APEC in the “Asian Century”: Contending Visions

Manassinee Moottatarn CMC’13

President Obama’s host of the recent Asia-Pacific Economic Cooperation (APEC) meeting at his birthplace, Honolulu, Hawaii on November 11th, 2011 is very symbolic. The US’s is hosting such an event for the first time in almost two decades. Halfway between the US and Asia, it is the site which “highlight(s) America’s position as a Pacific nation” as reported in Obama’s White House statement. The United States has every reason to participate in Asia’s rise. But is APEC the best forum for the renewal of US engagement in Asia? Is the US irreversibly belated in its participation, and if so, how can it renew its leadership position in the region before it’s too late?

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In Honolulu, Asia-Pacific finance ministers agreed to boost growth and trade in order to fend off the global financial crisis. Together, the 21 economies of APEC, developing and developed alike- account for more than half of world trade. “I want to emphasize that the Asia-Pacific region is absolutely critical to America’s economic growth. We consider it a top priority,” Mr. Obama said in Hawaii’s capital. With a weak domestic economy and his re-election hopes, President Obama made job creation a theme of the meeting.

In a Foreign Policy magazine report, Secretary of State Hilary Clinton hailed the 21st century as the “Asian century”, emphatically stating that after a long hiatus, the US is making a “pivotal” comeback to the region. Obama’s team is following through with Clinton’s grand statement and was enthusiastic in setting the Honolulu meeting agenda. They emphasized three main goals: increasing trade and investment, promoting green jobs, and coordinating member economies’ regulations on commerce and trade. In particular, the green trade initiative was hailed as an achievement for Obama at the meeting.

But for all the engagement that the US has recently begun, the truth is that they are dangerously belated in joining Asia’s booming times. The president’s trip to the island was marred by increasing domestic criticism for his softness on China’s unfair trade policies, such as keeping its currency undervalued and lavish state subsidies for companies. APEC is entering into its third decade with unresolved tensions between its original purpose- to unite the East and West in harmonious cooperation- versus today’s Asia-centric focus of member economies. How can the US reconcile these two goals to ensure its full participation in APEC? And after a long absence, how can APEC regain its leadership positions on key world economic issues?

It became apparent very early on that APEC had a clear Western versus Asian divide, with the US prioritizing trade liberalization while the East Asian countries sought trade facilitation and economic and technical cooperation.

And the US has little going for it at the moment in APEC. There is no reason why APEC cannot become as active as it once was during 1993-1997, under the presidency of Indonesia and the US and the introduction of the ambitious “Bogor Goals” for free and open trade and investment in the region. However, after the Asian financial crisis, APEC’s popularity began to wane as the effected Asian countries began to prioritize economic cooperation within Asia.

The crisis generated a bitter legacy of the US in Asia, the Washington Consensus and its institutions, such as the IMF. Instead, Asia has come up with their own proposals to improve their independence, such as the Chiang Mai Initiative, which aims to create an alternative Asian Monetary Fund. This has not bore any fruit so far, but the animosity towards external reliance is clear enough. In addition, the lack of progress on multilateral trade liberalization in the WTO and the Doha Round, as well as the creation of Western trading blocs such as NAFTA and the EU, has prompted Asia to become more self sufficient and create trading blocs of their own, such as ASEAN + 1, +3 and +6. Today, the US commands little respect in Asia, with the bursting of its two economic bubbles- one dot com crisis and the current financial debacle plunging the world economy into a downturn and discrediting the US as both a model and a leader. Moreover, the replacement of the G7 with the G20 as the chief steering committee of the world economy has major implications for APEC, for it enhances Asia’s global leadership- the G-20 includes five Asian countries, seven if Australia and Russia are counted. Bypassing APEC, Asian countries could enhance their roles in the G20 and address issues such as Europe’s reluctance to reform the governance structure of the IFOs and India’s blockage of the Doha Round.

Seeking to counter the growing Asia-only focus in the region, the US launched FTA negotiations of its own with several East Asian countries and proposed in 2006 a Free Trade Area of the Asia Pacific (FTAAP). Although most of these negotiations have stalled, one of the most promising initiatives in this vein is the Transpacific Partnership (TPP). The U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join the group, which brings together the economies of Chile, New Zealand, Brunei and Singapore. However, none of the major Asian economies have joined the TPP- suspicions are rampant that the US is trying to sideline Asian economic integration rather than promote it. US Trade Representative was very blunt in his response to this.”Well then, China can stay on the sidelines and watch us build the most dynamic trade partnership in the Asia-Pacific,” said US said Kirk. “If China believes this is too ambitious, that’s a decision for China to make.”

C. Fred Bergsten from the Peterson Institute for International Economics has four suggestions for the US to remain engaged in Asia in his policy report entitled “Pacific Asia and the Asia Pacific: The Choices for APEC.” Firstly, but most unlikely, the US could call for the termination of APEC. If the Asians decide that their futures lie in exclusively Asian arrangements and that their strength in numbers in the G-20 commands respect from the US without utilizing institutions, the US could possibly call attention to the redundancy of APEC.

Alternatively, the US could simply accept its marginalization in APEC but nevertheless keep it as insurance against the failure of Asia’s integration. Thirdly and most championed by Asia, the US could support major reform of the global economic governance in the IMF, WTO and the Doha Round. Fourth, as it is currently trying to do, the US should continue to renew its leadership in the Asia Pacific. It should agree to support Asian regional integration, as it did in Europe- but only if the principles were compatible with US and global interests, such as increased liberalization.

For now, Bergsten envisions a three-step process for the US since chances are slim that it will move directly toward an FTAAP soon. First, the United States and major Asian countries—most likely Korea and Japan—should join the TPP, enticing other Asian APEC economies to join. It should then be transformed into an FTAAP as soon as possible. This will then prompt the revival of the Doha Round as demanded by non-APEC countries excluded in the Asia Pacific trade integration.

In addition, Bergsten writes that China should welcome such cooperation with the US in any form. Indeed, as the regional hegemony, it should prefer having the US on the inside of negotiations rather than lurking outside it. Trade and currency disagreements between the two continue to simmer- launching a cooperative transpacific project should help ease tensions on these issues.

All eyes are on Asia right now. Whether the US likes it or not, it’s up to the Asian member economies of APEC if they want a primarily Pacific Asia future constructed via a 10+3, 10+6, and the like, or an all-encompassing Asia Pacific future for the benefit of the rest of the world too.

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About Adrian

formerly published under the name Wendy Qian at the Atlantic, China File and Tea Leaf Nation.
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