Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally Published in the China Post
As you listen to the unfolding discussion on the Trans-Pacific Partnership, do not be surprised if you hear as much about geo-strategic competition as you do about trade or economics. In fact, U.S. President Obama himself has been surprisingly straightforward and uncharacteristically devoid of nuance in portraying the TPP as something of a victory in a strategic contest between the U.S. and mainland China to gain the upper hand in setting trade rules in the Asia-Pacific. According to Obama: "If we don't write the rules, China will write the rules out in that region. We will be shut out." He then echoed these sentiments at the conclusion of the TPP negotiations: "We can't let countries like China write the rules of the global economy. We should write those rules ... that's what the agreement reached today in Atlanta will do."
So, seen from this perspective, the TPP is part of a larger competition between the U.S. and China for clout in the Asia-Pacific region. The TPP is intended as the economic component of the broader U.S. "pivot to Asia" — a strategy intended to signal that after more than a decade of Middle East misadventures, the U.S. is "back" in Asia, and will not lightly cede influence to a rising China.
One wonders however if this could prove to be an exercise in closing the barn door after the horse has already bolted. For many of the U.S.' "partners" in East Asia, China has long-ago supplanted the U.S. as their most important economic partner. And it is unlikely that the TPP will dramatically reconfigure these deeply-etched trade and investment patterns, many of which link to well-established global supply chains. Of course, some trade diversion to countries within the TPP is likely to take place as barriers are reduced, and China's slowing growth has certainly diminished its demand for commodity imports from its neighbors. But the agreement is not a "game changer" that will fundamentally disrupt or diminish the central role China plays in the region. In short, with or without TPP, China is not going anywhere. Its economic footprint in the region is simply too deep.
RCEP moving forward
Indeed, even while the ink is still drying on the TPP, all of its Asian members (and most every other major economy in the region) are continuing to move forward with negotiations on the Regional Comprehensive Economic Partnership (RCEP), a China-led trade deal which excludes the U.S. but includes the 10 ASEAN members, Korea, Japan, India, Australia, and New Zealand. These countries recognize that their interests are best served by fostering economic ties with both the U.S. and China, and see little value in getting caught up in any real or imagined competition between the two super powers.
Admittedly, casting the agreement as part of a geo-strategic competition is politically expedient for President Obama, since the accord will face a tough battle in Congress. The problem of course is that these words resonate far beyond the halls of Congress, and foster an unnecessarily confrontational "us versus them" mentality that raises emotion, but is not likely to be constructive.
The best path forward for the U.S., China, and their shared economic partners is to move beyond a "competing camps" vision for the region, and toward a broader, more realistic framework which recognizes that — like it or not — both the U.S. and China are going to continue to be leading economic partners for most Asia-Pacific countries for the foreseeable future. Separate "trade eco-systems" are out of line with economic reality, and simply create unnecessary complications and headaches for business.
The most practical short-term way to move toward a single regional framework would be to take advantage of the TPP's open architecture and aggressively pursue negotiations to add other members — certainly including China. China was initially cool to the notion of joining TPP, feeling perhaps leery of the much vaunted "higher standards" that TPP was supposed to achieve. More recent comments from Chinese officials indicate however a considerably more open attitude toward eventual TPP membership. This is likely an indication that the actual TPP accord has fallen short of many of its initial grandiose ambitions, which were thought to be beyond what China could or would accede to.
Another option for a region-wide solution would be to stitch together the TPP and the RCEP under a Free Trade Area of the Asia-Pacific (FTA-AP) — a concept which is under study by the Asia-Pacific Economic Cooperation (APEC) forum. But given APEC's institutional weakness and the glacial pace at which its liberalization initiatives have typically progressed, even if an FTA-AP is achievable it will be years — if not decades — in the future.
In any case, by whatever means, the sooner we move beyond a "competing camps" vision for the region, the better.