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Liu Zongyi: Economic reform best response to TPP

2015-10-14

By Liu Zongyi    Source: Global Times    Published: 2015-10-14

 

News that the US, Japan and other 10 Pacific Rim countries finalized the Trans-Pacific Partnership (TPP) Agreement early this month has caused a stir among both domestic and foreign media. Barbed remarks such as "China has suffered a setback in competing for predominance in formulating new rules for global trade" and "China has been thoroughly isolated" have been common.


Many Chinese scholars and think tanks anticipated the approval of the TPP agreement. From the arduous negotiation process, we can see that countries like the US and Japan have made substantial concessions in order to conclude the accord.


The TPP is a victory for US President Barack Obama, since it will be a part of his diplomatic legacy. The deal is of great symbolic importance to the US, since, just as Obama reiterated after the TPP agreement was passed, the US "cannot let countries like China write the rules of the global economy."  


It appears that China has been put in a weaker position because it`s excluded from the rule-making process. Once the TPP agreement takes effect, although it will have little influence on China`s foreign trade in the short term, it may break the China-centered supply and value chain in East Asia, leading to a reduction of foreign investments in China and an outward industrial transfer.


In the Americans` view, China must face the outcome if it refuses to accept the TPP rules made by the US.


From an optimistic perspective, the high criteria set by the TPP in terms of environmental protection, labor standards, intellectual property protection, limitation of state-owned enterprise privilege and more are also the goal of China`s economic reforms.


A few Chinese scholars have been calling on China to join the TPP negotiations since 2013, but unfortunately, even if China filed an application at that time, the US would have refused it.


The TPP, dominated by the US, is not only based on economic, but also geopolitical considerations. Should the TPP be ratified by legislative authorities in all its member states as the US expects, and should the US and Europe finalize the Transatlantic Trade and Investment Partnership (TTIP), a new global trade and investment system will take shape to replace the WTO.


Will China join the TPP in the future?


China doesn`t need to worry that it will be marginalized or isolated, nor should it hastily apply to join the TPP. China should be confident. It is the biggest trading nation in the world and attracts the most foreign direct investment. China is the biggest trading partner of over 120 countries and it has reached FTAs with over 20 countries including some TPP member states.


Apart from deepening economic reforms, expanding opening-up and exploring the Shanghai Free Trade Zone where new trade and investment rules are adopted, China is also in the middle of bilateral investment treaty negotiations with the US and the EU. It is upgrading the China-ASEAN free trade zone. By advancing the "One Belt, One Road" initiative and the establishment of the Asian Infrastructure Investment Bank, China has consolidated cooperation with the BRICS countries. It has also founded a new development bank with the BRICS states.  


China`s confidence stems from its domestic reforms. The sweeping anti-corruption campaign and the reform of the administrative procedures are key to the success of the economic reforms.


As long as China can smoothly finalize its economic restructuring, it will have no fear in the global competition with the US.


Globalization has integrated the world economy. Any exclusive regional trade design is detrimental to the development of world economy.


The global framework the TPP and the TTIP are designed to constitute is centered on the G7. The conclusion of the TPP will lay the foundation for a capitalist empire transcending sovereignty. Based on this, the TPP has severe flaws.


China hopes for a gradual reform on the international order and rules. It hopes they could be fair, just and beneficial to everyone involved. It will join hands with other Asia-Pacific countries and continue promoting equal and fair regional trade arrangements.


The author is a visiting fellow of the Chongyang Institute for Financial Studies, Renmin University of China.

Key Words: TPP   China   reform  

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