The CPTPP, UK and China
This is a complete transcript of the CPTPP, UK and China discussion, chaired by Andrew Bowie MP. He was joined by David Henig and Wendy Cutler.
Andrew Bowie
Good afternoon, everybody. Welcome to what I'm sure is going to be a fascinating hour of discussion, questions and answers on the CPTPP, the United Kingdom and China. So yeah, a small, inconsequential topic to be discussing on a Thursday afternoon. My name is Andrew Bowie. I'm the Member of Parliament for West Aberdeenshire and Kincardine and one of the founding members of the China Research Group, speaking to you from the Houses of Parliament in London. I'm delighted to be joined by two experts in this field. Wendy Cutler is a vice president at the Asia Society Policy Institute. She was formerly Acting Deputy US Trade Representative, where she worked on the TTP, which was at the centre of Barack Obama's strategic pivot to Asia and the precursor to the CPTPP. One advantage the TPP had was it was much easier for all of us to say. David Henig joins us and David is a UK trade policy expert and co-founder of the UK Trade Forum, which bring together UK trade policy to debate and analyse trade issues. He worked on the UK negotiations for the TTIP. And after the 2016 UK referendum, he helped establish the new Department for International Trade engagement in the UK, one of the first working groups with non-EU countries and not a day goes by it seems with a new announcement from the Department for International Trade of new agreements, or seeking to open new discussions and negotiations with countries with whom we have not had a trading relationship for well over 40 years. I'm going to ask them both to say a little bit about themselves, the topic and where they think that things are. And I'm first going to ask Wendy, if you would like to start?
Wendy Cutler
Well, thank you very much. It's really my honour and pleasure to be here this afternoon for you, my morning at in the Washington DC area. I'm looking forward to a really interesting discussion. Maybe I can just give a little context for this webinar. Just a little bit about the origins of TPP, the precursor to CPTPP (and I couldn't agree anymore, Andrew, it was a lot easier to say, before the initial CP were joined). But in any event TPP the TPP CPTPP saga has so many twists and turns. I had the pleasure of working on the TPP during my career at the office of the US Trade Representative. I mean, many people forget but the United States was not one of the founding members of the precursor to TPP, which was the P4 led by Singapore, New Zealand, Brunei and Chile. And the US joined over time, as well as other countries including Japan. And we concluded the deal in 2015. Now, one of the premise for bringing together these 11 countries was that the WTO work was not moving quick and there was a real interest among this group of like-minded countries to strengthen the rules, update the rules, and come up kind of with the new roadmap for trade and investment rules in the Asia Pacific region. And in doing so they concluded an agreement in 2015. I think they're like 30 chapters 1000s of pages of tariff commitments, as well as hundreds of pages of rules in areas ranging from labour to the environment, to state-owned enterprises to customs, all with what I've called kind of state of the art high standard provisions. After the United States signed the agreement, at the same time, the US presidential campaign kind of heated up. Fast forward, President Trump withdraws the United States from the agreement. And what really struck me is interesting the first few months after the United States withdrew, the other 11 members of TPP seemed a bit angry, lost, confused, and just kind of captured something Prime Minister Abe said early in that TPP without the United States was meaningless. But clearly that view changed within a few months. The other 11 countries came together concluded the deal a couple of years later, and that's kind of where we are now. I would give kudos to Japan for kind of leading the other countries to conclude the agreement, and also really to keep most of the provisions intact. Not a lot of changes were made - 22 provisions were suspended, some of them more important than others. But overall, if you think of all the rules, most of them stayed in place, and even more remarkable, the market access commitments were unchanged. And I think there was kind of a feeling among the 11 countries that if any country changed a tariff commitment then all the tariff commitments would unravel quickly. And so the agreement stayed together. And now I can just fast forward to where we are now, the agreement was always envisioned to extend membership to additional economies over the years. There are accession provisions in the text of the agreement and the CPTPP countries a couple of years ago, basically, detailed those accession procedures. The United Kingdom was the first formal applicant to express interest in joining the agreement, while a number of countries right after the agreement was signed in 2015, expressed interest. And a number through the years were kind of toying with the idea of joining, particularly Thailand always seem to be on the cusp of saying it wanted to join. It was really the UK that was first in the queue, which obviously, is interesting. You know, it doesn't seem to be in an Asia Pacific country, but I'm open to your views on that. And now even more interesting, I mean, just to add to the drama, in September, China announced it wanted to join. Six days later, Taiwan followed and said it wanted to join. And just a few weeks later, Ecuador out of the blue said it wanted to join. The Chinese application could be a potential game-changer. I'll just conclude and say that, even when I was involved in the TPP negotiations, particularly through 2013 to 2015, China wasn't really studying what we were doing and taking the agreement very seriously. And there were conversations that we were having with the Chinese, where they were just asking a lot of questions, including what they would have to do to join. So in a lot of ways, I don't think the Chinese announcement came out of the blue, there's been a lot of due diligence in Beijing on the agreement. And I think now that with the United States out of the agreement, China has seen a real opening where it can work with other CPTPP countries and seek membership. We'll have to see how that plays out. I'm sure we'll discuss it more during this webinar. But let me stop there.
