IN THIS EDITION: Two Sessions begin, Experts weigh in on likelihood of China and Chinese Taipei’s entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership

China’s Two Sessions begin

China watchers have their eyes on the Two Sessions, the annual meetings of the National People’s Congress (NPC), and the Chinese People’s Political Consultative Conference (CPPCC) which began on March 4. There are significant policy announcements expected to come out of the sessions this year, including a new five-year plan, changes to Hong Kong’s governance, and tech developments. The groundwork for the five-year plan was laid during 2020’s Fifth Plenum discussions. Canada West Foundation hosted an Arthur J.E. Child POP UP POLICY session on the impact of China’s fifth plenum and the five-year plan on western Canadian trade. Watch it here to get the background story and implications before the two sessions wrap up. 

In his work report to the National People’s Congress, Premier of the State Council of the People’s Republic of China Li Keqiang said that China was actively looking at joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Canada is a signatory to CPTPP. Read our spotlight feature at the end of this brief for more on what experts see on two fronts, the likelihood of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu joining and what this could mean for Western Canada. 

Food security and shipping shortages impact peas

As China continues its push for food security, the country is working on phytosanitary agreements with Russia and Ukraine for peas. Canada is currently a top exporter to China for peas but shipping overseas can take up to a month. Russia and Ukraine can get their peas to China by rail or overseas; one estimate says that Ukraine could have peas to China in two weeks.  

Rail is ideal as the shortage for shipping containers, detailed in a previous China Brief, continues. Meanwhile, 70 American agricultural associations have sent a letter to President Biden which asks him to take measures to ensure products can get into containers and out to the market.  

Mark Hemmes, from Quorum Corp, said that he saw port issues resolving by May or JuneHemmes spoke to this issue and others facing Canadian grain exports from farm to port in a recent interview. 

The pressures on peas and other exports come even as exports to China increased 18 per cent at the Port of Vancouver in 2020. Overall, canola shipments increased 45 per cent, barley 37 percent, and wheat volumes 25 per cent. As this relationship booms, it comes in light of the genocide vote which the House of Commons took two weeks ago. In a recent Western Producer op-ed, Kevin Hursh made the case for Canada to reconcile the economics of the China-Canada relationship, particularly in agriculture, with morality. Hursh argues that Canada cannot make this reconciliation alone, rather with multilateral partners to avoid serious economic repercussions felt in the past. 

Chinese Ambassador’s press conference, Canada’s response

Chinese Ambassador to Canada Cong Peiwu held a virtual press conference to respond to the genocide vote and took questions related to the Meng Wanzhou and the cases of Michael Kovrig and Michael Spavor. The ambassador called the genocide “the lie of the century” and denounced the House of Commons vote as political to gain points. The ambassador also said there was no connection between the Meng Wanzhou case and detention of Kovrig and Spavor. 

Prime Minister Trudeau responded to say that the detention of Kovrig and Spavor was tied to the Meng Wanzhou case and that the two Canadians were detained on “trumped up charges.” The Prime Minister also said that the international community could take action over genocide concerns and China could face repercussions.  

Meanwhile, the Meng Wanzhou case continued with defence lawyers expected to argue for dismissal on two fronts. The first argument is that then-President Trump politically influenced the case. The second argument is that Wanzhou’s rights were violated when Canadian Border Services detained and questioned her for three hours before the RCMP issued a warrant for her arrest. International law expert and UBC professor Michael Byers sees the second argument as more likely to succeed than the first.  

Challenge to China’s hold on rare earth minerals

Neo Performance Materials, a Canadian company, and two American companies, Energy Fuels Inc. and Chemours Inc. joined together to edge into China’s hold on the rare earth minerals market. Neo Performance and Energy Fuels Inc. have found a way to use monazite sands, which Chemour Co. will supply, to produce the minerals.  

Taiwan’s ‘freedom pineapples’

China recently announced a ban the import of Taiwanese pineapples over concerns of harmful organisms/creatures; Taiwanese authorities said the move was political. Taiwanese president Tsai Ing-wen dubbed the fruit “freedom pineapples” and encourage people to buy them. The Taiwanese people responded and purchased a year’s worth of pineapple exports to China in four days. Canadian and American officials on the island supported the Taiwanese pineapple industry and posted social media photos with the fruit.  

