Free trade across the Asia Pacific
- By Dan Steinbock
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E-mail China.org.cn, November 6, 2014
An ambitious dream
During the 1994 meeting in Bogor, Indonesia, APEC leaders opted for free and open trade and investment in the Asia Pacific. Official talks about the FTAAP started in the 2006 Hanoi summit, when C. Fred Bergsten, the then-chief of an influential U.S. think-tank, made a forceful statement in favor of the FTAAP.
Nevertheless, the FTAAP was set aside until the Obama administration began to push its Trans-Pacific Partnership (TPP), which hopes to include major economies in East and Southeast Asia, Oceania and Latin America. But it excludes China. In turn, ASEAN members and their FTA partners (Australia, China, India, Japan, Korea and New Zealand) are developing their Regional Comprehensive Economic Partnership (RCEP), which excludes the United States.
The APEC free trade initiatives complement China's recent regional initiatives, such as the Silk Economic Belt and the 21st Century Maritime Silk Road and the Asia Infrastructure Investment Bank (AIIB). The China-APEC cooperation fund has been set up to encourage more Chinese companies to participate in economic and technological cooperation with APEC members.
Last year, 60 percent of China's total foreign trade, almost 70 percent of its outbound investment and 83 percent of its utilized foreign investment was with APEC.
China sees the APEC as a major platform to broaden and deepen trade, investment and development in the region.
In Asia, the FTAAP is seen as a compromise between the U.S.-driven TTP, which favors advanced economies, and the RCEP, which reflects the interests of the emerging Asia.
In contrast, Washington hopes to defuse the call for FTAAP negotiations and the year 2025 as the final date to finish the deal.
No Asian Century without full integration
The FTAAP is not just another effort to reduce tariffs; it seeks to create a massive free trade zone.
Internationally, the FTAAP could prove a way out from the WTO Doha round quicksand. It has potential to surpass the "noodle bowl" effect created by overlapping and conflicting elements in current free trade agreements.
Some three years ago, a report by the Asian Development Bank argued that an additional 3 billion Asians could enjoy living standards similar to those in Europe today by 2050, when the region could also account for over half of global output.
As global growth may be decelerating, such aspirations are not viable without broader and deeper economic integration in the Asia Pacific region. That, in turn, requires a regional trading bloc, which is not designed for only advanced or emerging economies but both.
The Free Trade Area of the Asia Pacific fulfills both conditions. It could galvanize growth and prosperity in the Asia Pacific.
Dr. Dan Steinbock is Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see www.differencegroup.net
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