Closer Look: How Agreements Like the TPP Press China to Reform

When Singapore, New Zealand and Chile launched the Pacific Three Closer Economic Partnership in 2003, few could have predicted the agreement would grow into the greatest force on the economic and political landscape of the region.

The changes began in 2008 when the United States joined the negotiations and proposed launching the Trans-Pacific Partnership (TPP) based on the group formed in 2003, which by then had come to include Brunei. Washington pushed for the group to be even bigger so it would include Australia, Peru and Vietnam. Ever since, the United States has led the push for the partnership.

In the Asia-Pacific Economic Cooperation (APEC) summit in October, U.S. Secretary of State John Kerry said that TPP negotiations are set to end this year. For China, the TPP is a challenge at its very doorstep that it must address.

What the TPP Implies

The TPP stands out from many other trade talks. “Whereas previous trade agreements were about opening up borders, (the TPP) is moving inside them,” says Zhang Yunling, director of the International Studies Division at the Chinese Academy of Social Sciences.

In other words, not only will the TPP be concerned about issues such as tariffs and quotas typically at the center of free trade agreements, but it also sets very high requirements for whole supply chains. The areas it addresses include labor conditions, governmental procurement, state-owned enterprises, intellectual property and environmental protection.

It is more like an “upgraded” trade agreement and it will affect the core of a country’s business model.

Since the 12 TPP member countries have different levels of economic development and intertwined interests, issues such as intellectual property and state-owned enterprises are bound to arouse considerable disagreement.

Moreover, the demands of new members will exacerbate already complex negotiations. For instance, Singapore, Peru and Chile asked Japan to eliminate tariffs on agricultural products in August. Japan has not formally responded to the request, but for a country with tariffs on imported rice as high as 700 percent, concession would be very difficult to make.

Nevertheless, observers are relatively optimistic that an agreement on the TPP will be reached. Chen Fengying, director of the World Economy Department at the China Institute of Contemporary International Relations, notes that while the Obama administration is hampered by the United States’ domestic political polarization, it sees the agreement as one major way it can at least achieve something internationally.

The Costs of Competition

It was precisely at the moment of Washington’s “pivot to Asia” and at the end of Beijing’s charm offensive in the region that the United States began to push hard for the TPP. Where U.S.-Soviet competition was focused on military matters, Sino-U.S. relations involve economics.

Matthew Goodman, a former White House official in charge of Asian affairs and a research fellow at the Center for Strategic & International Studies, said in a recent article that right from the beginning the core of the “U.S rebalancing to Asia-Pacific” has been the economy.

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