A Chinese-Style Asia-Pacific Partnership

By+An+Gang

Since China became slated to host the 2014 Asia-Pacific Economic Cooperation（APEC） summit two years ago， the Chinese Government has poured a slew of efforts into the preparation process. The APEC 2014 Third Senior Officials Meeting （SOM3） and related meetings held from August 6 to 21 is the last senior officials meeting before APEC Economic Leaders Meeting in Beijing this year. The SOM3 consists of about 100 meeting sessions， covering a broad range of areas arranged under such topics as Trade and Investment， Standards and Conformance， Customs Procedures， Connectivity， Agriculture and Food， Forestry， Electronic Commerce， Anti-corruption， Disaster Management and Health.

Ambitious goal

China chose the theme “Jointly Build a Future-oriented Asia-Pacific Partnership” for the 2014 APEC Economic Leaders Meeting， where leaders will discuss how to promote regional economic integration， encourage economic innovation， reform and expansion， and to enhance construction of infrastructure and connectivity.

At the 2013 APEC summit in Bali， Indonesia， Chinese President Xi Jinping gained a head start in promoting the meetings subject matter as part of Chinas effort to help bolster the construction of economic corridors in various sub-regions and foster a vast Asia-Pacific market covering 21 economies and 2.8 billion people. Meanwhile， Xi also officially proposed the establishment of the Asian Infrastructure Investment Bank（AIIB）. Since then， China has taken significant steps in the preparation work， setting an initial registered capital target for the AIIB at $50 billion.

Chinas contributed more than 50 percent of Asian economic growth for two years in a row. In 2013， Chinas trade with APEC member economies accounted for 60 percent of its total foreign trade value； about 70 percent of Chinas outbound investment goes to APEC member economies， while 83 percent of Chinas paid-in foreign direct investment comes from APEC members. Eight of Chinas top 10 trade partners are APEC members. By the end of 2013， China had signed 12 free trade agreements （FTA） with 20 countries and regions， with six in the pro- cess of negotiation—the majority of which were composed of APEC members.

Trade disagreements

The 2014 APEC summit arrives at a time of complex circumstances. The world is continuing its march to globalization； the Doha round of WTO negotiations is progressing slowly after being restarted； regional and bilateral FTAs are being signed one after another； and Asia-Pacific economic cooperation is at a crossroads of integration and fragmentation.endprint

As the most important regional cooperation organization in the Asia-Pacific， APEC first proposed the Free Trade Agreement of the Asia-Pacific （FTAAP） as early as 2004. In 2006， the APEC Hanoi Declaration made FTAAP a long-term vision for study.

In fact， two other important FTA arrangements concerning the Asia-Pacific are already in the negotiation stage—respectively the Trans-Pacific Partnership Agreement （TPP） and the Regional Comprehensive Economic Partnership （RCEP）.

The U.S.-led TPP—which now includes 12 countries including Australia， Malaysia， Japan and viet Nam participating in the negotiation—has thus far excluded China. The proposed TPP will attempt to make new trade rules that involve not only tariff exemp-tion but also intellectual property protection and incentives to state-owned enterprises. The U.S. Government hopes to sign a preliminary framework agreement at the end of 2014， but has thus far been stagnated due to its diverging views with Japan on tariffs on agricultural products and automobiles.

The ASEAN-launched RCEP will include its member states as well as the six states with which ASEAN has existing FTAs—Australia， China， India， Japan， South Korea and New Zealand. The RCEP focuses on product trade， with an aim to build an integrated market through cutting tariff and non-tariff barriers.

At the 2014 annual meeting of the Boao Forum for Asia in April， Chinese Premier Li Keqiang expressed hopes that the RCEP negotiations would be finalized in 2015. He also stated that China is not opposed to the establishment of TPP， adding that RCEP and TPP can develop in parallel and promote one another.

The RCEP and TPP both cover most AsiaPacific economies. Thus， upon the completion of negotiations either of them could become a foundational platform for the FTAAP.

When addressing economic leaders at the 2013 APEC summit last October， President Xi noted that APEC should play a leading and coordinating role in promoting an open environment for development in the Asia-Pacific. He urged inclusiveness， mutual benefit and winwin to advance regional FTA coordination， while preventing the Spaghetti Bowl Phenomenon， which refers to an intertwined mass of preferential trading arrangements and rules of origin—creating a web of interests entangled like a bowl of spaghetti.

The coming years will be a key stage in deciding whether the Asia-Pacific can establish an open trade order. Chinese vice Foreign Minister Li Baodong said recently that “it is time to take action.”endprint

A boost for Sino-U.S. relations

On August 13， U.S. Secretary of State John Kerry said at the East-West Center in Hawaii that U.S. President Barack Obama will join APEC economic leaders summit in Beijing this fall to focus on three major issues： promoting clean and renewable fuels， supporting small businesses and womens participation in the economy and expanding educational exchanges. The three key areas are consistent with Obamas domestic agenda， and are aimed at both the Democrats midterm elections in 2014 and the 2016 presidential election.

Considering the U.S. mid-term elections， which will be held on November 4， at the request of the United States， China may postpone the APEC summit. Due to domestic issues， Obama has been absent from two consecutive APEC summits in the past two years. If he misses the chance to attend the summit for a third time， the international community will question whether the United States really cares about Asia. It would also have a negative impact on Sino-U.S. relations.

The Obama administration has put forward a widely publicized policy known as the “pivot to Asia.” Washingtons active promotion of the TPP negotiations and establishment of a set of new trade rules is one of the major pillars of the strategy. In his speech on August 13， Kerry said the United States now attaches greater importance to the Asia-Pacific than ever before， stating that the current administration will redouble its efforts to promote the strategy in the region over the next two and half years.

A rising China and the loss of its dominance in the region are the major concerns of the United States. In the past year， the United States has intensified its efforts to deploy weaponry systems in East Asia and strengthened its military alliance with Japan， Australia and the Philippines. It abandoned its previously neutral stance by showing support for Japan lifting its ban on the right of collective self-defense and interfering in maritime disputes between China and neighboring countries in the East and South China seas. These moves by the United States have had a negative impact on mutual trust.

In the United States， Obamas 2009 China tour was widely considered to have achieved little. Thus， Obama cannot afford to miss out on a second chance. The Obama administration knows that it must come fully prepared to reach an outcome that it can pitch to the public， especially in the fields of climate change， trade， and human rights.

However， Obama should also acknowledge that without a healthy and stable overall development framework for Sino-U.S. relations， his visit to China may not produce a fruitful outcome. During their meeting in California last year， the Chinese and U.S. presidents reached a consensus so as to avoid falling into a Thucydides Trap—that is， to prevent a rising power from challenging the established power. This November， President Obama will have an opportunity to demonstrate his sincerity by adopting mutually beneficial measures.endprint