Andrew Bowie
Great. Thank you, Wendy, what a great introduction and coming with the experience that you've got in the centre of things in the United States. From your perspective, I think it'll be really fascinating, especially when we get into the question and answer session a little bit later. And before I invite David to give his introduction, just to remind anybody watching that, you can ask any questions through the Q&A function, which is available to everyone. David, good to see you. Please. What's your view on everything?
David Henig
Thank you, what's my view on everything? It really does get down to everything. Because this is the whole world of trade that we're now talking about. And I think that there's a lot of under estimating the degree to which world trade is changing, and perhaps less so the degree to which China is doing at least as well as what we might call, I'm going to use the phrase the West, I don't particularly like it, but I'm using the phrase the West cover the US, EU and indeed the UK. I think China is doing at least as well as us now on trade policy development. And it's our fault. Actually, it's less the UK fault than, mostly more the US and the EU, but it's partly our fault. Look, just briefly, I'm gonna cover the UK is reasoning to join. I don't think that's the big issue for today. But I think there is a very good reason to join and a less good reason. The less good is that economically I don't think it actually adds much, we have arrangements with most of these countries already. The exception is Malaysia, but there are 11 countries. Politically though, this is New Zealand, Singapore, Chile, Japan, Australia, Canada, Mexico. These are the countries post-Brexit UK needs to be working with on trade. These are our natural allies, generally believers in trade and rules. And they're not the big three - China, EU and the US. In fact, there's an argument that says Japan, UK and Canada could really usefully get together as sort neighbours to the big three. You know, I'm surprised we haven't done it already. Just to note, that already kind of changes the equation if China is part of that arrangement. But let's come back to that. CPTPP is relatively high standard in some areas: state-owned enterprises and data are probably in those areas. Less so I think on some of the other areas: services, non-tariff barriers, not great. Market access, yes, good. It doesn't have some of the newer issues we're now talking about climate change carbon border adjustments, not surprisingly, trade moves on. But I think that, and I will come back to this, that there is a reason why China thinks it might be able to join, which is it's not quite the high standard it perhaps could be. I think there's a question there - is China genuinely trying to join spoil the party? I wasn't involved in TPP negotiations. But I was involved in TTIP negotiations, the EU-US talks between 2013 and 2016. They didn't come to an agreement. And China was interested in those. And they were asking lots of questions about those as well, not about joining, but about how it was going to impact them. And given what Wendy said and given some of those people I've spoken with, some of the scholars in Asia, they think China is serious, that this is serious. We shouldn't treat this as China's spoiling tactics. They seem to want to be in trade agreements. And, of course, that's completely natural.
Andrew Bowie
We expect them to want to be in trade agreements.
David Henig
Absolutely. And they just came into live, operational running of the new trade agreement, the Regional Comprehensive Economic Partnership, which covers the three countries of East Asia. The first time they've had trade deals with each other Japan, China, South Korea, Southeast Asian countries and Australia, New Zealand. So there is already regional integration. And that's partly why I say that they are, you know, they are doing as well as we are. So then it comes to this big question. And if you compare us RCPEP to CPTPP, it doesn't go as far in plenty of areas, but it goes quite a long way. So here's the big issue. On what basis do we feel China should be part of the world trading system? Do we want very high standard rules that would go beyond CPTPP? Is the WTO enough? What what are their own neighbours thinking? Because I have this sense that there's a lot of conversations going on, not a lot of which are actually involving what does Singapore think? What does Japan think? Yeah. And just as we see that the EU can make life difficult for the UK with trade threats, presumably China can make threats to their neighbours or, and we've seen the China Australia trade disputes. And we have an even deeper problem, we have long-standing differences between the EU and the US on various trade issues. And many of us in the West, we're relatively high standard or open in many areas, except one or two in which were quite protectionist. And we're also now slightly going backwards. And that's where we come to the EU and the US who did a deal on steel, which is frankly, blatantly not compliant with WTO rules. So are we then able to say to China, you can't join CPTPP? Because, you know, we're allowed to break the rules, but you're not. So you're getting into some really tricky territory here. And I think, sorry, I just wanted to sort of finish it. I mean, for me, the way out of this is, okay, we do we should actually be setting the rules, we should actually say, 'yes, CPTPP is good. But there are areas we think it should go further.' And specifically, you know, some of those do relate to China. But we really need to sort ourselves out between the US and the EU as well, which is why I say the UK is less problematic, although not entirely. I think the UK should be part of efforts to get the EU and the US to be on the same page on the areas like China and on having a slightly higher ruleset. Because if not, I don't see at the moment we can turn around to China and say, 'you can't join when we're going around breaking things.'
