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Rethinking the Strategic Value of CPTPP in the Age of Trump 2.0 and Taiwan's Path to Membership

  • Professor of Asia University　Arata Kuno
  • 2024/12/12
  • 已被閱讀 526次
  • WTOepaper835
Trump 2.0 and the International Trade Order

The re-election of Donald Trump, who advocates "America First," will expose the international trade order to significant uncertainty for at least the coming years.

As he explicitly declared during his campaign, Trump is likely to utilize tariffs without hesitation as a tool to protect domestic industries, promote the reshoring of production bases abroad, improve trade balances, and pressure other countries. Moreover, his administration could potentially impose even stricter controls on trade, investment, and people-to-people relations with China, which is viewed as the greatest threat to the U.S., both economically and militarily. These measures aim not only to protect domestic industries but also to strengthen supply chain resilience and prevent the leakage of sensitive technologies from an economic security perspective.

To counter such unilateral actions by the U.S., Beijing is expected to introduce additional retaliatory tariffs and accelerate policies of “indigenization （國產化）” and “self-reliance and strength （自立自強）” to achieve its national goal of building self-contained supply chains. In addition to these state-led industrial policies, fierce competition with rising local companies, expanding patriotic consumption favoring local brands, and prolonged economic stagnation, multinational companies conducting business in China are likely to face increasing challenges.

Even more concerning, Trump and his advisors not only disregard the rules-based multilateral trade regime but also view it as unfair and harmful to the U.S. As a result, there is no foreseeable prospect of WTO members agreeing to revive its dysfunctional dispute settlement mechanism or to contain U.S.-centric measures through rules.

The Growing Strategic Value of CPTPP

The turbulence brought about by Trump 2.0 will undoubtedly force multinational companies, including those from Japan and Taiwan, to partially restructure their supply chains.

However, this does not necessarily mean that all countries will be overtaken by a wave of protectionism. After all, for many nations, maintaining robust economic growth while abandoning open and predictable trade and investment policies is far from easy. Emerging economies are likely to continue exploring opportunities for economic growth through participation in global value chains (GVCs). At the same time, overseas markets will become increasingly critical for advanced economies like Japan, which face challenges such as population decline. Indeed, a survey conducted by the research firm Ipsos in early 2024 across 50 economies found that while public support for globalization remains low in some countries, such as France (35%) and the United States (49%), the global average remains relatively high at 64%.

From another perspective, the uncertainty that Trump may bring about could heighten demand for a predictable and stable trade order based on rules and trust. Additionally, with the legislative functions of the WTO paralyzed, there is also growing demand for new trade rules to address economic security challenges, such as recent disruptions in the supply chains of critical products. Although CPTPP cannot fully replace the WTO, it arguably represents the platform with the greatest potential to meet these needs. The increasing number of countries seeking CPTPP membership is a clear signal of its growing strategic value.

Furthermore, the re-emergence of Trump, who even seeks to threaten U.S. allies without reluctance, provides a strong incentive for middle-power nations that seek a rules-based trade order to unite and swiftly craft rules necessary to address pressing policy challenges. When Trump announced the U.S. withdrawal from the TPP shortly after taking office in 2017, the remaining 11 members successfully united to salvage the agreement. Since then, Japanese exports to CPTPP member countries, particularly automobiles, auto parts, and steel products, have increased by 26%.

CPTPP as a Tool to Mitigate Economic Security Risks

For the reasons outlined above, the CPTPP is expected to evolve innovatively as a toolkit to address various economic security risks in the future.

The CPTPP Commission, the decision-making body of the framework, is currently progressing discussions on revising the agreement under Article 27.2.3. At the eighth Commission meeting held in Canada in November 2024, several key areas requiring focused deliberation by the next year’s meeting were identified. These included issues related to economic coercion, GVCs and supply chain resilience, and market-distorting practices, all of which are closely tied to economic security. Market-distorting practices encompass policies and informal measures such as opaque industrial subsidies, non-market behaviors by state-owned enterprises, and forced technology transfers. Japan’s Keidanren (Japan Business Federation) has strongly advocated for introducing new rules to regulate such practices within the CPTPP framework.

