Out Now: LSE IDEAS on PRC Geoeconomic Strategy

♠ Posted by Emmanuel at 6/18/2012 12:16:00 PM
As usual, I am somewhat late with the publications generated by our very own LSE IDEAS, but let me rectify that here since there should be something for everyone with an interest in Chinese geopolitics. Drawing upon our own not-insubstantial in-house expertise--our Co-Director Arne Westad is fluent in Mandarin--and our expanding Rolodex of contributors, we have a fine selection here.

Jonathan Fenby should be familiar as an old China hand among journalists, and he puts the question of whether China has a foreign policy at all given how, as I like to repeat, the Communist Party is hardly a monolithic entity given its competing interests. (Witness the downfall of Bo Xilai, for example.) Shaun Breslin over at Warwick University meanwhile is one of the leading British academic scholars studying China from an IPE perspective, and his contribution documents China's worldwide resource grab to fuel its mighty manufacturing machine.

My LSE IDEAS colleague Cherry Yu is particularly interested in how Chinese firms operate abroad. She begins by differentiating between the China Investment Corporation, state-owned enterprises (SOEs) and privately-owned firms. Although Westerners typically view all Chinese FDI as somehow being state-directed, this is not always the case and it depends much on the ownership structure of the firm in addition to more traditional factors alike which industries they are in and where they perceive South-South or South-North investment opportunities. Linda Yueh requires no introduction since she appears frequently on Bloomberg, CNBC and so forth. Here she ponders the global economic crisis and whether it has speeded up or slowed economic reform (although you probably can guess the answer to that). Lastly, Guy de Jonquieres is another journalist with consderable knowledge of China-related topics, and he questions the notion of there being a "power shift" altogether.

Once more, the individial PDFs are available from our website, although a print copy will cost you £7.50 to purchase from the university bookstore (including shipping and handling). Happy reading!
-------------------------------------------



Executive Summary
Nicholas Kitchen, Editor, IDEAS Reports
China’s International Future
Odd Arne Westad
Does China have a Foreign Policy? Domestic Pressures and China’s Strategy
Jonathan Fenby 
Access: China’s Resource Foreign Policy
Shaun Breslin 
China as a Trading Superpower
Xiaojun Li 
Firms with Chinese Characteristics: The Role of Companies in Chinese Foreign Policy
Jie (Cherry) Yu
China’s Strategy towards the Financial Crisis and Economic Reform
Linda Yueh
China’s Approach to US debt and the Eurozone crisis
Nicola Casarini
What Power Shift to China?
Guy de Jonquières 
Read More

Like Attracts Like: Glazers Plan US Man U IPO [?!]

♠ Posted by Emmanuel in , at 6/14/2012 10:23:00 AM
I have been following the plight of the reviled Glazer clan, erstwhile owners of Manchester United Football Club, as they raise the ire of English football fans with their vile "Ameriscum" shenanigans, featuring the worst sort of financial chicanery their home nation has to offer. Their 2005 original sin of acquiring the storied club via leveraged buyout saddled it with onerous debt, all the while forcing supporters to pay inflated ticket prices. 

In August of last year we received news that the Glazers planned to improve the financial position of the debt-laden club by listing it in Singapore. Supposedly they would be able to capitalize on the large global Man U fanbase, especially in Asia. To which I said...
Are there really Singaporeans and other Asian investors dumb enough to fall for these Stupid Financial Tricks? Given the Glazers' track record, they may soon hire away Tim Geithner to tell investors how their investments in Man U are safe, all the while spouting obvious nonsense about "strong footballing finances" policy. I guess you can take the Ameriscum out of bankrupt America, but their capacity for financial foul play to paraphrase FIFA never changes. 
Well folks, score it IPE Zone 1, Ameriscum in Southeast Asia 0. (And Tim Geithner has indicated that he won't serve another term as Treasury secretary even if Obama is elected, so I've even found him a hot job prospect.) Apparently, the ever-devious Glazers didn't find the terms and conditions in the relatively freewheeling Lion City to their liking. Reuters has a useful recap of the extremely questionable reasoning behind the Glazers' retreat to the land where Stupid Financial Tricks are actually a source of pride in certain circles:

