Petersons Institute for International Economics, Policy Brief. No. P 19–1. Petri, P. A., and M. Plummer. (2020). “East Asia Decouples from the United States: Trade War, COVID-19, and East Asia’s New Trade Blocs.” Petersons Institute for International Economics, Policy Brief. No. W 20–09. Schneider, C. J., and J. Urpelainen. (2012). “Accession Rules for International Institutions: A Legitimacy-Efficacy Trade-off?.” Journal of Conflict Resolution, 56(2), 290–312. Sohn, I. (2008). “Learning to Co-Operate: China’s Multilateral Approach to Asian Financial Co-Operation.” The China Quarterly, 194, 309-326. Solís, Mireya. (2021). “Japan’s Balancing Act: Interdependence and Economic Security.” Paper presented at “Japan, the United States, and the Future of World Order,” Kissinger Center for Global Affairs, SAIS, March 24, 2021b. Solís, Mireya, Barbara Stallings, and S. Katada (eds.) (2009). Competitive Regionalism: FTA Diffusion in the Pacific Rim. London: Palgrave Macmillan. Stallings, Barbara, and S. Katada. (2009). “Conclusion: Free Trade Agreements in a Competitive World.” In Solís, Stallings, and Katada (eds.) Competitive Regionalism: FTA Diffusion in the Pacific Rim. London: Palgrave Macmillan, 236–251. Su, Qingyi. (2022). “Should China Join the CPTPP?” Bin Zhang (ed.) China’s Role in Global Governance. Palgrave Macmillan, Singapore, 2–54. Sugawara, J. (2018). RCEP Kosho nen-nai daketsu ho kanouka [Would it be possible to conclude the RCEP negotiations this year?]. Tokyo, Japan: Mizuho Insight.

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Sugawara, Jun’ichi. (2020). “Seicho ga kadai no RCEP: TPP Miman, WTO ijo no mega EPA [Expansion is the future task of RCEP: EPA that is less than TPP and more than WTO.]” Mizuho Insight. Mizuho Sogo Kenkyujo. November 30. Tamura, Jo. (2022). “Can the EU Save the CPTPP? T e CPTPP Needs More Market Share. The EU Needs to Expand Its Trade Leadership in the AsiaPacific.” The Diplomat, June 8, 2022 (https://thediplomat.com/2022/06/ can-the-eu-save-the-cptpp/). Terada, T. (2010). “The Origins of ASEAN+6 and Japan’s Initiatives: China’s Rise and the Agent–Structure Analysis.” The Pacific Review, 23(1), 71–92. Tsugami, Toshiya. (2022). “Simultaneous Application for CPTPP Membership by China and Taiwan: A Valuable Platform for Dialogue with China?” AJISSCommentary, JIIA (http://www.jiia.or.jp/commentary). Watanabe, M., F. Kawashima, T. Kamo, and T. Kawase. (2021). “Chugoku no CPTPP Sanka Ishihyoumei no Haikei ni Kansuru Kosatsu [China and CPTPP] (revised version).” Research Institute of Economic, Trade and Industry (RIETI), Policy Discussion Paper, September 2021 21-P-016. Wesley, Michael. (2008). “The Strategic Effects of Preferential Trade Agreements.” Australian Journal of International Affairs, 62(2), 214–228.

CHAPTER 8

Divergent Interests for Taiwan’s CPTPP Bid from Washington and Tokyo Shihoko Goto

When Taiwan announced its interest to join the Comprehensive and Progressive Trans-Pacific Partnership agreement in late September 2021, few were taken by surprise. After all, Taipei had made clear its interest in joining the preceding Trans-Pacific Partnership agreement especially after the United States declared its interest in joining the pact in November 2009.1 The fact that Japan became the 12th and final member country of the TPP in 2013 only increased the allure of the pact for Taiwan’s leadership on both sides of the political aisle. U.S. withdrawal from the TPP in 2017 did not diminish Taipei’s interest in joining, and Beijing’s announcement that it too would seek entry into the subsequent CPTPP has only heightened the urgency for Taiwan to follow suit. Granted, domestic opposition to the treaty from Taiwan’s agricultural sector in particular over market access has been, and remains, a challenge. Nevertheless, Taiwanese leaders are highly attuned to the fact that being part

S. Goto (B) Asia Program at the Wilson Center, Washington, DC, USA e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_8

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of the CPTPP is vital not just from an economic perspective, but more importantly, can safeguard Taipei’s standing on the international stage. Taiwan’s bid to join the pact also comes at a time when global attention on cross-Strait relations has reached new heights. No longer are tensions between Taipei and Beijing simply an issue of interest to themselves and their surrounding neighbours. There is far greater awareness of the precariousness of Taiwan’s future, and the risks to the global economy that would ensue by marginalizing Taiwan from the international community. The question for Taiwan, though, is whether joining CPTPP must be a core part of resolving some of the significant challenges facing its future. For Washington and Tokyo, meanwhile, the question is whether moving forward with trade deals with Taipei is an essential part of ensuring Taiwan’s economic future, or whether it ultimately puts Taiwan and their own respective interests at greater risk of Chinese backlash. Like all trade agreements, the economic value of the TPP and the ensuing CPTPP have been called into question by a number of constituents, especially from those in industries that would be hard hit by open markets, principally agriculture but in Taiwan’s case the food, automotive and possibly pharmaceutical sectors too.2 Amid a trend towards deglobalization and rallying cries for reshoring, it is hardly surprising that Taiwan too has its fair share of trade deal naysayers. Yet no other government stands to benefit more politically through CPTPP accession than the Republic of China (RoC). Washington had walked out of TPP in 2017, and has shown no signs of wanting to return. One of the biggest factors driving the country away from the regional trade pact has been the lackluster economic allure of such a deal. Indeed, according to Peter Petri and Michael Plummer in a 2016 Petersen Institute study, the TPP would have boosted real U.S. income only by 0.5%.3 That is not an insignificant contribution, but it is hardly a figure that could rally significant public support, especially when public opinion was far more sympathetic to stories about jobs lost to cheaper competition overseas as a result of trade deals. Yet while its economic value may be questioned, the political opportunities and diplomatic gains to be made by joining the world’s most ambitious mega-trade deal to date are clear. That has been especially the case for Japan. Even as it remains the world’s third-largest economy, Tokyo has clearly been concerned not only about losing ground economically, but also about a diminishing presence politically as a result. Then Prime Minister Shinzo Abe made the case for

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Japan to become the 12th and final member of the TPP in March 2013 by arguing that without joining the pact, the country not only risked losing its standing as an economic powerhouse, but could even be marginalized from the global economic rule-making process. In announcing his administration’s decision to apply for membership in March 2013, Abe stated that “if Japan alone should become inward-looking, we would have no chance of growth. Companies would not invest in Japan then. Talent would not be attracted either. The TPP is a framework which promises ‘prosperity in the future’ in the Asia–Pacific.”4 While domestic opposition from the agricultural sector was hardly negligible, the urgency of Japan needing to secure its economic footing in the region in the face of ever-mounting Chinese pressure ultimately overcame opposing forces from within and led to the adoption of TPP membership.

A Trade Deal as a Means as Well as an End If Japan as the world’s third-largest economy found an urgency to join a multilateral trade deal as a means not only to boost its exports but more importantly to secure its economic footing on the international stage, then it is hardly surprising that Taiwan too has found a similar need to join. In fact, Taiwan’s need to join to give greater clarity to its position in the international community is particularly acute, given the risk that ever-growing pressure from China will lead to it being marginalized from the world order still further. Of all the governments that are or are applying to be part of the CPTPP, Taiwan stands to benefit the most by joining from a political perspective, in addition to the economic gains to be made. However, precisely because CPTPP has drawn so much attention as a political instrument in defining the regional order and the accession process is likely to be drawn out given the number of stakeholders in the mix, it would be prudent for Taipei to concentrate on seeking trade deals that can be reached quickly and secure its economic foothold in the future. The focus to date has been on CPTPP. Given the high stakes of joining the deal, there has been no shortage of analysis by experts both within and outside of Taiwan advocating what the government should do to ensure accession to the CPTPP.5 With some estimating that the Taiwanese GDP would grow by 2 percentage points after joining the trade deal, the case for entry to the pact has had the support of most economists.6 But from

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a foreign policy perspective, the risks that accession could pose to the regional order are significant. Granted, as the threat of China destabilizing global stability continues to rise amid mixed messaging from Washington regarding its One China policy, there is greater global support too for Taipei’s desire to join the group as one means to give greater clarity to its position in the international space. At the same time, disruptions caused by the global pandemic since 2020 have made clear to the world what has been all too apparent in East Asia for several years now: that Taiwan’s semiconductor industry is at the heart of the global technology sector, and that without the input of Taiwanese chips, the world’s advanced critical industries would falter. Ensuring Taiwan’s stability and prosperity, in short, has taken on a greater sense of urgency that has led both Washington and Tokyo closer together in their commitment to protect Taiwan. The question, though, is whether CPTPP fits into the broader strategy of ensuring Taiwan’s future growth, both on the economic front as well as to ensure its future security more broadly. With the United States absent from the CPTPP and moving on to establish a new trade regime vision itself in the Indo-Pacific Economic Framework (IPEF), there are questions about whether or not the pact can deliver on some of Taipei’s most pressing concerns about its future in the longer term.

Bending to U.S. and Japanese Pressure for Liberalization Even after the United States abandoned the TPP, the push from Washington for Taipei to further open its economy by adopting TPP standards had persisted. Allowing U.S. agricultural goods access to the Taiwanese market in particular had been a constant demand from Washington that went across party lines and was seen as key to ensure continued U.S. political support for Taiwan. The de facto quid pro quo for U.S. commitment to the island was essentially for Taiwan to open up sectors of its agricultural market, pork imports especially, in return for continued U.S. support more broadly. Indeed, both Democratic and Republican leaderships have continuously called for Taipei to allow U.S. pork and beef into the market despite food safety concerns among Taiwanese voters.7 As one senior U.S. official said in a private discussion, it was “insulting” that the Taiwanese would label food that was deemed safe by the U.S. Food and Drug Administration as not suitable for Taiwan’s consumers, overlooking

