Trade Deals in Focus as Asia-Pacific Economic Leaders' Week Begins

6 November 2014

Leaders from 21 Asia-Pacific countries are set to arrive in Beijing, China in the coming days for a highly-anticipated summit, with trade expected to be one of the top items on the agenda. Issues to watch, observers say, include a potential breakthrough in the WTO’s stalled talks on expanding an agreement in technology trade, and a push by China to advance discussions on a future regional trade zone.

The meeting of leaders from the Asia-Pacific Economic Cooperation (APEC) regional grouping will be preceded by a meeting of ministers, set to begin tomorrow in the Chinese capital.

The 21-country APEC group was founded a quarter-century ago, with just 12 members at its outset, six of which were part of the Association of Southeast Asian Nations (ASEAN).

The forum began with the mission of supporting “sustainable economic growth and prosperity in the Asia-Pacific region.” This includes, according to the APEC mission statement, building a “dynamic and harmonious Asia-Pacific community by championing free and open trade and investment,” among a series of other foreign policy goals.

Twenty-five years since its founding, however, the difficulties of advancing regional trade liberalisation across such a diverse group of members – which covers a population of nearly three billion people and over half of the world’s GDP – has become increasingly apparent, even amid the proliferation of overlapping trade negotiating initiatives within subsets of that group.

For instance, one of the main topics expected to feature in leaders’ discussions is a push by China to draft a “road map” for a Free Trade Area of the Asia Pacific (FTAAP), a 2006 proposal that has since struggled to make headway, despite an agreement in 2010 to “take concrete steps” in this area.

Meanwhile, other regional negotiating efforts – such as the Trans-Pacific Partnership (TPP), the more recent Regional Comprehensive Economic Partnership (RCEP), and Australia’s bilateral deals with Japan, South Korea, and China – have been among those stealing the limelight in recent years.

Officials have long stressed that there is more than one way to reach an Asia-Pacific trade zone, and that these initiatives could ultimately work in concert with one another, rather than in competition. Analysts have speculated, however, that the TPP is an effort by some countries to respond to the economic rise of China, which is not one of the countries involved in those specific negotiations.

Speaking to reporters on Tuesday, Chinese Assistant Commerce Minister Wang Shouwen suggested that his country – this year’s APEC host – is hoping to see some progress on the FTAAP, including a draft “road map” for taking a 21-country deal forward.

"We hope we can adopt some concrete measures to make progress on the path to realising the (FTAAP) vision presented by leaders in 2006," Wang said, in comments reported by Reuters. A press statement by the APEC Secretariat confirmed that the meeting – led by Chinese President Xi Jinping – will consider this issue, building on the ministerial-level discussions. A related study may also be launched.

In response to questions on whether the US was trying to hinder the initiative, given its own goals of advancing the 12-country TPP, Wang confirmed that there were “no block or conflicts” within the APEC group.

“The meeting in Beijing is for all 21 members, and most eyes and attention will be focused on an Asia-Pacific free trade zone, an issue concerning all 21 members,” he said.

White House says TPP breakthrough unlikely

In this context, one of the main questions on trade observers minds’ will therefore be whether any TPP advances – major or otherwise – might be announced on the sidelines of the Beijing meet, given that leaders from the TPP countries are among the broader APEC group.

US President Barack Obama had said months ago that he had hoped there could be some sort of TPP result in time for his trip to Asia, which along with the APEC summit will also include a state visit to China, the East Asia Summit and US-ASEAN Summit. He will then be traveling to Brisbane, Australia for a 15-16 November meeting of G-20 leaders, according to a press statement on his travel plans.

However, speaking to reporters on Monday, White House Press Secretary Josh Earnest said that he did “not anticipate” that there would be a “significant breakthrough in trade talks while the President is traveling in Asia,” noting that this opinion is one that is shared with the Office of the US Trade Representative, which is tasked with conducting international trade talks on Washington’s behalf.

“That being said… I would anticipate that [with] any sort of agreement that the President reaches with other countries as it goes through the process of moving through Congress, we’re going to rely on a bipartisan majority to get that done,” he added, in an apparent reference to the US midterm elections.

The midterms on Tuesday evening saw the Republican Party sweep both chambers of the US Congress, as had been expected. Analysts have speculated that such a result, while potentially hindering the Obama Administration from achieving many of its stated priorities, could potentially ease the road for the renewal of Trade Promotion Authority (TPA).

This latter legislation would be needed to approve any final TPP deal, ensuring that a negotiated agreement would be protected from any amendments made by US lawmakers. Though draft proposals for TPA’s renewal have been tabled in the US Congress, little progress has been seen over the past several months, which was partly blamed on the fractious election climate.

Tech trade advances?

Another question on trade observers’ minds in recent months is whether a breakthrough might be announced on the talks to expand the product coverage of the WTO’s Information Technology Agreement (ITA).

The ITA is a tariff-cutting deal under the aegis of the WTO that covers a range of information and communication technology (ICT) products. The agreement dates back to 1996, and – unlike most WTO pacts – is binding only for those members who sign onto it, though the concessions made there are extended to all WTO members. Nearly all other WTO agreements are binding on the global trade body’s full membership.

The group of countries that has been negotiating an expansion of the ITA’s product coverage include 25 WTO members, counting the EU as one, out of the deal’s 50 signatories, which includes 80 members.

Efforts to add new products to the nearly 20-year-old ITA pact came to a halt late last year, after a disagreement between several of the tech trade deal’s members and China over how many items the Asian economic giant wanted excluded from the final product list, or subject to long tariff phase-outs.

However, the APEC leaders’ meeting has been touted for months as a potential date for resolving the stalemate, after a trade ministers’ meeting in May suggested that countries had settled on “creative ways forward” that could potentially lead to a resolution. (See Bridges Weekly, 22 May 2014)

“[An ITA breakthrough] could be a tremendous feather in the cap of China and its leadership of APEC,” US Trade Representative Michael Froman said at a trade conference in Washington last week, in comments reported by Reuters.

He warned, however, that if there is no way to resolve the gap “over a relatively small number of tariff lines, it’s hard to argue to people that China is going to be prepared to take on the much more difficult challenges involved in a successful bilateral investment treaty, or other negotiations.”

Though not all ITA participants – for instance, the EU – are members of APEC, the forum has proven a useful venue in the past for resolving disagreements in this area. A previous impasse in the ITA expansion talks was resolved at last year’s APEC meet. (See Bridges Weekly, 10 October 2013)

At a meeting last Friday of the WTO’s Committee of Participants on the Expansion of Trade in Information Technology Products, the US reportedly said there had been “some good progress” with China as of late, and that a consolidated product list could potentially be finished quickly, while acknowledging that there has not yet been a breakthrough.

Sources familiar with the meeting told Bridges that some members – such as the EU and China – had also expressed their hope for a deal at APEC.

ICTSD reporting; “U.S. warns China against dragging out technology trade deal,” REUTERS, 30 October 2014; “U.S. Blocks China Efforts to Promote Asia Trade Pact,” WALL STREET JOURNAL, 2 November 2014; “China Pushes Free Trade Over TPP Before Obama Lands in Beijing,” BLOOMBERG, 4 November 2014; “China presses case at APEC summit for own trade deal,” REUTERS, 5 November 2014.

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