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Canada’s CPTPP Leadership in 2024: Managing the Rival Accession Bids of China and Taiwan

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POLICY PERSPECTIVE

Image credit: WikiMedia Commons

by Kristen Hopewell
November 2023

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Table of Contents


Introduction

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is one of the world’s biggest mega-regional trade agreements, encompassing over 15 per cent of global GDP. It originated as the Trans-Pacific Partnership (TPP), until the U.S. withdrew from the agreement under the Trump administration. The remaining 11 members – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – went ahead with the pact, which became the CPTPP in 2018. The U.K. became the first new member to join the group in 2023, increasing its size by 25 per cent.

Taiwan and China both applied to join the CPTPP in 2021. However, both of their applications have been on hold while the U.K. – which was the first country to apply to join the pact – accession process played out. The CPTPP’s members must now decide what to do about Taiwan and China’s applications.

The chair of the CPTPP rotates each year, and Canada will be taking the helm next year. Canada should use this opportunity to show leadership in moving forward and opening formal negotiations for Taiwan’s accession. China’s bid, however, must be treated with considerable caution, given significant concerns about whether it meets the criteria for accession and could be trusted to adhere to the terms of the agreement.

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Considering Applications on Merit

The CPTPP is an ambitious, high-standard free trade agreement covering virtually all aspects of trade and investment. It requires countries to:

  • Eliminate or substantially reduce tariffs and other trade barriers;
  • Make strong commitments to opening their markets for services and investment; and
  • Abide by strict rules on competition, government procurement, digital trade, intellectual property rights, state-owned enterprises (SOEs) and protections for foreign companies.

Applications to join the CPTPP should be assessed on their merits and the demonstrated ability of the country in question to meet the agreement’s high standards and adhere to its rules. An applicant’s track record of delivering on its trade commitments under other international agreements, such as those of the World Trade Organization (WTO), must also be considered.

Some have supported reviewing applications on a first-come-first-served basis, which would put China – which submitted its application a week before Taiwan – first, potentially then enabling it to block Taiwan’s accession. Instead, a more effective approach would be to review applications simultaneously but at different speeds depending on their ability to meet the agreement’s high standards.

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Assessing Taiwan's Bid

Taiwan has a strong case for membership in the CPTPP. It is an advanced, market-based economy and has shown it is capable of meeting the agreement’s high standards through its trade agreements with New Zealand and Singapore, which are both founding CPTPP members. Moreover, Taiwan has been working diligently for nearly eight years in preparation for its accession bid. This has included conducting detailed informal consultations with existing members and undertaking a systematic and comprehensive process to review, identify and rectify any discrepancies between its domestic laws and regulations and the CPTPP’s requirements. Taiwan has completed wide-ranging legal and regulatory reforms to bring its policies and practices in line with the agreement. It has amended its policies across a diverse array of areas – including agriculture, fisheries, intellectual property, standards and the environment – to ensure compliance with the CPTPP.

There is little question about Taiwan’s willingness or ability to meet the agreement’s high standards. Instead, the issue is largely political. Taiwan is a member of the WTO as a “separate customs territory,” and there is nothing to prevent it from joining the CPTPP on the same basis. However, China has opposed Taiwan’s accession bid, and many believe China’s own bid to join the agreement was primarily intended to pre-empt Taiwan’s.

China’s strategy seeks to isolate Taiwan by limiting its opportunities for international co-operation and engagement. Beijing has sought to restrict Taiwan’s participation in international institutions and agreements, such as the United Nations and the World Health Organization. China has also sought to use its economic might to pressure other countries not to enter into trade agreements with Taiwan or include it in trade blocs.

Notably, China has excluded Taiwan from participation in the Regional Comprehensive Economic Partnership (RCEP), the second major trade pact in the region. RCEP encompasses China, Japan, Australia, New Zealand and South Korea, as well as the 10 members of ASEAN – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Although not as deep or broad in the extent of its liberalization as the CPTPP, RCEP’s primary significance lies in replacing the patchwork of bilateral agreements currently governing trade in the region with a common set of rules, including a unified rules-of-origin framework. Since any given product is usually comprised of inputs from many different countries, rules of origin are used to determine whether that product will be given preferential treatment under a free trade agreement. RCEP’s unified rules of origin will make it considerably easier for products made in its member countries to access other markets in the region at low or no tariffs. As a result, RCEP will drive further regional economic integration among participating states, with China at its hub. The agreement will deepen regional supply chains, and with Taiwan deliberately excluded at China’s behest, Taiwan’s position within those supply chains will be increasingly weakened.

