Prime Minister Jacinda Ardern has been surprisingly quiescent when it comes to welcoming Xi Jinping's outright interest in China joining the Asia-Pacific's most sophisticated regional trade pact.
The Chinese President surprised Apec-watchers when he revealed that China would actively consider joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) tradeagreement during a speech he gave to the virtual Asia-Pacific Economic Cooperation summit recently hosted by Malaysia.
This is a hugely significant step which Chinese state-controlled media have read as signalling that Beijing may want to progress a possible reconciliation with the United States under President-elect Joe Biden and take the steam out of the trans-Pacific trade war.
There is another aspect. Xi is taking the first steps in a dance that might ultimately bring both China and the US into the CPTPP and make good on a long-held Apec (and Beijing's) ambition for a free trade agreement of the Asia-Pacific.
Among the CPTPP members are Japan, Canada, Mexico, Australia, New Zealand, Brunei, Chile, Malaysia, Peru, Singapore, and Vietnam. As host of the 2021 Apec year — which got under way formally yesterday with the first senior officials meeting hosted virtually from Wellington — Ardern has a responsibility to take on board and support Xi's overtures.
Particularly, as she will host both Xi and Biden at the November 2021 Apec Leaders meeting where the topic will inevitably enter their agenda.
There was a time when New Zealand would have leapt to notch another famous "first" in its relationship with China.
New Zealand was the first country to promote China's accession to the World Trade Organisation. First to recognise China as a market economy. The first developed economy to cement a free trade agreement with China. And first to add Hong Kong and Taiwan to that trifecta of economic partnership agreements.
Chinese premier Li Keqiang first raised the prospect of China joining the CPTPP at a press conference at the end of the 13th National People's Congress, earlier this year. Li's comments were given further credence by Hu Shuli, the respected founder and publisher of Caixin Media, at this year's China Business Summit in Auckland.
At that same summit then Trade Minister David Parker noted that New Zealand would be open to looking at this possibility. However he noted that China had yet to formally approach New Zealand or the wider CPTPP membership to consider an application for membership.
It was appropriate that Japanese Prime Minister Yoshihide Suga — also speaking during the recent Apec CEO Dialogues — should promote the expansion of the regional trade and economic agreement at a time when global protectionist impulses have deepened.
Suga's comments were interpreted as not only catering to the previously expressed UK interest in joining CPTPP, but also that of China.
Prime Minister Jacinda Ardern. Photo / Mark Mitchell
New Zealand remains the official depository for the CPTPP agreement. But Japan comes into the chairmanship of the CPTPP Commission in 2021. This rotating chairmanship will be assumed again by NZ in 2023.
"Japan will aspire for the Free Trade Area of the Asia-Pacific through the early conclusion of the RCEP agreement and the steady implementation and expansion of the CPTPP as next year's chair," Suga told the virtual summit.
New Zealand will ultimately have to decide where it sits. Does it reoccupy its prior positioning of supporting China's accession to multilateral and plurilateral agreements by actively opening the door to the world's most significant economic power? Or will China have to make an application or be invited by the commission?
If China were to join the CPTPP, it would become a member of the region's two largest free-trade agreements, neither of which includes the US. The other is RCEP.
In multiple fora, former US Trade negotiator Wendy Cutler has said China would have to make some big structural reforms and go in a completely different direction than their economy is headed if it joins the CPTPP.
"Whether we're talking about the free flow of data, open labour practices and disciplining state-owned enterprises, these are all areas that China would need to grapple with," she told a recent China conference.
At that same conference, Long Yongtu, who helped negotiate China's entry to the World Trade Organisation and was also across NZ's FTA negotiations with China, pointed to the strong state sectors of current CPTPP member nations, like Vietnam, to suggest China, should it "accelerate SOE reform", could also become eligible for the Pacific Rim trade pact.
It will not be a simple matter for China to join.
The US inserted "poison pill" clauses in its rework of trade agreements with Mexico and Canada, and Japan which says it is mandatory for a signatory country to notify the other signatories three months before settling an FTA with a "non-market" economy.
The best option all round is for China and the US to join the regional agreement.
