Taiwan Looks to TPP as US Wary, and Japan Concerned About How to Handle China
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which has 11 member countries since the U.S. backed out in 2016, has attracted four applications this year, from the United Kingdom, Taiwan, China and, most recently, South Korea. The U.S., which took a leading role in negotiating the high-standard free trade agreement, is unlikely to ask to come back in the next two years, panelists on a Hudson Institute discussion agreed.
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Satohiro Akimoto, president of the Sasakawa Peace Foundation USA, said that while Japan's official position is that it wants the U.S. back, it's more realistic to continue to modernize the agreement and try to get Thailand, Indonesia or the Philippines to join.
"There is no political will or capital to build a case for CPTPP re-entry in the United States, at all, regardless of whether you are a Democrat or a Republican," he said.
From Japan's perspective, as the biggest economy in the FTA, CPTPP without the U.S. offers major opportunities, but the application of China to join is the biggest challenge. "China is serious about entry," he said, though the country has many obstacles to doing so. He pointed to China's policies on data protection and state-owned enterprises, both of which are against the rules of the FTA. And, he noted, two member countries will be particularly skeptical of the prospect of China joining. He named Australia, whose relationship with China has soured, he said, and Vietnam, "which has a historically difficult relationship" with its neighbor.Those two countries, he said, "will not welcome China with open arms, to say the least." Akimoto noted that the U.S. wants China kept out of CPTPP, but has no leverage on the matter, except for the language in the USMCA that says that the U.S. could exit that agreement if Canada or Mexico join an FTA with a "non-market economy."
But it will be hard for Japan to keep China out of the FTA without critically damaging its relationship with China. Panelist Roy Lee, deputy executive director of Taiwan's WTO & RTA Center at the Chung Hua Institution for Economic Research, said that joining the CPTPP is a critically important issue for his country. The member countries account for about a quarter of Taiwan's trade. Taiwan only has an FTA with two members, Singapore and New Zealand.
"That puts Taiwan’s exports at a significantly disadvantaged position. About 40% to 45% of Taiwan’s exports to the CPTPP members are subject to various levels of tariffs," he said, and gave the example of machinery exports to Vietnam and Malaysia. He said those are subject to tariffs between 5% and 12%, while their competitors in South Korea, China and Japan frequently don't have any tariffs on their machinery exports in those two countries.
He said joining the FTA would be an opportunity to catch up, since most countries will not engage in bilateral FTAs with Taiwan due to pressure from China not to recognize Taiwan as an independent country. "At this moment, there are no other viable options available to Taiwan," Lee said.
Lee argued that accession negotiations would not take that long, because Taiwan is already close to meeting many of the standards, and because its role in the semiconductor supply chain would be an asset to the member countries. But he acknowledged, "There will be thorny issues." He said the fact that Taiwan does not accept agricultural imports from Japan is scientifically groundless, and so would have to change to join the pact. But he said it's politically sensitive. He recognized that Taiwan's application itself is politically sensitive for the CPTPP countries, but he said that the fact that South Korea just applied "kind of dilutes the political sensitivity" of the fact that both China and Taiwan have applied to join in quick succession.
"By all standards, we are not seeing China preparing to bring all its regulatory regimes to meeting the requirements of the CPTPP," Lee said. "If that is the case, what is the objective of China’s application?"
Akimoto said if China did enter CPTPP, that could spur the U.S. to return, but said that's not an unalloyed positive. "The relationship between the United States and China has significantly deteriorated since the CPTPP came into fruition ... It is only natural that both the United States and China would like to shape TPP to its own liking, to help benefit national interests of its own. However, from [the] viewpoint of Japan, it is not desirable to make CPTPP a battlefield, or even a focal point, of the intense rivalry between the U.S. and China."