With Trump win, China looks to seize Asia free trade lead­er­ship

APEC to dis­cuss fu­ture of TPP at Peru sum­mit

Kuwait Times - - BUSINESS -

BEI­JING: China will po­si­tion it­self as free trade’s new cham­pion at an Asia-Pa­cific sum­mit this week­end, with the Com­mu­nist gov­ern­ment seek­ing to project eco­nomic lead­er­ship as a US-led Pa­cific Rim trade pact lan­guishes un­der Pres­i­dent-elect Don­ald Trump.

Bei­jing aims to cap­i­tal­ize on the Trump-in­duced coma of the Trans-Pa­cific Part­ner­ship (TPP), with Pres­i­dent Xi Jin­ping sell­ing al­ter­nate vi­sions for re­gional trade at the Asia-Pa­cific Eco­nomic Co­op­er­a­tion (APEC) meet­ing this week­end in Peru.

“If the US gives up its lead­er­ship here, of course China will take the role,” said Tu Xin­quan, a trade ex­pert at Bei­jing’s Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics, who has ad­vised China’s gov­ern­ment on trade is­sues. On the cam­paign trail, Trump la­belled the TPP, cham­pi­oned by Pres­i­dent Barack Obama, a “dis­as­ter”. Obama last week aban­doned ef­forts to win con­gres­sional ap­proval for the TPP be­fore Trump takes of­fice, say­ing its fate was up to the Pres­i­dent-elect and Repub­li­can law­mak­ers.

The China-backed Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP), a ri­val pact that ex­cludes the United States, has be­come the front-run­ner for new free trade deals in the re­gion.

The RCEP and the TPP-which ex­cludes China-were viewed as par­al­lel, if com­pet­ing path­ways, to an even­tual broader Asia-Pa­cific free trade zone. But when Bei­jing hosted the APEC meet­ing in 2014 and pushed the Free Trade Area of the Asia-Pa­cific (FTAAP) as a frame­work for lib­er­al­is­ing Pa­cific Rim trade, the United States saw it as a dis­trac­tion from TPP.

Now, the RCEP is likely the main av­enue to a fu­ture FTAAP, giv­ing China, as the largest econ­omy among the deal’s 16 coun­tries, a driv­ing role in the fu­ture of Asia-Pa­cific trade.

Obama had ar­gued that the TPP would al­low the United States and not China to write the rules of trade for the re­gion.

‘GEOPO­LIT­I­CAL RE­AL­I­TIES

China’s ef­forts to push trade pacts co­in­cide with other soft power ini­tia­tives aimed at ce­ment­ing the coun­try’s eco­nomic in­flu­ence, such as Xi’s global One Belt, One Road in­fra­struc­ture plan and the Bei­jing-led Asian In­fra­struc­ture In­vest­ment Bank.

Claire Reade, se­nior coun­sel at US law firm Arnold & Porter and a for­mer As­sis­tant US Trade Rep­re­sen­ta­tive for China Af­fairs, said China would seek to con­trast its com­mit­ment to the re­gion with US in­con­stancy. “The geopo­lit­i­cal re­al­i­ties and China’s eco­nomic diplo­macy make it seem un­likely the smaller coun­tries in the re­gion would spurn China’s lead­er­ship,” she said.

In a sign of frus­tra­tion with the United States among some TPP mem­bers, Peru’s pres­i­dent has said that Pa­cific-rim coun­tries can forge a new trade deal to re­place TPP that in­cludes China and Rus­sia but not the United States.

This week, Peru’s trade min­is­ter said it was en­gag­ing China on ways to get in­volved with RCEP ne­go­ti­a­tions. If Lima joined the talks, which is un­likely un­til ex­ist­ing mem­bers come to terms, it would be the only par­tic­i­pant from the Amer­i­cas and could en­cour­age other TPP sig­na­to­ries in Latin Amer­ica to fol­low suit.

Other TPP mem­bers, in­clud­ing staunch US ally Aus­tralia, have said they will pur­sue other free trade op­tions in Asia. Malaysia has said it would shift its fo­cus from TPP to RCEP, and Viet­nam, which is also party to both deals, will shelve its rat­i­fi­ca­tion of TPP due to po­lit­i­cal changes in Wash­ing­ton.

MORE OFF-SHORING

Trade ex­perts say that in ad­di­tion to deal­ing a blow to US in­flu­ence, TPP’s fail­ure could mean US goods lose out on lower tar­iffs and mar­ket ac­cess to RCEP coun­tries, in­clud­ing Ja­pan, China and In­dia. Pro­posed dates for an agree­ment have come and gone, but an RCEP deal could be reached as soon as next year.

Deb­o­rah Elms, who runs the Sin­ga­pore-based Asian Trade Cen­tre con­sul­tancy and ad­vises gov­ern­ments, said the lack of US in­volve­ment in fu­ture trade deals could spur more off-shoring by US com­pa­nies. “If you want to take ad­van­tage of RCEP, you need to be in Asia to ser­vice Asian mar­kets. That means you need to be phys­i­cally present with at least some part of your op­er­a­tion,” Elms said.

Gov­ern­ments in the re­gion should take ad­van­tage of RCEP mo­men­tum, she said. “I would be trum­pet­ing loudly from the rooftops ... Put your whole global op­er­a­tions here to take ad­van­tage of the place that is still open for busi­ness.”

The role-re­ver­sal on free trade zones and other un­cer­tain­ties stem­ming from Trump’s elec­tion bol­sters China’s im­age, Dou­glas Paal, vice pres­i­dent for stud­ies at the Carnegie En­dow­ment for In­ter­na­tional Peace, said at a fo­rum in Bei­jing on Wed­nes­day. “With­draw­ing from trade agree­ments, talk­ing about shak­ing up al­liances, talk­ing about pulling out of the cli­mate change agree­ment, talk­ing about pulling out of Iran - all of these make China look like the re­spon­si­ble stake­holder,” Paal said.

PERU: This handout photo taken on Novem­ber 17, 2016 and re­leased by the of­fi­cial APEC Peru 2016 or­ga­ni­za­tion shows Philip­pine Pres­i­dent Ro­drigo Duterte (C) ar­riv­ing at Lima’s in­ter­na­tional air­port to at­tend the Asia-Pa­cific Eco­nomic Co­op­er­a­tion Sum­mit.

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