Sawasdee krub. Trade Secrets comes to you this week from Bangkok, where Thai authorities are finally easing lockdown restrictions and preparing to reopen the city to foreign visitors as soon as November 1. Thailand, Vietnam and some other south-east Asian countries have been having a pretty awful year, thanks to the Delta variant of Covid-19 and the curse of their relative good luck in 2020, when they escaped the first wave of the pandemic mostly unscathed, which in turn made them complacent about ordering vaccines.
As people in south-east Asia raise their heads from the Covid trenches, the regional landscape looks pretty unsettling. The World Bank recently slashed its gross domestic product forecasts for Asia excluding China by almost 2 percentage points to an anaemic 2.5 per cent average, largely because of many countries’ slow vaccine response. And the geopolitical situation looks, if anything, even more unsettled than it did in the most heated days of President Donald Trump and the US-China trade war.
Today’s main piece looks at the latest piece of trade-related geopolitics to hit the region and asks whether or not any countries will support China’s attempt to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or the CPTPP as it’s known round these parts.
A cool response to Beijing’s cold revenge
Just a few days after the raucous Chinese and French outcry over the new US-UK-Australian defence pact Aukus, Beijing created an international splash of its own on the trade front: China’s commerce minister Wang Wentao submitted an application to join the transpacific trade partnership CPTPP.
The timing probably had less to do with the Anglosphere’s submarines pact than it did with the fact that Taiwan was poised to lodge its own CPTPP membership application, which it did just a few days later.
However, there were geopolitical overtones to the gambit, not to mention rich irony and (one can only imagine) a taste of sweet revenge being enjoyed cold in Beijing.
The CPTPP was brought to life in large part thanks to US efforts, and was a key part of Washington’s strategic pivot to Asia under President Barack Obama. For the transpacific pact’s south-east Asian members — Vietnam, Malaysia, and Singapore — and for Australia, Japan, and New Zealand too, it was always about counterbalancing China’s overweening economic clout.
Trump pulled the US out of the agreement, and a domestically mired Joe Biden is unlikely to return to either it or the broader free trade agenda soon. The question now being asked around the region is, in effect: is Beijing’s application for real, or is it just trolling?
“I don’t think China is serious about this application,” Greg Poling, a senior fellow for south-east Asia at the Center for Strategic and International Studies, told Trade Secrets. “It’s about sending a geopolitical message.”
China, he says, has been “rather gleeful” in pushing a narrative of US decline following its disorderly exit from Afghanistan. And if China is serious about joining, it is hard to imagine many current members would want it to.
Japan has endorsed Taiwan’s request to join the CPTPP, while questioning whether China would meet the trading bloc’s requirements, which include rules on state-owned enterprises and labour rights. “The direction of reform in China is not in favour of a move toward the CPTPP,” said Jeff Wilson, research director at the Perth USAsia Centre, a think-tank. “It’s moving harder toward state capitalism.”
Any current member of the pact can veto an applicant’s membership, and the reception for China is likely to be even cooler on the part of Australia — which is in open trade war with it — or Canada, which only last month welcomed home its “two Michaels” after their prison ordeals in China.
Asian CPTPP members are sure to be more discreet in their response, but no less cool. (Vietnam’s government did not respond to a request for comment from this correspondent when the news broke.) “Vietnam and Singapore don’t want another vehicle for China to flood their market,” said Alex Vuving, professor at the Asia-Pacific Center for Security Studies in Honolulu, pointing out that the countries already trade with China through an Asean-China free trade agreement and the Regional Comprehensive Economic Partnership, or RCEP.
“They want to have a counterweight to China’s economic juggernaut.”
China, Vuving points out, has a GDP that exceeds that of all the 11 CPTPP members, and even if you add the UK, which is in talks to join the trading bloc, they are still a smaller group.
All of this makes China’s membership bid look even more transparently like a tactical move to foil Taiwan’s bid — or an application by the US when and if it ever decides to come back to the pact.
Diplomatic protocols now require that members will have to respond to China’s and Taiwan’s respective applications within two months. One face-saving way of delaying a decision, says Wilson, would be for the bloc to use the UK’s previously lodged application as an excuse to postpone deciding, while talks with London are still under way.
“They could politely reject both applications and say ‘Come back in a few months’ time’,” he says.
Charted waters
Chad Bown, of the Peterson Institute for International Economics, has a new piece out explaining why Joe Biden will try to enforce China’s commitments made under the “phase one” trade deal signed by Donald Trump. (More on which, here.)
As the chart below shows, China is way behind on its commitment to up its purchases of US exports. Overall, it has purchased about 60 per cent of the targeted amount.
However, as Bown explains, a big reason for this is that the pandemic has led to far lower spending on goods such as US-manufactured automobiles and aircraft. Sales of medical supplies, meanwhile, have outperformed their targets, and agriculture exports, while still lower than the US would have liked, have recovered. Claire Jones
Trade links
China’s power crunch is testing its resolve in blocking imports of Australian goods. The country has started unloading a small number of Australian coal shipments despite an unofficial ban that resulted from tensions between Beijing and Canberra.
Kathrin Hille explains why there are no easy options to relieve the semiconductor squeeze. Europe’s gas crunch has pushed up the price of emitting carbon.
As Singapore’s economic reopening is delayed by an exponential surge in Covid infections, government officials are “soul-searching” (Nikkei, $, subscription required) for ways to diversify the country’s competitive advantage from trade and financial services. Claire Jones and Francesca Regalado
Source: Economy - ft.com
