Tag Archive for: CPTPP

US-led Indo-Pacific framework isn’t shifting regional trade away from China

US efforts to encourage Indo-Pacific nations to diversify their trade away from China confront a well-established trend towards deeper regional integration, according to a report by the US-based Peterson Institute for International Economics.

The Indo-Pacific Economic Framework for Prosperity (IPEF), launched by US President Joe Biden last year, was intended to help 14 Indo-Pacific nations pursue ‘friend-shoring’ and ‘near-shoring’ of their supply lines.

While there have tentative signs of a shift in Australia’s imports away from China in recent months, the trend over the past decade for both Australia and the Asian region has been for far deeper integration with China.

The Peterson Institute study found that of the 14 nations targeted by the IPEF, all except for Japan and the United States had deepened their dependence on imported Chinese manufactured goods over the past decade.

Australia and Thailand were the only countries to lessen their dependence on China for their exports of manufactured goods. In the case of Australia, manufactured goods exports to China are swamped by imports, which are almost 20 times larger.

‘Despite efforts by the Biden administration to strengthen ties with its IPEF partners and wean them away from Beijing, these countries are increasingly reliant on economic ties with China,’ the report says.

‘China is the top import source for all IPEF countries except Brunei as well as the top export destination for half: on average IPEF countries received more than 30 percent of their imports from China and sent almost 20 percent of their exports to China in 2021. These numbers reflect average increases in the China share of over 40 percent for imports and almost 45 percent for exports since 2010.’

Australia has a greater dependence on China as a market than any other IPEF economy, selling 36.3% of its merchandise exports there in the six months to August. That’s a rise of nearly 10 percentage points from a low of 27.5% in the six months to September last year, when Australian exports were feeling the full effect of China’s discriminatory trade bans.

China’s share of Australian exports is still below the record 42.5% hit in the six months to October 2020. However, its share is likely to rise further with increased purchases of Australian coal, barley and beef and the prospect of resumed sales of wine and lobster once remaining trade bans are fully removed.

There’s tentative evidence that Australian companies are shifting at least some of their purchases to non-Chinese suppliers. China’s share of Australia’s imports in the six months to August was 24.3%, the lowest since July 2019, and down from the peak of 30.5% reached in September 2020.

China’s share of the Australian import market has gone to other Asian suppliers, led by Korea, Malaysia, Japan, Singapore, Taiwan and India.

However, International Monetary Fund research on US trade, which has exhibited a similar decline in import dependence on China, has found that the industries in countries that are gaining US market share at China’s apparent expense are all closely tied to China for their supplies. ‘Countries that were more deeply engaged in Chinese supply chains experienced the most rapid export growth to the US.’

While China’s economic growth may be slowing, the momentum of the Chinese manufactured goods sector is still driving trade across the region. The Asian Development Bank’s annual report on regional integration shows that China’s share of Asian merchandise trade has risen from 10.3% to 16.7% over the past 20 years, with that gain coming at the expense of the US, whose share has fallen from 20.7% to 13.2%. Intra-regional trade, including China, now accounts for 58.2% of trade in Asia.

The hallmark characteristic of globalisation—the distribution of manufactured production of goods among several countries—is continuing to rise both in Asia and around the world, with the growth of exports of goods that are produced in more than one country outstripping the rise of exports produced in a single country. This is continuing to power intra-regional trade.

It’s too soon for assessments of the impact of the huge intra-regional trade agreement, the Regional and Comprehensive Economic Partnership (RCEP), which was signed in early 2020 and entered full force, with the Philippines being the last to ratify, in June this year. However, it’s to be expected that it will further accelerate regional integration.

The agreement—which covers China, Japan, South Korea, Australia, New Zealand and all the ASEAN economies—includes both tariff cuts and standard and relatively simple rules of origin, which mean that products benefit from tariff cuts if they are predominantly made from goods produced in member economies.

The US has marginalised itself from this process of regional integration by the decisions of both the Trump and Biden administrations to abandon trade liberalisation in the Asian region, declining to enter new trade agreements. The IPEF proposal doesn’t include any improved access for Asian exporters to US markets.

A recent report in the South China Morning Post said that successive Australian governments had commissioned reports into the prospects for diversifying Australia’s trade away from China and all had concluded it was impossible.

