ASIA-PACIFIC REGIONAL ECONOMIC COOPERATION UNDER A NEW SITUATION
The Asia-Pacific region embraces the world’s top three economies closely linked in economic terms and taking the front ranks of the world in the size of economy and trade volume, whose development trend and policy orientation have important bearings on the world economic development. In recent years, new changes have happened in economic relations in the AsiaPacific region, the most outstanding of which is the change in direction of US policy on Asia-Pacific regional cooperation, especially its China policy that is switched from “rebalancing” to “decoupling”, resulting in the fact that the world’s top two economies are moving toward competitive confrontation, greatly reducing the dynamics of AsiaPacific regional economic cooperation.
Levels of Asia-Pacific Regional Economic Cooperation and Their Development Process
The leading orientation of Asia-Pacific regional economic cooperation is to promote closer economic association under an open market that is to establish trade and economic relations based on the rules of open market. Open Asia-Pacific regional economic cooperation is multileveled: the first being the level of the Asia-Pacific as a whole, with the AsiaPacific Economic Cooperation (APEC) as its main framework; the second being the sub regional level, mainly including free trade agreements among concerned countries in North America and East Asia; and the third being the level of bilateral free trade agreements. It is different levels of development and different economic systems that give rise to the fact that Asia-Pacific regional economic cooperation features multileveled in development structure, diversiform in development characteristics, unbalanced in development level with great differences between participating entities in economic cooperation capacity, and therefore it is necessary to make concrete analysis of relations between various levels and their development conditions.
First, taking the Asia-Pacific region as a whole, the APEC is the main framework for Asia-Pacific regional economic cooperation. Asia-Pacific regional economic cooperation based on the framework of APEC has a history of more than thirty years. However, its development process is rather uneven. In 1994, the APEC adopted the Bogor Goals, according to which developed economies and developing economies would achieve trade and investment liberalization by 2010 and 2020 respectively. But the goals are yet to be met.
The Asian Financial Crisis of 1997 disrupted the original arrangements of the APEC, the radical plan of “early opening” of some of the sectors was terminated, and the development of APEC had entered a period of readjustment. Entering into the 21st century, members of the APEC signed several common agreements to advance the implementation of the Bogor Goals, but to little avail. In 2009, the United States announced to lead the establishment of the Trans-Pacific Partnership (TPP), disrupting the integration framework of the APEC. Later on, the East Asian region took action, deciding to advance
the Regional Comprehensive Economic Partnership(RCEP). After repeated communication, the APEC Economic Leaders’ Meeting of 2014 held in Beijing agreed on conducting strategic studies on the Free Trade Area of the AsiaPacific (FTAAP) under the leadership of China and the US. However, owing to differences among countries and the US being engaged in promoting the TPP, the study project was ended eventually to no avail.
In recent years, the development of APEC has encountered crisis. In 2017, the US groundlessly accused China at the APEC Summit, to the detriment of the cooperation spirit of the APEC. In 2018, due to serious differences among members, the APEC Summit failed to come up with a common statement. In 2019, due to Chile’s unstable domestic situation, the APEC Economic Leaders’ Meeting had to be called off. Owing to the impact of the COVID pandemic, the APEC Economic Leaders’ Meeting of 2020 to be held in Malaysia was held online.
It would be worth noting that since taking US presidency, Mr. Trump has pursued the “America First” policy, imposed trade sanctions and technological blockade on China, promoted the construction of a supply chain circle based on “common values”, and virtually abandoned the cooperation spirit of the Asia-Pacific region. As the outbreak of COVID-19 has raged worldwide, the Trump administration stubbornly provoked the so-called “national security” issues, impeding the circulation of epidemic prevention and control materials, and resulting in the ineffectiveness of Asia-Pacific regional economic cooperation mechanism centering on the APEC. Against this background, AsiaPacific regional economic cooperation faces an even direr situation.
