Should China Join the New Trans‐Pacific Partnership?

• Author: Michael G. Plummer,Peter A. Petri
• DOI: http://doi.org/10.1111/cwe.12319
• Published date: 01 March 2020
• Date: 01 March 2020

China & World Economy / 18–36, Vol. 28, No. 2, 2020

18

©Peterson Institute for International Economics, reproduced by permission from PIIE

Should China Join the New Trans-Pacic Partnership?

Peter A. Petri, Michael G. Plummer*

Abstract

After President Donald Trump’s ill-advised pullout from the Trans-Pacic Partnership

(TPP) and despite the absence of the US, the remaining 11 Asian and Pacic countries

agreed on a deal, renamed the Comprehensive and Progressive Agreement for Trans-

Pacic Partnership (CPTPP). The accord took effect on 30 December 2018 and provides

rigorous, up-to-date rules for Asia−Pacic trade, but excludes the region’s two biggest

economies: the US and China. In this paper, we calculate that Chinese membership

in the CPTPP would yield large economic and political benefits to China and other

members. The CPTPP, in its current form, would generate global income gains estimated

at US$147bn annually. If China were to join, these gains would quadruple to US$632bn,

or a quarter more than in the original TPP with the US. But to join the CPTPP,

China would have to undertake unprecedented reforms and manage complex political

challenges.

Key words: Asia−Pacic, Comprehensive and Progressive Agreement for Trans-Pacic

Partnership, trade agreement, Trans-Pacic Partnership

JEL codes: F4, F5, F6

I. Introduction

A year after President Donald Trump’s ill-advised pullout from the Trans-Pacific

Partnership (TPP) trade agreement in early 2017, the remaining 11 Asian and Pacic

countries1 agreed on a deal. Renamed the Compr ehensive and Progressive Agreement

for Trans-Pacic Partnership (CPTPP), the accord took effect on 30 December 2018 and

provides rigorous, up-to-date rules for Asia−Pacic trade, but excludes the region’s two

*Peter A. Petri, Carl J. Shapiro Professor of International Finance, Brandeis University and Visiting Fellow,

Peterson Institute for International Economics, USA. Email: ppetri@brandeis.edu; Michael G. Plummer,

Director, SAIS Europe and Eni Professor of International Economics, Johns Hopkins University, Bologna,

Italy. Email: mplummer@jhu.edu. We are grateful for helpful comments by Wendy Cutler, Anabel Gonzalez,

Marcus Noland, Sherman Robinson and Steve Weisman.

1CPTPP member countries include Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico,

New Zealand, Peru, Singapore and Vietnam.

Should China Join the New Trans-Pacic Partnership? 19

©Peterson Institute for International Economics, reproduced by permission from PIIE

biggest economies: the US and China.2 For the US, staying out of the agreement has

been costly: an estimated US$133bn3 in potential income will be lost annually as a result

of missed trade opportunities. Meanwhile, in the vacuum left by the US withdrawal,

several trade-oriented economies have become interested in joining the CPTPP. China

could be one of them.

Chinese membership in the CPTPP would yield large economic and political

benets to China and other members. The CPTPP, in its current form, would generate

global income gains estimated at US$147bn annually. But if China were to join, these

gains would quadruple to US$632bn, or a quarter more than in the original TPP with

the US (Figure 1). They would be even greater if other Asia−Pacic economies joined

as well. For example, a “CPTPP-16” agreement with five more members − Chinese

Taiwan, Indonesia, Korea, the Philippines and Thailand − all of which have expressed

interest, would yield benets of US$449bn per year without the Chinese mainland and

US$1225bn with it (Figure 1).

Figure 1. Potential Benets of Trade Agreements Compared: Real Income Increases in 2030

Source: Authors’ simulations.

Notes: Refer to Figure 2 for trade agreement members. Trans-Pacific Partnership (TPP) members include

the Comprehensive and Progressive Agreement for Trans-Pacic Partnership (CPTPP) members + the

US. CPTPP16, CPTPP + Regional Comprehensive Economic Partnership (RCEP) economies + Chinese

Taiwan.

2In this paper, “China” refers to “Chinese mainland,” otherwise stated.

3The US will forego US$131bn in potential gains from the TPP and will lose US$2bn as a result of net trade

diversion from the CPTPP (Table 1).