Andrew Bowie
Thanks to both of you for those introductory remarks. A couple of things. A couple of points that both of you raise. Firstly, Wendy, you make the point that Britain isn't a Pacific power. I think it's by virtue of the fact that Fletcher Christian, his descendants live on the Pitcairn Islands and they're thereby British, that gives us the opening that we need to apply for membership within the CPTPP. But surely, if you were sitting here in the United Kingdom, advising the UK Government, you would be all in favour of the UK getting involved with this incredibly large trade bloc that would see 99.9% of exports eligible for free trade as a plus sign.
Wendy Cutler
Yeah, and just to be clear, I was kind of talking more about when the agreement was formulated, you know, in the initial expression language, when the United States helped draft it, there was a real focus first and trying to attract other members from APEC, the Asia Pacific Economic Cooperation Forum, but there also was a provision for allowing non-APEC members. And so to be clear, I am fully supportive of the UK joining, I think that this really ups the game and ups the economic heft of the agreement, and really brings Britain in with other like-minded countries in the region. And given its increasing interest in the Indo Pacific, I think this is a very smart move by London to seek membership.
David Henig
I don't think it matters that we're not an Asia, Indo Pacific, whatever we're referring to it, power. These are, as I said, our friends. Why wouldn't we say, 'yeah, we'll take it, we'll take a part of that.' And in that sense, by the way, this isn't a substitute for the EU or anything like that. This is looking around saying, what could what can we see around the world? Yeah, we'll take this, that seems fine to us.
Wendy Cutler
I would just take issue with one thing David said because I've heard Korea say this, too: 'we already have FTAs with all these other countries. So therefore this negotiation, you know, it's just a natural fit. And while I agree with that, one thing that the TPP and CPTPP really strive to do is be a regional agreement. So it's not just individual kind of bilateral agreements. It envisions regional trade, regional integration, common rules of origin. So it ups the game in terms of really building on bilateral agreements to kind of weave them together in a common kind of regional framework.
Andrew Bowie
Thank you, Wendy and David, I'm going to come to some of the questions that have been coming in, in a second. And actually one of them touched on what I was about to raise. You talked about a set of rules there, Wendy and David, about standards and regulations, there are very high standards expected of CPTPP members. You've spoken about one of the problems for the UK was that we always got taken back to hormone-treated beef or chlorinated chicken and all the rest of it and whether the standards that apply in the United States of America would be acceptable to people in Europe. Surely the high standards that the CPTPP requires of members would make it incredibly difficult - not least in terms of how the labour force is treated, environmental stuff, animal standards - for China to join. I might come to David first on that one.
David Henig
Thanks, Andrew. I mean, I'm not a real expert in China's domestic regulatory framework, but people who are have suggested that in many areas, that at least on paper, they pass. Now there are a couple of areas where they don't pass on paper, and one is to do with data. They're to do with intellectual property, where there are more question marks that I've heard, but in terms of say the labour and environmental provisions, at least on paper, it is claimed that they could achieve those. Now, there's another big part - do you actually believe them? Do you really believe that they're going to do what they say? Are they going to have a track record of that? More questionable, but I worry that we're relying too much on that. And I was interested to note, there was a story in the FT a few months ago, which suggests that US officials thought that existing CPTPP members might delay China's accession plans for a few years, but wouldn't be able to do it beyond that. A suggestion that perhaps they're not quite as far away as we might assume. And that's why we need to have these discussions now is because it's not quite so blunt that they're not going to meet the standards.
Andrew Bowie
That's interesting. Wendy, one for you. I had a question from the audience. And just following on from that exact point - China's application to join the CPTPP came alongside a raft of new regulations centred on the tech sector. How might joining the CPTPP fit into Beijing's broader economic policies?