Second, the performance of AsiaPacific regional economic cooperation varies between different goals and forms. In North America, the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico used to be the most open and most strictly rule based sub regional free trade arrangement. Since taking office, President Trump has reconstructed the free trade arrangement between the US, Mexico and Canada, inserting articles for compulsory correction of trade imbalance and putting into place an article to prevent Mexico and Canada from independently negotiating for free trade agreements with “non-market economies” (mainly pinpointed to China), which underlines US leadership and control over the regional free trade arrangements.
The Association of Southeast Asian Nations (ASEAN) is a forerunner for constructing a free trade area in the East Asian region. The ASEAN free trade area based on the ASEAN regional framework has adopted the method of “step-by-step advancement” and “hierar
chical arrangements” that is to give considerations to under-developed member countries and grand them a period of grace. Although the efforts of the ASEAN in deepening economic cooperation have encountered difficulties, its driving force for regional economic cooperation has not been reduced. At the same time, the ASEAN has actively promoted the construction of self-pivoted “ASEAN plus” free trade area, promoting the construction of free trade area successively with China, South Korea, Japan, Australia, New Zealand and India and thereby laying a foundation for the construction of a greater open East Asian market.
RCEP is an ASEAN-promoted construction of the East Asian sub-region free trade area, conducive to promoting the construction of East Asia Economic Zone based on openness and cooperation. Earlier, Japan had misgivings about the RCEP without India’s participation and the US put pressure on Japan, Australia and other countries against signing the RCEP with China’s participation. However, regional countries had overcome all resistance and eventually came to an agreement to sign the RCEP within 2020. On November 15, 2020, after 31 rounds of formal negotiations spanning 8 years, 10 ASEAN countries and China, Japan, South Korea, Australia and New Zealand formally signed the RCEP agreement. It means that about a third of the world’s total economy will form an integrated market. At the same time, China has seen the establishment of China-Japan free trade relations through the RCEP, which was the first time for the country to sign a free trade agreement with one of the world’s top ten economies, and increasing the trade coverage of China’s free trade partners from 27 percent to 35 percent.
The TPP was originally a high-standard Asia-Pacific free trade area built by the US government excluding China. However, under the Trump administration, the US announced withdrawal from the TPP, whereas Japan promoted and completed the Comprehensive and Progressive Agreement for TransPacific Partnership(CPTPP), seeing to it that the CPTPP came into effect and has left room for the return of the US. At the same time, Japan wishes to attract more countries to join the CPTPP, making it a greater framework of a transregional free trade area. On November 20, 2020, speaking at the APEC Economic Leaders’ Meeting, President Xi Jinping remarked that China will give positive considerations to the idea of joining the CPTPP. Attracting great attention across the globe, this statement displays to the world China’s profile of continued expansion of opening up to the outside world and of its support for multilateralism and free trade.
Third, in regard to the construction of bilateral free trade area, the concerned countries have taken the lead in achieving negotiation results whereas bilateral economic and trade relations between China and the US remain the focus of regional attention. The US has successively completed talks with Japan, South Korea and Australia for renewing free trade area while Japan and South Korea have made remarkable headways in signing for bilateral free trade area. Likewise, China has taken the construction of free trade area as a national strategy and successively completed negotiations with South Korea and the ASEAN for free trade area renewal. In regard to China-US relations, as great turnabout has happened to US China policy, China-US investment negotiations have stagnated. Although both countries reached the Phase-One Economic and Trade Agreement, impacted by the COVID pandemic and due to approaching US general elections, phase-two negotiations between the two countries have been shelved, its future development pending the trend of US policy after the US presidential election.
Overall, Asia-Pacific regional economic cooperation has entered a new stage of development. Under the influence of factors like US policy change and the COVID-19 outbreak, the driving force for whole Asia-Pacific regional economic cooperation within the framework of the APEC has been weakened, and there have appeared reversed development trends such as the socalled “decoupling”, “coming home” and “constructing a trustworthy supply chain” pushed forward by the US. At the same time, sub-regional and bilateral economic cooperation has continued to deepen, consisting of the main trend of present Asia-Pacific regional economic cooperation.