The report, by the SCMP’s Kandy Wong, said the first study, conducted jointly by the Department of the Treasury and the Department of Foreign Affairs and Trade, was commissioned by the Abbott government in 2015 to follow US concern that Australia’s economic dependence on China was making it vulnerable to Chinese pressure. The Morrison government called for a follow-up study, in 2020, and there was apparently a third study conducted by the Albanese government.

The paper cited unnamed sources saying the studies concluded that ‘no other markets could replace China as a market for Australian commodity exports’. They also reportedly said the studies had made it clear that Australia ‘cannot successfully diversify trade away from China. Diversification to Southeast Asia is really China plus.’

They are conclusions that will inform the Albanese government’s decision on whether to approve the start of negotiations with China over its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This trade agreement, which includes 12 nations, was originally designed by the Obama administration as a means to advance US integration with the Asian region while locking China out. However, with both the Trump and Biden administrations deciding not to  participate, China has seen an opportunity to advance its regional integration further, at the US’s expense.

The CPTPP goes further than RCEP, offering tariff reductions of 99% compared with RCEP’s 90% and including chapters on financial services, telecommunications, state-owned enterprises, labour relations, competition policy, transparency and anti-corruption. Many suggest that the demands written into CPTPP are too tough for China to meet; however, Vietnam managed, partly due to some leeway granted, and China would be hoping for the same.

All existing members have the ability to veto a new applicant. Australia couldn’t approve the start of negotiations while China still had discriminatory—and illegal under World Trade Organization rules—trade measures imposed on Australia, and while it was refusing to talk to the Australian government.

With those barriers being removed, the government may at some point decide Australia has nothing to lose by commencing a process that could result in further integration of China into the regional economy. However, it could do so with no greater confidence that, once it was admitted, China would stick to the CPTPP trade rules than it did the rules of the 2015 China–Australia Free Trade Agreement when it decided to teach the Morrison government a lesson.

How Australia withstood China’s campaign of economic warfare

It’s too soon to declare an end to China’s economic war against Australia, but the signs are all pointing in that direction, with the meeting between trade ministers of the two countries this week coinciding with the first shipments of Australian coal to China in two years.

What looks like a unilateral Chinese backdown is a remarkable development. Prime Minister Anthony Albanese’s government has made no visible change in policies affecting China, beyond a softening of the at times harsh rhetoric of its predecessor.

China was showing signs of wanting to resume a more normal relationship with Australia before the change of government last May. Australian National University researcher Benjamin Herscovitch highlights the December 2021 speech by Wang Xining, chargé d’affaires at the Chinese embassy, who declared: ‘There are so many common values that we share and present at this challenging juncture. I believe that there is no reason that Australian and Chinese people can’t be good friends.’

China has a very long history of using denial of access to its markets as a tool of economic coercion, going back to the early 20th century when there was an orchestrated boycott of American products to pressure the US to shift its then–racially based immigration policy.

In recent times, there have been numerous episodes of China closing its markets to particular nations over perceived grievances, ranging from Norwegian salmon following the awarding of the 2010 Nobel Peace Prize to imprisoned Chinese dissident Liu Xiabao to the blockages to French products after the 2008 Olympic torch relay was disrupted in Paris.

However, China’s campaign of economic coercion against Australia, launched in May 2020, went much further than its efforts against any other significant economy and included strikes against Australia’s exports of coal, copper, nickel, woodchips, wine, lobster, cotton, barley and beef. Commodities for which there was no feasible replacement, including iron ore, wool and liquefied natural gas, were exempted.

The only analogous, though much less fierce, campaign of Chinese economic warfare was conducted against South Korea in 2016–17, following the US’s installation of its THAAD missile-defence system. Both Seoul and Washington said the move was designed to defend South Korea against missile attack from North Korea; however, Beijing contended that the system’s reach, particularly its radar, extended to China.

Chinese tourism to Korea stopped overnight. The Korean supermarket chain Lotte had 70% of its outlets in China shut down, ostensibly over fire regulations. Hyundai’s car sales in China plummeted by two-thirds, Korean pop stars disappeared from Chinese TV and exports of some consumer goods were blocked.