One of the sources said Manchester United had always planned to position itself as a global media business rather than a sports franchise, suggesting that a US listing would make more sense. The club's American owners, the Glazer family, are well known in the US as owners of American football team the Tampa Bay Buccaneers, as well as First Allied Corp, which owns and leases shopping centres. Conversely, they are extremely unpopular in the UK, which could have made a London listing difficult.
The Singaporean exchange authorities have not exactly been forthcoming with the idea of offering shares that give few to no voting rights to shareholders. In other words, it would have been another raw deal from these Yanks in the same way that they screw over Man U fans year in and year out with inflated ticket prices. So it's back to America where they hope to shaft folks in that genuine American fashion:
U.S. investors are also familiar with the dual-class share structure that was under discussion for Manchester United's Singapore listing, having seen it used by household names such as Google and Facebook. The Glazers are understood to have wanted to sell Class B shares with limited or no voting rights to maintain a level of control of 95-100 percent.

That structure was said to be one reason why they opted for Singapore in the first place, as, unlike Hong Kong, the exchange was happy to agree to the format, and for the club's Class A shares to be quoted but not traded. However, the issuer is understood to have become frustrated with long delays in approval from the SGX, even after it had indicated it would have no problems with a dual-class share issue.

Going back to the US homeland of Stupid Financial Tricks--the UK is obviously similar, but fan hatred precludes a Man U listing there--has its drawbacks. The most obvious of these is that few Yanks actually follow world football, preferring homegrown cornpone "sports" [yee-haw!] alike neo-primitivist NASCAR racing or, to mimic the Glazer's claim about being a global media conglomerate, "World Wrestling Entertainment." Fanbase numbers certainly aren't encouraging:

A U.S. listing might earn the company a better valuation as a media business, since it has contracts for broadcasting rights as well as its own television channel. However, it is unlikely to achieve the original goal of putting shares in the hands of a wide base of United fans. A source said the original aim of the Singapore listing was to create "a pan-regional platform for retail investors".

Singapore had seemed the ideal location, as it provided a way to reach retail investors in one of its biggest fan bases, Indonesia. When the Singapore listing was still under consideration, the importance of Asia to the company, with much of its growth coming from Asian merchandise sales, had been heavily emphasised during marketing to investors. The club claims to have 659 million supporters worldwide, of which 325 million are in Asia Pacific and 55 million in Indonesia. It counts just 34 million fans in North America, where soccer has yet to build a significant supporter base.


The sad thing for Man U fans is that while the Glazers have already brought their financial chicanery home where it belongs, they still retain the club. For that we will still have to wait. And oh yeah, Glazers go home.
Read More

It's All Greek to Me: Cyprus, Next on the EU Dole

♠ Posted by Emmanuel in , at 6/12/2012 09:03:00 AM
Erm, on second thought, let's not call it a "bailout" but a "bank recapitalization programme" to use the sort of euphemisms Spanish officials prefer as they too succumbed to the inevitable when you have overextended banks. To be sure, there are differences among [i] a balance-of-payments crisis (in which case the IMF would have been functioning in its more classic lender of last resort role), [ii] a fiscal crisis (in which case the government has taken on too much debt and cannot meet its repayment obligations) and [iii] a banking crisis (in which case your banks don't have enough spare cash to stay afloat after loans they've made that have gone bad). For the latter, it's to the EU you go such as with the case of Ireland or most recently Spain. True, BOP, fiscal and banking crises tend to occur simultaneously and cause confusion as to the underlying nature of the problem, but true connoisseurs of financial implosion such as readers of the IPE Zone should care about such differences. 

