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US and China to compete at APEC meeting

Editor’s Note: Dr. Terry F. Buss is a Fellow at the U.S.’s National Academy of Public Administration. He wrote this article on the competition between the U.S. and China at the Asia-Pacific Economic Cooperation meeting in Beijing exclusively for Tuoi Tre News.

US and China to compete at APEC meeting
US and China to compete at APEC meeting

This week the 21 member nations of the Asia-Pacific Economic Cooperation (APEC) forum are meeting in Beijing to “reinvigorate trade, productivity and sustainable development” aimed at lifting “prosperity across the region.” China, especially because it is hosting APEC and wishes to increase its dominance in the regional and global economy, is expected by some to be quite assertive at the meeting. The U.S., its main competitor, is expected to be less so. Both U.S. President Barack Obama and PRC President Xi Jinping are scheduled to attend. How will APEC negotiations play out?

Differing visions for regional trade

The U.S. has since 2005 attempted to get APEC nations to sign on to the Trans-Pacific Partnership (TPP) which would create a regional free trade zone. Twelve nations have participated in its negotiations. Vietnam stands to benefit substantially from TPP.

The U.S. has run hot and cold in pursuit of TPP. The Middle East crises – Syria, Iraq, Afghanistan, Iran, and Israel – the Islamic State and Ukraine distracts the U.S. from focusing on TPP, trade and APEC. U.S. Secretary of Defense Chuck Hagel was forced to cancel a trip to Vietnam and Myanmar recently because of the Middle East. And the U.S. Senate in the past refused to give President Obama the trade negotiation authority he needs to make TPP work. Japan has resisted giving up protections for its agriculture and automotive industries. Russian President Vladimir Putin ahead of his visit to APEC tried to discredit TPP for leaving Russia and China out of the agreement.

The Chinese tend to view TPP as an attempt by the U.S. to exclude it from taking a leadership role in organizing trade relations in the region. Consequently, China chose not to participate in TPP even though the U.S. wanted it to.

China has recently begun to assert itself as the regional leader and increasingly dominant global player. The Chinese have offered the Free Trade Area of the Asia-Pacific (FTAAP) as an alternative to TPP. FTAAP, which has not been fully developed as a framework, would focus on networking bilateral free trade agreements and standardizing rules governing trade. To gain support for FTAAP, China could combine TPP and other trade initiatives if it chooses to do so.

Interestingly, China could benefit by $100 billion in trade were it to participate in TPP. But China has not wanted to be led by the U.S., preferring instead to lead the U.S. and others in the region. China could be softening on this position as its regional/global influence grows and it stands to benefit.

The U.S. has recently vetoed a Chinese proposal to conduct a feasibility study of its FTAAP framework, a setback for the Chinese. At the same time, China and the U.S. are actively trying to recruit member countries to their regional visions. Neither competitor seems to be able to convince other nations to fully commit.

The Regional Comprehensive Economic Partnership (RCEP) – comprised of 10 ASEAN members and six others including China, Japan and India – is yet another trade alternative being pursued as part of the East Asia Summit (EAS) in Myanmar following APEC. RCEP is favored by China, but it is not clear whether this will compete with or complement TPP; RCEP was only proposed in 2011-12. The U.S. is not a party in this initiative. This proposal may take the luster off TPP and FTAAP.

As a result of this maneuvering, many countries in the region are trying to remain neutral, not wishing to offend either superpower. Because APEC requires consensus to adopt policies, it seems unlikely that a comprehensive trade agreement will be much advanced.

U.S. pivoting again in the region

A recent speech by U.S. Secretary of State John Kerry seems to signal major changes in the on-again, off-again U.S. policy toward the Asia-Pacific region. This may provide important clues about how the U.S. views the region and APEC: the U.S. will be less assertive.

In 2011, former U.S. Secretary of State Hilary Clinton announced the new Asian Pivot policy, having these pillars: strengthening bilateral security alliances; deepening working relationships with emerging powers, including with China; engaging with regional multilateral institutions; expanding trade and investment; forging a broad-based military presence; and advancing democracy and human rights.

Kerry’s speech states that the “rebalance” now consists of: creating sustainable economic growth, including finalizing TPP; addressing climate change; reducing tensions, promoting regional cooperation, contributing to rule-based norms; and empowering people to live with dignity, security, and opportunity.

It appears that the U.S. has backed away from the security focus of the pivot policy, likely in an effort to expand the “soft diplomacy” approach favored by the Obama Administration. This policy revision, plus a greatly weakened Obama presidency, may embolden the Chinese either to pursue its agenda, or to be more cooperative on trade negotiations if China feels that the U.S. is not trying to “contain” it in the region. The Chinese are likely to wait to see whether this is real or rhetoric.

U.S. mid-term elections

One bright spot for U.S. policy in the region is the takeover of the U.S. Senate by the Republican Party on November 4th. The new Majority Leader of the Senate, McConnell, is a staunch supporter of a more engaged foreign policy in the region and TPP, as is the new Chairman of the Foreign Relations Committee, Corker. John McCain, a friend to Vietnam – he was instrumental in lifting the ban on weapons sales to Vietnam – is taking over the Armed Services Committee.

Unfortunately, these new leaders do not assume their positions until January, too late to affect APEC. But they will be instrumental in the future in getting TPP implemented. Recall that the defeated Democrat Senate Majority Leader, Harry Reid, effectively thwarted TPP.

Other issues

The U.S. and China will engage in bilateral talks during APEC in addition to trade issues. Advancement on climate change, energy efficiency and counter-terrorism will be areas where cooperation can be advanced. Network security and North Korea nuclear weapons proliferation will show little progress. Obama will try to get China to sign the World Trade Organization agreement removing barriers to duties on IT equipment, an agreement China has been trying to thwart.

Prognosis

I expect little agreement on trade to come out of this summit, if the past is prologue to the future. But even if initiatives by the U.S. or China gain traction, trade agreements on this scale take years to materialize. TPP is in its ninth year of negotiations! What this likely means is that bilateral agreements between nations will continue to dominate. The U.S. and China, in spite of differences, are negotiating a Bilateral Trade Agreement to sort out what industries will be liberalized and which will be protected. So it goes.