The world watches as Asia plays host to the Asia-Pacific
Economic Cooperation (APEC) summit along with Trans-Pacific trade negotiations
(TPP) this week.
Despite the US president’s inability to attend the latest
meetings of APEC and the Trans-Pacific trade negotiations, member countries are
moving forward. Combined, members including Australia, Brunei, Canada, Chile,
Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam
comprise over 40% of global trade. Members are meeting this week in Bali to
discuss such concerns as tariff barriers, intellectual property rights and
labor rights.
The US president has made these negotiations a key part of
his administration's efforts to strengthen relations with Asia. China is not
yet part of the TPP talks, though it has not been excluded. That has fueled speculations
that the negotiations are part of the U.S. strategy to counterbalance Beijing's
growing might in the region.
China, however, is a member of APEC, and in his opening
speech, leaving China’s President, Xi Jinping, noted “China cannot develop in
isolation of the Asia-Pacific and the Asia-Pacific cannot prosper without
China.” Asian supply chains are tightly
woven connecting many countries to China which is indeed an important economy
within the region as well as to the global economy. Despite this, a recent
World Bank report concluded that countries with developing economies in East
Asia and the Pacific were expanding at a slower pace as China shifted from
export-driven growth and focused on domestic demand. Growth in larger
middle-income countries, including Indonesia, Malaysia and Thailand, is also
softening because of lower investment and global commodity prices, as well as
lower-than-expected export growth.
As such, the TPP negotiations are taking on a more urgent
tone as these Asian countries look to stimulate and expand trade. Still, the
issues at hand are formidable and the end of the year deadline may be difficult
to meet.
For example, Vietnamese manufacturers want better access to
sell their shoes and clothes in the U.S. and other industrialized nations. Some
U.S.-based manufacturers, meanwhile, oppose opening their factories to
competition from nations with low labor costs.
Meanwhile, the U.S. wants better access for its service
providers, especially banks, in developing nations. It will also be seeking
freer trade with Japan, its fourth-largest agricultural export market, which
protects local farmers with tariffs and quotas. Japan is also under pressure to
open its automotive and insurance industries to global competition.
Another core issue is how to ensure that state-owned
enterprises do not pose unfair competition to private-sector businesses.
According to the Peterson Institute for International
Economics, once agreed and is fully implemented, the Trans-Pacific trade pact
could raise Japan’s GDP by 2.2% by 2025, Malaysia’s by 6.1% and Vietnam’s by
over 13.0%.
While politics hint at shutting out China, the TPP will
provide opportunities for all its member countries and as such supply chains
could be altered as trade barriers fall and trade increases between member countries.