Today we line up another sucker of EU emergency funds in Cyprus. Based on the classification I have given above, its most pressing problem is [iii]. However, this occurrence is blowback from Greece's own woes which stem from [ii] during a period in which the Cyprus has been running large fiscal and current account deficits, too. Confusing, no? Remember that a lot of Cypriot's residents are of Greek descent. Plus, with a significant financial services industry by Eastern Mediterranean standards, it was only natural that its banks lent to many Greek concerns, all the while stocking up on Greek sovereign bonds. Having gorged its citizens on credit as well in that post-EMU accession euphoria alike many troubled economies doesn't help. The end result? Cyprus was made quite vulnerable to Greek default and its subsequent haircuts, the endgame of which is nearly upon us:
Cyprus said that it urgently needed European financial aid to boost its banks' capital, a step that would make it the fifth euro-zone economy to seek help from the region's bailout funds. Cyprus Finance Minister Vassos Shiarly said that the country's need for an international bailout was "exceptionally urgent" in order for it to recapitalize its banks, and that the issue would need to be resolved by the end of the month.

According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion ($3.8 billion to $5 billion), a sum that wouldn't strain the resources of the euro zone's bailout funds. The economy of Cyprus—an island of 800,000 people—is 1/60th the size of the economy of Spain, which said over the weekend that it would seek European funds to recapitalize its own banks.
What Cyprus will be seeking is a deal similar to that of Spain: as few as possible IMF-style conditionalities on how governments run their affairs but more EU discretion on restoring their banks' soundness--which again points to Cyprus' situation being a banking crisis first and foremost. Further, it will be interesting to see how this divided nation split between those of Greek and Turkish descent cope with resorting to the EU poorhouse. Clearly, many of the current woes stem a lot from the Greek faction, so finger-pointing naturally inflames longstanding tensions between Greek and Turkish Cypriots who still don't get along for the most part.
Read More

Pacquiao-Bradley, Stitched-Up Globalization Metaphor

♠ Posted by Emmanuel in ,, at 6/11/2012 12:59:00 PM
Preponderance can be interpreted in any number of ways, but here's a thought for you: What if the globalization game was biased to produce results favouring certain nations time and again? That would indeed be a form of (malign) influence insofar as someone sets the rules of the game a certain way. If it's tails they win, and if it's heads they win again.

Certainly there's good reason for some to think of globalization this way, where the rules of the game are indeed highly biased in favour of those who set the rules. In world trade for instance the United States has foisted many of its preferences for industrial policy, intellectual property, competition law, services, government procurement and so forth on others. There's no gainsaying that their development would have been faster had they ignored American preferences instead, but that their preferences are being made to conform to a singular vision of development which is certainly not a surefire recipe for success is cheeky to say the least.

Here's a sporting analogy for you. Think of modern US influence this way: Like "undefeated" Timothy Bradley, the United States would not win a straight fight with many of its contemporary challengers. (As an aside, the US is a lawyer-infested society precisely to keep such ill decisions valid. Pace its never-ending quest to make the world economy a microcosm of legalistic American culture.) Fortunately, with the WTO established in 1995, it long ago set the rules that raise the likelihood that it will get its way. Why, for instance, should Las Vegas host so many marquee boxing contests when China's special administrative region Macau surpassed it as the world's top gambling destination long ago?

Even if the sentiment of a far larger majority and the facts line up against you--CompuBox stats say "Manny outlanded Bradley 253-159 in total punches and had a 190-108 edge in power shots landed. Manny outlanded Bradley in 10 of 12 rounds," it is very easy to flip others off. In the trade realm, consider the US just ignoring Antigua's claims against America for blatantly violating its services trade commitments by banning offshore online gambling and decimating Antigua's economy in the process.

Globalization as represented by trade is thus seen as rigged not only by Antigua but by so many others. Just as online betting concerns in Europe refuse to honour this farce, witness the never-ending quest to complete the Doha Round of negotiations. If most of the others thought it was a good idea to sign on, then it would have been completed a long time ago. Message to America: did you ever consider that it is not only in boxing where you are unfair but in so many other things? Like for Manny Pacquiao in boxing or Antigua in gambling for that matter, why bother to even wake up when the White Man's Burden in the 21st century is simply to screw you over?

Simply put, some have a habit of not fighting fair whether in sports or in economic matters. And that's all she wrote for the "American" ideal of fair play.