China-US Economic linkage and Open Cooperation being the foundation for Asia-Pacific Regional Economic Cooperation
The foundation of Asia-Pacific regional economic cooperation is economic linkage between East Asia and North America based on open market, among which East Asia’s economic center of gravity and growth vitality mainly rests with China whereas the US is the economic center of North America. Over the years, China-US economic relations have featured mutual complementarity based on openness, and meanwhile issues of structural imbalance, however related issues like the huge deficit in US-China trade are largely caused by factors on the US side. The Obama administration built the TPP within a general Asia-Pacific framework excluding China whereas the Trump administration has applied unilateral sanctions to reduce the so-called trade deficit, which not only cannot resolve the structural
China has taken the construction of free trade area as a national strategy and successively completed negotiations with South Korea and the ASEAN for free trade area renewal.
imbalance issue but also has caused damage to China-US bilateral relations, and thereby further destructed the foundation of Asia-Pacific regional economic cooperation. Besides, the APEC is not only a regional organization but also a consensus action based on the spirit of cooperation, which is its core. If concerned members and especially key members lose political will of cooperation, Asia-Pacific regional economic cooperation based on the APEC will fall further into predicament, and related consensus actions can hardly be taken, which is a new situation with new challenges facing Asia-Pacific regional economic cooperation within the whole of region framework.
The inherent driving force for AsiaPacific regional economic cooperation comes from regional economic linkage and the cognition of mutual benefit on this basis. Looking from the angle of division of labor on supply chain, it is an echelon shaped structure of mutual benefit with highly developed economies taking the high end of the supply chain by providing technology and key parts, middle developed economies sitting at the middle end by providing manufacturing technology and important parts, and under-developed economies being mainly engaged in reprocessing and end assembly of the product. The network of production chain and supply chain created by such an echelon shaped structure of division of labor based on open market environment is supported and promoted by various governments. Looking from the angle of dynamic mechanism for the development of supply chain, the Asia-Pacific region features dynamic advantage shift and extension, whose operation rests with two driving forces. First, companies on the ground of costbenefit comparison conduct industrial shift of division of labor and allow more and more participants to join the ranks of the division of labor. Second, companies upstream increase research and development input, elevating division of labor, thereby entering still higher ranks of division of labor, and yielding lower ends to economies with comparative competitive advantage. Asia-Pacific regional economic cooperation has provided institutional support for such a regional linkage development.
The most important impact of the International Financial Crisis of 2008 is that the US economic policy of pulling consumption and driving economic growth with credit expansion has been ended. The economic chain supporting North America and East Asia is broken, breaking the existing “dangerous balance”. In fact, open market itself can hardly address imbalance between countries. First, trade imbalance is based on division of labor along the supply chain, which in turn is based on distribution of enterprises in global division of labor and functions of participants. Therefore, there is no mechanism of rebalancing between dynamic exchange imbalance within an industry and trade imbalance between countries. Second, the fact that the US has incurred a gigantic trade deficit has to do with its saving structure and the dominant position of the US dollar. Therefore, the key to a solution rests with the US readjusting its own policy and conducting economic reform, and it will not solve the US’s own problem to rely on the socalled “decoupling” or raising the tariffs. Although the Trump administration has pressured on US enterprises to “come home”, most of them do not consider withdrawing from Chinese market, as Chinese market and East Asian market hold the balance for their development and, on top of that, Chinese market and East Asian market have the market advantage for production and demand that the US lacks.
It should be noted that an important factor that strengthens the economic linkage of the Asia-Pacific region is the rapid development of Chinese economy. The preferential policy and favorable market environment provided by China has pushed the shift of production link of the supply chain to China, making it an important center of the supply chain. However, China’s fast development gives rise to the alert and strategic anxiety of the US, which embeds AsiaPacific economic cooperation with more and more political factors. The Obama administration pushed forward an AsiaPacific Rebalancing Strategy pinpointed to China. Since taking office, President Trump has upgraded the overall plan against China and conducted comprehensive containment of China. Especially in the economic realm, Mr. Trump has even avowed to entirely “decouple” China. Not only did he replace the concept of Asia-Pacific with that of IndoPacific, he has also taken the latter for a regional platform in containing China’s development. Under these circumstances, a political consensus and strategic
The preferential policy and favorable market environment provided by China has pushed the shift of production link of the supply chain to China, making it an important center of the supply chain. However, China’s fast development gives rise to the alert and strategic anxiety of the US, which embeds Asia-Pacific economic cooperation with more and more political factors.
foundation for co-constructing an open, developing and cooperative Asia-Pacific is devoid between the US and China. How to improve China-US relations and to bring it back to the right track for promoting Asia-Pacific cooperation becomes an important issue for preserving Asia-Pacific development.