Everything Else

  • In a different sort of pandemic headline from Global News, Japan has asked China to stop subjecting its citizens visiting China to anal (instead of the more common nose and throat) swab tests for COVID-19. American diplomats were another group reportedly being targeted, though this has been denied by the Chinese government.  
  • In confirmation hearings, Katherine Tai, the nominee for United States Trade Representative, used a line heard often from the Canada West Foundation about a path forward with China. “China is simultaneously a rival, a partner and an outsized player whose cooperation we’ll also need to address certain global challenges […] We must remember how to walk, chew gum and play chess at the same time.”
  • New regulations from the China Banking and Insurance Regulatory Commission have disrupted Ant Group. The regulations affect joint lending on internet platforms and require the platforms to provide 30 per cent funding on loans and banks cannot outsource risk management of those loans to platforms.  
  • Chinese fintech company may withdraw its public offering. The move comes in light of the Chinese government’s November declaration that fintech companies were engaged in monopolistic actions and the new regulations. 
  • The Economist takes a look at how the U.S. can “break the deadlock” between China and Canada in this article (paywall)  

Spotlight Feature

The Question 

“On trade, Canada’s best path forward in Asia is expansion of the TPP, the more the better. With the Biden administration putting trade on the back burner to protect its domestic agenda and mid-term election prospects Canada’s best chances of expanding the agreement lie elsewhere. The UK has already begun to apply and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu is prepared to apply as well. China has also floated hints of being interested. What are pros and cons for Canada of Chinese Taipei and mainland China joining? What are the likelihood of having either enter?” 

The Insights 

The views expressed in this section are opinions and do not necessarily reflect the views or positions of the Canada West Foundation or the China Brief authors.    

Bart Édes, Distinguished Fellow, Asia Pacific Foundation of Canada, former North American Representative, Asian Development Bank, and Senior Associate (Non-resident), Project on Prosperity and Development, Centre for Strategic and International Studies. Montréal, Canada. 

Expanding the CPTPP’s membership would boost the competitiveness of Canadian exports in more markets. Taiwan would make a terrific addition to the pact and has already signalled its interest in joining. That said, current members will weigh the economic benefits of admitting Taiwan with the undetermined cost of antagonizing Beijing, which has opposed Taiwan joining the World Health Organization and becoming a founding member of the Asian Infrastructure Investment Bank.  

Chinese President Xi Jinping has said that the PRC would actively consider joining the CPTPP. Although Canada would clearly gain from improved access to the enormous Chinese market through the multilateral accord, it’s doubtful that Beijing would agree to meet certain provisions, like those pertaining to labor standards and support to state-owned enterprises. It’s also unlikely, at least in the short term, that current members would agree to weaken the agreement to accommodate the PRC. The Asian giant already enjoys preferential trade terms with most CPTPP members via the Regional Comprehensive Economic Partnership, which includes all ASEAN members and several high-income countries, such as Japan, Australia, and New Zealand. 

The next member of the CPTPP may well be a country that doesn’t border the Pacific Ocean – the United Kingdom, which is the third leading importer of Canadian goods. The UK has already applied to join the CPTPP, and negotiations on its admission will certainly involve less geopolitical drama than would accession talks with either Taiwan or the PRC. British participation in the CPTPP would increase the combined GDP of the accord’s members by more than 20%.  

Embassy of the PRC in Canada, Ottawa 

China is favorably considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. We are currently carrying out assessment, research and in-depth analysis on all CPTPP provisions. China has already had informal contacts with some members of the CPTPP, and plans to have further informal contacts with other members to communicate at the technical level on issues involved. 

Taiwan is part of China. Any country that has diplomatic relations with China should not discuss or sign any official agreements and deals related to sovereignty with Taiwan. Taiwan’s participation in regional economic cooperation should be based on the one-China principle.

Stephen R. Nagy, PhD, Senior Associate Professor, Department of Politics and International Studies International Christian University (ICU); Distinguished Fellow Asia Pacific Foundation, Canada; Fellow, Canadian Global Affairs Institute; Visiting Fellow, Japan Institute for International Affairs (JIIA); 2018 AIF Fellow, Center for Strategic and International Studies, Tokyo, Japan. 

Canada should proactively work with current CPTPP members advocate new members from this 21st century Indo-Pacific trade agreement. Key candidates include the UK, South Korea, Thailand, and Taiwan. They have the existing regulatory frameworks, transparency and commitment to rules-based trade making them appropriate and feasible candidates.  