UPDATE: This sort of horseplay is not confined to boxing. Consider the even less cerebral, er, sport of hotdog eating. You'd think the world's hotdog eating champion would be American given how incredibly fat they are, but no. Still, they have frozen out the great (and actually quite lean) Takeru Kobayashi from competing freely in America.
Read More

Stiglitz Recycles Marx (But Fails to Quote Beardy)

♠ Posted by Emmanuel in at 6/10/2012 04:08:00 PM
While Joe Stiglitz is pretty hirsute himself, he's certainly no match for Karl Marx when it comes to luxuriant facial hair. Esquire considers Herr Marx's to be one of the best beards in history, and who am I to disagree. However, it seems Stiglitz is not only aping Marx's grooming habits but also his argument on the economy-wide effects of rising inequality. Return to the classic argument about the internal contradiction of capitalism that when wealth is increasingly concentrated in fewer hands, demand for the goods and services made by the capitalists will eventually dissipate, eventually threatening the sustainability of the entire capitalist system.

With labour's share of income plummeting in a highly racialized and inequitable society like the United States, Stiglitz is not exactly the first to notice this trend. Other mainstream economists like Nouriel Roubini having noted the same. Anyway, Vanity Fair has an excerpt of his new book The Price of Inequality where he observes:
When too much money is concentrated at the top of society, spending by the average American is necessarily reduced—or at least it will be in the absence of some artificial prop. Moving money from the bottom to the top lowers consumption because higher-income individuals consume, as a fraction of their income, less than lower-income individuals do...
The relationship is straightforward and ironclad: as more money becomes concentrated at the top, aggregate demand goes into a decline. Unless something else happens by way of intervention, total demand in the economy will be less than what the economy is capable of supplying—and that means that there will be growing unemployment, which will dampen demand even further. In the 1990s that “something else” was the tech bubble. In the first dec­ade of the 21st century, it was the housing bubble. Today, the only recourse, amid deep recession, is government spending—which is exactly what those at the top are now hoping to curb.
While I appreciate the Marxist turn, I would have liked to have seen more numbers to back up this stock assertion. As far as I can tell, Americans are still spending their brains out with household savings rates still nowhere near double digit percentages and consumption accounting for 70% of the US GDP.

BTW, the rest appears to be a rehash of what I among several others have noted on why the "American Dream" is a sick joke on the aspirations of those who still believe in that downwardly-mobile place [1, 2, 3]. Elsewhere it's an anti-finance screed you've probably seen many, many times before.
Read More

The International Political Economy of Obesity

♠ Posted by Emmanuel in , at 6/09/2012 03:26:00 PM
To be honest, IPE is usually not quite on the leading edge of social science in many respects. Prior to the breakout of the subprime crisis, there were next to no scholars focusing on real estate for instance save for a few exceptions like Herman Schwartz and Len Seabrooke. It thus bothers me that a quick Google search for "the international political economy of obesity" yielded my blog posts in the top three spots. Aargh.

Make no mistake, however: I believe that this subject matter will be a topic of, ah, w-i-d-e-r interest as the globalization of American-style obesity gathers pace and its fiscal implications become more evident. It's the worst of both worlds as far as industrialized countries are concerned. Not only will many folks live longer but they will also require more (costly) health care given the myriad of obesity-related illnesses. It's just another thing USA#1 cheerleaders routinely overlook: the strain placed on the public purse by the gut-busting expansion of American waistlines that's being copied the world over.

Anyway, Yahoo! News has an interesting feature on how ultrafat Americans--over a third of them are now not just overweight but downright obese [oink, oink]--bolster add more crippling poundage to already soft-in-the-middle budget deficits. Based on the percentage of health care costs thought to be associated with obesity in 2003, they predict that by 2018 the godforsaken US federal budget will include a hefty $343 billion forking out for these rotund Americans AKA "the nearly average Joe." That's not all health care spending but just that related to obesity. Throw in things alike other health care, pensions, unemployment benefits (I am not betting the US will have recovered a decade after the subprime crisis and it's indicative how bad things are that few will disagree) and it's too scary to contemplate.

