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Should the TPP Include China?

Especially now that South Korea recently engaged in talks with Japan about the possibility of joining Trans-Pacific Partnership (TPP) negotiations, the potential inclusion of China has become a hot topic.

Some argue that China’s inclusion in TPP talks is necessary given that it is the U.S.’s largest trade partner, and is already a full member of the World Trade Organization. Also, China’s admittance into the fold could give the U.S. and its trading partners greater purchase in trying to push it toward commercial compliance, especially with regard to historically thorny issues like intellectual property protections and currency manipulation, as well as human rights abuses.

Also, allowing China to jump on board is consonant, some trade experts argue, with President Obama’s “Asia pivot,” or his strategy to prioritize the normalization of diplomatic and economic relations with the region. And China’s absence has become conspicuous as more of its neighbors, and competitors, join in turn. Last year, despite the challenges surrounding the reform of its agricultural sector, Japan signed on. Vietnam, Malaysia and Singapore have been at the party since the beginning. Last week, South Korea has long expressed an interest in its inclusion in the twelve-nation talks that includes the U.S., Vietnam, Singapore, Australia, Peru, Brunei, New Zealand, Chile, Malaysia, Mexico, Canada and Japan. And just recently one of its top trade representatives said, “[The government] expects participation in the TPP to help [the country] secure a big market spanning over the Asia-Pacific region and to allow competition with the other member countries on an equal footing.” Many have taken to colloquially referring to the TPP as the “everyone but China” treaty.

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Furthermore, now many, maybe principally China, worry that the U.S. is incrementally retreating from the international system it once constructed. Historically the guarantor of this world order, a beneficent financial and military hegemon, the U.S. now seems to prefer to accept a diminished role. In place of grand global systems, the U.S. is substituting a multitude of more limited, preferential trade deals. Instead of sweeping, comprehensive organizations, it gravitates toward regional pacts, investment deals and ad hoc arrangement with similarly interested nations.

Why should China be worried? One maybe cynical interpretation of the U.S.’s strategic shift is that it is intended to isolate a rising China, newly minted as a member of the WTO. Many see the TPP as an economic inflection point, significantly liberalizing trade routes among sixteen major commercial nations. Even more specifically, it aims to redraw a traditionally cloistered quarter of the Asian markets, including Singapore, Malaysia, Japan and Vietnam. China is conspicuously absent from the party.

China also has other pressing concerns regarding American stewardship of the world financial order. Of course, it would disproportionately suffer from a U.S. default, and so it vigilantly follows the U.S.’s legislative disputes about mounting debt play out anxiously.

Additionally, China is worried about a gradually devalued American dollar, given that its diminishment also devalues its $1.3 trillion of U.S. Securities. Chinese officials have bitterly complained for years that the U.S. borrows more while inflating away the debt it accrues, effectively paying it down by dint of monetary policy.

The exclusion of China from the TPP, in particular, seems like a strategic isolation precisely because so many see the free-trade deal as historically momentous. Julia Hughes, president of the United States Fashion Industry Association (USFIA) opined, “One of the goals of the TPP is to have it be a true 21st-century agreement and part of what that means is the ability of manufacturers in one TPP party to sell to all others with no new regulatory barriers, technical barriers [or tariffs]. Part of the point of TPP is to create a new supply chain among the countries.”

Reportedly, China has communicated interest in joining the next round of TPP discussions. New Zealand congressional TPP caucus member Charles Boustany recently said, “Some discussions I have had with the Chinese government indicate there is an interest in China, but there’s also an interest brewing in China about participating at some point in the TPP.”

While the Obama administration’s desire to recede from the international spotlight militarily has never been concealed–in fact, is has been ostentatiously advertised–it has been more reticent about its disengagement from the kind of sweeping global financial arrangements it once produced and then advocated. The U.S. ceremoniously rebuilt the world and now would like to flee it, gradually, one regional arrangement at a time. China can’t move so easily, tethered to a financial ecosystem fracturing into parts around it, unable to move into any one of them. It is becoming a global superpower just as the age of the global superpower comes to an end.

Of course, the inclusion of China into the TPP entails the acceptance of a whole new bag of political and economic entanglements to unfurl, halting even further an already stalled process of negotiation. Some worry that this could doom the TPP to a permanent limbo of the kind the DOHA rounds suffered. However, if the point of the TPP is to transform U.S. relations with the Asia-Pacific region, the exclusion of China might accelerate a settled agreement at the expense of its breadth and effectiveness.