Wendy Cutler
You know, this is just a great question. I couldn't agree more with David, that I think people would be surprised if you just counted the number of provisions in quantity, not quality, where China could probably get a passing grade and say that its laws and regulations on the book are in compliance with CPTPP rules. I would add, beyond kind of data, digital and IP, I think that China's trade regime falls way short with respect to the provisions on state-owned enterprises, on labour, and the environment as well. And that's not a comprehensive list. But those are kind of the chapters that would stick out in my mind. Now, I think it's very interesting that just last November, Xi Jinping at the Shanghai Import Expo, made a speech. And he said China was going to keep a positive, and open attitude toward negotiations on state-owned enterprises, digital environment - he didn't say labour. But he touched on a lot of these topics. And I think this is part of China's campaign to try and convince others that they are ready. And they're willing to make changes. Where I have serious scepticism is on two issues. David raised one - their track record in following through and implementing these commitments. Let's just look at what's going on with Australia now. I mean, China has a free trade agreement with Australia. And yet it is limiting imports across a wide range of products, with no explanation and no FDA immediate consultations about how this could happen. So that doesn't suggest a great track record. And there are obviously areas in the WTO, where there are concerns that China's regime doesn't live up to the standard.
David Henig
Although it was interesting RCEP comes into force while that's going on. So Australia, clearly is having to sort of hedge their bets a little bit on that as well.
Wendy Cutler
I couldn't agree more. And I think this gets into kind of the next point where I agree with you, and this is a message I'm sharing in Washington as often as I can. And that is the don't rest on your laurels here just because it looks like China can agree to these provisions on high standards. Because I think once you start looking at existing CPTPP membership, and you look at their ties with China, as well as kind of a feeling that maybe it's better to get China under the tent. And, you know, try and get them to reform using CPTPP as the vehicle.
Andrew Bowie
I suppose the question there is ‘could membership of the CPTPP change China?’ Now, I suppose many people thought that bringing China into - I don't want to use the phrase either David isn't a fan of it - but into the western model of capitalism would lead to an eventual upsurge in demand for representative democracy within China. We obviously have not seen that. So are we being a bit naive to think that its membership of the CPTPP could change how China does business? And goodness, the question, of course, would countries like Australia, and Canada who have been very vocal in their criticism of the Chinese Communist Party, be likely to allow this application? Or do will they actually just see it in purely economic terms? Sorry, but that's a big issue.
David Henig
A thought occurred to me because it's such a big question. I'm going to just take a thought experiment here. Let's say you are a country in the CPTPP, Australia or Singapore. And you compare what China is offering you with what the EU or the US is offering you right now. What is the US offering you? Well, not very much actually. We're going to talk to you but we don't really want your imports, we don't really want your trade, we'll just kind of talk to you. The EU yep, there are trade agreements already. But again, the EU is starting to say, look, actually, we want you to follow our rules in future on low carbon, we want you to follow all our new Green Deal regulations. We're not really sure we want your inputs, either unless they stick to our regulations. And then you've got China saying, let's just have a trade area free of tariffs, we're not going to force you to change your regulations, we might put you under political pressure, but we're not going to force you to change your regulations. Which of those is more attractive. Um, I'm not saying it is. But I'm saying we don't think about it like that. And so you know, and in a sense, I'll be quite critical of UK trade policy, because I don't think we're putting enough of ourselves and our interests into some of our free trade agreements. But if you look at it in comparison to the EU or the US, who are more or less saying, 'actually, we don't really want your imports at all,' we look like saints. And so I just think this is where I really want us to go and while I'm sort of sounding the alarm a bit on China and CPTPP, don't assume this can't happen. Look at what's actually happening with China in comparison to what other countries are doing, and think to yourself: 'the West is no longer the side of the good, necessarily.' I think we've got a problem, then we need to get back onto the West as the side of us being on the side of the good. And that means we actually have to offer something, we actually have to make a sacrifice.
Andrew Bowie
I couldn't agree more, David. Wendy coming to you in a second. But I'm also asking if anybody wants to ask a question, please put it up on the Q&A function or on the chat function. I'll try and get to them very soon. Wendy?
Wendy Cutler
Yeah. So again, I couldn't agree more with David that we cannot assume because China can't today live up to those high standards that other CPTPP countries are going to block their entry. I think certain countries have already expressed some scepticism. Other CPTPP members have been much more open - Singapore and Malaysia would welcome China into the CPTPP. I'd remind everyone there are kind of two stages to CPTPP accession. And really, the first threshold is establishing a working group where the actual accession negotiations would begin. Those are underway for the UK. But CPTPP members have not taken a decision on establishing a working group for China. And in my view, that's a very important decision. Because once you start the negotiations, and China kind of gets its nose under the tent, over time, even though they may not become a full member of the negotiations went on for a number of years, they would in some ways become a de facto member They could be observers in meetings, people would be concerned and want to take China's input as they develop new rules. So I always remind people, let's look at the front end of the process, which I think is equally as important as the back end. I don't think that China in saying it wants to join CPTPP is thinking like, oh, in a year, we'll be in. I think they probably have a longer time horizon there. But that's okay. And let's remember WTO accession for China took 15 years. And so I just think that people who focus at the end are kind of missing the point or the front part of the process, which is important, and I think consequential.
