CPTPP: Taiwan VS China

Taiwan filed to join a Trans-Pacific trade group days after China formally submitted its application, potentially compounding an already awkward position for the pact’s 11 members.

• What is CPTPP?

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) evolved from the Trans-Pacific Partnership (TPP). Former U.S. President Donald Trump had withdrawn the U.S. from the original agreement in January 2017.

On 1 February 2021, the U.K. formally applied to join CPTPP. The U.K. is the first non-founding country to apply to join the CPTPP. If successful, the U.K. would become the second-largest CPTPP economy after Japan.

• What chances and challenges Taiwan will confront with?

—- Challenges

John Deng, Taiwan’s Trade Representative – Minister without Portfolio, said the biggest challenge facing Taiwan would be lifting the restrictions on Japanese food imports, which were put in place after the Fukushima nuclear disaster.

Almost every agricultural business in Taiwan, including crop, livestock and aquatic farms, will be affected if the country joins the CPTPP.

Members of CPTPP have zero tariffs on 99% of agricultural products and industrial products. In Taiwan, however, the average tariff of agricultural products is 15%, and quotas of imported rice is limited. Taiwan has to adjust tariffs on agricultural products if CPTPP member Vietnam support is required.

—- Chances

More enterprises would like to stay in Taiwan for tax benefits and attract foreign investment, which will upgrade the concerning industry. CPTPP requires advanced trade regulations, which urge Taiwan to improve its legal environment.

In five years, Taiwan will see a boost of NT$50 billion in agricultural exports, reaching NT$200 billion in total. Some agricultural goods are poised to benefit from Taiwan’s admission to the trade bloc, though, with a boost expected for exports of flowers, some fruits, aquatic goods, teas, and eggs.

• About China

Entry into CPTPP would consolidate China’s economic integration drive, building from joining the Regional Comprehensive Economic Partnership (RCEP) trade agreement, its state-sponsored Belt and Road Initiative, and the Chinese-led Asia Infrastructure Investment Bank. The CPTPP would be a particularly valuable feather in China’s cap as the champion of economic globalization. It would reverse the persistent narrative of economic decoupling, as China would appear more centrally integrated into the world economy with an ambitious trade agreement under its belt.

Beijing, however, may have difficulties fulfilling the mega trade pact’s demands for a level playing field in areas such as state-owned enterprises, labour rights, and cross-border data flows.

Attitudes of member countries

Japan welcomes Taiwan’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership free trade deal (CPTPP), Foreign Minister Toshimitsu Motegi told reporters Thursday from New York.

Australia has also expressed reservations about China joining the CPTPP. Beijing has imposed trade restrictions on Australian barley, wine and coal after Canberra called for an independent inquiry into the origins of the coronavirus. Australian trade minister Dan Tehan has said the country would oppose China’s bid unless these issues are addressed.

Japan has an existing territorial dispute with China in the East China Sea, while Australia has been receiving import tariffs imposed by China.

Meanwhile, Canada and Mexico could stand in China’s way through the United States-Mexico-Canada Agreement or USMCA. The trade deal contains a “poison pill” provision requiring any of the three members to consult the others if wishes to pursue a trade deal with a “non-market country.”