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the fact that the EU also bans the use of ractopamine altogether, not just in pork. The official argued that it would be politically challenging to rally U.S. support including potentially U.S. lives for the survival of Taiwan when the Taiwanese themselves were not willing to accommodate the political needs of the United States. The situation came to a head in late 2021, as Taiwanese voters went to the polls in December to voice their position in a referendum regarding banning imports of pork containing ractopamine. The opposition Kuomintang Party (KMT) had positioned the issue as a way to undermine public confidence in President Tsai Ing-wen’s administration.8 Had the referendum passed, it would have undermined Tsai’s efforts to position Taiwan to be accession-ready for CPTPP. To be sure, the administration acknowledged that some industries could be hard hit by losing to ensuing foreign competition. Indeed, in concluding its announcement in bidding for entry, the Ministry of Economic Affairs stated that “the people and related citizens’ groups must also be educated on the numerous new highstandard trade rules involved. For sensitive industries that may affect local businesses, complementary measures may be necessary for Taiwan to be fully prepared for entry.”9 There were, however, far greater political risks jeopardizing U.S. public support for Taiwan had the 2021 referendum passed. Not only would U.S. agricultural producers have cried foul against Taiwanese legislators, but it would have also shaken Washington’s confidence and indeed the world in the ability of Taipei to deliver its commitments. After all, it was only the previous year, in December 2020, that after years of opposing such a move, the Legislative Yuan had passed the bill to allow U.S. pork imports back onto its shores despite considerable internal opposition. The timing of the bill’s passage was noteworthy insofar as it came four months after an official visit by the Trump administration’s Secretary of Health and Human Services Alex Azar, who was then the first sitting U.S. cabinet member to make way to the island.10 Should Taiwan have backtracked on its commitment to open its doors to U.S. pork, not only might it have jeopardized relations with the United States, but it would have also brought into question the reliability of commitments made by the Taiwanese government more broadly. Voting against imports of American pork would have risked undermining broader support in Congress for Taiwan and raised questions in Washington about the ability of Taiwan’s government, whether under the KMT or DPP,

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to deliver on its commitments, given that the referendum would have reflected the public opinion of Taiwanese voters. This needs to be kept in perspective, however. As is explained below, in its wish to maintain Japanese support, the Tsai government was willing to over-ride an earlier referendum, also KMT inspired, against resuming the import of food products from the Fukushima region and there is no reason to assume that it would not have done the same in the case of the referendum on pork imports, given the even greater importance of its relations with the USA. For the United States, however, the referendum about importing pork was regarded as a litmus test of the extent to which Taiwan would be able to accommodate U.S. interests in return for a greater commitment from Washington to invest in bilateral relations more broadly. At the same time, it was also a test to reassure the United States that Taiwan would remain committed to its agreements and support Washington’s efforts to highlight the need for further engagement. That need to compromise and to cultivate stronger partnerships had led Taiwan to lift its ban on most food products from Japan’s Fukushima region. The government had imposed a ban on such imports from five Japanese prefectures in 2011 following the Fukushima nuclear disaster. At the time, many countries around the world had done the same, but while the United States and some others subsequently lifted the restrictions following scientific findings that deemed the food safe, restrictions remained in place in Europe.11 Japanese food exports to these countries were never significant, however, and by 2018, only South Korea and China as well as Taiwan remained as notable remaining standouts in continuing to block Fukushima-produced foods. Given Japan’s politically challenged relations with both Seoul and Beijing to date, there was an understanding that it was not simply food safety concerns alone that motivated Seoul as well as Beijing to maintain the ban on Fukushima imports. (It should also be noted that of Taiwan’s two main political parties, the KMT has traditionally favoured closer ties with China than with Japan and this may well have been a factor in its advocacy of the ban.12 ) Japanese expectations for Taiwan to lift the ban soon were far higher, however, given the otherwise close relations between Tokyo and Taipei, and Tokyo’s expectations for Taipei to accommodate Japan’s own concerns about restoring global confidence worldwide post-Fukushima. As such, the 2018 referendum in which the Taiwanese electorate voted to keep the ban in place had caught many Japanese legislators off-guard and remained a particularly thorny political issue between Taipei and Tokyo.13

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With Japan as the single-biggest country in terms of GDP among the 11-member CPTPP, as Taiwan made its official bid to join the group, the need for Taipei to address the Fukushima food issue increased in urgency. The government’s decision largely to lift the ban in February 2022 was greatly welcomed by Tokyo and seen to be an appropriate action in light of Japan’s growing commitment in defense of Taiwan’s security and presence on the international stage (restrictions on imports of wild game and mushrooms remain in place but these are of minor importance compared to those of shellfish and other seafood).

Cashing in the Chips As countries closed their borders and the global economy came to a halt during the first months of the pandemic, there was far greater appreciation of Taiwan’s role in the world. For one, the government’s ability to keep the spread of covid under control, and its ability to manufacture and distribute necessary medical goods including face masks across the globe at a time when supplies were sorely lacking put Taiwan on the map as a model for efficient governance. Yet even as it set standards in how to deal with the pandemic, from effective use of data technology to nimbleness of industry to produce necessary goods, the fact that it was not a part of the World Health Organization or the United Nations due to its singular international status was especially noted. More significantly, though, was the fact that Taiwan’s dominance in the technology sector became all too apparent as demand for semiconductors surged amid the covid shutdown. Shortages of materials for production and disruptions in supply chains became headline news at the height of the pandemic. From the temporary closure of automobile manufacturing plants to computer makers being unable to keep up with production output because of a shortage of chips, supply chain disruptions made clear to the wider global market of consumers anxious for tech goods that Taiwan dominated global semiconductor manufacturing. All of the world’s most advanced semiconductor capacity in nodes below 10 nanometers are manufactured in Northeast Asia, with Taiwan accounting for 92% of market share. The remaining 8% is produced in South Korea.14 When the global economy was running efficiently and supply chains were driven first and foremost by cost considerations, dependence on two locations for critical technology supplies did not seem so risky. Or at least it was in line with production practices more generally in which an eye on

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the bottom line predominated, from depending on cheap generic drugs made in India to importing the bulk of healthcare products from China. The disruptions caused by COVID have, however, led to a reassessment of economic priorities and the role of supply chains. No longer is cost effectiveness the single biggest driving force. Rather, the need for resilience to survive disruptions caused by geopolitical turmoil, natural disasters, and other unexpected risks has taken on greater importance as a result of the covid shutdowns. When it comes to Taiwan, the geopolitical risks are particularly high, given its vulnerability to economic coercion as well as military intervention from China. Moreover, its geographic location makes it susceptible to earthquakes and other environmental risks, adding to concerns about the consequences of depending so heavily on Taiwanese produced technology goods. In the near term, however, surging consumer demand for technology products has been a boon for Taiwan. In 2021, Taiwanese exports reached record levels, hitting nearly $447 billion, rising consecutively for 18 months amid the pandemic.15 The leader of the pack is Taiwan Semiconductor Manufacturing Company (TSMC), which accounts for nearly 50% of the global output of advanced chips.16 Revenue in the first quarter of 2022 rose almost 36% from the previous year to nearly $17 billion, in part because of increasing prices as well as continued demand worldwide. TSMC also supplies computer chips to the US military, including those used in F-35 fighter jets. It would not be too much of a stretch to say that since the pandemic, TSMC has become the face of Taiwan, and the world has taken on an outsized interest in the company’s performance as well as its future growth strategy.

Limited Window of Opportunity for Global Presence Through TSMC, Taiwan currently dominates the advanced semiconductor industry, and for now, the interests of both the Taiwanese government and the Taiwanese semiconductor giant align. The danger of putting all of Taiwan’s economic expectations on the shoulders of TSMC and the small and medium enterprises that support it, however, is a risky one. It is a risk that is readily acknowledged by Taiwanese government officials as they look to diversify their innovation portfolio. Granted, the outlook for the chip sector for now is rosy and demand is expected to continue to climb. Global semiconductor revenue was

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projected to rise by nearly 14% from one year earlier in 2022, and earnings projections continue to be revised upward amid a seemingly insatiable appetite worldwide for technology products. Still, once the supply chain disruptions come under control and supply constraints ease, prices are expected to stabilize.17 Moreover, some analysts would argue that demand for high-end semiconductors is not infinite, and that as governments focus their attention on producing chips within their own borders, or at least closer geographically, the need for chips made in Taiwan would decrease significantly. For TSMC itself, however, its earnings are unlikely to be hurt for some time. The chipmaker’s advanced, proprietary technology ensures that it is the most sought-after partner as countries vie to boost their own capabilities. Indeed, TSMC inked a deal with Sony in November 2021 to build a $7 billion chip fab with a monthly production capacity of 45,000 12-inch wafers. The announcement came with the full blessing of the Japanese government as it looks to increase its own chip making capabilities amid growing tensions between Washington and Beijing that could disrupt supply chains, in addition to mitigating against natural disaster risks. In the United States, meanwhile, TSMC started building a $12 billion fab in Arizona in June 2021 which is expected to produce 5 nanometer chips. Meanwhile, the European Union too has been courting TSMC to invest on the continent as it looks to move forward on its own roadmap for greater chip-producing capability. While the most advanced, high-capacity semiconductors will continue to be produced in Taiwan for now, TSMC is positioning itself so that it can hedge its own geographical risks by investing in more fabs overseas, whilst maintaining its position as the unshakeable semiconductor leader. There are coordinated global efforts too, that could not move forward without TSMC’s technology but could lessen the strategic value of Taiwan. For instance, calls by some Japanese officials including former foreign minister Kono Taro to establish a coalition of like-minded countries to share research and manufacturing capabilities amongst themselves may seem more of an idea than an actual plan for now. But should such collective efforts to build up the global semiconductor sector bear fruit, then the need to depend so fully on Taiwanese efforts would fall considerably. TSMC’s successes and plans for expanding overseas, however, come without Taiwan being a member of the CPTPP or indeed any other regional trade group. In fact, when it comes to growth prospects, Taipei

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clearly needs TSMC driving the Taiwanese government more than the chipmaker needs government intervention on its behalf to secure its market share. As TSMC spreads strategically to diversify its manufacturing worldwide to key locations, Taiwan’s position as the epicenter of chip manufacturing will diminish as well. That in turn risks decreasing the visibility of Taiwan and its position as a technology hub, which in turn could hamper Taipei’s bid to boost its standing in the international arena. The irony, of course, is that the more successful the Taiwanese semiconductor industry becomes in hedging against the risks of concentrating too heavily in Taiwan, the less will be the world’s dependence on chips that are actually made in Taiwan. That in turn runs the risk of deflecting from the need for support to ensure the future resilience of the Taiwanese economy.