It will become literally the survival of the fittest among industrialized economies as they struggle to keep in passable fiscal shape. Who will succeed in slimming down health care costs by doing the same to the general population? I don't know about you, but I doubt whether Americans will succeed at all given their track record in which things just get progressively worse, with no significant improvements in sight.
Read More

Rogue Traders, or Le Grand Casino Francais

♠ Posted by Emmanuel in , at 6/07/2012 11:24:00 AM
I've long supported the claim that London, not New York, is the financial capital of the world [1, 2]. I guess it's a backhanded compliment to London's claim to be the world's financial capital that earthshaking events for US financial concerns more often than not emanate from there instead of New York. Think of AIG's disastrous credit default swaps (CDS) being written in London. Or, to be current, JP Morgan Chase's London Whale messing around with CDS indices.

However, this trail of casino capitalism lacks another element to the story: So London may in fact be laxer and thus more attractive than New York when it comes to freewheeling financial frivolity, but where exactly do these budding masters of the universe come from? To be sure, the "rogue trader" can be from anywhere: Think of "pioneers" such as Japan's Yasuo Hamanaka, England's Nick Leeson and so on. As of late, though, there has been a distinctly Francophone flavour to these questionable characters, most recently Bruno Iksil, the London Whale himself.

Christopher Dickey of Newsweek does us a favour by describing how France has been a hotbed for graduates in the dark arts of financial engineering. The French have always had a penchant for mathematics, thus it's no surprise that recent years have witnessed its application in fields where the profit motive is strong. That said, the country itself has (thankfully) cast a weary eye on laissez-faire banking practices and has limited the wiggle room for budding casino capitalists. So, while various French universities produce financial engineering graduates dreaming of fame and fortune, their skills are much more in demand in what Bonaparte once called a nation of shopkeepers:
London is a magnet for France’s young financial professionals. They often prefer to work in what they call “Anglo-Saxon” environments (New York is another). Job openings are more abundant, salaries and bonuses aren’t so heavily taxed, and the culture admires success rather than envies it, as often happens in France. And there’s one advantage New York can’t match: in London, French transplants are blessed with easy weekend commuting via the Eurostar, which now runs from the heart of Paris to the heart of London in two and a half hours. The young City of London veteran, an El Karoui [quant goddess] disciple who prefers not to have his name in print, recalls his years at a major British bank where his team eventually numbered roughly 40 members, at least 75 percent of whom were either French or had a French educational background. Among the elite schools they attended: Paris VI with El Karoui, the ESSEC international business school, and the Université de Paris Dauphine—three of the many French temples of financial learning where formal mathematics is emphasized.
Though I suspect the JP Morgan Chase incident was unique in being a known entity with formal backing from the heads in New York, there may be a grain of truth to those far more junior than the London Whale being made scapegoats characterized as villainous "rogue traders." It is not entirely obvious why large positions without sanction can so readily be amassed in the absence of an infrastructure designed to accommodate such large positions:
The traders, the structure guys, and the quants have all seen the numbers sort themselves out before, and they may be tempted to imagine they’ll see it happen again this time. The outside world hears only about the derivatives that go wrong, while careers are built on the ones that go right. That’s how things have gone in the past, anyway. At JPMorgan Chase, hundreds of billions of dollars were in play, and Iksil was part of a unit that had earned $5 billion in the last three years. Given the extent to which teams are involved in the work of refining and improving the products, the idea that a “rogue trader” can make billion-dollar bets all on his own is, to say the least, improbable. It’s worth noticing that other heads besides Iksil’s are rolling already at JPMorgan—and they’re not French.
Read More

Bremmer and Roubini's Faulty Russia Analysis

♠ Posted by Emmanuel in at 6/06/2012 10:26:00 AM
It's nice to find new blogging talent every once in a while, and boy this fellow is impressive. I had never heard of Mark Adomanis before coming across his neat riposte to famous political risk analyst Ian Bremmer and economist Nouriel Roubini on why the West should "blackball Russia." Partly it's because his The Russia Hand blog is country-specific and its host Forbes isn't quite the first name you think of in terms of geopolitics. But don't be fooled: his wide-ranging analysis that considers much beyond that goes on in Russia is spot-on and I find very little to disagree with in his commentary. Here, he takes exception to rather lazy characterizations of Russia as (a) exceptionally authoritarian, (b) having doomed demographics when authorities have actually succeeded in boosting its population as of late and (c) a development laggard compared to other BRICs.

