US moves can aid China’s economic expansion plans

Biden’s foreign policy initiative in the Indo-Pacific hinges solely on forging a strategic partnership. The critical economic dimension has been ignored, at least for now,

Published: 08th October 2021 01:10 AM  |   Last Updated: 08th October 2021 01:10 AM   |  A+A-

Illustration: Amit Bandre

On September 15, US President Joe Biden announced the formation of AUKUS, a new enhanced trilateral security partnership between Australia, the United Kingdom, and the United States in the Indo-Pacific region. The President described AUKUS as “a partnership where our technology, our scientists, our industry, our defence forces are all working together to deliver a safer and more secure region that ultimately benefits all”. AUKUS was thus projected as a regional public good, but the three heads of governments avoided mentioning the reason for their coming together, namely, the threat from China.

On the face of it, AUKUS appears to be a throwback to the Obama presidency’s foreign policy, the high point of which was the pivot to Asia. However, there is a major difference. Besides the strategic dimension, President Obama decided to create an economic area under the US leadership by stitching together the 12-member Trans-Pacific Partnership (TPP), which was abandoned by his successor, Donald Trump. In contrast, the Biden presidency’s foreign policy initiative in the Indo-Pacific hinges solely on forging a strategic partnership; the critical economic dimension has been ignored, at least for now.

While the global media gave plenty of space to the formation of AUKUS, they chose not to report an important development that took place immediately afterwards. Hours after the AUKUS was announced in Washington DC, China made a formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the trade agreement between 11 countries formed after the US pulled out from the TPP. China had long been interested in expanding its economic presence in the Indo-Pacific and its CPTPP application must be read in this context.

Till date, the most noteworthy initiative was taken during China’s chairmanship of the 21-member Asia-Pacific Economic Cooperation (APEC) in 2014 when it leveraged an earlier decision of the grouping to examine the prospects of a Free Trade Area of the Asia Pacific (FTAAP). China succeeded in getting the APEC members to endorse the “Beijing Roadmap for APEC’s Contribution to the Realization of the FTAAP”. But why did Beijing push for the FTAAP when two regional trade agreements, namely, the Regional Comprehensive Economic Partnership (RCEP) and the TPP were being negotiated in the Indo-Pacific region? This was because these agreements hardly reflected Beijing’s ambitions; the RCEP was driven by the members of the Association of Southeast Asian Nations (ASEAN), while the TPP was being shaped by the US. However, with FTAAP continuing to remain on the drawing board, President Xi Jinping made an important announcement in the APEC Summit in 2020 that China would “favorably consider” joining the CPTPP.

There are justifiable reasons for China to join the CPTPP, even though RCEP provides a large market, averaging nearly 32% of its total trade since 2014. What makes the CPTPP more attractive for China as compared to RCEP is that while the share of the latter grouping in its total trade had declined from nearly 34% in 2017 to 31% in 2020, its trade with CPTPP members had increased from 20% in 2014 to nearly 24% in 2020. Besides, CPTPP provides China with the opportunity to expand its economic footprint in non-Asian members of the grouping.

It may appear that China’s prospects of joining CPTPP would be slim since most of its members have been close partners of the US, having actively participated in the now-defunct TPP. However, China’s bid to join CPTPP has been welcomed by Malaysia while Singapore and Japan have argued that Beijing’s membership depends on its ability and willingness to accept CPTPP’s stringent rules. Further, the Vietnamese government has agreed to share information regarding its experience of joining the CPTPP with China. Among the other members, New Zealand seems to have developed a special relationship with China, which is also its largest export market having a share of 30%. And Mexico is currently experiencing a diplomatic charm offensive by the Chinese leadership.

Even if China’s membership is backed by CPTPP members, the US can spoil China’s chances by invoking the “poison pill” provision in the United States-Mexico-Canada Agreement. This provision requires any of the three members of the Agreement to consult the others if it wishes to pursue a trade deal with a non-market country like China. However, commentators are divided in their opinion as to whether the “poison pill” provision can adversely affect China’s interests.

There is no gainsaying that by proposing its own version of “pivot to Asia”, which lacks a coherent economic strategy, the Biden administration would, in fact, help China in realising its long-term ambitions of economic expansion in the Indo-Pacific. The Obama administration, mindful of the fact that geography, economics, and technology favoured China in its competition with the US, decided to forge an economic partnership agreement, namely, the TPP, with several key partners, which could be expanded later to include others like India. With China’s move to join CPTPP receiving more than the requisite support and interest from the existing members of the grouping, the US may well have lost the plot.

Biswajit Dhar

Professor, Centre for Economic Studies and Planning, School of Social Sciences, JNU


India Matters


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