IPEF and the Unknown Entry into CPTPP may not be necessary for TSMC’s future success, but it would certainly benefit the SMEs that supply the chip giant and support the Taiwanese economy. Looking ahead, the emerging rivalry between Taiwan and South Korea over production of advanced chips is expected to intensify. While South Korea is already a member of the Regional Comprehensive Economic Partnership (RCEP) agreement and has bilateral trade deals with most major countries, it too is seeking CPTPP accession.18 Should Seoul be able to secure membership before Taipei, it would put Korean manufacturers at a considerable advantage, especially as the deal would facilitate access to Japanese markets. Although Taiwanese semiconductor manufacturers benefit from the WTO Information Technology Agreement, which has progressively eliminated tariffs on semiconductors and manufacturing equipment, as countries look to develop comprehensive ecosystems that include the testing and packaging of chip products, there are fears that not being part of major regional trade agreements could put Taiwan at a clear disadvantage compared to Korea.19 Still, neither RCEP nor CPTPP are gateways for furthering trade relations with the United States. That will now come in the form of Washington’s latest initiative, the Indo-Pacific Economic Framework (IPEF) which was launched in May 2022. Granted, at a time when Washington is unable to sign on to new trade agreements due to domestic political considerations, the framework continues to come under criticism as merely a poor substitute for CPTPP, to which neither the Democrats nor

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the Republicans have any real appetite to push for U.S. reentry. It is easy to dismiss IPEF as a temporary solution to the glaring absence of the United States from being engaged in the economic rule-making process of the Indo-Pacific region which is now home to two major multilateral trade deals. That said, 13 countries across the region have signed up to the IPEF, including India, the Philippines, Indonesia, Vietnam, Thailand, Malaysia, and Fiji.20 While the IPEF focuses on addressing issues of particular concern for the Indo-Pacific, including supply chain resilience and environmental sustainability, just how it will be able to contribute to economic growth per se remains in question. Until the unveiling of the initial membership, Taipei’s hope had been to join as well, but it had become clear that Taiwan would have jeopardized the willingness of key Southeast Asian nations to be part of the group amid fears of Chinese retaliation, should it have been allowed to join. In short, IPEF is a small political victory for the Biden administration at a time when Washington’s economic engagement in the Indo-Pacific has been lacking in contrast to its military engagement. By bringing together a diverse range of countries across the region to join and not simply staunch U.S. allies such as Japan and Australia, the administration is able to claim that it has an economic roadmap for growth as well as security in the Indo-Pacific. For Taiwan, the possibility of a bilateral deal increasing as a result of IPEF can be seen as a significant step forward in its relations with the United States, even if there is understandable frustration about not being invited to join IPEF itself.21

Coordination on Economic Security As Taiwan looks to join new trade deals and bolster its competitiveness beyond TSMC, the biggest barrier by far remains its unique international status and the prospect of China taking action against any move that would seemingly jeopardize the One China policy. That situation is hardly new. Still, current geopolitical realities will both elevate Taiwan’s standing and also raise awareness of its challenges. Yet expectations for Taiwan to be able to enter new trade deals and economic partnerships are rapidly evolving. With the lifting of the ban on U.S. pork and produce from the Fukushima area, the Tsai administration has finally eliminated the major stumbling blocks in trade negotiations with the two countries. Looking ahead, though, both Washington and Tokyo are now focusing on

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economic security cooperation and resilience, rather than market access or tariff issues, as the biggest challenges to trade. At the summit meeting between Japanese Prime Minister Fumio Kishida and President Biden in May 2022, the two countries unveiled a joint action plan to further bilateral economic cooperation that included enhancing supply chain resilience. From supply chain resilience and cooperation in diversifying semiconductor manufacturing capabilities to 5G supplier diversification, it is clear that interoperability and cooperation will be a key part of the bilateral Competitiveness and Resilience Partnership (CoRe).22 The partnership can be seen as the groundwork for the development of a US-Japan led technology sphere in which the two countries will be seeking to work closely with Taiwan for technological compatibility. The Kishida government in particular has been proactive in taking action to protect the Japanese economy from Chinese coercion, sabotage, and espionage. One of the first actions taken by the administration had been to appoint the country’s first economic security minister, who then spearheaded efforts to draft economic security legislation. In May 2022, the Japanese Diet passed a law consisting of four pillars, namely to secure supply chains; safeguard infrastructure; identify and invest in emerging technologies; and protect critical technologies through patents and other legal means.23 Implementing these new rules will require not only greater coordination between the Japanese government and private Japanese companies, but also between the governments of Japan and the United States as well as with the European Union. It will be critical too for Taiwan’s economic future to ensure that its own economic security standards also comply and are compatible with the rules emerging from these international negotiations.

Maximizing the Window of Opportunity Beyond CPTPP Although global supply chain disruptions in recent years have elevated awareness of Taiwan’s role in the global economy, the policy of strategic ambiguity continues to define its economic as well as diplomatic standing. Taipei’s bid to join the CPTPP will not be part of the solution to bring greater clarity to the situation, and even runs the risk of creating divisions among the 11 member countries. The fact that even a new economic initiative established by the White House finds its hands tied about the

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possibility of bringing Taiwan to the table indicates the extent to which wariness of Chinese backlash defines relations in the Indo-Pacific. But greater awareness of Taiwan’s role in the global economy has expanded the range of stakeholders vested in ensuring its future stability. With the possibility of a bilateral trade deal with the United States at long last on the table, Taipei must now ensure that it is not just CPTPP accession-ready, but also be on standby to negotiate bilateral deals with the United States and potentially Japan. If Taiwan’s ultimate goal is to ensure that its economy remains resilient and irreplaceable on the global stage, then its priority must be to ensure that its technology industry is compatible and compliant with the standards that are now being established between the United States and Japan. With market access no longer a stumbling block for Taiwan’s critical technology sector, its motivations to join CPTPP are more political than they are economic. The political drive and public push to have Taiwan join the global trade agreement should persist as part of a broader strategy to ensure Taiwan’s foothold in the international order and in demonstrating its willingness to confront the challenge from the PRC head on. Nevertheless, to protect and further Taiwan’s competitive edge in the technology sector and the semiconductor industry in particular, Taipei’s focus must be to ensure that it remains part of the rule-making process as countries look to harmonize and standardize technologies. The role that Taiwanese technology plays in the global economy has become all too apparent. That momentum must be leveraged so that Taiwanese corporate interests are furthered together with the continued drive to further Taiwan’s international standing by being part of global trade deals.

Notes 1. The White House, Office of the Secretary, Fact Sheet: The United States in the Trans-Pacific Partnership, 2011. https://obamawhitehouse.arc hives.gov/the-press-office/2011/11/12/fact-sheet-united-states-transpacific-partnership. 2. M. Reilly: Towards and EU-Taiwan Investment Agreement: Prospects and Pitfalls, Palgrave Macmillan, 2018. 3. P. Petri and M. Plummer, “The Economic Effects of the Trans-Pacific Partnership: New Estimates”. https://www.piie.com/publications/wor king-papers/economic-effects-trans-pacific-partnership-new-estimates, 2016.

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4. Prime Minister of Japan and His Cabinet, “Press Conference by Prime Minister Shinzo Abe,” 2016. https://japan.kantei.go.jp/96_abe/statem ent/201303/15kaiken_e.html. 5. An analysis in 2014 by former American Institute in Taiwan Chairman Richard Bush on what steps Taiwan should take to join the TPP exemplifies the prescriptions made by US analysts at the time to press for Taiwanese reform in order to meet the demands of accession. https://www.brookings.edu/wp-content/uploads/2016/06/ taiwan-tpp-bush-012014.pdf. 6. M. Strong, “CPTPP Membership Would Add 2% to Taiwan’s Economic Growth,” 2021. https://www.taiwannews.com.tw/en/news/4294942. 7. The U.S. National Pork Producers Council was jus one of a number of industry groups that had continually pressed for Taiwan to lift its ban on ractopamine. https://nppc.org/issues/issue/taiwan/. 8. Financial Times, “Taiwan Voters Back Government on US Pork Referendum,” 2021. https://www.ft.com/content/cee59ee9-f549-47fb-baf3d2c3942f99b0. 9. Ministry of Economic Affairs Bureau of Foreign Trade, “Taiwan’s Bid for CPTPP Membership,” 2022. https://www.trade.gov.tw/english/Pages/ Detail.aspx?nodeID=4572&pid=735704. 10. Nikkei Asia, “Taiwan Passes Bill to Allow Imports of US Pork Containing Additive,” 2021. https://asia.nikkei.com/Business/Agriculture/Taiwanpasses-bill-to-allow-imports-of-US-pork-containing-additive. 11. J. McCurry, The Guardian, “The UK only Lifted Its Last Remaining Restrictions in June 2022,” 2022. https://www.theguardian.com/env ironment/2022/jun/29/uk-to-lift-import-restrictions-on-food-from-fuk ushima. 12. Brian Hioe: Taiwan’s Tsai Lifts Import Ban on Food From Nuclear Disaster-Hit Area of Japan. https://thediplomat.com/2022/02/taiwanstsai-lifts-import-ban-on-food-from-nuclear-disaster-hit-area-of-japan. 13. Articles to explain why the Taiwanese voted against lifting the ban on Japanese food imports proliferated in the Japanese media after the 2018 referendum. https://wedge.ismedia.jp/articles/-/14894. 14. https://www.bcg.com/publications/2021/strengthening-the-global-sem iconductor-supply-chain. 15. M. Strong, Taiwan News, “Taiwan Sets New Export, Import Records for 2021,” 2023. https://www.taiwannews.com.tw/en/news/4402193. 16. Robyn Klingler-Vidra and Yu Ching Kuo: Brexit, Supply Chains and the Contest for Supremacy: The Case of Taiwan and the Semiconductor Industry, in M. Reilly and C.-Y. Lee eds. A New Beginning or More of the Same? The European Union and East Asia after Brexit, Palgrave Macmillan 2021.

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17. Gartner, “Gartner Forecasts Worldwide Semiconductor Revenue to Grow 13.6% in 2022,” 2022. https://www.gartner.com/en/newsroom/ press-releases/2022-04-26-gartner-forecasts-worldwide-semiconductorrevenue-to-grow-13-6-percent-in-2022. 18. The RCEP, which was signed in November 2020, is a trade deal between the ten members of ASEAN and Australia, China, Japan, New Zealand, and South Korea. 19. World Semiconductor Council, “Free and Open Markets,” 2023. https:/ /www.semiconductorcouncil.org/issuesactivities/free-open-markets/. 20. The White House, “Statement by National Security Advisor Jake Sullivan on Fiji Joining the Indo-Pacific Economic Framework for Prosperity,” 2022. https://www.whitehouse.gov/briefing-room/statements-releases/ 2022/05/26/statement-by-national-security-advisor-jake-sullivan-on-fijijoining-the-indo-pacific-economic-framework-for-prosperity/. 21. The White House, “Press Gaggle by Press Secretary Karine Jean-Pierre and National Security Advisor Jake Sullivan En Route Tokyo, Japan,” https://www.whitehouse.gov/briefing-room/press-briefings/ 2022. 2022/05/22/press-gaggle-by-press-secretary-karine-jean-pierre-and-nat ional-security-advisor-jake-sullivan-en-route-tokyo-japan/. 22. The White House, “Fact Sheet: The U.S.-Japan Competitiveness and Resilience (CoRe) Partnership,” 2022. https://www.whitehouse.gov/bri efing-room/statements-releases/2022/05/23/fact-sheet-the-u-s-japancompetitiveness-and-resilience-core-partnership/. 23. Sangiin, 2023. https://www.sangiin.go.jp/japanese/joho1/kousei/gian/ 208/pdf/t1002080052080.pdf.