The campaign lasted for about nine months. China’s decision to end it followed the 19th Chinese Communist Party congress, at which Xi Jinping was anointed leader for another five years, paving the way for him to hold office indefinitely.

It also followed Korea’s election of a more moderate leader in President Moon Jae-in, who had stressed the importance of good relations with China. The ice broken by a meeting of foreign ministers.

While the breakthrough with Australia may appear to follow this template, the huge difference is that the Korean and Chinese foreign ministers struck what China contends is a military agreement, which it renders as ‘the three nos’. The Moon government undertook not to expand the THAAD system, not to enter a missile-defence network with the US and not to enter any trilateral alliance with the US and Japan. It was a humiliating deal for Korea, and China withdrew its boycotts in return.

Korea, which last year decided to add to its missile defences, contends that there was no signed agreement and that the ‘three nos’ simply articulated the Moon government’s policy at that time. However, China believed it had a deal, and friction has intensified between the two countries over the past year as a result.

Any explanation of China’s about-face with Australia is necessarily speculative, but there are several possibilities.

The biggest strategic issue facing China is how to preserve the globalisation that has delivered it such gains over two decades in the face of the US’s increasing rejection of international trade architecture in favour of a more robust policy of containment of China.

China’s ‘coming out’ internationally, following the abandonment of its zero-Covid-19 policy, is consistent with this. Vice Premier Liu He’s speech at the World Economic Forum in Davos last month declared that for China, ‘opening up to the world is a must, not an expediency’, adding that China must oppose unilateralism and protectionism while strengthening international cooperation.

China’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is designed to cement its economic relations through the Asia–Pacific, using a vehicle that the US designed but then, under Donald Trump’s administration, walked away from.

Starting negotiations to enter the CPTPP requires the assent of all parties. In 2021, Australia’s trade minister, Dan Tehan, explained that while Australia had no principled opposition to China’s admission, it would be impossible to commence negotiations without minister-to-minister dialogue. This was not a veto, he said. ‘These are ultimately decisions which always end up at the ministerial level. There’s never been a free trade agreement that’s purely been negotiated at an officials level.’

It hasn’t been stated publicly, but it wouldn’t be surprising if Australia has given China an indication that it will not block its application. It was striking that directly after his meeting with Xi at last year’s G20 summit in Bali, Albanese stumbled when asked about Taiwan’s application to join the CPTPP, saying that it was a trade agreement only between states, implying that Taiwan would be excluded. Albanese’s office swiftly corrected the record to make clear that the CPTPP is an agreement between economies and is open to Taiwan; however, the prime minister’s formulation reflected Chinese talking points.

So it’s likely that China’s CPTPP application has been discussed and Australia’s support for negotiations over China’s accession to at least begin may have been on the agenda at yesterday’s online meeting of Australian Trade Minister Don Farrell and Chinese Commerce Minister Wang Wentao.

As US President Joe Biden’s administration intensifies its efforts to isolate China, Beijing’s campaign against Australia looks increasingly like an own goal, pushing Australia into closer alliance with the US, as evident in both AUKUS and the Quad arrangement, without achieving any obvious gains.

Australia had been extraordinarily successful in diversifying its exports in the face of China’s boycotts. China’s share of Australia’s exports dived from 42% in July 2021 to just 29% by August last year, where it has remained for the last four recorded months. Australia’s export earnings in the year to November of $585 billion were $200 billion, or 55%, higher than in the 12 months before China started rejecting Australian cargoes.

Before the boycotts, China was buying a third of Australia’s metallurgical coal and a quarter of its thermal coal. Australia was able to replace these markets entirely with additional sales to India, South Korea, Taiwan, Japan and the European Union. China was left facing episodic blackouts because of coal shortages, while the lifespan of its steel mills will have been reduced through the use of inferior coal for which they were not designed. One of the largest coalmining companies in Australia affected by the boycott was Yancoal, which is majority owned by a Chinese state-owned company.

Other commodities like cotton and barley were able to diversify similarly despite China having taken the lion’s share of their sales before the boycott. Wine and lobster were among the few industries that were really hurt.