Being excluded from the two major trade agreements in the Asia-Pacific region puts Taiwan at a significant disadvantage. Over the long term, this will make it a less attractive destination for industry and foreign investment and threaten its economic security. Allowing Taiwan to join the CPTPP would help to mitigate the effects of its exclusion from RCEP, by enabling it to deepen its trade and economic ties to other CPTPP members. CPTPP membership would give Taiwan preferential access to many important markets, help it to attract inward investment and support its ability to remain competitive in global markets.

Joining the CPTPP is a top policy priority for Taiwan because it faces intense military pressure from Beijing. As Shihoko Goto of the Wilson Center aptly put it, the CPTPP is “at the heart of mapping out Taiwan’s long-term survival.” Giving in to Chinese efforts to isolate Taiwan and limit its economic and political ties to other states will only render it more vulnerable.

Recognizing the importance of supporting Taiwan through economic co-operation, the U.S. concluded the first phase of a new trade agreement with Taiwan in May 2023. The initial agreement covers trade facilitation, regulatory practices, services, domestic regulation and anti-corruption, and supports small and medium-sized enterprises. Negotiations have now moved to finalizing the remaining areas of agriculture, labour, environment, SOEs, digital trade and non-market policies and practices. Since the U.S.-Taiwan Initiative on 21st Century Trade actually replicates many of the provisions and chapters contained in the CPTPP (which the U.S. played a central role in drafting), it has also helped accelerate Taiwan’s preparations and readiness to join the CPTPP.

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Can China Meet the Agreement's Standards?

Joining the trade pact would be a significant symbolic and strategic win for China. As the TPP, the pact was originally conceived as a cornerstone of the U.S. strategy for containing China’s growing influence in the Asia-Pacific region. Now, in the words of The Global Times, a state-controlled newspaper, China’s CPTPP accession bid aims to “cement the country’s leadership in global trade.”

China’s economic weight exceeds that of all the CPTPP members combined. If it joined the CPTPP, it would overwhelmingly be the dominant economic force in the trade bloc. It is the largest export market for the majority of CPTPP members and these countries can be expected to come under substantial pressure to allow China to join the agreement. Some CPTPP participants may also view China’s accession as a favourable means to expand their access to its market. Singapore and Malaysia have already signalled their support for Beijing’s membership bid.

However, CPTPP members should proceed cautiously in considering China’s accession. Any country seeking to join the CPTPP must be able to meet its high standards. But China’s current policies and practices are incompatible with many of the CPTPP’s provisions, including:

  • Its restrictions on the activities of SOEs and subsidies for them;
  • Protection of cross-border data flows, restrictions on data localization requirements and prohibitions on forced transfer of enterprise source code to gain market entry;
  • Requirements to open government procurement to foreign competition;
  • Prohibitions on discrimination between domestic and foreign firms and requirements for transparency and fairness in the treatment of foreign companies and products;
  • Protection of labour rights; and
  • Prohibitions on harmful fisheries subsidies.

For example, the CPTPP contains enforceable labour rights and obligations. Participants are required to abide by the International Labour Organization’s core labour rights and principles, including the prohibition on forced labour. Given China’s severe human rights abuses, including the use of forced labour in Xinjiang, this represents a significant barrier for China to join the agreement.

There is a vast gap between China’s current practices and the CPTPP’s standards. China would be unable to meet the CPTPP’s requirements without a profound and fundamental overhaul of its approach to managing its economy, and there is little reason to believe it intends to undertake this. It is also fair to question whether Beijing could be credibly relied on to abide by its commitments, given its poor record of compliance with other agreements, such as the WTO.

Beijing has a track record of violating global trade rules and weaponizing trade as an instrument of economic coercion against weaker states. Canada experienced this firsthand when China blocked imports of Canadian pork, beef, soybeans and canola in retaliation for its participation in the extradition of a Huawei executive to face fraud charges in the U.S. Beijing’s trade restrictions cost Canada $4 billion in lost exports. 