Andrew Bowie
It's very interesting. So I mean, just sitting here is a question that's been sent in and it just occurred to me, there might be this very same discussion going on. I doubt it very much. But there might be this very same discussion going on in Beijing at the minute looking at whether or not it would be in China's interest for the UK to gain membership with the CPTPP. And James London actually asked this question, what do you believe to be the CCP's view of the UK and its likely acceptance into CPTPP?
David Henig
I thought, and this is something we need to we actually should come on to. So I'll try. I would have thought that China welcomes the potential for the UK to be in CPTPP.
Andrew Bowie
The reason I asked David is the timing was kind of apposite. Their application for membership came the day after the announcement of the AUKUS deal.
David Henig
I suppose there were some comments at the time saying this was quite coincidental. I think it was the speed with which a decision would need to be made in China that it seems unlikely to have been linked. I'd have thought the Chinese would want a trade agreement, which includes the CPTPP countries and the UK, because those rules of origin provisions that regional integration really helps them and then helps them to sell into the UK. Now, slightly different question for the UK. Does the UK want a trade agreement? Now, for understandable reasons, I think the UK Government has not really said anything about China's accession. And I think I understand that I think if you're trying to join a group of countries, you know, I don't think it's a good idea to run your club like this.
Andrew Bowie
Until you're in the club, you should restrain yourself and refrain from giving advice on how the body members should conduct their affairs.
David Henig
I can understand why they wouldn't do it. Yeah. But fortunately, we're not restricted in that way. So we can speculate - I think it would be a tricky situation for the UK. I think that we would, ultimately, we would probably have to just go along with the majority opinion. But I do think that we need to have a bit more thought about whether there's more of an economic impact that we get from a trade agreement with China, and indeed the other way around. And I think this comes back to what I've been saying about CPTPP. There's been talk a lot about whether the CPTPP grows as an agreement, whether you could do more with it. And I think that from a UK point of view if China was going to come in, I think you'd really want to say, well, human rights, yes, and labour and many areas there, but also in terms of actual market access. In terms of services in terms of investment restrictions, would we not want to get some pretty strong commitments from China, such that even if not all of them are quite met, a lot of them were and would that actually be achievable? So, there are quite a lot of questions I have about that way around. But I think if you were having this meeting in China, well, you wouldn't be - it probably will be closed down by now - but I think that they would agree that actually, they would like the UK in.
Wendy Cutler
Maybe I can add there. If you're in Beijing, let me just have another wrinkle. Are you thinking that if the UK gets in, is that another country that is going to align itself with Japan and others and try and make it really difficult for China to join the agreement, particularly if the UK feels that during their accession, their feet were held to the fire and the CPTPP countries weren't showing a lot of flexibility? Would they feel that maybe the UK joining doesn't work in their interest? So I think it's more of a complicated kind of analysis by them with pros and cons.
Andrew Bowie
Wendy, Leticia has sent in a question, kind of linked to this. We've talked about the UK. That's what the title of this debate is. That's great. UK entrance into the CPTPP. And we hope by the end of the year, we're gonna have good news in that, and China's application, and what that means. What would China's entrance mean, for a possible US accession to the CPTPP? What does a larger CPTPP mean for the EU projects of exporting its own high regulations?
Wendy Cutler
That's just a great question. I think, you know, the Chinese application to join CPTPP was a wake-up call in Washington, right? Because again, even though we all knew that China might be interested, the fact that they actually made that formal step came as a surprise. And so it comes at a time where the United States is just not showing a lot of interest in pursuing trade agreements, although it will soon be launching a new Indo Pacific economic framework, but that's different from a trade agreement, like the CPTPP. And so number one, it's a wake-up call, but what I would think that if accession negotiations begin in earnest with China, I think the US will become less interested in the CPTPP. I just don't see a political climate where we could enter into a trade agreement with China. China, again, at a time when its economy is becoming more state-run, you know, less market force driven, becoming more restrictive the way it's handling the application and use of data. And with all the human rights violations, it would just drive the US further away from the CPTPP.
David Henig
Sorry Andrew, I'm now going to sort of half do your job. I listened to what Wendy said and I sort of hear it with slight horror that the US will kind of withdraw further from global trade or any attempt at trade/trade leadership.
Wendy Cutler
I'm not necessarily saying that, but the CPTPP being that vehicle, I think that we would have to find another vehicle on trade then.
