By Wen Jin Yuan

[Editor’s note: During the G-20 Summit in Los Cabos, Canada and Mexico have both announced they will join TPP negotiations following formal invitations, expanding the size of the TPP’s potential economic impact.]

As many cogitASIA readers know, the Trans-Pacific Partnership (TPP), is a fledgling multilateral free trade agreement (FTA) being negotiated between the United States and eight other member countries, which aims to liberalize the economies of the Asia-Pacific region.   Most recently, the U.S.’s growing interest on pushing the TPP agenda has caused China – the U.S.’s big trade partner and rival — some disquiet.

China is keeping a close eye on the process of the TPP negotiations and anxiously awaits the outcome. China is actively promoting the regional economic integration of East Asia, which depends heavily on external neighboring economies, and the TPP agenda is considered by many Chinese policy makers and scholars as a centrifugal force arising to rip asunder the regional economic integration of East Asia. For instance, Li Xiangyang and Shen Minghui from the Chinese Academy of Social Sciences (CASS), noted that the TPP is an important component of the U.S. strategy of “Returning to Asia” that would economically contain China’s rise, and would attract ASEAN countries and other U.S. allies in East Asia to adopt a policy leaning towards the US.

Taken aback by the US’s recent support of the TPP, China is actively pushing for its own FTA strategy as a counter-balance to China’s perceived growing economic influence of the US in East Asia.  Li Wei, President of the Development Research Center of the State Council, said in a keynote speech on the “Asian Financial Forum” that accelerating the development of free trade areas with China’s major trading partners in Asia is the Chinese government’s “unswerving policy”. However, Li cited an old Chinese saying, “close neighbors are better than distant relatives” and warned that the close geographical location between Asian countries is “a vital guarantee for each other’s economic stability and development”, and “cooperating with countries far away might not be beneficial for these countries’ own economic development”. Li’s speech is widely regarded as a clear signal that China will actively propel the establishment of new FTAs with its Asian neighbors as a counter-balance to the TPP agenda pushed by the US.

Apart from an economic rationale to secure China’s future supplies of much-needed natural resources, improving its international environment, especially the surrounding environment, is one of the most important reasons that China pushes its FTA agenda.  However, it is highly unlikely that China will fulfill its political goal of improving its neighboring environment through the aforementioned strategy —  although the Chinese government is trying to “bribe” its Asian neighbors with economic benefits, China’s amiable stance has constantly been undercut by its unwillingness to solve territorial disputes in a multilateral setting as well as its simultaneous threat to browbeat its neighbors.   Most recently, tensions have been rising again between China and the Philippines over a territorial dispute in the South China Sea, and Chinese state media warned the Philippines that military conflict is possible over a stand-off at a disputed reef, the Scarborough Shoal, off the Philippine coast.  Moreover, the effectiveness of China’s FTA strategy could further be undermined by China’s domestic political conflict — the looming leadership transition in China will probably solidify the Chinese leaders’ unwillingness to take risks to facilitate the trade liberalization process.

Wen Jin Yuan is a researcher with the Freeman Chair in China Studies.  To learn more, please see her recently published Freeman Briefing for an extended discussion of this issue.