Snubbing China on trade is a strategic mistake


The focus here is on the Comprehensive and Progressive Trans-Pacific Partnership Agreement, signed and ratified by Australia in 2018.

He was born as Lazarus from the Ashes of the Trans-Pacific Partnership that Australia signed in 2016. It was an initiative launched by the Obama administration as it sought to pivot to the Asia-Pacific region (now the Indo-Pacific, with merit from Rory Metcalfe of the Australian National University).

But he couldn’t resist Donald Trump’s campaign to make America great again. Hillary Clinton, the Democratic candidate, withdrew her support ahead of the 2016 presidential election and the new president rescinded the deal on January 23, 2017, three days after taking office.

The accompanying memorandum did not mince words: I hereby order you to withdraw the United States as a signatory to the Trans-Pacific Partnership, to withdraw the United States permanently from the TPP negotiations and to begin, in the wherever possible, bilateral trade negotiations to promote the industry, protect American workers and raise American wages.

The collapse of the TPP was particularly heavy as the Doha Round of the World Trade Organization, which began in 2001, slowed down over the next decade. Multilateralism died with Doha and there was even a push in mid-2020 for the United States to withdraw from the WTO (Congress can vote on withdrawal every five years).

President Joe Biden restored the United States to various international organizations, agreements and treaties.

However, he was reluctant to re-engage in the trade. This reflects its national constituencies as well as the pro-US provisions that have been suspended or changed by the 11 countries that have moved from TPP to CPTPP (mainly in the area of ​​intellectual property, new technologies, investment, labor and environmental rules).

The Biden administration is also in trouble. He has very slim margins in the House and the Senate, and the mid-terms are just over a year away.

The president’s popularity collapsed over the delta epidemic and the withdrawal from Afghanistan. And feuds between House and Senate Democrats are now delaying his legislative agenda.

A soft poll by Prime Minister Scott Morrison next week on whether the United States will join the CPTPP is not going to shake things up in the current feverish climate.

China matters

What might have helped is if the PM had asked Mr Tehan to stick to the scenario of what the Australian government said it would do when a country formally requests to join the CPTPP, like China did so on Thursday night.

According to the Department of Foreign Affairs and Trade, “for all candidate economies, Australia is committed to considering any formal application for membership, once submitted, on its merits, in close cooperation with other Parties to the CPTPP “.

This statement is made in DFAT’s submission to the current parliamentary inquiry into the expansion of CPTPP membership. It is government policy.

Instead, Tehan has been widely reported, including internationally, as having made any consideration of China’s request conditional on ending the punitive trade measures currently in place.

It was a fundamental mistake and a complete failure to seize a diplomatic opportunity at a historic moment.

It also marked a very visible change on the part of the Morrison government which welcomed the interest when President Xi Jinping first indicated that China was “actively considering” joining the CPTPP in November. last year.

Preferred Approach: Australia welcomes China’s interest in joining the world’s leading rules-based plurilateral trade agreement, and looks forward to discussing it with relevant ministers as soon as the opportunity arises. will present.

And if Mr Tehan really wanted to make his point, he could cite the CPTTP Commission, which is the key decision-making body made up of representatives from each of the members.

The very first article of the membership process states that “Aspiring economies are encouraged to informally engage with all CPTPP signatories regarding their interest in joining the CPTPP before submitting a formal application”.

The deep freeze in communications between Australia and China could have been resolved in this way and the trade posture could have been handled in tandem.

It would also have sent a timely signal to the Indo-Pacific region that, in the midst of this drastic repositioning of our national security posture, Australia is still, fundamentally, a trading and open for business nation.

Diplomacy matters

Of course, the preferred approach does not imply that China will join the CPTTP anytime soon. It wouldn’t take as long as submarines, but years are a good measure.

The only non-founding country that has applied at this point is Great Britain, in February. This is a function of “Global Britain” in a post-Brexit world and a measure of the attractiveness of the CPTPP. The British bid was warmly received and a formal working group was formed in June, with Japan as chair and Australia and Singapore as vice-chairs. Membership requires the unanimous consent of all members, which is likely in 2022.

There is no doubt about Australia’s support in this case (especially given UKUS). Yet there is lobbying to speed up the free trade agreement. Bilateralism still has its role to play.

For China, the British process implies that a minimum of five months would open up to discuss the merits. It would force China to engage diplomatically with all members, and, yes, that includes Australia.

It was the ice-breaker that Mr. Tehan naively conceded on Friday.

At the end of this process, the CPTPP commission would simply issue a statement, as it did in the case of Britain, claiming that China had not, at this point, met the requirements of the established trading system. on rules, and that its experience with strict rules on trade and investment, and compliance more generally, has been insufficient.

This conclusion wouldn’t surprise Beijing – yet it’s the process that really matters.

Beijing knows that it will take many attempts and that quantum leaps must take place in terms of compliance with the CPTPP itself, especially in terms of subsidies to state-owned enterprises, investor-state dispute settlement mechanisms, rights. intellectual property, human and labor rights, and data flows, broadly defined.

In the meantime, Australia would talk about carrots, not sticks, and have the opportunity to reconnect with diplomacy, including through a high-profile delegation attending the Winter Olympics in February next year.

The current downward cascade, which includes our top exports to China, as we reported in this journal a month ago, could, should and would be avoided.

Taiwan counts

A final point is that Taiwan is at stake regarding the CPTTP. Taiwan has expressed interest in joining “at the appropriate time”, and this is emerging as a major challenge for the CPTTP’s membership framework.

Taiwan, due to its contested status, has only concluded a handful of free trade agreements, most notably with New Zealand and Singapore in 2013.

Yet it is a heavyweight in global trade and controls the dominant heights of the critical semiconductor industry.

Taiwan is an important export destination for Australia, ranked around 10th in terms of partners. But it pales in comparison to China, of course.

Yet Taiwan is heading towards the CPTTP, in part to gain global recognition. As an indication, about a quarter of the submissions to the parliamentary inquiry on the expansion of the composition of the CPTTP focused on Taiwan. Australia’s trade with Taiwan is only a fraction.

With China taking the first step on Thursday and being so caustically pushed back by Australia, preparation for next year is frankly dangerous.

Taiwan will seek membership and if China is not at least at the table, major downside risks await.

Again, the preferred approach is to re-engage with China, keep the Biden administration informed and motivated, and get a head start on Taiwan.

Diplomacy matters, and on that front Australia has failed the world this week.

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