To be honest, I find navigation of Forbes blogs leaves much to be desired. This is a real shame since Adomanis is a really prolific blogger who makes long, detailed posts nearly daily. I hope Forbes pays him well for this kind of output! Again, he's a real up-and-coming talent not afraid to take on much more ballyhooed figures.

On the basis of their FT article, I doubt whether many will be encouraged to solicit political risk analysis from Bremmer's Eurasia Group--or economic analysis from Roubini's RGE Monitor, for that matter. While conducting political risk analysis, your job is to tell clients about prevailing risks to investment and how to address them should they decide to enter Russia, not to increase such hazards by inviting a "blackball" of the nation. What an attitude. Meanwhile, misstating trends alike demographics isn't the sort of thing that produces top-notch economics monitoring.

It really is a devastating but spot-on critique. And no, I certainly don't think blindly applying standards of Western capitalist democracy to others is going to cut it in this day and age when most OECD nations are in varying stages of distress.
Read More

Egypt, Spain & Far Beyond: Youth Unemployment

♠ Posted by Emmanuel in ,,, at 6/05/2012 04:08:00 PM
As an educator, I believe there is a personal responsibility on my part to ensure that my students are able to find gainful employment. I am not paid so that those seeking work won't be...simple as that. While there are others in academia who see themselves as  "preparing people for life outside of work" instead of "preparing people for working life," I must disagree. The hoity-toity idea of a liberal education being removed from the humdrum existence of everyday life has deep roots starting from ancient Greece. But, the ubiquity of capitalism and democracy--both disliked by then Greeks way back when (and arguably even today[!])--necessitates a practical approach. That is, contemplating higher pursuits in life doesn't quite work if you don't have the means to support it. To get all structuralist on you, someone must have laboured to erect those ivory towers.

Unfortunate college-educated unemployed and underemployed aside, what does this have to do with IPE, you ask? Plenty. Egypt has been paralyzed by unemployed youth with nothing better to do than protest again and again. So they overthrew Mubarak, but things have gotten even worse economically. Some change, and certainly not the sort you'd expect to help land jobs for the youth. Same thing in Spain: With the unemployment rate for those aged 15-24 reportedly above 50%, headlines numbers like these are hardly inspiring. While the relationship between youth unemployment and economic crisis is complex, you can at the very least say that high rates of the former are indicative of the latter.

The International Labour Organization (ILO) has a neat publication from late last year that notes that these trends are not unique to certain troubled countries but are evident the world over. For another woeful statistic, consider that about 40% of those unemployed worldwide are the youth:
Of the world's estimated 207 million unemployed people in 2010, nearly 40 per cent – about 75 million – were between 15 and 24 years of age. In many countries, this grim unemployment picture is further aggravated by the large number of youth engaged in poor quality and low paid jobs, often in the informal economy. Many youth are poor or underemployed: some 228 million working poor youth in the world, live on less than the equivalent of US$ 2 per day.
The abstract does not hide the bleak global situation:
In August 2010, the ILO published the Global Employment Trends for Youth: Special issue on the impact of the global economic crisis on youth. The report presented an analysis of the latest available world and regional aggregates of key labour market indicators for young people aged 15 to 24 years, with a specific focus on how young people fared in the face of the recent global economic crisis. One year later, with an environment of growing uncertainty in the economic recovery and stalled recovery in the job market, the ILO revisits the much publicized youth labour market figures and draws the unfortunate conclusion that the situation facing youth in the labour market has not improved and that prospects for the future are not much better. Not only do youth unemployment rates continue to rise in developed economies, but also the increasing length of the job search is leading some young people to become discouraged and fall out of the labour force entirely. In developing regions, on the other hand, many young people continue to work while living in conditions of extreme poverty.
It is certainly worrisome in a number of senses. First, where has all the education gone? Despite massive increases in enrollment the world over, it has been noted that work opportunities remain scarce for supposedly better-educated people. The ILO publication makes for a very sobering read that suggests such employment for youth is often the exception rather than the rule--especially nowadays. Second, various nations being unable to accommodate their justifiably angry youngsters is a political-economic threat of the highest order. 