Andrew Bowie
I mean, it's fascinating because we're dealing in hypotheticals now, obviously, but the hypotheticals may very well become real issues in the very near future. And I think David's right to express concern. I mean, if the US was to withdraw further from global leadership on trade, what would that mean, for what we've just been talking about, about the West taking a leading role? Because we all know what free trade can do and the good that it can bring in? And if the US was to retreat further, is it possible - this is me just discussing this with some colleagues in a very informal manner this morning -after trade questions. I come to David first, is it possible that the US gets a veto on Chinese membership of the CPTPP through existing members and allies of the United States so that this doesn't become an issue for the US in the long run?
David Henig
I'd seen the story in the FT saying that US policy analysts or foreign policy analysts thought that that was not going to be possible beyond a certain number of years, that presumably didn't think that Japan, if we're referencing them, could actually be the ones who are holding out that long. I don't know enough about it. But I think that wake-up call - I'm just wondering Wendy - can we replay it frequently in the US, and probably in other countries as well. What I feel is that quite a few countries need this wake-up call. China joining the CPTPP is bringing a lot of issues to the surface here about the way we think the trade system should work. The worry is that where we're headed is that China is the one trying to join everything. The EU says we'll trade with you if you meet our rules. And the US says we don't want to trade with you at all, I paraphrase, unless you buy Microsoft or Apple or something. It's a quite scary prospect. You feel there's a need for a sort of wake up call. Meanwhile, the WTO is going nowhere in particular right now, again, because the US and now to a degree the EU is pulling back. And even in the UK, it sometimes feels to me that we're involved in a sort of result of leaving the EU discussion between the EU and the US over which one we would prefer to be aligned with? That's not the right question. The right question is, can we align with both?
Andrew Bowie
How do we be better aligned with both? Absolutely right. Wendy, do you have any come back? I can throw in another really difficult question as well. In just over two years time, we're gonna have another presidential election and the administration in Washington may change. And dare I say it maybe even more averse to free trade agreements, as they stand if the favourite for the Republican ticket does get the nomination and the rest follows through. So, how will that impact America's position on the CPTPP and whether China can join and everything else?
Wendy Cutler
So just a couple of points here, just to highlight this Indo Pacific economic framework that the US is now hard at work on. My understanding is that will be unveiled to the region in the short term and will include a trade component. Now, it won't, from what I understand, include market access, this is not going to look like a traditional trade agreement, but it will include a trade element, it will include resilient supply chains, green technologies, etc. So, when we talk about US trade leadership, I hear what my colleagues are saying on that. But I think we will see some US economic leadership in the region, which I think will be welcomed by other partners. Now, when they compare it to China's move to join the CPTPP. Will this pass the red face test, we'll have to see because we don't know the details of this framework. So that's number one. Number two, in terms of, you know, the US influence or ability to get other existing CPTPP countries to turn down China's bid and not even establish a working group. Look, I'm I'm sure the administration's having some private conversations with other countries. And countries like Japan and Australia, in particular, at least at the current time, are very sceptical and concerned about the implication of the Chinese application. But I think over time, they're going to be hard-pressed, at least to block the establishment of a working group, given their extensive trade, supply chain, investment ties with China. The two countries I would just put on the plate - Canada and Mexico. I would remind our viewers that under the USMCA, there is a binding provision about how negotiations with non-market economies - codeword for China - should take place under this agreement. Now, there's not an overall veto power by the United States, for Canada or Mexico entering into a trade agreement with China. But there are provisions where the US has a little leverage where there are calls for transparency and calls for the United States at the end, to see the full text before it's signed, presumably, so we could offer our views. But, again, I want to put that on the table, as well. And just with respect to your last question. I mean, I understand the sense of where we are in trade, and as someone who worked at USTR for 30 years, when we were in a market opening rules-based quest globally. Things really changed. But I think people should just keep in mind that even under the Trump administration, NAFTA, which was thought of as the worst trade agreement ever, even probably worse than TPP, was renegotiated and then passed by Congress, by an unprecedented bipartisan majority. So to say, like trade is dead, and we're not going to do any trade agreements, in any administrations going forward - I can't agree with that. But I couldn't agree more with that we're not going to play that leadership role in the trade arena globally, that we played for the past 70 years. Those days are over, regardless of which administration from which party comes in.
Andrew Bowie
It's quite sad to hear you say that Wendy, but I appreciate your knowledge and your candour. David, at the very beginning of the chat, you mentioned that there could be a potential conflict with potential EU carbon border levies. Can you expand on that please? What did you mean by that?