CHAPTER 9

Not Quite Déjà Vu All Over Again: CPTPP Accession and Taiwan–China–US Relations Jacques deLisle

It’s déjà vu all over again. —Yogi Berra RTAs today go beyond market access in goods and services and related WTO rules…. [T]oday [the WTO Commission on RTAs] will be considering one of the largest and most complex RTAs, the CPTPP. —WTO Director-General Okonjo-Iweala (2021)

Introduction Taiwan’s and the People’s Republic of China’s (PRC) bids to join the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership (CPTPP), and the US’s position on CPTPP-related issues (including US membership), pose familiar challenges in an altered context. For

J. deLisle (B) Center for the Study of Contemporary China, University of Pennsylvania, Philadelphia, PA, USA e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2_9

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Taiwan and China, the reasons for joining the significant trade agreement are partly economic but are also political. Taiwan’s and China’s parallel pursuits of CPTPP inevitably implicate issues of Taiwan’s international status and stature and US–China–Taiwan relations. The CPTPP bids from Taipei and Beijing resonate with an earlier instance of simultaneous attempts by the two to join a central international economic accord Washington had taken a leading role in developing: the World Trade Organization (WTO). But much—including much that matters in Taiwan’s quest for international status and security— has changed since the PRC’s and Taiwan’s WTO accessions more than twenty years ago. For Taiwan, China, and the United States, there have been substantial shifts in relative power, relations among one another, and the appeal of participating in a new international economic regime. Taiwan’s imperative to accede to such pacts arguably has grown while the obstacles—especially from China—have mounted. China’s stake in joining has changed and, in some respects, weakened as China has gained power, both generally and in economic affairs, but has drawn deepening suspicion and growing opposition from many quarters and critical counterparties. The US’s influence has diminished, partly due to China’s rise but also through self-inflicted wounds, including opting out of the original Trans-Pacific Partnership (TPP). Washington’s strategy to reinvigorate support for a “rules-based international order”, enhance coordination among like-minded partners, and counter perceived rising threats from China should make reengagement with the CPTPP appealing. But the US has not yet found such incentives compelling. For Taiwan and China (and the US as well), CPTPP accession is unlikely in the near future. The questions of Taiwan’s and China’s memberships are, and are likely to remain, politically fraught, partly due to the implications for Taiwan’s international status and China’s international influence. This is so even though—seemingly paradoxically—the promise of a new phase of transformative global economic integration has waned since the WTO’s early years or the TPP’s gestation. In this context, the most likely outcome is kicking the can down the road—that is, no near-term resolution of the PRC’s and Taiwan’s applications to the CPTPP or the US’s possible (re)entry. Not bedeviled by the fraught politics of the Taiwan and China bids or the US’s reluctance the United Kingdom’s application has proceeded more quickly and smoothly.

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Taiwan Taiwan’s pursuit of CPTPP accession, like its earlier quest to enter the WTO, fits the conventional logic of international economic liberalism. The agreement obliges parties to reduce barriers to trade and other border-crossing economic activities, limits policies and practices that can confer unfair competitive advantages or constitute predation, and provides for authoritative and binding dispute resolution. In principle and potentially in practice, such arrangements raise overall productivity and wealth, with benefits flowing to all participating economies. More immediately, membership avoids the competitive disadvantages a non-member faces under regime rules that reduce barriers facing those member states that are a non-member’s competitors. Such issues are particularly salient for Taiwan, even more so than was the case when Taiwan joined the WTO. Its economy is (as it long has been) highly trade-dependent, with trade totalling more than 100% of GDP. More qualitatively, Taiwan has become increasingly integrated into the international economy, including through dense global value chains that have developed in recent years (CEIC Data 2022; WTO 2022a). Taiwan also lacks access to options that might serve as substitutes for membership in the CPTPP. This problem has become more acute during the twenty years following Taiwan’s WTO entry. WTO accession secured for Taiwan rights to relatively level playing-field access to international trade (and some beyond-trade activities) with almost all of the world’s significant economies. Taiwan’s WTO entry was followed by the Economic Cooperation Framework Agreement (ECFA) between Taiwan and the PRC—forged a decade into the era of their concurrent WTO membership—and numerous follow-on agreements, including a controversial proposed Cross-Strait Services Trade Agreement (CSSTA). But ECFA was not followed, as Taiwan hoped, by Taiwan’s entering preferential agreements with other key trading partners. Beijing’s opposition has been a principal, and often decisive, impediment. Taiwan has fewer than a dozen operative bilateral free trade or economic cooperation agreements, several with diplomatic partners that do not account for a substantial share of Taiwan’s trade (Taiwan Ministry of Economic Affairs 2022; Tsai and Liu 2017; Shapiro 2013). Taiwan has been unable to join increasingly important regional trade agreements, including the TPP/CPTPP and the Regional Comprehensive Economic Partnership (RCEP), in their initial rounds. Taiwan also was excluded from

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the initial group invited into the US-led—and institutionally thin and still-inchoate—Indo-Pacific Economic Framework (IPEF). The WTO now offers Taiwan less than it used to—or once appeared to—provide. The WTO’s centrality in regulating and ensuring access to the international economy has diminished. The Doha Round of negotiations stalled. The WTO’s once-impressive law-shaping dispute resolution process has been hamstrung (in part because the US blocked appointments necessary for the appellate body to function). The WTO’s reach in addressing some of the most dynamic “trade plus” issues—including electronic commerce, investment, regulatory harmonization, and more—has been exceeded by the CPTPP and other regional initiatives (Bown 2016; Alden 2020; Duesterberg 2021; Noland 2018). With the proliferation of bilateral and multilateral agreements, a shrinking share of international trade makes use of the privileges provided by general WTO rules and commitments (Baldwin 2016). Such economic arrangements have political significance, especially for Taiwan and its quest for international space and security. Taiwan’s ECFArelated agreements with China, and lack of economic agreements with other states, have amplified complementarities between Taiwan’s and the mainland’s economies, and increased Taiwan’s economic dependence on China and, in turn, fears about political risks for Taiwan (Lin and Shieh 2017; Matsuda 2015; Chang and Yang 2020). Asymmetrical economic interdependence can bring political vulnerability, including—where the stronger partner is so inclined—threats to the autonomy and sovereignty of the weaker party. This danger, classically articulated by Albert O. Hirschman, has become increasingly resonant for Taiwan (Hirschman 1945). It has provided much of the impetus behind Taiwan’s initiatives to diversify external economic activities and limit cross-strait economic integration. Examples include Lee Tenghui’s “southbound policy,” Tsai Ing-wen’s “new southbound policy,” and Taipei’s attempts to access non-China-centered trade arrangements, from bilateral Free Trade Agreements (FTA) to the TPP, CPTPP, and IPEF. Concerns about the political consequences of economic ties also helped drive the opposition (including the Sunflower Movement) that stymied ratification of the CSSTA (Rowen 2015; Kaeding 2015). CPTPP membership appeals, in part, because it could help alleviate this source of Taiwan’s international insecurity.

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Taiwan’s imperative to join the CPTPP reflects accession’s potential impact on Taiwan’s international status. Membership in major international bodies and other modes of participation in international accords and organizations matter because they are opportunities for Taiwan to act as a state or near-equivalent entity on the international stage. More narrowly, they are an aspect of the “capacity to engage” in international relations that is among the indicia of statehood in international law (deLisle 2000). For decades, Taiwan has sought membership in international organizations and agreements where possible and some lesser form of engagement—observer status, “meaningful participation,” or more ad hoc access—where membership is unattainable (deLisle 2021a; Goto 2021). Accession to the WTO was a milestone in this dimension of Taiwan’s pursuit of international status (Charnovitz 2006; Hsieh 2005). Taiwan had entered the most significant then-recently-created near-universal institution, one of the most potent international regimes (given the WTO’s authority to make and interpret rules governing international trade and related issues of economic regulation in member states, and given the WTO dispute resolution system’s authority to make binding decisions concerning members’ rights and obligations and to authorize remedies), and arguably the second-most important international body of any type (behind only the UN). WTO entry recovered some of the ground lost through Taiwan’s exclusion from major international organizations (primarily after the 1971 General Assembly resolution that gave Beijing the “Chinese seat” in the UN system) and Taipei’s subsequent loss of diplomatic partners. In some ways, prospects for Taiwan’s joining the CPTPP—and reaping gains on this front—should be promising. Taiwan’s bid can play to Taiwan’s relative strengths—and reprise past successes—in seeking international status and participation (deLisle 2000, 2021a; Goto 2021). First, like the WTO and unlike the UN, the CPTPP is not a “states member only” body. Taiwan’s quest for inclusion thus does not necessarily or immediately implicate questions of Taiwan’s sovereignty or statehood— which invariably elicit strong opposition from Beijing and raise difficult issues for other members. The CPTPP’s economic focus puts the fraught political issues of sovereignty at one remove. The distinction also matters for US support: Washington’s long-standing policy of backing Taiwan’s

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international participation excludes supporting membership in organizations for which statehood is a requirement (US Department of State 2022). Second, like the WTO, the CPTPP principally addresses an arena in which Taiwan is an important actor. The CPTPP’s ambit—the regional economy—is one where excluding Taiwan makes the regime much less comprehensive and effective. Third, although Taiwan faces some challenges in meeting the demanding criteria for CPTPP membership, Taiwan is already largely compliant (Taiwan Ministry of Foreign Affairs 2022a; Schott et al. 2016)—particularly in contrast to the PRC, which faces many obstacles born of its still (and in some respects increasingly) state-involved economy (Congressional Research Service 2021; Solis 2021). Taiwan’s possible shortcomings appear less persuasive as a reason for exclusion given that Vietnam was admitted as an original CPTPP member, notwithstanding its significantly illiberal economic order. These attributes give Taiwan a relatively compelling normative card to play, stressing its already-close alignment with the CPTPP’s principles and values. Fourth, as with the WTO, Taiwan’s bid for CPTPP membership does not come after the PRC has already joined and thus is positioned to veto Taiwan’s entry (under the CPTPP’s unanimity rule on new memberships). Here, the WTO example could serve as a precedent, with the two candidates’ bids proceeding as a de facto package deal, albeit with China nominally acceding first and Taiwan joining under a name that sounds less “state-like” than “Taiwan” (Tucker 2000; People’s Republic of China 2001; WTO 2001). Finally, as with Taiwan’s WTO bid, the US—still the world’s largest economy, sole genuinely global power, and significant economic and security partner for key CPTPP states—today supports Taiwan’s membership and participation in international organizations and agreements and encourages other states, including CPTPP member states, to do so as well. US support is all the more likely to be reliable in the context of growing wariness in Washington—and among “like-minded” states in the region (including some CPTPP members) and beyond—about Beijing’s expanding influence and assertive agenda, both generally and concerning Taiwan.1 But such factors are not enough to make Taiwan’s accession to the CPTPP feasible in the near term. Taiwan’s will and ability to address compliance issues with CPTPP requirements are real (with agriculture

