Superpowers offer competing visions for trade, integration

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The presence of US President Barack Obama and China’s Xi Jinping as leaders of the two most influential economies of the Asia-Pacific Economic Cooperation (APEC) in this week’s forum brings into focus their competing visions for regional economic and political cooperation.

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Both are bringing recent individual successes and handicaps with them, and although the 21-member economic grouping seeks to enhance trade and cooperation, China and the US are not letting the event pass without making their strongest pitch in the region.

On Obama’s part, the recently completed Trans-Pacific Partnership (TPP) – which China was pointedly excluded from – is seen as a success for America’s market-driven liberalization approach to trade, an ideology US officials are not shy about promoting.

TPP is central to the US vision of the region’s future and the country’s place in it, US National Security Adviser Susan Rice said in a press conference last week. The sweeping trade pact involving 12 Pacific Rim economies is a critical step toward a high-standard free trade area in Asia and the Pacific, and our goal of revitalizing the open rules-based economic system that the US has led since the second World War, she said.

On the first day of the formal discussions of the APEC 2015 summit On Wednesday, President Benigno Aquino 3rd announced at a joint news conference that he has had discussions with US President Obama on the Trans-Pacific Partnership (TPP), in which he reiterated his country’s interest in the program.

“On the economic front, we welcomed the continued strengthening of trade and investment relations between our countries. I conveyed the keen interest of the Philippines in the Trans-Pacific Partnership (TPP) and we hope that the United States, as one of our most important economic partners, can assist us in the process,” Aquino told journalists.
Obama welcomed Aquino’s expression of interest in the US initiative, which he said, is a vital part of the US plan for the Asia Pacific region.

“We also had a chance to discuss the Trans-Pacific Partnership, which is a pillar of America’s rebalance in the region. We welcome the Philippines’ interest in TPP and we have directed our Trade Ministers to have discussions about how TPP is going to be implemented among the original 12 countries and how we can work with the Philippines to follow through on their interest. TPP is designed to be an open and inclusive trade pact for countries that can meet its high standards,” Obama said in the same news conference.

Challenges on both sides
That leadership, however, is being sorely tested by Xi’s China. Earlier this year, the Obama Administration was embarrassed by the failure of its attempts to dissuade a number of key allies from signing on to the China-based Asian Infrastructure Investment Bank (AIIB), seen as a potential competitor of US- and western-backed institutions such as the World Bank and the Asian Development Bank.

As of last month, 54 nations had signed up as AIIB members, including staunch American allies Great Britain, Australia, France, Israel, and even the Philippines (although the Philippines has yet to sign the articles of ratification).

China’s alternative to the TPP, the Free Trade Area of the Asia Pacific (FTAAP) is attracting greater attention now than when it was first suggested by Xi at last year’s APEC summit in Russia, and ironically, Xi may have Obama’s political opponents at home to thank for it. While Obama is heavily promoting TPP through a series of meetings with world leaders – this week alone includes the G20 summit, the APEC summit, and the Asean summit in Kuala Lumpur – dissent among US legislators, even some among Obama’s own Democratic party, make US ratification of the American-styled trade accord far from a sure thing.

While the current political and economic momentum may appear to some to be in China’s favor, like his American counterpart Xi is also grappling with potentially thorny problems.

China’s aggressive pursuit of what it sees as its rightful claims in the South China Sea (West Philippine Sea) and the East China Sea are increasingly being challenged by the countries directly affected – primarily the Philippines and Japan – and by the US itself.

Recent moves toward rapprochement between traditional rivals South Korea and Japan, a warming of ties understood to be engineered by their mutual American ally, also threaten to blunt Chinese influence in the region. And Xi is also bringing a pitch for China-led economic institutions and trade frameworks to Manila at a time when the Chinese economy is cooling, causing some consternation among potential trade and investment partners.

Advantage China?
Despite these shortcomings, analysts suggest China may still enjoy a clear advantage over the US in presenting alternatives to the TPP and western financial institutions.

Richard Javad Heydarian, an assistant professor of international affairs and political science at De La Salle University, and an expert in US-China affairs sees China’s offering as being perhaps more compatible with its ‘target market’ in Asia.

“The APEC was originally an American vehicle for pushing a market-driven globalization across the region. In recent years, however, there is a genuine Sino-American competition over who sets the rules of the road,” he explained.

“The American-led TPP emphasizes high-standards liberalization, which significantly reduces state intervention in domestic economies in favor of a more private-sector-driven economy, with major multinationals gaining better access to untapped markets in the Asia-Pacific area. China, meanwhile, is pushing for a more flexible and inclusive FTAAP, which focuses more on reducing trade barriers and consolidating a myriad of existing FTAs between China and its regional trading partners.”

Heydarian see China’s focus on infrastructure as being a key to its efforts to extend its power. “To buttress its burgeoning economic influence, China is also pushing for infra-focused initiatives like AIIB and Silk Road projects, which aim to enhance trans-regional connectivity under a more Sino-centric order,” he said.

The US might also be at a disadvantage in terms of broader foreign policy in the view of University of Asia and the Pacific international law and trade expert Jemy Gatdula. “What is necessary is for the US to display better leadership,” Gatdula said. “APEC could serve as a proper avenue for the US and China to focus more on shared goals than dwell on differences. But for that to happen, a stronger, more ‘adult’, mature foreign policy thinking needs to be taken by the US.”

One relevant example of a shortcoming in this area was highlighted by China analyst Bill Bishop, author of the Asia-focused Sinocism newsletter, in a recent interview with AFP: The US failure to ratify the UN Convention on the Law of the Sea (Unclos) hurts its credibility in dealing with the issue of China’s maritime disputes with neighboring countries; without the benefit of a ‘soft’ law-based option, Bishop said, the US could only rely on the ‘blunt instrument’ of military posturing – such as recent sail- and fly-bys near China’s newly-constructed artificial islands – which limits the solutions it can pursue.

The limitations seem to be reflected in the US’ economic “vision” represented by the TPP.
“America’s stringent free market-based conception of globalization isn’t very consistent with China’s emphasis on state-to-state cooperation and flexible trading agreements which don’t radically overhaul state-led economies in Asia,” Heydarian observed. “[And] China’s infra initiatives obviously are a huge plus for the region and facilitate regional integration.”

Even so, Heydarian urged caution in assessing both countries’ efforts to appeal to the region, suggesting both China and the US are pursuing ulterior motives to some extent.

“My concern is how these superpowers tend to use these initiatives to bolster their leadership credentials and outmaneuver each other,” he said. “The trick for smaller countries is to get maximum benefit from both but not commit to either.”

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