TPP’s downfall ‘could put brakes on reform in China’

Beijing will be under less pressure to make painful domestic changes, analysts say

PUBLISHED : Tuesday, 22 November, 2016, 11:32pm
UPDATED : Wednesday, 23 November, 2016, 9:16am

The demise of the US-led Trans-Pacific Partnership (TPP) could inject momentum into China’s proposed trade pact, but it might stall needed reforms, observers said ­on Tuesday.

The Pacific Rim trade agreement, which excludes China, was promoted as a way to foster fairer and freer trade, with provisions for ­labour and environmental protections.

The scale of the pact was expected to put external pressure on Beijing to lift its own standards.

But US president-elect Donald Trump’s announcement this week that the US would pull out of the TPP could embolden China to remain assertive in areas such as cyberspace control and state ­intervention in the economy, analysts said.

WATCH: US president-elect Trump announces he will cancel the TPP agreement

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New York University professor Ian Bremmer said the death of the TPP would make Beijing “less resolute” in various areas from state-owned enterprise reform to the free flow of information.

“If you are a single-party government ... if you grow economically in the last 35 years ... there is risk involved in opening up in China to Facebook, Google and Twitter. There is risk involving losing control of data,” Bremmer said.

Trump said in a video on Monday he would move to pull out of the TPP deal on the day he took office in January.

“On trade, I am going to issue our notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country,” he said.

As TPP falters, China steps up charm offensive to woo Asian nations on board Beijing-led trade pact

Trump’s decision to scrap the TPP gives Beijing the chance to promote its own deals – the Regional Comprehensive Economic Partnership (RCEP) and Free Trade Area of the Asia-Pacific.

Foreign ministry spokesman Geng Shuang said yesterday that Beijing was willing to keep pushing for talks on the RCEP and had an open attitude towards any ­attempts to advance free-trade ­arrangements.

But without external pressure, China could continue with business as usual.

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Zhao Minghao, a researcher with the China Centre for Contemporary World Studies, said the TPP’s demise would be a “double-edged sword” for China because it could hurt free trade in general, even though it could give a boost to the RCEP, a deal that did not require the central government to make painful domestic changes.

He Ning, a former commerce ministry official involved in negotiations for China’s entry into the World Trade Organisation, said the external pressure from the TPP’s high standards would not have necessarily been a bad thing for China.

Wilfred Chow, a specialist in international political economy at the University of Hong Kong, said China was keen to advance the RCEP because much of the deal did not involve reform.

“China-led agreements will definitely have a lot less transparency. They are going to emphasise fewer reforms for state-owned sectors. That is the big distinction,” Chow said.

Australian Trade Minister Steven Ciobo said TPP members could push ahead with the pact without the US by amending the agreement and possibly adding new members.

Japanese Prime Minister Shinzo Abe said “the TPP would be meaningless without the US”, even as parliament continued debating ratification.

Additional reporting by Frank Tang and Reuters