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being among the sticking points), but they do not look insurmountable, particularly when compared to China’s. The principal obstacle, instead, is Beijing. Official PRC statements have pointedly rejected the idea of Taiwan’s concurrent accession, despite the apparent WTO precedent (China Ministry of Foreign Affairs 2021a2 ; Mayger and Li 2021; Hille and White 2021). This opposition comes against the backdrop of years of mounting PRC efforts to constrain Taiwan’s engagement with international organizations and other states. After Tsai Ing-wen became president in 2016, Beijing clawed back gains Taiwan had reaped during Ma Ying-jeou’s presidency: ending Taiwan’s eight-year run of attendance at the annual meetings of the World Health Assembly (the World Health Organization’s plenary body); blocking a recurrence of Taiwan’s participation in the triennial session of the assembly of the International Civil Aviation Organization (like the WHO, a core UN-affiliated entity) (deLisle 2009; Taiwan Ministry of Foreign Affairs 2021a, 2022b); terminating an informal “diplomatic truce” that had paused Beijing’s chipping away at Taipei’s dwindling cohort of states maintaining formal ties; and generally squeezing Taiwan’s international space (Niewenhuis 2021; deLisle 2016; Taiwan Ministry of Foreign Affairs 2021b). Beijing has considerable influence with other CPTPP members, rooted in its geopolitical clout, standing as the top trading and a leading investment partner for many CPTPP states, and position as the largest economy in the RCEP (to which seven of the eleven CPTPP members also belong). One plausible explanation for Beijing’s seemingly sudden application for CPTPP membership in September 2021 is that, knowing Taiwan was about to file, Beijing sought to deter CPTPP members from opening accession discussions with Taiwan (Lester and Zhu 2021; Freeman 2021). China’s stance on Taiwan’s bid also parallels Beijing’s wider use of incentives—ranging from development assistance to diplomatic support to diplomatic pressure and more—to induce other states, especially but not only in the Global South, to toe its line on Taiwan more generally (and other issues as well) (Thibaut et al. 2022; Shinn and Eisenman 2020; Drun and Glaser 2022; Shattuck 2020). In a high-profile example that roughly coincided with China’s and Taiwan’s CPTPP bids, China recalled its ambassador and imposed severe de facto restrictions on trade with Lithuania—prompting an EU complaint against China at the WTO— because Lithuania allowed Taiwan to use the name “Taiwan” for its

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unofficial presence in Vilnius (Higgins 2022; China Ministry of Foreign Affairs 2021b3 ; WTO 2022b). Another vulnerability in Taiwan’s bid are the limits to US support. Washington’s capability and will—generally and in the CPTPP context— have suffered significant erosion since the heady days of the creation of the WTO or even the TPP. The long-term relative decline in US economic and political power, the Trump-era “proof of concept” that Washington might lastingly abandon its postwar and post-Cold War global roles, and the US’s opting out of the TPP are among the markers of a lowered ceiling on US influence from its position as clearly preeminent global power and principal architect, and backer, of the WTO and other major international institutions.4

China China, too, is seeking CPTPP membership. In a short period, it has moved from suspicion toward the TPP as a US-steered “anyone but China” pact to “favourably consider[ing]” and then “actively promot[ing]” the process of joining the CPTPP while also pledging “an active and open attitude” in negotiating over sensitive issues such as subsidies and state enterprises (Ye 2015; McGee and Yoon 2015; Xinhua 2020; Wang 2022; Tan 2021). Economic prospects provide part of the impetus. The absolute and relative gains to be reaped—through international trade, inbound foreign investment, and other aspects of international economic liberalization that CPTPP membership would enhance—remain economically valuable for China. The opportunity membership confers to shape the rules of a major “trade plus” regime to better suit Beijing’s interests and preferences is another evident motivation. In all these respects, there are echoes of China’s earlier quest to join the WTO (deLisle 2006; China Ministry of Foreign Affairs 2022b). Yet, the economic imperative for China is limited, and less compelling with the CPTPP than it was with the WTO. China’s application to the CPTPP occurs in the context of a very different relationship between China and international economic regimes than in the late 1990s. During the two decades following WTO entry, China has been very active in establishing bilateral and regional trade agreements (RTAs), including with some of the largest economies in the CPTPP (China Ministry of Commerce 2022; Wang 2004). The biggest of China’s RTAs—the RCEP—has a membership that overlaps substantially with the CPTPP

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(although the RCEP’s liberalization requirements and substantive reach are considerably less than the CPTPP’s) (Schott 2022; Zhang 2021; Economist 2020). The Belt and Road Initiative (BRI) offers another vehicle for multiple arrangements that promote China’s expanding economic engagement with other states in its region and beyond (partly in the form of access for Chinese outbound investment to build infrastructure-underpinned connectivity and, in turn, trade). More broadly, China now has the leverage—much of it derived from its status as the top trading partner and a significant investment partner for many states (Sampson 2021; Marukawa 2021)—to get some of what it seeks in other states’ foreign economic laws and policies through ad hoc negotiations or unilateral measures that generate economic incentives and pressure (Seppanen 2018; Wolff 2020). China thus has less need to rely on the WTO’s limited legal commitments and enforcement mechanisms. More fundamentally, China’s economic gains from CPTPP would be less transformative than those facilitated by China’s WTO accession. Measured against the baseline of nearly a quarter-century ago, China’s economy is much larger, more developed, more mature, and intractably slower growing. It is also less heavily dependent on foreign trade and inbound investment. Domestic demand, investment, and innovation play much more prominent roles now. Some Xi Jinping-era economic policies, including the “dual circulation” economy, the quest for greater self-sufficiency in crucial technologies, and a re-expansion of the partystate’s roles in firms and the economy, reinforce this relatively organic trend. Other policies, to be sure, cut the other way, including those seeking international dominance in emerging technologies and promoting Chinese trade and investment through the BRI (Petri and Plummer 2020; Lin and Wang 2022; Blanchette and Polk 2020). Still, China’s CPTPP accession would not be—and is not meant to be—the crucial lever for opening China to the outside world and driving liberalizing economic reform at home that WTO entry sought and served to provide. Political considerations figure prominently in China’s pursuit of CPTPP membership, arguably overshadowing economic reasons. China’s CPTPP membership would give Beijing surer and more formal authority—enhancing (albeit perhaps only marginally) its formidable informal power—to block or set the terms for Taiwan’s admission and, in turn, advance the PRC’s agenda of squeezing Taiwan’s international space, denying it the appearance of parity with the PRC, and promoting

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unification. More broadly, China’s full membership would give it more robust options to shape the rules of the regime—and to influence future accessions (including potentially the US’s)—in ways that suit China’s interests and preferences. Still more broadly, China’s inclusion—or, more accurately, avoidance of exclusion—would marginally advance its quest for the deference and respect due a great power, second only, perhaps, to the United States (all the more so if the US remains outside the pact). While such prospective gains should not be gainsaid, the political upside for China in joining the CPTPP is much less than it was with entering the WTO, when a much poorer and weaker China sought membership as a pivotal step in accelerating economic development and securing acceptance in an international order from which it had previously absented itself or been excluded. China’s bid for CPTPP membership can draw on many of the same strengths that enable Beijing to stymie Taiwan’s chances and to pursue China’s international objectives more generally. The more unrestricted access to economic interaction with China that the PRC’s CPTPP membership would promise is a potential lure for CPTPP members. China’s positions as a leading trade and investment partner and a great power—and Beijing’s demonstrated penchant for deploying carrots and sticks to induce others to comply with its preferences—would seem to enhance Beijing’s chances for CPTPP accession. So, too, would factors that limit the effectiveness of opposition from Washington, including, not least, the US’s absence from CPTPP. Yet, Beijing’s CPTPP initiative is undercut by significant vulnerabilities. The PRC’s increased ability and will to press other states on a wide range of issues have emerged alongside—and helped foster—wariness and opposition toward China and its agenda among critical actors, including gatekeepers to the CPTPP. In several respects, the optimistic view of economic engagement with China that brought widespread international support for China’s WTO entry has faded markedly over the last two decades. First, and perhaps most fundamentally, worries that economic integration with and dependence on China—which China’s CPTPP membership would promote—bring undue political risks are not limited to Taiwan. Other states, including members of the CPTPP, have witnessed troubling instances of China’s assertive use of economic levers to political ends. Although some examples are ambiguous or contested, the peril is widely perceived. Beijing threatened an export embargo on rare earths—a vital

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input for electronics of which China is the predominant global supplier— amid a flare-up of long-running maritime territorial disputes with Japan (Bradsher 2010; King and Armstrong 2013). China limited Australian commodity exports amid a row over Canberra’s national security concerns about Chinese technology, cyber activities and more, and Australian criticisms of China’s political behavior at home and abroad. Canadian exports and business opportunities in China also faced restrictions in response to Canada’s detention of a senior Huawei executive at Washington’s request. (Reuters 2020; Kearsley 2020; Hufbauer and Jung 2020). China’s Belt and Road Initiative (which includes seven of the eleven CPTPP members) has drawn criticism—and questionable charges of “debt trap diplomacy”—over concerns that China will use the economic leverage BRI projects provide to press host states to adopt policy positions that align with Beijing’s preferences (Chellaney 2017; Truman 2018). Beijing faced allegations that its COVID-19 diplomacy (which targeted many of the CPTPP member states) reflected a significant political component, including offering vital public health supplies with political strings attached, or based on the politics of its relations with importing countries (China Power Project 2021; Lin et al. 2021; deLisle 2021b). The US-China economic conflict that surged during the Trump presidency and continued under Biden demonstrated the potential—in relations with China—for spiralling cycles of politically driven restrictions on trade in vital or sensitive goods or investment in purportedly sensitive sectors. China has been especially likely to use economic means to pursue political ends when Taiwan has been at issue: imposing sanctions and other economic measures against foreign governments, officials, and firms that have adopted positions or taken actions opposed by China on Taiwan (Hufbauer and Jung 2020; European Parliament 2021; China Ministry of Foreign Affairs 2022a5 ); offering material rewards (including aid packages and prospects of increased trade and investment) to induce governments in the Global South to switch diplomatic ties from Taipei to Beijing; and adopting measures to expand or contract Taiwan’s opportunities for economic engagement with China and others, especially in response to moves by Taipei that Beijing sees as addressing Taiwan’s international status (deLisle 2021a). To be sure, the political use of economic power is a common feature of major powers’ statecraft (Baldwin 2020). But Beijing’s version gives

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special reasons for concern among China’s potential CPTPP counterparties, who must contemplate the prospect of China’s membership bringing both greater economic engagement with China and greater ability of China to influence the CPTPP’s trajectory. Principal reasons for concern include: the vast scale of PRC trade and investment (absolutely and relative to other partners); China’s dominance in key sectors and supply chain links; the range and types of political ends to which Beijing uses economic leverage; and the party-state’s pervasive power to control the behaviour of China-based economic actors (making Beijing’s efforts more potent and harder to police under existing international rules). Each of these factors is much more formidable at the time of China’s CPTPP bid than when the PRC sought WTO entry a generation earlier. Second, China faces doubts about its prospective compliance with the requirements of the CPTPP—and the downstream consequences of noncompliance—that are more serious than those that accompanied China’s efforts to join the WTO. There is room for debate about whether the gap between China’s laws, policies, and practices and WTO requirements in the late 1990s was more than the gap between China’s current system and behaviour and the CPTPP’s rules. Judgments about the scale and significance of such gaps are subjective and the gaps themselves are not easily commensurable. But some contrasts are clear, especially in external perceptions and expectations concerning China’s actions, which will greatly affect China’s prospects for accession (Stephens and Kucharski 2022). In the run-up to its successful WTO bid, China pledged substantial, wrenching changes—including “WTO plus” obligations that exceeded other members’ commitments (especially to monitoring) and “WTO minus” privileges (which gave China less protection against anti-dumping duties and export-limiting safeguards and denied China special treatment accorded other developing and transitioning-from-socialism economies) (Qin 2003; Gao 2007). Before achieving membership, China had substantially reduced its trade barriers and revised many laws to become WTO-conforming, and seemed to be on a positive trajectory. It was widely believed that Premier Zhu Rongji and other Chinese leaders sought WTO entry to impose external legal obligations that would help drive market-oriented economic reforms at home (see p. 364 in Pearson 2001; Fewsmith 1999; deLisle 2006). A principal (and notably “constructivist”—in the international relations theory meaning of the term) premise of what would become the US’s

