Under President Donald Trump, the United States took a wrecking ball to the international trading system, starting with the decision in its earliest days to pull out of the Trans-Pacific Partnership (TPP) negotiated under President Barack Obama. Now China, in a little noticed gambit, is applying to join the very trade accord that Trump abandoned — a move that confronts President Joseph R. Biden Jr. with an urgent choice.
Will Biden urge the 11 current members of the pact to reject China’s bid in an attempt to isolate China and demand changes in its behavior? Or will the administration apply for U.S. membership too, recouping the Trump administration’s senseless withdrawal and use the revived TPP to promote economic reforms in China, as Biden says is a top priority? And even if Biden pursues this second course of action, can he persuade a skeptical Congress to go along?
The smart approach would be for the U.S. to apply for membership, too. There is a precedent for why lobbying to reject China’s bid to join the trade pact would be ill-advised. It occurred when President Obama engaged in a futile and embarrassing effort to block membership in China’s new Asian Infrastructure Investment Bank in 2015, only to see its closest allies in Europe and Asia join and nudge China toward working on infrastructure with other multilateral institutions while avoiding aggressive lending practices.
Potentially the largest trade agreement on the planet
The renamed Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) would be the largest trade agreement on the planet if either China or the U.S., let alone both, were to join. It now includes Japan, Australia, and New Zealand, America’s main allies in Asia, along with Canada and Mexico and six smaller countries. The U.S. originally joined TPP under the Bush administration. The Obama administration worked out the terms. China’s adherence would help address U.S. concerns with its state subsidies, technology transfer requirements and intellectual property theft. But U.S. membership is probably necessary to enforce those terms. Congress provided authority for the negotiation for TPP in 2015 but never addressed ratification before Trump pulled out.
Obama promoted U.S. participation in TPP mainly on the grounds that “the U.S. rather than China should write the rules” for trade and investment in the world’s most dynamic region. Hence it would be ironic for China to essentially replace America in the group with its inevitable damage to the rules themselves and how they are implemented. In purely economic terms, U.S. firms and workers would face new discrimination against their exports as several of the world’s largest markets moved to free trade among themselves. Many key U.S. industries, and virtually the entire agricultural and services sectors, have already been urging Biden to re-enter CPTPP even before the prospect of Chinese membership arose. Increased competition from dynamic Asian countries would provide a healthy stimulus to the U.S. economy.
Biden has continued much of Trump’s policy of confrontation with China while also seeking to cooperate with it on climate change and other global challenges. It is not yet clear whether he wants to include economic issues in the “confrontation” or “cooperation” categories. But this CPTPP issue will force him to choose. Biden says he wants to defer any new trade agreements until he has made progress in putting America’s own house in order, but significant delay is not an option in this case because China could veto any future U.S. entry if it were to join first.
The U.S. will continue to disagree sharply with authoritarian China on many security and values issues, including the South China Sea and its repression of Uighurs and Hong Kong. But China’s global economic power is now roughly equivalent to that of the US and we must deal pragmatically with its challenges to U.S. leadership. The U.S. cannot block China’s rise, as Trump demonstrated so vividly, and such functional decoupling is far superior to comprehensive decoupling of relations between the two superpowers. The other CPTPP countries will desperately want the U.S. to join to balance China, which will otherwise dominate the grouping.
America’s role in the Asia region, and indeed its global economic leadership, are at stake. Continued U.S. absence from Asia’s dominant economic grouping would essentially turn the region over to China, especially as it joins that grouping itself. The administration should promptly apply to join CPTPP as well and start working to persuade the Congress of our critical national interests in doing so. This will be one of the most important foreign policy and economic policy decisions that Biden will make.
C. Fred Bergsten is founding director of The Peterson Institute for International Economics and author of the forthcoming book "The U.S. vs China: The Quest for Global Economic Leadership," to be published in 2022.
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