China similarly blocked imports from Australia in retaliation for its calls for an independent investigation into the origins of the COVID-19 pandemic as well as Canberra’s complaints about Chinese Communist Party interference in Australia’s domestic politics. As the destination for nearly 40 per cent of Australia’s exports, Beijing’s import curbs – targeting an extraordinarily broad list of agricultural and mining products, including coal, copper, timber, wine, beer, cotton, barley, beef, lamb, lobster, sugar, wheat and wool – caused severe economic pain for Australia’s core export sectors.

These are far from isolated incidents. Beijing has used the threat and imposition of trade restrictions to punish over a dozen countries for various perceived affronts, including the EU, Japan, South Korea, New Zealand, Norway, Sweden, the Philippines, Taiwan, Mongolia and the U.K. These actions directly violate the WTO’s rules and principles.

The logic behind trade agreements like the CPTPP is that trading relations between states should be governed by the rule of law. But Beijing has shown repeated disregard for global trade rules and an unwillingness to be bound by the rule of law in trade. China’s claims that it would meet the CPTPP’s standards have little credibility when it has so blatantly violated the terms of other agreements. There is little reason to believe China would either meet or comply with the terms of the CPTPP.

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Moving Forward With CPTPP Expansion

Besides Taiwan and China, four other countries – Costa Rica, Uruguay, Ecuador and Ukraine – have applied to join the CPTPP, and a number of others, including South Korea, Indonesia, the Philippines and Thailand, have expressed interest in joining. Expanding membership in the agreement is an important way to broaden its scope. For Canada, CPTPP expansion represents an important means of diversifying its export markets, reducing its dependence on both the U.S. and Chinese markets and furthering the goals of the Indo-Pacific Strategy by deepening its co-operation with other states in the region.

Moreover, the liberal trading order has increasingly come under threat, with the WTO’s negotiation function largely paralyzed and its dispute settlement mechanism in crisis due to the U.S. Appellate Body blockage, and a growing turn away from free trade and open markets in many parts of the world. In this context, CPTPP expansion represents a crucial means to strengthen global trade rules, deepen international co-operation on trade and bolster the open, rules-based global trading system. Yet CPTPP participants need to be confident that any new member will actually respect and abide by its rules. There are compelling reasons to question the credibility of China’s commitment to comply with the rules. Taiwan, in contrast, has a strong case for joining the agreement and its accession bid should be seriously considered and supported.

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About the Author

Kristen Hopewell is a professor and Canada Research Chair in Global Policy at the University of British Columbia and the author of Clash of Powers: US-China Rivalry in Global Trade Governance.

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Canadian Global Affairs Institute

The Canadian Global Affairs Institute focuses on the entire range of Canada’s international relations in all its forms including trade investment and international capacity building. Successor to the Canadian Defence and Foreign Affairs Institute (CDFAI, which was established in 2001), the Institute works to inform Canadians about the importance of having a respected and influential voice in those parts of the globe where Canada has significant interests due to trade and investment, origins of Canada’s population, geographic security (and especially security of North America in conjunction with the United States), social development, or the peace and freedom of allied nations. The Institute aims to demonstrate to Canadians the importance of comprehensive foreign, defence and trade policies which both express our values and represent our interests.

The Institute was created to bridge the gap between what Canadians need to know about Canadian international activities and what they do know. Historically Canadians have tended to look abroad out of a search for markets because Canada depends heavily on foreign trade. In the modern post-Cold War world, however, global security and stability have become the bedrocks of global commerce and the free movement of people, goods and ideas across international boundaries. Canada has striven to open the world since the 1930s and was a driving factor behind the adoption of the main structures which underpin globalization such as the International Monetary Fund, the World Bank, the World Trade Organization and emerging free trade networks connecting dozens of international economies. The Canadian Global Affairs Institute recognizes Canada’s contribution to a globalized world and aims to inform Canadians about Canada’s role in that process and the connection between globalization and security.

In all its activities the Institute is a charitable, non-partisan, non-advocacy organization that provides a platform for a variety of viewpoints. It is supported financially by the contributions of individuals, foundations, and corporations. Conclusions or opinions expressed in Institute publications and programs are those of the author(s) and do not necessarily reflect the views of Institute staff, fellows, directors, advisors or any individuals or organizations that provide financial support to, or collaborate with, the Institute.

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