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long-lasting policy of “constructive engagement” was that welcoming China into the WTO and other elements of the international order would, at least, make China more rule-following and status quo-supporting, and, more ambitiously, foster an internal economic transformation—and, still more aspirationally and less plausibly, political change—that would make China more like the developed capitalist democracies that were the gatekeepers to China’s WTO membership (Clinton White House, n.d.6 ; NY Times 20007 ). By the time of China’s CPTPP application, all of this has changed markedly. Doubts are much more profound and widespread about whether China will comply, or try to comply, with the CPTPP’s exacting requirements—especially if reforms are not completed before accession (Tucker 2000; People’s Republic of China 2001; WTO 2001; Ebuchi et al. 2021). Complaints and concerns about China’s non-compliance—or mere “paper compliance”—with WTO requirements across two decades have been chronic and severe, breeding profound scepticism about Beijing’s good faith and reliability (USTR 2022a; Webster 2014; Zhang and Li 2014). Some critics have lamented that the WTO is fundamentally ill-equipped to deal with the liberal-economic-order-undermining and trade-partner-damaging consequences of China’s economic structure, laws, policies, and actions (Wu 2016). Third, these developments have occurred in the context of, and have reinforced, a broader turn toward sceptical and critical views of China and its international behaviour in the US and among some CPTPP members. China, especially during the Xi era, has shown declining interest in convergence with foreign, primarily Western, liberal norms—including but not limited to areas addressed by the CPTPP (Tiezzi 2021). Recent PRC statements and actions have prompted assessments abroad that Beijing has begun to try to reshape foreign and international norms and rules to align with Chinese models and preferences (Economy 2020; deLisle 2018). The era of constructive engagement in US China policy has ended. Rightly or wrongly, policy debates in the US now focus on how tough to be on China, whether constructive engagement was a terrible mistake rooted in a dangerous delusion, and how severe and intractable a threat China poses to a rules-based, primarily liberal, international order and the interests of the US and other pro-status quo states, including members of the CPTPP (deLisle and Goldstein 2021; Ikenberry 2022; White House 2021a). Although the US may be a relatively extreme or

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unsubtle case, such concerns are increasingly serious and evident among CPTPP members and other states in the Indo-Pacific and beyond. China’s recalcitrance toward international collective efforts to address the Ukraine crisis and the PRC’s de facto alignment with Russia have entrenched such perspectives (deLisle 2022). Especially resonant in the context of Beijing’s and Taipei’s CPTPP bids, China’s growing pressure on Taiwan—underscored by extensive debates over the implications of the Russia-Ukraine conflict for cross-strait scenarios, and by the military exercises China launched after US House Speaker Nancy Pelosi’s visit to Taiwan—has prompted expressions of heightened concern about the challenges China poses in authoritative statements issued jointly by US and key CPTPP states’ leaders (US-Japan and US-Korea), the G7, and the EU (White House 2021b, c, 2022a, b; EEAS 2021a, b, 2022). The shared wariness toward China that underpins such declarations reinforces a narrative of a bullying and disruptive China that would be a problematic partner in vulnerability-enhancing relationships, including the CPTPP. While views of the US-China rivalry continue to vary (including among CPTPP members), the room for other states to avoid “choosing sides” appears to be shrinking, to the detriment of China’s CPTPP bid (Stromseth 2019). In the context of China’s CPTPP bid, the US’s potential leverage is formidable: Washington can trigger the “poison pill” clause in the US-Mexico-Canada Agreement (USMCA), which allows the US to opt out of the USMCA if Mexico or Canada enters a trade agreement (including the CPTPP) with a “non-market economy” (such as China) (Lan 2020; Liang 2020).

United States Unlike Taiwan and China, the United States is not, at least for now, seeking to join the CPTPP. Washington’s influence on matters such as others’ CPTPP bids is less than when Beijing and Taipei pursued WTO entry in the 1990s, and less than it would be if the US had not withdrawn from the TPP in 2017 or if it were prepared to (re)join the CPTPP today. A key impediment to US influence is, of course, the US not itself being a party. It cannot unilaterally block an application under the CPTPP’s unanimity rule. Washington also has foregone the diffuse but sometimes-decisive leverage that a leading member can exert within a regime, bargaining with, persuading, or cajoling its fellow gatekeepers.

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More broadly, foundations of US influence have eroded since the time of the WTO’s creation and the PRC’s and Taiwan’s accessions. The US’s share of international economic activity—the principal focus of the CPTPP as well as the WTO—has been waning. The same is true of US hard power, compared to the early post-Cold War years. On many accounts, US soft power has been faltering as well (World Bank 2022a; Djankov et al. 20218 ; Koka and Mastro 2021; Nye 2004). Much of the relative decline is due to the rise of China, including its place in the global economy, its economic importance to many CPTPP members, and its greatly increased hard power. With some states and at some times, China has also accrued substantial soft power (World Bank 2022b; DNI 2021; Ding 2008; Repnikova 2022). Still, the US retains significant and recently reviving resources to affect prospects for China’s and Taiwan’s bids. Sway over CPTPP decisions is not, of course, limited to members. The US still derives considerable (if, in the CPTPP context, informal) influence from: its importance as a trade and investment partner—and in several cases a security partner— for key CPTPP member states (including Japan and Korea); its broader economic and geopolitical clout; its resurgent, pivotal role in addressing a wide range of now-widely-perceived and increasingly-concern-provoking challenges posed by China; and—if it is willing to risk large economic and diplomatic costs—the ability to threaten an end to the USMCA to coerce Canada or Mexico to block China’s CPTPP entry. The US thus can still expect to affect the decisions of current CPTPP members that act as gatekeepers to the PRC and Taiwan. In supporting Taiwan’s candidacy or, more clearly, in impeding China’s, US efforts would have the additional advantage of targeting an audience that is increasingly receptive to critical views of China. The challenges for US efforts to affect CPTPP decisions—and the trajectory of a liberal international economic order more generally—are only partly problems of limited and diminished capacity. They are also issues of questionable will. During the early 1990s, the US had taken the lead in creating the WTO as an ambitious, substantively more expansive, and legally and institutionally more robust successor to the original General Agreement on Tariffs and Trade (GATT). At the end of the decade, the US’s consent was the most significant remaining factor in determining when China’s quest for accession (to the GATT from 1986 and the WTO from its inception) would succeed. Washington demanded that China make extensive changes and promises to change—explicitly

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to adopt market-regarding and internationally open economic laws and policies and implicitly to undertake institutional and structural changes that were presumed to be prerequisites to, or consequences of, fulfilling general WTO requirements and China’s specific WTO pledges (in its protocol of accession) (Clinton White House 2000; Abbot 1998). At the TPP’s inception, US agendas and aims were less ambitious. The Obama administration framed the TPP as a gold-standard accord, one that would reach beyond the WTO, and that was the US’s more liberal entry in a competition with China over who would “write the rules of the global economy for the twenty-first century” (Obama 2016; Obama White House, n.d.). The tone was still-relatively-high US confidence, but in a newly ideationally tinged struggle in which the US and like-minded states were on the right side. By the mid-2010s, this vision had darkened further. The TPP was stalled in Congress during the final months of Obama’s presidency. Both major party candidates—Clinton and Trump—criticized the pact. Once in power, Trump withdrew from the TPP, leaving Japan to pick up the pieces and forge a shrunken CPTPP. Although the Biden administration moved away from the heated and erratic economic nationalism of its predecessor and moderated the volatility and virulence of the Trump-era approach to China, it did not return to Obama-era, or earlier, baselines. Biden declared that “China’s goal” of “becom[ing] the leading…wealthiest….most powerful country in the world” is “not going to happen on my watch” (Renshaw et al. 2021). The Biden administration has been less willing to embrace the asserted virtues of trade liberalism than its pre-Trump predecessors. It has reaffirmed that the US would “not rejoin the TPP as it was initially put forward” (White House 2021d). It has retained Trump’s tariffs, bans on some Chinese firms from access to crucial US inputs and markets, and other restrictions targeting China (at least partly because of the domestic political consequences of removing restrictions without reciprocal concessions from Beijing). It has continued the long-developing “securitization” of US foreign economic policy, invoking national security concerns to restrict trade (especially in sensitive high technology) and inbound investment, especially from China. It has adopted elements of what in other systems would be called industrial policy—including subsidies and protectionist barriers to promote industries deemed vital or promising for future national economic strength. Some of these measures are found in headline initiatives and legislation, such as Build Back Better, the US Innovation

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and Competition Act (USICA)/America COMPETES Act/CHIPS and Science Act, and the Inflation Reduction Act (Bader 2022; Khalid 2021; Deese 2021; White House 2021e). In lieu of the CPTPP, the Biden administration offered IPEF (White House 2022c; Curran and Jamrisko 2022). While IPEF includes commitments to principles found in the CPTPP and arguably goes farther in addressing cutting-edge issues in the management of a largely liberal international economic order (such as data privacy, anti-corruption standards, sustainability, and supply chain resilience), IPEF is in crucial ways less than the CPTPP—or the former TPP. Its substantive scope is more limited. It lacks the CPTPP’s structure as a multilateral pact with distinct institutions for interpretation and enforcement. It seeks to substitute a series of overlapping bilateral deals for a full-fledged multilateral treaty. At its launch, IPEF did not appear to spawn the breadth and depth of enthusiasm the TPP had attracted. Like the TPP/CPTPP, IPEF excluded Taiwan from the inaugural group, despite Taiwan’s strongly expressed interest in joining (Taiwan Ministry of Foreign Affairs 2022c; CNA 2022b). This omission—partly driven by other IPEF states’ concerns about the pressure China would exert if Taiwan were included—denies Taiwan the gains, in terms of international status, that could have come from membership in the US-led regional trade initiative. Taiwan’s exclusion broadly reprises the pattern in the initial rounds of the TPP and the WTO—and which continues under the CPTPP. These disappointing developments for Taiwan have been tempered by the Biden administration’s pledges to engage Taiwan in ways that parallel IPEF (principally, the US-Taiwan Initiative on 21st Century Trade) and the reinvigoration of discussions of a US-Taiwan FTA (with, at best, still-uncertain prospects of success) (Sacks and Hillman 2021; USTR 2021a, 2022b; White House 2022d; Lawder 2022). Such moves come in the context of a broader trend of offering more robust US support for Taiwan and its international space. Other Biden administration signals of strengthened support for Taiwan have included: statements that US support for Taiwan is “rock solid”; calls for Taiwan’s participation in high-profile international organizations (including restoration of Taiwan’s access to the WHA annual meeting amid the COVID crisis); condemnation of China’s economic coercion of Taiwan; and comments from the President that were widely interpreted as implying a clearer commitment to defend Taiwan from military pressure by China (to the point