Prospect for Future Development of Asia-Pacific Regional Economic Cooperation
In regard to Asia-Pacific regional economic cooperation, though the membership framework of APEC cooperation mechanisms remains intact and many a mechanism is still working, if a failure occurs in pushing AsiaPacific regional economic cooperation to produce new results, it will reduce members’ confidence in it. At present, it is necessary for APEC leaders to have in-depth discussion on the development of the APEC under the new situation in order to reach important consensus on the orientation of its way forward, the mode of its progress and the goals of its development. This can not only raise the confidence in promoting the development of the APEC under the new situation but also send a positive signal of openness, cooperation and development to the world at large, as the latter is under the circumstances of prevailing protectionism worldwide and economic development encounters sizable uncertainties.
At present, the most concerned issues for parties to the Asia-Pacific region include the change on US regional policy, the COVID pandemic and the economic recession induced by the pandemic. Under these conditions, it is necessary for Asia-Pacific regional economic cooperation to make efforts in several areas as follows, first to stop trade protectionism and unilateralism and uphold the big picture of openness and cooperation of the Asia-Pacific region; second, to readjust priority direction of Asia-Pacific cooperation and focus on advancing pragmatic, effective and functional cooperation, for instance, to further implement the APEC consensus on advancing financial cooperation and cooperation for green economy, new energy and interconnectivity, and timely summarize and appraise such implementation; and at the same time, to give special attention to promoting openness and cooperation in the AsiaPacific region for logistics network, big data network and digital network, and to tap potential and vitality for future development in new areas.
After the liberalism comes to a “low tide”, it is necessary for countries to pay more attention to issues like balance and sustainability of their own development. Therefore, it is necessary for AsiaPacific regional economic cooperation in the future to pay more attention to issues like achieving universal and equitable benefit for the society and improving participation capacity of citizenry. In its Belt and Road Initiative, China has put forward the cooperation principles of consultation, contribution and shared benefits, taking connectivity including People-to-people bond as a priority in achieving goals of cooperation and development. In promoting functional cooperation in the Asia-Pacific region, it is also necessary to put such principles and modes into projects of Asia-Pacific regional economic cooperation.
Asia-Pacific regional economic cooperation has gone through a journey of decades, and most importantly established a framework of principles and mechanisms on the basis of the Asia-Pacific region. Under the situation of global multilateral system encountering challenges and globalization being reversed, regional cooperation conversely tends to be further strengthened. Asia-Pacific regional cooperation mainly focuses on economic fields but is also heavily politically guided that is to reconcile disputes, resolve conflicts and enhance trust. As the main platform of promoting Asia-Pacific regional cooperation, the APEC should make new accomplishments under the new situation.
As an Asia-Pacific country, China sets great store by Asia-Pacific regional cooperation. China is not only an important participant in Asia-Pacific regional cooperation but also an important contributor to it. China will unswervingly uphold the major political principle of openness and cooperation. It will rally the greatest number of countries in the Asia-Pacific region with deepening the open up and sincere cooperation, and reduce adverse impact of unilateralism and adversary politics. In face of a number of challenges, it is necessary for the Asia-Pacific region to return to the path of win-win cooperation as soon as possible.
In its Belt and Road Initiative, China has put forward the cooperation principles of consultation, contribution and shared benefits, taking connectivity including Peopleto-people bond as a priority in achieving goals of cooperation and development. In promoting functional cooperation in the Asia-Pacific region, it is also necessary to put such principles and modes into projects of Asia-Pacific regional economic cooperation.