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Overblown Hype over China-U.S. Trade Rivalry in Asia

Feb 27 , 2015
  • Li Shengjiao

    Former Counselor, China's Ministry of Foreign Affairs

The Trans-Pacific Partnership (TPP), the backbone of U.S. President Barack Obama’s Asia policy, is down to its final negotiations. U.S. negotiators hope they can close out the TPP deal by the summer, despite mounting opposition from both sides of the nation’s partisan aisle.

When opposition has arisen from within, some U.S. politicians have exaggerated threats from the outside to divert attention and win domestic support.

There have been many voices in the U.S. that have described the TPP and the Free Trade Area of the Asia-Pacific (FTAAP) as two competing trade initiatives, and labeled the competing agendas as a China-U.S. tug-of-war in the Asia-Pacific region. They fear that China is trying to gain dominance in Asia-Pacific trade agendas, and displace the U.S.-led TPP by pushing for the FTAAP. Although the appearance of rivalry does exist, much of the hype is overblown.

FTAAP, not “Made in China”

Quite a number of media outlets see the FTAAP as a China-led initiative, but it isn’t. It has long been a common vision of APEC economies.

The initiative was first proposed at the APEC Hanoi Summit as early as 2006 and endorsed by all 21 APEC leaders, including then U.S. president George W. Bush. Noted American economist C. Fred Bergsten, then director of the Peterson Institute for International Economics, even made a strong statement in favor of the FTAAP, arguing that it would represent the largest single liberalization in history. Interestingly, the FTAAP concept was in fact first developed by the Americans.

Moreover, according to APEC Executive Director Alan Bollard’s interview with the People’s Daily Online in November 2014, the FTAAP has been a long-time shared aspiration of most APEC economies. As the host of the 2014 APEC summit, China helped to cement the deal. APEC members were grateful for China’s engagement in turning the all-encompassing, all-win trade deal from words into action.

“We do see FTAAP as being a big goal out into the future, and China is doing a lot of work looking at the FTAAP,” said the APEC boss in the Elite Talk show from the People’s Daily Online. “China would like to bring FTAAP to our attention this year, and probably agree to work on a study that will help us understand what it means; when we might achieve it; how we might achieve it; and what paths would be followed to get there.”

According to the interview, the FTAAP is not a Chinese initiative, but an APEC initiative.

FTAAP and TPP could be compatible

The FTAAP is seen by many as a rival to the U.S.-led TPP, which is currently under negotiation with Japan and 10 other Asia-Pacific countries, with the exclusion of the world’s second-largest economy. The truth is, the FTAAP is neither a contradiction nor a challenge to the TPP; the two trade arrangements could be compatible, and complement each other.

The FTAAP does not cast aside TPP or any of the on-going regional undertakings; on the contrary, it can be the “aggregation” of existing free trade arrangements, including the TPP. The FTAAP, which includes both China and the U.S., could be built on the basis of the TPP and other regional talks.. Hence, the acceleration and smooth conclusion of the TPP could contribute to the formation of the FTAAP, and this in turn, could also amplify the TPP results to an even wider area.

As Alan Bollard said in the People’s Daily Online’s Elite Talk program, the TPP could be a stepping stone to the all-inclusive FTAAP. He also said in an interview with CNBC at around the same time that the FTAAP is not necessarily competing with the TPP.

As the case stands, the FTAAP and TPP could run in parallel, or even be mutually beneficial to each other.

As the TPP talks near completion, troubles from both tea party Republicans and rank-and-file Democrats have emerged. Hyping China’s trade dominance in Asia is merely a political gimmick to win domestic support for the TPP. The FTAAP is a joint effort by APEC economies, and have the potential to incorporate the TPP and other existing free trade arrangements, not necessarily conflicting with the TPP.

While the TPP is not attractive to several APEC economies because of its U.S. dominance, the proposed FTAAP, which embraces all of the 21 APEC economies, is meant to be an all-inclusive, all-win trade initiative that “represents the largest single liberalization in history”, as the renowned American economist C. Fred Bergsten himself put it.

The United States should walk the talk and work with China to take a leadership role to truly facilitate global economic integration instead of waging a trade war with China, and trying to have a narrow interest that barely a certain number of countries could benefit from. As long as the two parties seek collaboration over conflict, there is reason to believe that China-U.S. trade engagement in the Asia-Pacific could be a win-win game.

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