The Australian

Don’t Expect Beijing to Comply with Trade Rules

Senior Fellow
BANGKOK, THAILAND - NOVEMBER 19: President Xi Jinping of China enters the APEC Economic Leaders Sustainable Trade and Investment meeting at he Queen Sirikit National Convention Center on November 19, 2022 in Bangkok, Thailand. Thailand is hosting the APEC meetings this year, w
Xi Jinping in Bangkok, Thailand, on November 19, 2022. (Lauren DeCicca/Getty Images)

There are calls for an economic if not broader reset with China.

In recent days, some have argued the requirement that a mandatory negative test for inbound travellers from China is not only pointless but could set back the normalisation of relations.

On the testing stipulation, Beijing has itself to blame for refusing to release credible information on case numbers and genome sequence data, which Chinese authorities—obsessed with monitoring all aspects of society—would have.

Releasing that data is what any responsible government ought to be doing when re-engaging with the world.

More broadly, a reset will work only if there is good faith on both sides. This means preparedness to compromise and do things differently from what occurred in the past. This is the problem with the argument that the resumption of meetings with Chinese leaders should mean business as usual, and even lead to Australia supporting China’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

It is not just the opaqueness and deception when it comes to COVID-19. The record of Chinese behaviour across a long period and the future policies paramount leader Xi Jinping is explicitly committing removes any realistic possibility of good faith or meaningful compromise from the Chinese side.

Let’s begin with the strange argument being advocated by some that Beijing eventually reversing trade bans against us is a demonstration of renewed Chinese commitment to the norms of open trade and the free trade agreement between our two countries.

The politically motivated Chinese trade measures were illegitimate and probably illegal in the first place. Beijing is reconsidering these measures because they have produced the opposite of the intended political and strategic effects. Praising and possibly rewarding one side for merely ceasing to do what is wrong is an extraordinarily low standard for demonstrating commitment to free trade rules and norms.

Moreover, it is not as if China has a credible record of compliance to these cherished rules and norms, and that the past four years of actions against Australia is an aberration.

Since its ascension into the World Trade Organisation in 2001, Beijing has promised an arm’s-length relationship with state-owned enterprises, to cut back on industrial subsidies and other advantages offered to SOEs and national champions, and more recently to refrain from conducting state-backed and systematic intellectual property theft.

Instead, the reverse has occurred while Xi has doubled down on this state-led model on achieving his historic third term in power.

The Chinese Communist Party has increased its role in all aspects of economic activity. For example, more than half of the approximately 16 million private firms in China and more than 95 per cent of the 500 largest private firms have CCP committees built into their management structures to ensure compliance with party objectives. This is several steps closer to a genuine Leninist political economy rather than the retreat from it.

Then there is the issue of China’s broader geo-economic and geopolitical objectives. The Belt and Road Initiative remains Xi’s primary blueprint to build a Sino-centric economic, trading, infrastructure and supply chain ecosystem in which Chinese entities enjoy an insurmountable position of strength.

The Made in China 2025 plan is still the framework to ensure Chinese SOEs and national champions dominate global export markets in the most strategic and lucrative hi-tech sectors. The explicit endgame is to secure Beijing uncontested geopolitical leverage over our region and beyond.

More recently, Beijing has put forward its Global Development Initiative and Global Security Initiative, which elevate notions of the collective or greater good over Western ideas about universal or individual rights.

The implication is that it is the prerogative of the ruling regime to define and pursue the collective or greater good on behalf of the people to fast-track material advancement rather than leave that delicate task to one’s democratic processes or pre-existing liberal institutions.

One can now relate these embedded Chinese policy trajectories to the question of Chinese membership of the CPTPP. The CPTPP has strict provisions preventing data localisation requirements that would force firms to build data storage centres or use local computing facilities. It also prohibits the forced transfer of source code. This violates Chinese provisions such as the cybersecurity law and data security and personal information protection law, which have been enacted to create the surveillance state.

Longstanding Chinese laws and policies that restrict external unfiltered information entering in the country also would violate CPTPP standards.

Now consider CPTPP standards designed to dilute unfair advantages for SOEs and other preferred entities. Meeting these stipulations would require China to transform its entire state-led political economy, which is the primary way the CCP maintains its domestic leverage and relevance.

Neither can Beijing compromise on CPTPP calls to eliminate forced labour and allow freedom of association. These would strike at the heart of its policies in Xinjiang or the heavy regulation of and control over labour unions that authoritarian regimes must do to remain in power.

That China would objectively fail key CPTPP standards is not the end of the matter.

If CPTPP members agree to a formal working group to begin negotiations with China, as those urging a reset and an “open mind” insist, the working group is expected to negotiate in good faith with China and to try to resolve differences.

On some of the CPTPP standards, there are exceptions for legitimate public policy goals. There are guidelines, but the definition is ultimately dependent on argumentation and context. This will generate new avenues for Beijing to coerce or seduce member states to grant it exceptions or weaken the spirit or letter of the rules.

Where Beijing fails in doing so, it will offer unenforceable promises of future conduct, which is its standard modus operandi.

As we have seen with the WTO, and this time regarding an entity without the balancing influence of American or European membership, it will use its size and leverage to change the nature and operation of an institution once it is a member.

The point is that Beijing has not changed even if it is modifying its tactical approach. We seek a functional and stable relationship with an indispensable economic partner. But there cannot be an economic reset nor the return to business as usual with China.

Read in The Australian.