If these new economic security rules are integrated into the CPTPP, they could potentially serve as a future model template influencing other FTAs. Should this occur, the strategic value of the agreement would be further enhanced.

The Importance of Taiwan for CPTPP

It goes without saying that Taiwan plays an indispensable role, particularly in the GVCs of semiconductors and other electronic components, making it an indispensable trade and investment partner for existing CPTPP members. According to a previous study using “Trade in Value-Added statistics,” Taiwan is a major supplier in several industries for Japan, Singapore, Malaysia, Vietnam, and New Zealand. At the same time, it serves as a key customer for Japan, Brunei, and Chile. These facts suggest that Taiwan's accession to the CPTPP could enhance the efficiency of regional value chains while also improving the competitiveness of exporters within the region. For Taiwan, joining the CPTPP holds equally strategic significance. Membership would contribute to diversifying supply chains, boosting industrial competitiveness, and engaging in advanced rule-making processes.

Taiwan is also one of the most prepared applicants for CPTPP membership. To gain accession, three conditions, known as the so-called Auckland Principles, must be fulfilled: (1) readiness to comply with the high standards of the agreement, (2) demonstrated pattern of compliance with commitments under existing trade agreements, and (3) consensus among members. Regarding the first criterion, Taiwan has taken swift and serious actions to align its domestic laws with CPTPP rules, showing its preparedness to meet the agreement’s rigorous standards better than any other applicant. For the second criterion, Taiwan has a strong track record of respecting WTO rules. The only case in which Taiwan has been accused of a potential WTO violation involved an offshore wind auction dispute raised by the EU. Even in this case, mutual understanding was reached between the two parties, leading the EU to suspend the dispute settlement process.

Despite Taiwan’s indispensable role in trade and its efforts toward accession, no working group has been established to review Taiwan’s application since it applied for CPTPP membership in September 2021. At the 2024 CPTPP Commission meeting, no consensus was reached on Taiwan’s accession, and instead, a working group was established only for Costa Rica, which submitted its application approximately one year after Taiwan.

Pursuing Incremental Gains Through a Dual-Track Approach

Despite the disappointing decision at the recent CPTPP Commission meeting, Taiwan should continue to demonstrate its ability and willingness to comply with the high standards of CPTPP rules, reaffirming its commitment to the international community. Additionally, as a complementary measure until consensus for its accession is reached, CPTPP members and Taiwan may benefit from pursuing a dual-track approach. This involves early tangible gains through bilateral frameworks that incorporate key provisions of the CPTPP.

In fact, Taiwan has already established several bilateral frameworks with CPTPP members. In 2013, it signed Free Trade Agreements (FTAs) with New Zealand and Singapore. In 2023, Taiwan signed a Foreign Investment Promotion and Protection Agreement (FIPA) with Canada and a Trade Enhancement Partnership (ETP) with the UK, which included the announcement of negotiations in areas such as digital trade and investment. Moreover, according to the website of the Japan-Taiwan Exchange Association, over 100 Arrangements and Memoranda of Understanding (MOUs) across various fields have already been signed between Japan and Taiwan. Many of these agreements, particularly in economic domains, cover areas addressed by the CPTPP, such as investment liberalization and protection, e-commerce, financial services, product safety and consumer protection, competition law, SME cooperation, intellectual property rights, and customs cooperation.

CPTPP members and Taiwan should not only upgrade these existing frameworks to align with CPTPP’s high standards but also work to establish new rules addressing economic security risks, such as creating mutual support mechanisms in the event of supply chain disruptions. By allowing for the strategic flexibility of simultaneously pursuing CPTPP membership and bilateral frameworks with member countries, Taiwan could gain further opportunities to deepen mutual understanding with its partners and highlight its importance to stakeholders, including government officials, industries, and academia in partner countries.

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