Taiwan’s advocacy will need to be delicately managed. This is best done through adopting BRI precedent. Beijing has proactively sought out new BRI members without consultation with central governments as we saw with the state of Victoria in Australia. a similar approach should be done with Taiwan. This strategy maintains the one China policy that is the basis for formal relations with China.   

China’s floated interest in the CPTPP was performative and not realistic based on domestic economic trends in China. These include a growing role not declining roles of SoEs, growing Party influence in the economy, continued lack IPR protection, loose environmental and labor regulation, and critically state intervention in the digital economy. The deepening US China great power competition, post-COVID 19 trends including the diversification of supply chains through the Resilient Supply Chain Initiative (RSCI), semiconductor manufacturing relocation, and a growing trend to recalibrate trade portfolios with China suggest that its candidacy is a non-starter for current members. Also, the US has already legislated its position on trade with China evidenced in the nafta 2.0 agreement with a legal right to be notified if Canada engages in trade negotiations with a “non-market” country.

Dr. Jeffrey Wilson, Research Director, Perth USAsia Centre, University of Western Australia, Perth, Australia 

CPTPP expansion poses complex choices for the existing membership. There are now eight countries – Korea, US, UK, Indonesia, Philippines, Thailand, China and Taiwan – which have expressed interest of some form in joining the agreement. With the UK the first country to lodge a formal accession application in February, the expansion process is now underway. Yet there remains questions for how to prioritise the potential new members. 

One approach would be to begin with a comparatively ‘easy’ candidate. This recognises that the CPTPP accession mechanism has never yet been used, and given the complexity of the agreement would benefit from a more straightforward ‘test case’ to set procedural precedents before moving onto more challenging accessions. By this logic, Korea and/or the UK should be first in. Both are developed and market-based economies, whose policy settings are already close to existing CPTPP standards.  

An alternate approach would be to prioritise growing the size of the bloc. This is informed by the desire to make the CPTPP a “high standard template” in the global trade system, which requires greater scale to achieve systemic impact. For this objective, a return of the US should be top priority. US accession alone would almost triple the size of the bloc – from 13 to 37 percent of world GDP – and re-establish the CPTPP as the largest regional trade agreement in existence.  

Yet another approach would be to bolster its credential as a regional agreement. At present, the CPTPP had patchy regional membership: only four of the ten ASEAN states, and one of the three Northeast Asian economies. Targeting new members from the region – particularly a large Southeast Asian economy like Indonesia – would improve its claim to be a platform for the next phase of regional economic integration.

Roy C. Lee, Senior Deputy Director, Taiwan WTO & RTA Center, Chung Hua Institution for Economic Research, Taipei City, Taiwan 

Taiwan has been highly interested in TPP/CPTPP since the start of TPP negotiations in 2015. In the past five years, Taiwan has continued to create conditions for joining by way of adjusting its industrial structure and promoting regulatory harmonization based on the level of liberalization of the CPTPP. It is my observation that Taiwan is now well prepared at the domestic front. Nonetheless, Taiwan has yet made former request to start the accession process. 

For Taiwan to become a CPTPP member, the pros are: Given the level of readiness, Taiwan’s accession negotiation, notwithstanding geo-political challenges, is expected to be a quick, “low-hanging fruit” style process;  Taiwan is able to bring in an important missing link in current CPTPP membership, considering Taiwan’s center role in the global semiconductor, electronic and ICT supply chains, thus increasing the level of completeness of the CPTPP that is able to map more efficiently with the global supply chain; Taiwan is by most criteria a like-minded and trusted economic partner to all existing CPTPP members. This is of particular importance given the fact that the quality of like-minded and trust are becoming key considerations in the global supply chain reform process. 

The cons for Taiwan to become a CPTPP member are: Considering the current tension between China and Taiwan and China’s potential interest in CPTPP, Taiwan’s accession might be creating pressure for Canada and other existing members to observe the “One-China” policy, as well as creating complications for China’s CPTPP participation; Canada’s support for Taiwan might be resulted in creating new complications to the current tension, or attract China’s additional coercive action against Canada. 

– Stephany Laverty, policy analyst

The China Brief is a compilation of stories and links related to China and its relationship with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.