David Henig
Well, that's coming into the global trade system. So the EU intends to start adding to the costs of importing a carbon border adjustment for those countries that don't have carbon pricing systems in place. It's not obvious that this is in line with WTO rules because it's going away from the same tariffs being applied to all WTO members, but nor is it obvious that would stop the EU from doing what it is going to do. You don't really get any climate language in the CPTPP, so that's not much help to us. It's a problem for the UK: you then get the EU and the US at least they're cooperating but they're cooperating from going backwards in having the steel agreement which somehow is going to create a low carbon club of steel producers (we're not entirely sure what that is, possibly because they aren't either). And it all gets very messy - so I'm not sure that helps the discussion. I'm not sure it necessarily makes it more complicated, just makes it a whole complicating factor. On complicating factors, Andrew, I don't know if you're going to mention Taiwan as well, because there's another complicating factor.
Andrew Bowie
I was just coming to Taiwan. I thought I was having to deal with one complicating factor at a time.
David Henig
But essentially the EU is moving. So as the US is withdrawing in its way, the EU is going through the stage of saying 'we want more of our rules to be met.' It's not just carbon border adjustment. You now have President Macron saying that the French want to have mirroring tools in trade agreements, which is you have to meet our regulations for how things are produced in order to export to us. Leticia's question earlier on the US, the second part of the question was on what this would mean for the EU's exporting of its own regulations. People still want to export to the EU, so they will still where necessary will follow rules. I don't think the EU will be able to go through with everything it actually wants to do. I think it will do the carbon border adjustment. I don't think they'll do the full marine clause. I think the EU's ability to set global rules will slightly diminish over time, it won't disappear. But it'll apply only to certain areas. And again, there's a danger the EU gets left behind out of all this as well. So I think that's where it comes to, I'm just not sure how much the EU are players when it comes to CPTPP, though the former EU trade commissioner Cecilia Malmstrom suggested the EU join CPTPP. That's almost certainly not going to happen, because the idea of the EU signing up to somebody else's rules is very, very unlikely.
Andrew Bowie
Unconscionable, I suggest the view from Brussels would be. Wendy, did you have anything to add there? And as David raised, the complicating factor of Taiwan, and our stated obligations, and indeed, the stated obligations of many members of the CPTPP. to Taiwan, and what Chinese applications to join, because let's not forget, Taiwan has expressed an interest in joining as well. And of course, what might happen there? So where do you see that?
Wendy Cutler
If China's application wasn't complicating enough, the fact that Taiwan put an application in to join CPTPP, just six days later, made things really messy. You had asked earlier, there was a coincidence in timing with China's bid being put in the day after AUKUS was announced. There's also speculation that China applied when it did because it was concerned that Taiwan may submit a bid before it, and it didn't want to be second in the queue behind Taiwan. So I just share that with the audience. We don't know, the actual deliberations in Beijing. It sounds credible good to me, I have to say. Yeah. You know, the whole order thing was a big deal in the WTO accessions by both economies. Now, the CPTPP accession provisions explicitly talk about customs territories, like Taiwan, being able to become a member. And so, according to their rules, they should accord the same type of assessment to Taiwan's application as to all other members. But let's be honest, politics enters into this equation very quickly. I think a number of CPTPP countries are going to be extremely cautious and nervous. We've already seen China putting pressure on CPTPP countries, not to even consider the Taiwan bid, basically to return the envelope with their bid back to Taipei. And we've also seen other countries like Japan being very explicitly supportive of Taiwan's application. And to complicate things further, I don't think it's a stretch to say that Taiwan, at least in terms of its trade regime is a lot closer to adhering to CPTPP rules than China. It wouldn't be a slam dunk, accessioned negotiation - it will take time with some of the agriculture provisions and market access, I would say is extremely sensitive. But again, I think this is just going to complicate things further. And this kind of leads me into these UK negotiations. I think that the CPTPP members, given the different views among them, and also given all these complications, may want to delay making any decision as long as possible on these applications, and therefore may look to use the UK negotiations as the rationale for not making a decision on China and Taiwan applications. And so, therefore, maybe these UK negotiations take a little longer than they would have under normal circumstances because the CPTPP members may think, 'gosh, the minute the UK is in and we're done with them, then all attention will be what we're going to do on China and Taiwan.' And I would just say one other implication that we'll have to see is that if I were a CPTPP member now, knowing that China is going to be watching the UK accession negotiations very carefully, I would want to make sure that I offered the UK as few flexibilities as possible for membership, with the idea being that if CPTPP members are too relaxed with the UK, then China is going to say: 'Hey, you did this for the UK? Well, we're a lot bigger and these are the flexibilities we need.' So I just put those two kinds of connections on the table. And I already see David shaking his head.
