As US and China meet at APEC summit, a drama involving billions in trade
| Beijing
President Barack Obama and other world leaders arrive in Beijing聽Monday聽for the Asia Pacific Economic Cooperation annual summit. This year, an unusual amount of drama has surrounded the preparations, as China and the United States are battling for regional clout and hundreds of billions of dollars' worth of trade.
Here's a briefing on key questions surrounding the conference, which is marking its 25th birthday.
What is APEC and what does it do?
As the world鈥檚 center of economic and political gravity shifts eastwards, APEC鈥檚 21 member countries will be setting the pace of global prosperity in the 21st 聽century. Already they account for 53 percent of the world鈥檚 GDP and 44 percent of its trade.
When they hear of APEC, many people think of the annual 鈥渇amily photos鈥� of world leaders looking awkward together in the host country鈥檚 national dress 鈥� from gaudy batik shirts in Bali to ponchos in Peru. (US President Bill Clinton started the tradition in 1993, handing out bomber jackets to his guests.)
But there is, of course a serious side. APEC鈥檚 central goal is to encourage freer trade and easier investment among members as a route to greater wealth: 20 years ago, it set itself a target of 鈥渇ree and open trade鈥� within the Pacific Rim (which it has not yet met).
The regional grouping has no enforcement powers, and it is not even a forum for negotiation. While agencies such as the World Trade Organization organize negotiations about binding rules, APEC plays a more informal role. 鈥淥ther regional organizations鈥� modus operandi is 鈥榥egotiation plus law,鈥� 鈥� says Mei Xinyu, a researcher at the Chinese Commerce Ministry鈥檚 think tank. 鈥淎PEC operates by consultation and independent action鈥� by its members.
So does APEC even matter?
Because it has no authority to impose anything, 鈥淎PEC has always faced the challenge of justifying its existence,鈥� says Deborah Elms, founder of the Singapore-based Asian Trade Centre, a new think tank.
APEC officials note that average trade barriers in the region have fallen drastically since the group launched in 1989 鈥� from 16.9 percent to 5.8 percent. 鈥淏ut they cannot claim a lot of the credit for that,鈥� says Gary Hufbauer, a trade expert at the Peterson Institute for International Economics in Washington. 鈥淐ountries have done that unilaterally.鈥�
APEC is very useful, though, in greasing the wheels of regional trade and unblocking bottlenecks. It does a great deal of nuts and bolts work in facilitating the export and import of things 鈥� making ports and customs offices run better, for example, or encouraging regionwide accounting standards.
But it is APEC鈥檚 annual summits that are seen as one of its biggest selling points, offering a chance for leaders from North and South America, Asia and the Pacific to get together informally and chew the fat.
鈥淗opefully they develop warm and fuzzy feelings about their geo-political differences,鈥� says Mr. Hufbauer. 鈥淭hat鈥檚 the main payoff.鈥�
But APEC鈥檚 role on this front has been somewhat eroded by the plethora of new get-togethers that world leaders can go to. When they leave Beijing next week, for example, some leaders will go on to an East Asia Summit meeting in Myanmar. Others will head to the G20 meeting in Brisbane.
Everyone is coming to the APEC meeting in Beijing. But then, this is Beijing, heart of the Middle Kingdom. Will all 21 leaders feel the same compulsion to show up in Manila next year, or in Lima in 2016?
What鈥檚 happening now on the Asia and Pacific trade front?
You might not expect it, but this is where things get interesting. Asia-Pacific is more than a region 鈥� it is an alphabet soup of potential free trade deals. But the letters in that soup now spell out a fiercer rivalry between China and the United States.
Washington is pushing the Trans-Pacific Partnership (TPP), a trade deal under discussion by 12 countries. China is conspicuously not one of them.
Resentful at its exclusion, China is championing a rival grouping, the Regional Comprehensive Economic Partnership (RCEP) that includes Beijing, the Association of South East Asian Nations (ASEAN), and five other regional nations.
China wants to use this year's APEC summit, where it is host, to launch the Free Trade Area of the Asia Pacific (FTAAP, pronounced eff-tap), open to everybody in APEC. This has been on APEC鈥檚 agenda since 2010, with the TPP and RCEP seen as two pathways to reaching the broader goal of an all-inclusive regional deal.聽
Washington was once an FTAAP booster. But the White House now wants the focus to stay on TPP instead. US negotiators have been fighting hard in preparatory APEC meetings to stop the Chinese from including anything in the final communiqu茅 that might suggest negotiations on an FTAAP are imminent.
鈥淭he US is stiff-arming FTAAP because it doesn鈥檛 want to roil the picture in Congress" 鈥� always suspicious of trade deals, especially if they include China 鈥� 鈥渋n case the TPP comes up for a vote,鈥� says Hufbauer.
Meanwhile the Chinese have become less fearful than before of TPP being used as a weapon aimed at isolating them economically in their home region, not least because they wonder whether the US-sponsored TPP talks will ever bear fruit.
What can we expect to come out of the summit?
The Americans hope to prove the TPP doubters wrong. The governments that have been negotiating a treaty have kept the details close to their chests. But Ms. Elms and Hufbauer, who have closely followed the five-year talks, both believe they might announce a deal at the Beijing summit.
The 12 trade ministers "have been working unbelievably hard,鈥� says Elms. 鈥淚 think ... they will try to substantially conclude鈥� this week, she adds, though some contentious issues of market access may need to be resolved next year.
If TPP doesn鈥檛 happen in the next few months, she predicts, it will never happen. Congress would never vote for a trade bill in the run-up to a presidential election, and that could mean the steam goes out of the process.
The Chinese summit hosts would not be happy if a US-led TPP deal upstaged their own plan for a new FTAAP, and stole their thunder. But they are hoping to benefit in profitable ways from the meeting.
