APEC Fight Club, US v China, FTAAP Edition

♠ Posted by Emmanuel in , at 11/04/2014 01:30:00 AM
APEC, where Pacific Rim leaders play fancy dress...and that's about it.
The Asia-Pacific Economic Cooperation (APEC) is rightly regarded as a "talk shop" that does not really have much policy impact in the region. Like the yahoos who keeps yelling "Free Bird!" at rock concerts, a recurrent--and repeatedly failed, it must be said--battle cry is establishing a free trade area within APEC. At the moment the US is having a hellishly hard time establishing a wider, US-dominated Trans-Pacific Partnership (TPP). As with the WTO Doha round, TPP negotiations are stalled as the number of would-be members increases and so does the difficulty of concluding negotiations. From a recent WSJ blog entry:
Despite a joint statement of “significant progress” from the trade ministers of 12 countries negotiating the TPP trade agreement, no one pointed to a major advance in any key issue during the recent talks in Sydney, including anything that would resolve the deadlock between the U.S. and Japan over agricultural and other barriers.
See an earlier post of mine on Japan throwing a monkey wrench into proceedings. Before continuing, let's have a brief history of failed FTAs in APEC. Sometime ago, Fred Bergsten of the Peterson Institute of International Economics was championing another idea, the (surprise!) US-led Free Trade Area of the Asia-Pacific that also got precisely nowhere:
The FTAAP idea has been actively promoted by APEC’s Business Advisory Council (ABAC)[which is dominated by Bergsten, it must be said] since 2004 as the only means by which APEC could achieve its signature Bogor goals, adopted in 1993 and reaffirmed every year since (including at Sydney), of achieving “free and open trade and investment in the region.” It has suddenly become a focal point of official activity because of major shifts in policy positions by several key member economies.

The United States took the lead in promoting the initiative, and the leaders unanimously endorsed President George W. Bush’s call to give it “serious consideration” in a speech in Singapore just before the [2006] summit. Japan welcomed the idea along with its own recent proposal for an “economic partnership agreement” among the 16 leading Asian countries (including India, which is not a member of APEC). Australia, which played a key role as chairman of APEC over the past year, reiterated its support. So did Canada and Mexico, two of the six largest APEC economies and traders, along with several of the smaller members.
Friends, there is apparently nothing new under the sun since the FTAAP idea is now being revived...by China! Whereas FTAAP used to be an American counterproposal to whatever pan-regional grouping the Chinese were proposing outside of APEC, it has now become a "Chinese" initiative after the Americans moved on to pimping the TPP expansion. It sounds ridiculous because it is...yet it is also true:
The U.S. has blocked China’s efforts to use a leaders’ summit to begin negotiations on a free-trade zone spanning the Pacific, people close to the matter said, as the world’s two largest economies tussle over influence in the region and billions of dollars in trade. China, the host of this year’s Asia-Pacific Economic Cooperation forum on Nov. 10-11, has sought to highlight its expanding international role by pressing for a pact known as the Free Trade Area of the Asia Pacific.

Beijing’s free-trade zone has been on the agenda of APEC for years—and was initially pushed by the U.S.—but has been relegated to the back burner as the U.S. has poured its efforts into the Trans-Pacific Partnership, a trade pact it is negotiating with 11 nations that include Japan but not China. For Beijing, the FTAAP would offer a way to ensure that it continues to get preferential access to some of its largest trading partners. A TPP deal would cost China about $100 billion a year in lost exports as the partners trade more among themselves and less with China, according to an estimate by the Peterson Institute for International Economics, in Washington.
China reviving the lame FTAAP idea which the Americans (like Bergsten) dreamed up anyway in order to fight the United States' current TPP expansion negotiations sounds daft IMHO. Nevertheless, I am intrigued by this "competitive vaporware" aspect to the US and China vying to ink signatures of other APEC members in an FTA of some sort. In the end, both probably know that interest among other countries is negligible, and that it's simply gamesmanship between the two in "showing" how much support they have from other members for bragging rights. Therefore, I would not take figures offered about how much China would "lose" from being frozen out of TPP seriously since its prospects for meaningful completion are low.

Rightly enough, the others correctly regard these APEC-based FTAs as the pointless exercises they are by staying away by and large.