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Working Papers / Global Economics: Trade Investment and Development

2017

TPP, American national security, and Chinese SOEs

Author(s): Raj Bhala

Topic(s): Trade, Investment and International Cooperation //

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ABSTRACT

Free trade agreements (FTAs) are about far more than free trade. They are about national security. A trade deal may be ambitious in liberalizing or managing cross-border flows in goods, services, intellectual property (IP), and people. But, to argue for or against an FTA solely along the axis of free-versus-managed trade is to miss another vital purpose the deal can, and indeed should, advance: national security. This article makes two points. First, TPP exemplifies the possibility of national security enhancement of the United States. That may occur through the containment of China and its ruling Chinese Communist Party (CCP). Second, the debate over the definition of “state owned enterprise” (SOE) is one among many illustrations in TPP of the link between national security, trade, and containment. The 12 nations negotiating TPP were aware of this link, and deliberated the definition of “SOE.” TPP excluded the Middle Kingdom from the founding members, while the founders wrote TPP rules to bind China if it subsequently joined the deal. Chinese SOEs were of concern to them, for bona fide national security reasons, and so also were legitimate sovereign interests in providing goods and services through their own SOEs. The evaluation by America and its 11 TPP partners, as to which entities should be included in the scope of SOE disciplines, led to a set of clear rules.