There are many differences between Australia and South Korea, but it’s possible that the export sectors targeted by China have less political sway in Australia than do the chaebol conglomerates in Korea. While there were some grumbles from Fortescue Metals Group founder Andrew Forrest, there was little concerted pushback from the Australian resources and rural sectors over government policy towards China, which was increasingly dominated by security considerations.

In an increasingly fractious world marked by economic hostilities, the lessons from the Australian experience would appear to be that:

  • faced with coercion, a country may have success if security policy assumes priority over economic policy
  • commodity markets are enormously flexible, making it hard to sanction them—as Europe has shown over Russian gas and as Russia may yet show over its oil
  • branded products, such as wine, are more vulnerable
  • sanctions can hurt the country inflicting them
  • a little bit of leverage, as Australia may be demonstrating over China’s mooted application to join the CPTPP, can go a long way when it affects the interests of great powers.

Will China end its deep freeze of Australia to join the CPTPP?

China’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership free-trade agreement is dead in the water unless its commerce minister, Wang Wentao, agrees to meet his Australian counterpart, Dan Tehan.

Tehan has been careful not to present this as an ultimatum. When Chinese officials indicated to Department of Foreign Affairs and Trade officials that they were planning to apply, they were told it was ‘just the practical reality—that as part of the accession process, we need to be able to sit down at the ministerial level to work through it’.

‘This isn’t a condition,’ he told the National Press Club last month. ‘These are ultimately decisions which always end up at the ministerial level. There’s never been a free trade agreement that’s purely been negotiated at official’s level.’

But the consequence is the same: Australia will veto China’s application unless China drops its ban on ministerial-level meetings with Australia.

The government also expects that if and when Wang meets Tehan, he should be prepared to explain that China is withdrawing its series of informal barriers to Australia’s exports, which are illegal under the World Trade Organization’s foundation rules prohibiting discrimination against individual trading partners.

Again, that hasn’t been stated as a condition. Tehan says that for any new applicant, there would have to be confidence that ‘the candidate would meet, implement and adhere to the high standards of the agreement and has a track record of compliance with its commitments in the WTO and existing trade agreements which it is party to’.

The hard line that Tehan has taken to the Chinese application isn’t shared by all Australian officials.

Joining the CPTPP is a multi-stage process. First, all members must agree to start the accession process, and then a committee with representatives of all members negotiates the terms to their individual satisfaction, with unanimity again required.

There are some economic advisers who believe Australia should give a green light to starting the process of China’s accession and then negotiate the terms on which it would join, which could then include dropping all informal barriers and ministerial meetings.

Their reasoning is that the issues that would have to be negotiated for China’s entry to the CPTPP are precisely the central problems that China creates for the world trading community: the subsidies to state-owned enterprises, intellectual property protection, barriers to digital trade and labour rights.

Without settlement on these issues, there’s little chance of the United States re-engaging in the WTO and advancing its reform. China’s application to join the CPTPP presents a unique opportunity to tackle these issues without the added complication of the rivalry between China and the US.

If Australia stops the accession process at the outset, that opportunity will be lost.

However, there’s considerable anger within the Australian government about China’s campaign of economic coercion which is seen to breach the requirements of both the WTO and the China–Australia Free Trade Agreement, signed in 2015.

China doesn’t formally acknowledge that it has imposed barriers on Australian exports—to do so would expose it to Australian counteraction before the WTO.

Beijing has a long history of using trade coercion and usually maintains the fiction that its boycotts of particular nations are simply the spontaneous result of Chinese businesses and consumers aggrieved by foreign insults. That was its stance in its campaigns against South Korea after it allowed the installation of a US missile-defence system and against Norway after the Nobel Peace Prize was granted to the imprisoned government critic Liu Xiabao.

The closest it has come to taking responsibility for its campaign was the Chinese embassy in Canberra’s distribution of a set of ‘14 grievances’ against Australia last year, along with the declaration by an unnamed embassy official that ‘China is angry. If you make China the enemy, China will be the enemy’.

There wasn’t the slightest trace of this sentiment in the Chinese embassy’s extraordinary submission to the Australian parliamentary inquiry underway into whether CPTPP membership should be expanded. The inquiry was launched in late 2020 in view of the interest in joining expressed by the United Kingdom, China, Taiwan, South Korea and Thailand.

