The Paling of the US Economic Presence in the Indo-Pacific

The United States is getting serious about its focus on the Indo-Pacific, but it has yet to make a significant move to offer something the region urgently needs: namely economic leadership. Granted, from strengthening the Quad to pressing for Europe to focus more on the region, the Biden administration has made clear its commitment to not only bolster its own military presence in Asia, but also lean more on treaty allies and like-minded countries to push back against the growing reach and strength of China. Washington’s strategy, however, continues to lack an economic component, which may very well undermine its security objectives given China’s obvious enthusiasm to fill that gap.

Questions abound about the exact timing of Beijing’s official request to join the CPTPP trade bloc, since it came less than 24 hours after Washington announced a deal for the United States and the United Kingdom to share nuclear submarine technology with Australia. Leaving aside whether Beijing had carefully calculated the timing of its announcement, China’s decision is a bombshell for the United States. China has now begun the formal process of being considered to join the Trans-Pacific trade deal, famous for its high standards.

Before China’s announcement, Washington could get away with being dismissive about Beijing’s economic vision for the Indo-Pacific and beyond. While the Belt and Road Initiative, coupled with the Asian Infrastructure Investment Bank, may provide much-needed financing for infrastructure projects in emerging markets, China’s broader economic strategy has often been regarded simply as checkbook diplomacy. The argument had been that even though Chinese capital may be sought after in developing countries, industrialized nations have increasingly become united in their frustration and indeed fear of China’s economic coercion as well as its disregard for fair trade rules.

By launching a bid to join the CPTPP, China has achieved three goals in one fell swoop. First, it has challenged the prevailing narrative about China’s economic diplomacy and economic strategy more broadly. In declaring its intent to join the CPTPP, Beijing has not only acknowledged the value of a system that is structured by U.S. allies, but it also effectively announced its intentions to introduce market reform and be prepared to abide by trade rules that it has flouted to date. As a country seeking to sign on to an established agreement, China would have little ability to alter the requirements and obligations to join, which means it would have to accept the CPTPP commitments, including adhering to its high non-tariff standards, as is.

Second, by declaring its intention to join the deal, China is challenging the United States and Washington’s own commitment to fair trade rules. Even as it continues to push for open markets, the United States is unlikely to rejoin a pact that provides a roadmap to achieve those objectives due to domestic political considerations. Even beyond deep-rooted partisanship on Capitol Hill, the fact remains that there is little appetite among legislators on either side of the political aisle for the United States to sign on to new trade agreements.

Still, the third and biggest challenge posed by China officially declaring its intent to join the CPTPP is that it is driving a wedge between the United States and its allies, even among the G-7. For Japan, which played a key role in ensuring that the TPP did not collapse altogether after U.S. withdrawal from the deal, China’s bid presents a particularly tricky balancing act. On the one hand, Tokyo has pushed for the pact to be open to new members and indeed was instrumental in shepherding the U.K. to be the first to formally request its intention to join the CPTPP earlier this year. It was a win-win for both the British government, which is seeking to map out its Global Britain strategy after leaving the EU, and for the CPTPP’s credibility, especially as it competes with RCEP to define the trade rules of the Indo-Pacific.

Less than a week after China’s bid for membership, Taiwan became the latest government to request to join the pact. Taiwan’s application has complicated the situation for CPTPP members, including Japan. For one, Taiwan’s bid politicizes the trade deal as it will become a high-stakes battleground for Beijing to further marginalize Taipei from the international community. When China joined the WTO two decades ago, both Taiwan and China joined simultaneously, thus averting the “one China” debate. Such an option would not be feasible this time around, given the drastic changes in the global economic landscape and Beijing’s unyielding position that Taiwan is a core interest. In the absence of the United States, it would be particularly challenging for countries to champion Taiwan’s ascension before China joins, or even for both Taiwan and China to be accepted simultaneously.

The looming question, of course, is the extent to which China is serious in its commitment to become ascension-ready. Although China has made considerable strides in enhancing its intellectual property rights law, governance of state-owned enterprises, for instance, remains far too weak for the country to meet the requirements to join the pact. But whether or not China is able to actually join the CPTPP is less of an immediate concern than the United States’ continued unwillingness to rejoin the trade agreement that it had created.

The United States lacks a vision for the economic landscape of the Indo-Pacific, and it is time to grapple with that weakness. It is not enough for Washington to press for issue-specific trade deals, such as focusing on digital trade. The economic leadership that is needed from the United States now is to match the rhetoric of multilateral cooperation and defending free and open markets with its actions. Without joining the CPTPP, Washington’s rallying cry will be increasingly seen as merely empty words.