Trade in Asia: China wants to set the rules

Trade policy in the Asia-Pacific region is facing an acid test.

A special class free trade alliance will come into force at the beginning of 2022.

The "Regional Comprehensive Economic Partnership", abbreviated to RCEP in English, unites 15 countries from China, Japan and Korea to the Asean states to Australia and New Zealand.

In essence, Beijing wants to use the alliance to set the rules for trade in the region.

Attempts by western-oriented countries like Japan to harden the RCEP rules to secure economic property rights, for example, have had only limited success.

At the same time, China and Taiwan have applied for membership in the competing CPTPP alliance.

In the “Comprehensive and Progressive Agreement for a Trans-Pacific Partnership”, eleven countries from Japan to Australia to Canada and Chile have come together.

CPTPP is the more western of the two alliances.

In addition to free trade, other rules are also set out in the pact for the protection of workers' and trade union rights, environmental protection and competition policy.

CPTPP is a bulwark of Western values ​​against state capitalism with Chinese characteristics.

It is a bulwark that the United States undermined when President Donald Trump adopted his country from the pact still negotiated by Barack Obama in 2017.

Current President Joe Biden shows no interest in correcting the mistake.

China thinks long term

China's application for membership in the pact is more than an attempt to exploit America's nakedness for propaganda purposes. The communist regime thinks long term. It's about making the rules in the region. The hurdles for China to join the pact are high. The difficulties lie less in the liberalization of trade, which is more extensive under the CPTPP than under the RCEP. The big stumbling blocks are whether and how China wants to comply with rules on equal treatment of private and state-owned companies, on the freedom of data traffic across borders or on the abolition of forced and child labor. Compared to the first-time members of the Trans-Pacific Partnership, who still had exceptions, there are no special rules for new members.

Last but not least, a poison pill that Trump mixed into America's free trade alliance with Canada and Mexico counteracts a quick acceptance of China into the trade pact.

According to this, the three countries are effectively forbidden from concluding trade agreements with non-market economies.

Canada and Mexico would have to reject China's membership in the Trans-Pacific Pact.

But regardless of the institutional hurdles, Beijing has an impact on the institutional structure of the Trans-Pacific Partnership with the admission mandate.

The prospect of deeper free trade with China shifts the interests of smaller CPTPP members in particular towards a softer interpretation of the rules.

Geopolitical reality

This does not bode well for the Western-oriented binding force of the pact, especially since the rules have not yet been tested. Even the UK, which is expected to be the first new member to join the pact, could not be immune to the temptations. Via the detour CPTPP, London could perhaps find its way to free trade with China faster than the European Union.

With its motion, the regime in Beijing overshadows Taiwan's efforts to become a member of the Trans-Pacific Trade Pact. Agile island democracy would find it easier than mainland China to comply with the rules of the game for acceptance. It is not for nothing that Japan, currently chairman of the alliance and economically the largest member, has signaled openness to Taiwan, but concerns about China. But geopolitical reality puts Taiwan joining without China into the realm of wishful thinking.

Japan and America's other partners will find it difficult to counteract Beijing's hegemonic claim to trade rules in the region in the long term.

What is missing is the weight of the United States.

Washington is indirectly influencing the events with the poison pill.

It would be more effective, however, if Biden gave himself up and led America back into the Trans-Pacific Pact instead of paraling a new trade-policy approach.

The sparrow in the hand weighs more than the pigeon on the roof.