The Chinese submission asserted that the implementation of the China–Australia Free Trade Agreement had ‘led to rapid development of our bilateral economic and trade relationship’ and had created ‘favorable conditions for depending, broadening and improving our bilateral economic relationship’. The statistics for Australia–China trade it cited were all from 2019, before China’s coercive campaign began. The numbers for 2020 would have shown that, under the weight of China’s discriminatory boycotts, exports apart from iron ore had dived by 25%.

The need for China to obtain Australia’s assent before its application to join the CPTPP can proceed has led some to question whether it was acting in good faith or simply using the process to drive a wedge between Australia and CPTPP members who would gain from China’s accession, including Malaysia and Singapore.

However, China’s intent has been repeatedly expressed over the past year, including by President Xi Jinping, who told the 2020 APEC leaders’ summit that China would ‘favourably consider’ joining.

A commerce ministry spokeswoman, Shu Jueting, says that China will offer the other CPTPP members ‘unprecedented market access’ if it is permitted to join and that it is ready to meet the pact’s requirements. ‘China has conducted comprehensive assessment of the rules of the pact and sorted out potential reform measures and revisions to laws and regulations that it may need to make to join the CPTPP,’ she said.

The CPTPP is the replacement for the Trans-Pacific Partnership that was initiated in 2008 by the US as the economic component of President Barack Obama’s ‘pivot to Asia’ but rejected by President Donald Trump on his first day in office. The TPP was originally intended to include provisions that would be difficult for China to meet but would cement the US primacy as the standard-setter in Asia–Pacific trade.

However, a series of less-developed nations, including Vietnam, Brunei and Peru, have surmounted the bar to become CPTPP members, and some academic commentators believe China would be able to do so too.

UNSW’s Weihan Zhou and Singapore Management University’s Henry Gao say the CPTPP’s demands for state-owned enterprises are less onerous than the China-specific requirements designed for its accession to the WTO.

China has accepted the right to cross-border data transfer and the prohibition of data localisation rules under the Regional Comprehensive Economic Partnership, the ASEAN-led trade agreement signed last November. The CPTPP has provisions banning the forced transfer of source codes, but includes exemptions for financial services and government procurement, which are the most sensitive areas for China.

The most difficult provision for China to meet would be a requirement that it pass laws to incorporate rights enshrined in the International Labour Organization’s declaration. These include bans on forced labour and rights to collective bargaining and freedom of association in independent trade unions.

China would simply deny it uses forced labour in its camps in Xinjiang, but granting the right to form independent trade unions would be anathema to the Chinese Communist Party, which resists independent organisation of any sort. Collective bargaining would also be seen as a threat. Breaking the monopoly of the state-run union movement may have been a difficult reform for Vietnam, but it is impossible to envisage in Xi’s China.

If Wang persists with China’s deep freeze on ministerial-level contact with Australia, the issue will never arise.

Closer Taiwan ties show alignment of Australia’s economic and strategic priorities

In this month’s AUSMIN statement, somewhat overshadowed by AUKUS and Australia’s decision to purchase nuclear-powered submarines, was a notably robust paragraph about Taiwan. The statement used new phraseology, describing Taiwan as ‘a leading democracy and a critical partner’. It was a step forward from the 2020 AUSMIN statement and also one of a number of bilateral and multilateral statements from countries, led by the United States, that have signalled concern for the security of Taiwan. The statements have come about in response to a step-up in tactics by Beijing over more than a year, including naval exercises and almost daily provocative military flights in the Taiwan Strait.

In addition to these statements, Australia and Taiwan have had publicly acknowledged ministerial-level bilateral meetings on trade and investment. Australian Trade Minister Dan Tehan has met virtually with John Deng, Taiwan’s chief trade negotiator, and Economic Development Minister Wang Mei-hua, and also addressed the Australia–Taiwan Business Council’s annual meeting in August.

Although government-to-government contact is a normal part of Australia–Taiwan relations under Australia’s ‘one China’ policy, Beijing objects to any actions by governments that treat Taiwan as if it’s a sovereign state in the international system. Ministerial-level contact can be especially sensitive and hasn’t always been conducted so visibly by Australia. By holding meetings on bilateral trade, Canberra is pushing back against Beijing’s perennial efforts to isolate Taipei, aligning Australia’s international trade policy with regional security policy and giving substance to statements like that from AUSMIN.