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where some observers inferred an end to the long-standing norm of “strategic ambiguity”) (US Department of State 20219 ; Blinken 2021a; Wei 202110 ; White House 2022e; CBS News 2022; Kanno-Youngs and Baker 2022). Congress, too, has been unprecedentedly active in passing ‘proTaiwan’ legislation, much of it speaking to issues of Taiwan’s international status. Congress has called on the administration to support Taiwan’s membership or participation in international organizations, to pursue closer diplomatic and military cooperation and visits by higher-level officials (some of which have been undertaken), and to reward or punish other states that make, retain, or break diplomatic ties with Taipei (Taiwan Travel Act 2018; TAIPEI Act 2020; Asia Reassurance Initiative Act 2018; Reuters 2021; Wang 202211 ; Pollard 2022; CNA 2022c). A bipartisan group in Congress called on the Biden administration to include Taiwan in IPEF (Menendez et al. 2022). All of this has been reinforced by an ideational element. Since Taiwan’s democratic transition (fully achieved only a few years before WTO entry), the US has routinely stressed Taiwan’s stature as a liberal democracy. This pattern continued, and arguably sharpened, around the time of Taiwan’s CPTPP bid. One illustration is the Biden administration’s inviting Taiwan to its Summit for Democracy. Such moves emphasize Taiwan’s higherstatus place on what the US and other liberal democracies—including key CPTPP members—have framed as the right side of a normative divide from (and competition with) autocracies (including China) (Blinken 2021b12 ; White House 2021f, g13 ). Across these dimensions, there are elements of substantial and increased US support for Taiwan’s international status that would be further enhanced by Taiwan’s CPTPP accession. Still, what the US is currently willing and able to muster to help Taiwan’s bid—on its own or in concert with others—is unlikely to be enough to secure success any time soon. At the same time, US skepticism toward China’s CPTPP gambit can damage China’s already-weak chances, especially given the similar views and closer cooperation on China-related issues that have emerged among the US, key CPTPP members, and other like-minded states. Washington has been, unsurprisingly, less than enthusiastic about China’s prospective CPTPP membership.14 The US’s escalating critiques of China’s economic model and its international economic policies and behaviours—including departures from liberal, market-oriented, and level-playing-field norms

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(USTR 2021b; Meltzer and Shenai 2019)—read like a brief against China’s case for CPTPP membership. The turn toward more adversarial US-China relations—reflected in the Trump and Biden administrations’ designation of China as a strategic competitor (Trump White House 2017; White House 2021h) and many harsh rhetorical exchanges with Beijing—implies an aversion in Washington toward developments that would enhance China’s international influence, stature, and economic opportunities, especially relative to the United States. A CPTPP that includes China but not the US would— on almost all analyses—mean a win for China and a loss for the US in terms of GDP growth and shares of global trade. It would also be a political blow, giving credibility to China’s claim, prevalent in the post-Global Financial Crisis era, that China (and not the US) is a leading supporter of economic globalization (World Economic Forum 2017; China Ministry of Foreign Affairs 201415 ). The contrast to what was expected when the US was pushing for the original, China-excluding TPP would be a striking—and unwelcome—instalment in the narrative that the US has retreated from world leadership while China has advanced.

A Protracted Contest Over an Elusive and Shrinking Prize? CPTPP membership is unlikely in the near future for Taiwan, the PRC, or the United States. With China’s stern opposition and the US’s constrained support, Taiwan’s chances are slim. China’s CPTPP bid faces significant questions on the merits and deepening doubts among CPTPP gatekeepers about China’s possible actions and aims as a CPTPP member. The US is not yet reconsidering its withdrawal from the TPP, and such a reversal would face significant resistance domestically (White House 2022f). Moving to decide soon on Taiwan’s and China’s applications would be contentious, subjecting CPTPP members to considerable pressure, including from China and likely from the United States. The process could strain the still-new institution and create rifts among its members. For the applicants, a negative resolution—the most likely outcome if a decision were reached promptly—would be costly, especially politically. For Taiwan, it would be a definitive rebuke—rather than mere protracted ambiguity—in its pursuit of modestly enhanced international status. For China, rejection could validate the storyline that China is

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not a responsible stakeholder in prominent international organizations. A forced—rather than a US-style self-imposed—exclusion would be a setback for China’s Xi-era pursuit of full acceptance as a normal great power. For the US, a high-profile and high-stakes tussle over Taipei’s and Beijing’s applications could reemphasize the harm to the US’s international stature that attended opting out of the TPP. On that score, China’s accession would be still worse for the US and would further reduce the prospects for the US’s return (which is an outcome sought by several CPTPP members). In this context, delay is the most likely and probably the wisest course for all concerned. While the China-Taiwan dynamic is unlikely to improve any time soon, other factors affecting the CPTPP’s future might. The UK’s less contentious bid has proceeded, expanding the pact’s economic scale and geographic reach, proving that orderly accession is possible, and perhaps paving the way for still more entries. The US might move toward some degree of reengagement with the CPTPP, and reentry is not definitively off the table. The Biden administration has left the door slightly ajar (White House 2021d, 2022d16 ). Rejoining the agreement would dovetail with fundamental elements of current US foreign policy, including the focus on countering China, supporting a rules-based international order, and aligning with like-minded states. The view is widely and deeply held in US policy and some political circles that walking away from the TPP/ CPTPP was a significant unforced error (Carper and Cornyn 2021; Solis 2017; Heath 2017). If such developments were to occur, a more WTOlike solution to Taipei’s and Beijing’s concurrent CPTPP bids might become more plausible or, at least, rejection or withdrawal of their applications might be less damaging to what likely would be a more robust and resilient CPTPP. While the prize—membership for China and Taiwan and revived interest in membership from the US—is, thus, likely to remain elusive in the near term, it may also be of diminishing value. For all its impressively liberal contents and broad substantive scope, the CPTPP (unlike the WTO) will not be a near-universal-membership organization nor an international economic institution clearly without peers (given the RCEP, the EU, and other recently created multilateral economic accords). The political importance of membership (or exclusion) is further cabined by the CPTPP’s limited normative heft. The CPTPP has come into existence in an era of doubt about the wisdom or desirability of liberal trading regimes

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(when measured against the baselines of when the WTO was founded and China and Taiwan joined). The “low politics” of trade and economic interdependence loomed large in the early post-Cold War era. They helped make the WTO so central an institution, and membership such a marker of acceptance and importance, in the international order. This is no longer the case. CPTPP membership decisions are significantly more likely to be seen as “political” amid the sharpening US-China rivalry (again, in contrast to the more benign tone in US-China relations on the eve of China’s and Taiwan’s WTO accessions). Economic issues have become more “securitized,” and traditional—and nontraditional—security issues have again taken center stage in international affairs, not least due to China’s rise and growing tensions with the United States. Large-scale war—including across the Taiwan Strait and between great powers—seems a less remote possibility than it was in the late 1990s and early 2000s. In such contexts, the CPTPP and membership in it (and other international economic organizations) are likely to matter less, including for issues of members’ and non-members’ international status and stature—and much else.

Notes 1. These issues are discussed in later sections of this chapter. Taiwan has been in active discussions with other CPTPP members about its bid and the UK has sent notably positive signals (CNA 2022a; Office of the President 2022). 2. Statement by spokesperson Zhao Lijun that “China firmly opposes all official interactions between Taiwan and any country, firmly rejects Taiwan’s accession to any agreement or organization of official nature. China’s position on this issue is clear.” Zhao also rejected the WTO precedent. 3. Explaining China’s actions against Lithuania. 4. These issues are addressed in more detail later in this chapter. 5. Sanctions on US officials and firms over Taiwan issues, including arms sales. 6. WTO membership “will entangle China more deeply in a rules-based international system and change China internally.” 7. Transcript of speech by President Clinton asserting that WTO entry is the “…most significant opportunity…to create positive change in China” including political reform. 8. Trade’s rise as percentage of GDP is lower for the US than for other advanced economies. Other measures also point to US economic “disengagement”.

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9. Stating “rock-solid” support. 10. Concerning economic coercion. 11. Concerning visits by former high-ranking national security and defense officials. 12. “Taiwan is a critical partner to the United States and a democratic success story.” 13. Concerning contests between democracy and autocracy and between the US and China. 14. The initial reaction from the White House to China’s bid was muted and perhaps disingenuous: “we’d leave it to those countries”—that is, CPTPP members—“to, certainly, determine” (White House 2021d). 15. Li Keqiang speech at Davos World Economic Forum. 16. Remarks of Katherine Tai.

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Index

A Acquis communautaire, 143 Act East Policy, 146 Albanese, Anthony, 132, 136 Alliance shoring, 149 Anti-currency manipulation, 149 ASEAN+3, 144 ASEAN+6, 144 Asian Infrastructure Investment Bank (AIIB), 58, 125 Asia Pacific Economic Cooperation (APEC), 5, 16, 20, 32, 35, 79, 93, 97, 105, 119, 123, 125, 129, 148, 151, 159 Association of South East Asian Nations (ASEAN), 3, 27, 31, 32, 57, 144, 145, 153, 159 AUKUS Agreement (Australia–UK–US), 12, 48, 60, 97, 149 Australia, 5, 7, 12, 13, 15, 16, 33, 34, 36, 37, 39, 48, 53, 54, 57, 58, 60–62, 64, 69, 71–73, 78–80, 93, 96–99, 104, 117–119, 123,

125, 128, 129, 131, 133, 150, 153, 155, 156, 175, 191 Australia-UK FTA, 124

B Beijing, 20, 49, 53, 60, 61, 96, 98–101, 104, 127, 148, 166, 170, 173, 182, 183, 185–194, 196, 199, 200 Belt and Road Initiative (BRI), 11, 58, 125, 189, 191 Biden, Joe, 10, 16, 31, 57, 58, 69, 102, 149, 153, 175, 176, 191, 196–200 Boa Forum, 148 ‘Build back better’, 196 Bush, George W., 2

C Canada, 4, 5, 7, 12, 23, 35, 39, 48, 53, 58, 60–62, 72, 73, 79, 96, 97, 119, 120, 126, 128, 134, 155

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd 2023 C. Lee and M. Reilly (eds.), China, Taiwan, the UK and the CPTPP, Taiwan and World Affairs, https://doi.org/10.1007/978-981-99-3197-2

217

218

INDEX

China, 2–16, 20, 23, 25, 26, 31–33, 35, 36, 38, 39, 47–64, 73, 95–101, 103–106, 120, 122–126, 129, 132, 133, 142–146, 148–157, 159, 167, 168, 170, 172, 175, 182, 184, 186–194, 196, 198, 199, 201 China–Australia FTA (2015), 125 China (PRC), 23 China (Republic of), 166, 181 China’s accession to the CPTPP, 100, 102 Clinton, Hillary, 196 Closer Economic Relations (Australia - NZ), 118 Codex Alimentarius Commission (Codex), 29 Competitiveness and Resilience Partnership (CoRe), 176 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), 2–9, 11–15, 19–24, 26, 27, 29–39, 47–61, 63, 64, 67–70, 72–75, 77–83, 90, 93–97, 99–106, 117, 121–123, 128–134, 142, 143, 146, 148, 151–157, 166–169, 171, 173, 174, 176, 177, 181–195, 197–201 Comprehensive Economic Partnership for East Asia (CEPEA), 144, 145 COVID-19, 14, 15, 62, 72, 98, 122, 124, 126, 149, 151, 171, 172, 191, 197 Covid pandemic, 14, 15, 124, 149 CPTPP Accession Process, 34, 35, 75, 95, 98, 118, 130, 155, 156 CPTPP Commission, 35, 36, 155, 156 Cross-Strait Services Trade Agreement (CSSTA), 183, 184