There is certainly no lack of poster children for dysfunctional education systems nowadays alike erstwhile models the Anglo-Saxons. While it may have few answers, the ILO report at least suggests where to start. Make no mistake, youth unemployment is no small issue, and it's certainly one with severe ramifications the world over if it continues unaddressed. Ask Tunisia, Egypt, Greece and Spain...I fear this list will run and run.
Read More

Why Japan Favours an FTA With China, Not the US

♠ Posted by Emmanuel at 6/03/2012 10:06:00 AM
I almost missed this, but better later than never: the Economist's Banyan has a perceptive entry into why a pan-Asian FTA incorporating the world's three largest economies US, China and Japan is unlikely. Not only do the US and China have competing regional interests, but their preferences differ as well. As I've written in the past, the US favours a "high-quality" FTA incorporating its pet issues of intellectual property, competition law, government procurement, the environment and labour. In other words, the US is trying to make its trade partners microcosms of itself, although trade theorists alike Jagdish Bhagwati have been especially wary of many of these as unnecessary add-ons that do not promote trade but merely assuage certain domestic US lobbies.

By contrast, China-led FTAs reflect China's preferences in dealing more with goods than services as well as not cross-linking various economic issues USTR-style. By not placing so many demands on FTA partners, there is in theory a better chance of inking deals. That said, FTAs are not merely about economics but about politics. In our region, some perceive that the US currently has an advantage since many see trade as a way to hedge security bets against an increasingly dominant and potentially belligerent China. 

Or so the story went. Recently, Japan has warmed up to China--it's recent vanquisher for second-largest economy status in the global league tables--instead of its nominal geopolitical ally the United States. Despite a fairly heavy full-court press by the US to include Japan in the Trans-Pacific Partnership (TPP) expansion talks, it hasn't really participated there. Instead, Japan has (again) been talking to the +3 in the ASEAN+3 of itself, China and South Korea. These three combined would dwarf the EU, but heaven knows we've been here before:
[A] first reaction to the announcement on May 13th that China, Japan and South Korea are to open talks on establishing a trilateral free-trade area is to shrug. The idea has been around for a decade. There are many obstacles to its realisation. And not so much as a date has been announced for the talks to begin...

There are a couple of shrug-worthy elements to the proposed free-trade area. The first is that it will be terribly hard to bring to fruition. In all three countries, important lobbies will resist the opening to free competition: Japanese farmers, Chinese state-owned enterprises, South Korean exporters hoping to steal a march over Japan through a bilateral free-trade agreement with China. Secondly, any agreement is likely to be a “shallow” one—allowing plenty of exemptions [especially in agriculture for Japan and South Korea]. South Korea has signed “deep” agreements with the European Union and America, though they have been fiercely controversial. But China’s trade agreements, such as that with the Association of South-East Asian Nations, ASEAN, tend to be sneered at by American and European trade negotiators as feeble substitutes for the real thing—FTA-lite. 
Once again demonstrating that security and economic concerns do not always coincide, Japan's reluctance to be invovled in the TPP talks signifies realism about what sort of deal it can sign (with many exemptions for agriculture possible) with China, as opposed to what the US wishes (that it be less beholden to certain lobbies alike agriculture). Besides, there's this undying fantasy about American carmakers gaining access to the Japanese market despite decades of unremitting failure. Anyway...
The biggest problem facing the TPP, however, is the failure so far of Japan to join the process. Without it, says Razeen Sally, an economist at the Lee Kuan Yew School in Singapore, the TPP “would look emasculated”. As Japan’s prime minister, Yoshihiko Noda, put it in March, it would be like The Beatles without Paul McCartney (America is John Lennon, he said). 
To be sure, both the +3 and TPP are going to be difficult endeavours to complete. Still, it's noteworthy that many Asian countries linked by defence pacts to the US alike Japan or for that matter the Philippines, South Korea and Thailand prefer not to participate in the US-led FTA shindig. Is it a sign of waning US influence or FTA fatigue after so much busywork over the past two decades? I believe it's a bit of both.
Read More