This is an interesting echo of an earlier period in Australia–Taiwan relations. In the 1990s, a new post–Cold War global trade architecture was built that created an impetus for boosting relations. This included the establishment of APEC in 1989 and the World Trade Organization in 1995. Taiwan acceded to APEC in 1991 as ‘Chinese Taipei’. In 1992, an Australia–Taiwan bilateral dialogue was established called the Joint Energy and Minerals, Trade and Investment Cooperation Consultations, or JEMTIC, which continues today.

Both Australia and Taiwan aligned their relationship through the vector of trade and investment in the era of ‘globalisation’. Each side did, however, have different motivations for doing so. For Taipei, the 1990s multilateral trade framework was a way of maintaining an international presence as it was losing diplomatic allies to Beijing. For Canberra, APEC in particular was a regional grouping that mobilised Australia’s shift to a more open and deregulated export-oriented political economy.

In 1996, Australian exports to China exceeded those to Taiwan for the first time. They have since grown to more than 30% of Australia’s exports. (At that time, Japan was Australia’s biggest market at only 16% of total exports.) The alignment between Australia and Taiwan passed and a range of problems emerged in the relationship in the 2000s, including concerns about the status of ANZUS in a conflict over Taiwan and chequebook diplomacy in the Pacific.

Now, however, in the context of the deterioration of Australia–China relations and Beijing’s military provocations towards Taiwan, the ministerial trade meetings this year point to a new alignment, and potentially a less ephemeral one than in the 1990s.

The test of this moment will be the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. After a number of years of diplomatic manoeuvring, both Beijing and Taipei have played their hands and formally applied to join. Like its participation in the international trade architecture of the 1990s, Taiwan’s calculus includes an opportunity to expand its international presence. China’s calculus includes shutting Taiwan out of any regional institutions now that it has the economic power to act in ways that it could not 30 years ago.

Australia’s support for Taiwan’s and China’s membership of the CPTPP will be a test of how it judges its trade and regional security interests and how far it is willing to go to align them. For Australia and the other members of the CPTPP, the outcome will be a complex measure of policy priorities and principles, and will be a marker of the contours of power in the international system in the era of China under Xi Jinping.

One of the more interesting ministerial meetings this year was the Australia–Taiwan Hydrogen Trade and Investment Dialogue in July. Hydrogen is a critical technology in the transition to low-carbon energy. As important as the CPTPP may be for mapping a changing international order, in the face of foundational global challenges like climate change, it may be that trade in specific commodities matters more than broad principles of regional free trade for connecting trade and security and strengthening Taiwan’s bilateral relations. The semiconductor industry is an obvious example. Here, Taiwan is the global giant and China is less consequential, and post-carbon-economy sectors may yet be a vector through which Australia sees its interests being served by a strong bilateral relationship with Taiwan.

Australia should support Taiwan’s bid to join the CPTPP

A federal parliamentary joint committee inquiry is examining the potential for new members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, and is assessing each individual case for accession against Australia’s national interests.

The CPTPP itself is a successor trade bloc of 11 members to the Trans-Pacific Partnership (TPP) that former US president Donald Trump abandoned in 2017. The agreement features market access commitments in trade in goods, services, investment, labour mobility and government procurement. It establishes rules that help create a transparent environment to do business in CPTPP markets. Australia has already benefited from the agreement with reductions in Japanese beef tariffs, as well as access for dairy products in Japan and Canada.

The agreement is now in force in most member states: Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam. Brunei, Chile, Malaysia and Peru are set to join after they complete their ratification processes.

The CPTPP agreement explicitly welcomes the accession of other states or separate customs territories. The Republic of China (Taiwan) is one of the several countries including Thailand, Indonesia and the UK that have expressed interest in acceding to the agreement.

Before US President Joe Biden’s inauguration, joining the CPTPP was expected by some to be one of his administration’s goals. However, there’s some speculation that Biden might prefer a return to the original TPP. Australia was opposed to the strong intellectual-property rights in the TPP and had them watered down in the CPTPP.