D Data security, 77 Decoupling, 72, 149, 157 Democratic Progressive Party (DPP), 6, 150, 169 Diet (Japanese), 176 Digital economic partnership agreement (DEPA), 52 Digital governance, 51, 53, 78, 79 Digital localization standards, 146 Digital trade, 20, 51, 68, 71, 78, 80, 82, 94, 95, 100 Digital trade regime, 95 Doha Round, 2, 89, 184

E EAS, 144 East Asia Free Trade Agreement (EAFTA), 144 E-commerce, 50, 78, 120, 129, 146, 152, 154 Economic Co-operation Framework Agreement (ECFA), 6, 105, 183, 184 Economic impact, 68, 70, 71, 152 Economic security, 33, 142, 152–154, 157 Economic Security Council, 154 Environment, 32, 48, 72, 75–77, 81, 82, 93, 99, 120, 146, 148 European Commission, 3, 31 European Single Market, 2 European Union (EU), 2, 3, 5–10, 50, 61, 68–72, 75, 76, 79–83, 93–95, 106, 120, 121, 124, 132, 133, 143, 156, 173, 176, 187, 194, 200 Canada trade agreement (CETA), 120 Export bans, 149

INDEX

F Food and Drug Administration (FDA) (of USA), 168 Food safety regulatory practices, 27 Foods standard and safety, 68, 80, 82 Freedom of Navigation Operations, 14 Free Trade Agreement (FTA) coverage rate, 22, 23 Friend shoring, 149 Fukushima, 13, 30, 99, 102, 103, 130, 150, 170, 171, 175 Fumio, Kishida, 62, 176

G G7, 124 Gatekeeper, 13, 142, 143 General Agreement on Tariffs and Trade (GATT), 118, 119, 195 Geoeconomics, 94, 104, 143 ‘Global Britain’, 2, 5, 68–71, 82, 93 Global supply chains, 31, 33, 75, 103 Global value chains, 31, 32, 72, 119, 183

H High-standard rules, 144, 146, 156, 157 Huawei, 12, 62, 96, 126, 191

I Indo-Pacific Economic Framework (IPEF), 4, 15, 59, 102, 153, 154, 159, 168, 174, 175, 184, 197, 198 Indo-Pacific tilt, 68–70, 82 Information Technology Agreement (ITA), 8, 22, 26, 119, 133, 174 Institutional discourse power, 149

219

International Civil Aviation Organization (ICAO), 187 International institutions, 143 Internet, 113, 135 Investor protection through ISDS, 149 IPR, 149

J Japan, 2, 5–7, 13, 14, 23, 25, 27, 30, 36, 39, 48, 53, 58, 60–63, 72, 73, 78, 79, 94, 96, 97, 99, 103, 119, 120, 124, 128, 134, 141, 142, 145, 149, 152–154, 156, 157, 166, 167, 170, 171, 175–177, 191, 195, 196 Joint Standing Committee (of Australian Parliament), 33, 130

K Kajiyama, Hiroshi, 151 Kono, Taro, 151, 173 Kuomintang (KMT), 6, 102, 169

L Labor regulations, 149 Labour, 48, 50–52, 55, 64, 120, 129 Lee, Hsien Loong, 36 Lee, Teng-hui southbound policy of, 184 Legislative Yuan, 42, 169 Liberal Democratic Party, 151, 154 Liberal International Economic Order (LIEO), 150 Li, Keqiang, 125, 148 Lithuania, 53, 62, 187 Liz, Truss, 2 ‘lock-in’ economic reforms, 148 Look East Policy, 146

220

INDEX

M Malaysia, 23–25, 31–33, 59, 79, 96, 101, 119, 128, 144, 146, 153 Market access, 11, 20, 32, 37, 48, 55, 56, 94, 102, 120, 128, 131, 132, 142, 154, 155 Market-driven economy, 50 Ma, Ying-jeou, 6, 32, 187 Member country considerations, 80 Mexico, 24, 35, 58, 60, 62, 72, 97, 105, 119, 120, 128, 155, 194, 195 Mimura, Akio, 152 Ministers’ Declaration on India’s RCEP, 146 Modi, Narendra, 146 Morrison, Scott, 122, 124–129, 132 Movement of natural persons, 146

N National Security Secretariat, 154 New Southbound Policy, 11, 150, 184 New Zealand, 8, 23, 32, 34, 35, 52, 60, 69, 71–73, 78–80, 94, 96, 99, 103, 118, 119, 128, 129, 144, 145, 153, 155 Non-zero-sum, 148

O Obama, Barack, 2, 15, 145, 196 Okonjo-Iweala (Director General, World Trade Organisation), 181 One China policy, 104, 168, 175

P Pelosi, Nancy, 96, 194 People’s Bank of China, 148 Plurilateral agreements, 73, 119, 133 Political economy, 10, 53, 97

Politics of membership, 59 Pork, imports of, 29, 130, 150, 168, 169 Q Quad members, 153 R Ractopamine, 13, 29, 30, 130, 150, 169 Rare earths, 61, 190 Reform, 9, 20, 27, 30, 31, 35, 38, 48, 50, 55, 56, 63, 98–101, 106, 118, 123, 145, 148 Regional Comprehensive Economic Partnership Agreement (RCEP), 3, 4, 9, 23, 25, 27, 33, 47, 54, 68, 90, 96, 97, 120, 129, 133, 146, 148, 152, 174, 183, 187–189, 200 Regional Economic Integration (REI), 21, 22, 27, 32, 33, 100, 150 Regional institutions, 143 Regional Trade Agreements (RTAs), 2, 3, 183, 188 Regulatory constraints, 75, 82 Reshoring, 72, 149, 153 Rule-of-origin, 146 Rules-based trade regime, 98 Rule-setting, 142, 145, 154 S Sanctions, 14, 57, 58, 61, 62, 64, 149 Sanitary and Phytosanitary Measures (SPS), 27, 29, 37, 80, 81, 150 Securitization of national economy, 154 Semiconductors, 8, 14, 24, 57, 168, 171–174, 176, 177 Semiconductor sector, 149 Shinzo, Abe, 6, 119, 166

INDEX

Singapore, 6, 8, 13, 23, 32, 36, 37, 52, 59, 72, 73, 78, 96, 99, 119, 121, 128, 129, 144, 146, 150, 153, 155 Societal implications, 68, 75 Soft power, 195 South China Sea, 14, 61, 125 South Korea, 2, 3, 5–7, 25, 47, 54, 57, 61, 67, 144–146, 149, 153, 170, 171, 174 Special and Differential Treatment, 146 Special safeguard duties, 146 State enterprises, 48, 50, 51, 56 State-Owned Enterprises (SOEs), 9, 90, 96, 120, 129, 145, 147, 152 Sunflower Movement, 184 Supply chains, 20, 51, 54, 58, 59, 62, 142, 153 T Taipei, 13, 102, 127, 128, 137, 166–171, 173–177 TAIPEI Act, 198 Taiwan, 2, 3, 5–9, 11, 13–16, 19–27, 29–33, 35–39, 48, 60–62, 90, 93, 97, 102–106, 123, 127, 129, 130, 142, 150, 151, 154, 166–172, 174, 175, 177, 182–187, 190, 191, 194, 195, 197, 199, 201 agricultural imports, 37, 186 Council of Agriculture, 38 food imports from Japan, 130 National Referendums, 29, 30 Taiwan Semiconductor Manufacturing Company (TSMC), 172–175 Taiwan Travel Act, 198 Tariff structures, 23–25 Thailand, 2, 3, 31, 32, 47, 58, 153 Thatcher, Margaret, 2 The 3-11 disaster, 149

221

The Abe administration, 102, 154 The Bush administration, 144, 145 The Obama administration, 11, 75, 144, 145 Tokura, Masakazu, 151 Tokyo, 102, 166, 168, 170, 175 TPP Promotion Strategies Action Plan, 27 Trade creation effect, 93, 94, 103, 106 Transatlantic Trade and Investment Partnership (TTIP), 11, 76 Trans-Pacific Partnership Agreement (TPP), 4, 7, 9–11, 19, 27, 33, 50, 57, 63, 68, 75, 93, 99, 101, 102, 119–121, 141–145, 147, 148, 150, 152, 153 Trans-Pacific Partnership (TPP), 166–168, 182–184, 188, 194, 196, 197, 199, 200 Trans-Pacific Strategic Economic Partnership (P-4), 144 Trump, Donald J., 2, 10, 12, 16, 57, 96, 117, 119, 125, 126, 145, 188, 191, 196, 199 Tsai, Ing-wen, 6, 11, 29, 150, 169, 184, 187 U Ukraine, 48, 49, 53, 56, 60, 62, 72, 96, 99, 194 United Kingdom (UK), 2, 7, 8, 10, 12, 13, 48, 60, 63, 67–72, 74, 76, 78, 80, 82, 93, 94, 96, 97, 123, 124, 128, 132, 156, 182 United Nations, 171 United States interests, 16, 80, 145 USA, 2, 4, 5, 7, 8, 10–16, 117, 119, 127, 170 ban on pork imports from, 175 Interim National Security Strategic Guidance, 31

222

INDEX

‘securitization’ of foreign economic policy, 196 US-China-Taiwan relations, 182 (US) CHIPS and Science Act, 57, 197 (US) Congress, 5, 154, 196 (US) Inflation Reduction Act, 197 US Innovation and Competition Act (USICA), 197 US-Mexico-Canada Agreement (USMCA), 58, 149, 194, 195 US-Taiwan Initiative on 21st century trade, 114, 197 US Trade Representative, 155 V Vietnam, 9, 13, 23–27, 36, 37, 55, 59, 72, 79, 96, 101, 119, 128, 146, 153, 155, 186 W Washington, 57, 96, 101, 102, 166, 168–170, 173–175, 182, 185, 186, 188, 190, 191, 194, 195, 198, 199 Win-win, 148

Wong, Penny, 127 World Health Assembly, 187 World Health Organization, 14, 98, 126, 171 World Trade Organization (WTO), 3, 5, 8–10, 12, 14, 16, 22, 27, 30–33, 35, 39, 48, 49, 53, 55, 56, 81, 97, 98, 100, 104, 105, 118–120, 126, 133, 144, 155, 182–190, 192–198, 200, 201 dispute resolution procedure of, 185 Most Favoured Nation commitments, 23 WTO-extra, 90, 100 WTO-plus, 90

X Xi, Jinping, 6, 9–11, 49–51, 55, 56, 63, 97, 99, 100, 125, 147, 148, 189

Z Zhou, Xiaochuan, 148 Zhu, Rongji, 192