David Henig
No, I agree. But I think it affects how I would want the UK government to approach this. You know, I think we've been pretty gung ho on all our trade policy so far. And that's for understandable, domestic political reasons. But I think that I really would like to see the UK government perhaps acknowledge some of the difficulties, or at least be seen to be promoting some sort of discussion around some difficult issues, to be being seen as a helpful player. I worry that the UK government is very much sort of in the mode, where it just thinks this will be relatively straightforward, not seeing the wider politics. And I think that it would be useful for us to show that we understand it and that we're going to be not a problem when it comes to being a member of CPTPP. So there may be a wider piece to go into here. I'd like to see the UK do that anyway because I still believe we're at our best when we can be a convener and a facilitator of others. And I think we have an opportunity to maybe just slightly change tack here and be more of a facilitator of discussions around the future of trade. And that then makes people think, well, we should have them in CPTPP: as well as being a large market, they're useful. They're good people. I think I just feel we've gone away from that in the last few years. And actually, it needs us more now.
Andrew Bowie
That's great. You wouldn't expect me to disagree with you at all on any of that, David. We're running very short on time, this hour has flown by. So I'm just going to come to a couple of summary questions, one for each of you, to sum up what we've spoken about. So David, starting with you - is the CPTPP an endpoint for the UK? Or could it be used as the basis from which to build new high standards partnerships for this country?
David Henig
That's a good question. No, it shouldn't be the endpoint. There should never be an endpoint in trade. And it actually slightly worries me that, you know, we're in kind of that at the moment. No, I'd really like us to be a little bit more proactive in thinking 'you know, what are the what are the things that we should be doing and moving out beyond the FDA?' I think the reason we went into a Free Trade Agreement space - Australia, CPTPP - was a government needed to prove itself that it could do it. I understand that perfectly - all governments, all ministers want to sign pieces of paper, that is understandable. Hopefully, once we've signed a few, then we can relax a little bit more into our role and say, 'look, it's not just about signing pieces of paper, can we push the debate further?' I would like to see us try to help facilitate the conversation on, for example, climate change and trade and say: 'you know, okay, it's interesting, the EU is trying to do this thing. We're not necessarily against what the EU is doing, but the way in which it's being done. Looks like it's potentially going to be really tough on the whole world trading system. How can we do this in a better way?' So I would like us to move beyond it. I understand the reasons for joining CPTPP. I hope we're going to end up being successful even if it might take a while longer, but yeah, I don't want it to be the endpoint for the UK at all.
Andrew Bowie
Good to hear. And Wendy, final question for you. With your crystal ball gazing into the future over the next 12 to 18 months. What do you envisage the developments being within the CPTPP - other than the UK acceding - and then what should we be looking out for?
Wendy Cutler
So if I had to predict, yes, I think the UK will be a full member. We need to keep in mind that three of the 11 CPTPP countries have yet to ratify and become parties to this agreement. These include Brunei, Malaysia and Chile. I would hope that they would finish their domestic ratification procedures and become full members. And I think we will see a working group for China established soon after the UK negotiations. The big question mark, for me, well, how will Taiwan be treated? I hope we also see a working group for Taiwan, and I hope the CPTPP countries stand firm on that - either you do both or you don't do either. Because, again, their procedures allow for customs territories to join. The CPTPP is getting a little old now and it needs to be updated. And I'm not just talking about the digital chapter, I'm not just talking about the environment. But there are a lot of new challenges in the trading arena where I think CPTPP members could really improve the agreement and expand it. I don't know if they have the bandwidth to do that, particularly given these accession applications. But one thing about our trade agreements, if you think about TPP, CPTPP, many of those rules were based on proposals that were put on the table about 10 years ago. So I think an update and maybe adding some new issues to the CPTPP plate would be in order. It's easy for me to say that our government isn't a member of CP TPP. But actually, I would just conclude and say, I think we should all be encouraged by the interest by accession partners in the CPTPP. It did look pretty static and there is a lot of movement now. And I think by the UK taking the bold move to apply, I think that really open things up. So I really wish my British colleagues the best of luck in their CPTPP negotiations. And I'm rooting for them to become full members by the end of this year.
Andrew Bowie
Wendy, David, thank you so much for your time. That has been a genuinely fascinating discussion. Thank you everybody who submitted their questions and took part. There's a lot going on in the world of trade right now. But I think this issue of the CPTPP, where it goes in the future, and China's membership of it, is possibly one of the most important things that we should be looking at over the next 12 to 18 months. So thank you so much for taking the time to talk that through with us and to people who have joined us. If I could speak to everybody who joined and remind you that the next event the CRG is hosting is on China's tech landscape. And that's on Wednesday, February 9th, and you'll be more than welcome to join. But thank you so much everybody for joining this afternoon.