Japan, US and the TPP: the view from China

Author: Aurelia George Mulgan, UNSW Canberra

Japan’s Prime Minister Shinzō Abe successfully stared down opposition from the domestic farm lobby and his own ruling party to take Japan into the TPP negotiations. The other half of the equation — gaining the consent of TPP negotiating countries to Japan’s entry — was sealed at the recent APEC ministerial meeting in Indonesia.

But what does Japan’s largest trading partner, China, think of these developments? While remaining enthusiastic about promoting negotiations for a comprehensive economic and trading framework in East Asia, China is cautious about the TPP.

A recent article in the People’s Daily discusses US motives in ‘passionately promoting’ the TPP. It identifies two principal reasons.

First, the United States wants to open the door to the Asian market and harness Asia’s rapid economic growth to increase its exports and revive its economy.

The second reason is that the United States wants to gain leadership over the trade system and increase its political influence by setting regional trade rules. Involving Japan in the TPP is not, therefore, simply a question of economics and trade for the United States — it is also strongly political. Without Japan, the TPP will not have as much impact or influence on regional and global trade rules. By inviting Japan to join the TPP, the United States can make the TPP stronger, attract even more countries and turn the TPP into the biggest free trade system in the Asia Pacific region. Furthermore, America can only exert leadership over setting ‘international standards’ by gathering as many allies as it can and establishing a multilateral agreement with substantial outcomes. Its overarching goal is to maintain its leadership and control over the global economic and trade order.

Jianshu Zhang in the China Youth Daily goes further. He argues that the United States ultimately wants to rope in China, the biggest market in the world, and change it into a ‘big cake’ for the developed nations of the West. An article in the Tokyo Shinbun agrees that President Obama is actually targeting China, which has become economically indispensable for the United States.

Abe also wants to see Japan participate in the rule-setting process. He recently told the Japanese Diet, ‘Japan’s TPP participation will result in Japan and the United States virtually leading the TPP … there are advantages to Japan and the United States forming a team to make rules for the free trade area’ (NHK News, 7 March 2013). In China’s view, Japan is attempting to become a leader and setter of international trade rules in order to maximise its national benefits and guarantee its voice in international discourse.

While China itself has not yet met the standards for joining the TPP, the China Internet Information Centre predicts that the familiar picture of ‘where the US leads, Japan follows’ will not change in future TPP negotiations, and even after Japan joins the TPP. In its view, the Japanese political and financial worlds knew that the United States wanted to use the TPP to allow US products, capital, technologies and culture to expand into Japan without hindrance. Tariffs only accounted for one aspect of US concerns in relation to free trade with Japan. It was more concerned with establishing an advantageous standpoint in regard to services trade, government procurement and intellectual property rights.

As far as its own trading interests are concerned, China fears exclusion from major regional free trade deals. In fact, Tingbin Zhang, writing for  China Finance information, observes that ‘China has been excluded from the very beginning’. He paints an extreme picture of US motives vis-à-vis China, arguing that the TPP is America’s attempt to shake free of its dependence on China’s manufacturing industry and establish an import substitution system that excludes China. In other words, through the TPP, the United States is aiming fundamentally to destroy China’s role as the world’s factory, destroy Chinese manufacturing’s ability to survive and destroy the Chinese myth of development.

In more measured terms, China’s recently retired Minister of Commerce, Deming Chen, emphasised that trade negotiations including the TPP cannot exclude a third party and expressed alarm about the trend towards ‘rejecting’ specific countries. Whilst Chinese business is also concerned about the trade-diversion effect of the TPP, the Commerce Ministry’s response has been to accelerate China’s own free trade strategy, including negotiations on a trilateral Japan-China-South Korea FTA, which is a win–win situation for Japan. If Japan joins the TPP and opens its agricultural market, this could also be advantageous for accelerating negotiations on the Japan-China-South Korea FTA, as agricultural products are predicted to be a difficult problem in negotiations amongst the three countries.

Just as the Noda government’s own internal trade document predicted in late 2011, Japan’s decision to participate in the TPP negotiations appears to have spurred a whole series of other trade developments, including:

  • the first round of trilateral China-Japan-South Korea FTA talks, beginning less than two weeks after the TPP announcement on 15 March;
  • the start of serious Japan-EU talks on an Economic Partnership Agreement (EPA) in April; and
  • the launching of negotiations on the Regional Comprehensive Economic Partnership (RCEP) in May, demonstrating how both emulation and competition can act as triggers for FTA diffusion.

From a US perspective, the RCEP and China-Japan-South Korea FTA are both potentially rival blocs to the TPP, but Japan will be advantageously positioned in all three. This has not escaped Chinese commentators who note how Japan has welcomed the opportunity to maximise their profits by establishing a footing in the TPP while not closing the door to cooperation with China through means such as the China-Japan-South Korea FTA.

From a broader strategic perspective, China sees the TPP as an important part of America’s ‘return to Asia’ strategy, alongside other, including military, aspects of that strategy. Tingbin Zhang asserts that the United States wants to use the TPP to take direct measures against China’s expansion of military power, stir up unrest in China and make China fail in external military confrontation.

Xinhua, amongst others, argues that Japan’s successful entry into the TPP negotiations means that the United States has taken a step forward in encircling China. For this reason, the United States is accelerating efforts to strengthen cooperation with other countries in the region. The Tokyo Shinbun advances a modified version of this theory, reasoning that China’s ever-expanding military activities are posing a threat to American security. Therefore, the United States has formed a strategy to rope the Chinese economy into the ‘economic net’ established on new rules and stop it from posing a threat.

Lastly, the China Internet Information Centre also explains the Abe Cabinet’s willingness to override domestic objections and pressure against the TPP as based on considerations for US-Japan alliance strategy. Japan understands that it will only be able to demonstrate its relative power in the development of the Asia Pacific region if it participates in that development led by the United States as an ‘assistant’.

Aurelia George Mulgan is Professor at the University of New South Wales, Australian Defence Force Academy, Canberra.

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