The Asia-Pacific partnership on trade
The annual meetings of APEC, a leading intergovernmental forum, are being hosted in Beijing this week, with a theme of "Shaping the Future through Asia-Pacific Partnership." There are many pressures shaping the future of the Asia-Pacific region, some of which appear to be working against partnership. Among those needed to promote partnership, trade and investment are at the top.
Today, global trade is increasingly governed by a growing mélange of regional trade agreements, or RTAs. As of June 2014, some 585 RTAs had been reported to the World Trade Organization according to figures released by the organization. Of these, 379 were in force. The Asia and Pacific region boasts a long history of talks about regional trade integration, and about 30 free trade agreements, or FTAs, are currently in force in the region. In addition to the Asia-Pacific Trade Agreement (originally known as the Bangkok Agreement) and ASEAN Free Trade Area, the on-going Transpacific Partnership, aka TPP, the Asia-Pacific Free Trade Area negotiations and the 16-nation Regional Comprehensive Economic Partnership have been highlighted this year for both the great expectations and the tough negotiations ahead. Very recently, the joint statement coming from the TPP's Sydney Ministerial meeting signaled difficulties moving forward.
Today, Asian nations rely heavily on all kinds of bilateral FTAs to promote intra-regional trade with other trading partners in Asia. Because Asia is playing a dominant role in economic growth and world trade, the United States and EU have steadily advanced their economic partnerships in Asia. And yet, while the U.S. has free trade agreements in force with 20 countries, only three trading nations in the Asia-Pacific region are among them: Australia, Singapore and South Korea. The U.S. does not have FTAs with its top trading partners, China and Japan, and even though China is the second largest trading partner of the U.S., it is not included in the U.S.-led TPP negotiations. There is growing concern about how the U.S. can achieve its goal of shaping a high-standard 21st century regional pact without involving the world's second-largest economy and top U.S. trading partner. On the other hand, however, there is also concern that TPP can be completed without China. Japan continues to be locked into strong protectionist policies in the automobile industry and agriculture, while the U.S. seems unable to get the Trade Promotion Authority from Congress that is necessary for the President to swiftly implement a trade agreement.
As important as the numerous RTAs in Asia are, there is no doubt that the big prize, and the big problem, lies in how the two largest economies in the world – the U.S. and China – will structure a productive trade relationship. The first critical step toward this end was taken very recently: a very high level, albeit unofficial, proposal to consider a China-U.S. FTA was thrust into the Washington-Beijing dialogue. A new study from the Peterson Institute for International Economics, "Bridging the Pacific,"proposes a China-U.S. Trade and Investment Agreement. The authors argue that such an agreement will not only lower trade and investment barriers, but will also promote U.S. trade and the U.S. economy over the long term. Most trade economists would praise this idea, but at the same time they would also recognize the huge challenges that lie ahead. However, the book launches a necessary policy debate in Washington, and presumably a similar process in Beijing, that can build momentum toward more official pre-negotiation negotiations.
The time is ripe for serious movement forward on economic integration across the Asia-Pacific region. China, as the leader of the 2014 APEC meetings, has promoted a re-invigoration of the Bogor Goals set forth for APEC in 1995. China tested the waters for the launch of the Free Trade Agreement of the Asia-Pacific, or FTAAP, which would be completed by 2025. This goal has apparently been withheld in deference to TPP under pressure from the U.S. Nevertheless, the signs are hopeful. The new Chinese government under President Xi Jinping has recently completed the 4th Plenum of the 18th CPC Central Committee, which focused on the rule of law in China. This comes on top of stronger recognition of market forces' power to allocate resources in China. The Republican Party's control of the U.S. Congress also bodes well for TPA and more trade leadership from the U.S.
Just before heading to Beijing for the APEC meetings, U.S. Secretary of State John Kerry spoke about the Sino-U.S. relationship at the Johns Hopkins School of Advanced International Studies. Kerry said, "The U.S.-China relationship is the most consequential in the world today, period, and it will do much to determine the shape of the 21st century." Both China and the U.S. recognize that their mutual interests would be served by a cooperative bilateral relationship, though at the same time, both sides acknowledge that managing the differences of the world's two largest economies will pose many challenges.
APEC was designed as a forum for trade talks, and under Chinese leadership, this year is a perfect opportunity for boldness. The constraints created by the U.S. election have been removed. China has set forth a bold vision for the future. In Beijing, the APEC leadership can support TPP, and the leaders of the TPP nations can support the larger FTAAP plan launched by China. How to properly set up the Asia-Pacific Partnership will inevitably become a critical talking point for the U.S. and China. Trade talks between the U.S. and China will not only matter to the formation of a constructive bilateral partnership, but will also matter to the development of a comprehensive trade and investment partnership in the Asia-Pacific, and it will matter even more to the process of upgrading the world's multilateral trading system.
Source: china.org.cn