Whatever the US decides to do on multilateral trade policy, it’s in our national interest to support Taiwan’s accession to the CPTPP. Taiwan, one of the top 20 trading nations in the world and a vibrant democracy, believes that through accession, it will be able to contribute actively to the objectives of the CPTPP. It’s demonstrated this commitment by taking steps last year to achieve the necessary degree of compatibility to meet CPTPP aims and contribute to them in future. All current CPTPP members will need to agree to Taiwan’s accession.

The Australian government has already made the case that Taiwan substantially meets the economic criteria for serious consideration. Taiwan is an important trading partner for Australia—it’s our sixth largest. It was this mutual economic importance that made Taiwan a serious candidate for a free trade agreement two years ago.

Unfortunately, political considerations trumped economic viability and the proposal for an FTA with Taiwan was abandoned due to pressure from the People’s Republic of China. The FTA with Taiwan was being advanced because it was in Australia’s national interests to have closer economic relations with Taiwan. Retreating from the proposal in deference to another state’s national interest was done at the cost of our own.

But it remains in Australia’s national economic national interest to develop closer economic ties with Taiwan. Therefore, some appropriate means to secure this objective should be found. The proposed FTA would still be the most direct and effective way of achieving this, but if that’s not possible, Taiwan’s membership in the CPTPP should be considered as an appropriate multilateral vehicle for pursuing closer economic relations as well as enhancing Taiwan’s broader contributions to economic prosperity in the Indo-Pacific.

There are at least three layers to assessing the politico-strategic risks in endorsing Taiwan’s accession to the CPTPP: the nature of the CPTPP, the benefits of multilateral versus bilateral agreements and China’s nationalist approach to international economic rulemaking.

The CPTPP is less firmly rooted in doctrinal sovereignty as a basis for economic cooperation than an FTA would be. The language of the CPTPP agreement allows for non-state accession, for example on separate customs territories.

Since Taiwan is a full member of the World Trade Organization, if necessary, it could use this to accede to the CPTPP agreement consistent with article XXIV of the WTO pact. A similar point could be made of Taiwan’s membership in APEC, which it joined in 1991 along with China and Hong Kong.

Elements of these arrangements can be seen in the way all the current members of the CPTPP have formalised economic ties with Taipei through reciprocal trade offices. In Australia, Canada, Japan, the US and Vietnam, these are de facto embassies with ancillary consular arrangements that reflect these important trading ties.

And Taiwanese trade with China is so extensive and important that Taipei has virtually as many trade offices in China as there are members of the CPTPP.

The multilateral nature of the CPTPP offers the security of a collective, shared responsibility for any decision. This has been an important element for Canada in its arguments for supporting Taiwanese accession.

New Zealand, the depository state for the CPTPP agreement, notes it and other CPTPP signatories enjoy membership in a number of multilateral arrangements along with Taiwan, including APEC, the WTO and the Asian Development Bank.

New Zealand itself concluded a special trilateral trade agreement with Taiwan and Singapore in 2013. Unlike the Regional Comprehensive Economic Partnership, which Beijing was able to prevent Taiwan from joining, China is not currently a signatory to the CPTPP.

It’s in Australia’s national interest to strengthen international economic regimes to ensure they remain free, open and robust. Taiwan can help here through committing to promote issues relevant to the CPTPP’s values, rules and norms, and enhancing its role as a vehicle for economic collaboration and cooperation.

Beijing’s aggressive approach to economic and diplomatic relations in recent years has impacted heavily on Australia. And the free-trade agreement between the two countries hasn’t inhibited China from taking punitive economic action against Australia whenever it perceives a slight. Both these circumstances make a good argument for building a coalition of states with the same rules-based values through the CPTPP.

While China has expressed an interest in joining the CPTPP, we’re sceptical of its commitment to the economic reforms required for membership, especially around state-owned enterprises, industrial subsidies and forced labour.

China’s more pugilistic stance in the South China Sea and abuse of human rights in Hong Kong and Xinjiang have raised broader concerns regarding its willingness to act as a good international citizen.

Bolstering the economic coalition of states committed to maintaining a free and open Indo-Pacific is very much in Australia’s national interest. By supporting the inclusion of Taiwan in the CPTPP, Australia will be contributing to this broader regional objective while making an important economic relationship stronger.