Strengthening Economic Ties with Asia

As host of the Asia Pacific Economic Cooperation (APEC) summit in Honolulu this weekend, U.S. President Barack Obama is expected to underline the importance of U.S.-Asian economic ties (CNN) in the midst of continued global economic uncertainty. At the top of Obama’s APEC agenda is the nascent Trans-Pacific Partnership, a multilateral free trade agreement being negotiated between the United States and eight other countries bordering the Pacific Ocean, says Simon Tay chairman of the Singapore Institute of International Affairs. The agreement has become a "battleground for influence" in the Pacific between China and the United States, he adds. While the United States has been left out of many intra-Asian trade pacts led by China, Tay says, TPP has been a "game changer" for the U.S. presence in the Pacific.

What is at the top of the agenda for this weekend’s APEC summit?

APEC is looking for kind of a new driver, and this is where the Trans-Pacific Partnership (TPP) comes in. It is not formally within APEC, but it’s really reenergized the discussion about having deep integration and freer trade in the Asia Pacific. It will be the thing people pay most attention to, given that America’s on board, and Japan now probably will indicate that it wants to be part of the negotiations.

What should be expected from those negotiations?

The Trans-Pacific Partnership was energized in late 2009, when America came on board. Trade negotiations, which want to be deep, want to be substantive, and want to really go beyond just tariff reduction, will take more than two years. So I expect there will be a declaration or framework agreement, but not a full, comprehensive treaty. The nine countries that are on board really have momentum, so if Japan got on board, further negotiations can bring in other countries and really start to take the Asia Pacific in a more positive direction than has been.

How does China see the TPP negotiations?

China has seen it very negatively. [TPP] is seen as the non-China mechanism for economic engagement [for the United States]. The economic engagement, of course, has some political ramifications. It has been a game changer for America’s presence in the region. If you looked at America’s economic engagement in Asia without TPP, you see that America’s been really locked out of all the future agreements and other things going on. Instead, in all those inter-Asian agreements, it’s been China front and center--ASEAN-China, China with Taiwan, and Singapore bilateral [agreement] with China.

So except for with Singapore and still struggling to complete the [pending bilateral trade agreement] with South Korea, America’s been out of the picture. That’s why the TPP, in a way, has become a sort of surrogate battleground for influence. Are you in the Chinese camp with the intra-Asian FTAs [Free Trade Agreements], or are you leaning toward America with the TPP?

How will the U.S.-China trade imbalance and China’s alleged currency manipulation be addressed at the summit?

APEC will be the wrong place to settle things. It may not be the best time for America, as host, to really press the issue in an aggressive way. Similarly, just as America has domestic politics, increasingly we recognize that China has too. [In] China’s domestic politics, it’s a very interesting moment where a lot of the questions of who will lead China are being settled. So if America pushes too hard at APEC or [another time] soon, it may actually go negative.

Beyond TPP, what else do you see as U.S. goals for this summit, particularly in light of Secretary of State Hillary Clinton’s pledge (Reuters) to reengage economically with Asia?

Coming into the summit, [Clinton] has been a masterful hand. China in this last year has really played quite clumsily in terms of stirring up different security issues with its fellow Asians. Whether it’s the Korean peninsula and its backing of North Korea, whether it’s the Senkaku Diaoyu Islands with Japan, or the South China Sea, for every one of these missteps by Beijing, Clinton has been there to reinforce the importance of America being there as an ally and to provide strategic reinsurance for nervy Asians. APEC in a way culminates that.

There will be a side meeting among foreign ministers who are there. Straight after that, they’ll go to the East Asia Summit, and it will be the first time America’s participating. There again, Secretary Clinton has been the front runner, going forward before the president to create the space for America to engage with ASEAN and others in Asia in a much deeper way than the Bush administration had.

Beyond trade, what are other economic ways that the United States can engage with Asia?

The importance of looking at ASEAN and helping ASEAN to become integrated more economically is significant. American investments in Southeast Asia--whether in Singapore or Indonesia--have been quite deep. ASEAN has become a production base for Japan and increasingly for America. A more integrated ASEAN would be helpful as a non-China counterpart to America.

Not to say that [ASEAN will] suddenly become allies with America and negate ties with China. But it’s in America’s interest to strengthen ASEAN, and of course in ASEAN’s interest to strengthen itself and reach out to America. So we see that the U.S.-ASEAN summit has emerged in Barack Obama’s administration, and it’s something that needs to continue to find more depth, more detail in various schemes, whether it’s the Mekong [River, in which China is building dams that have a potentially negative effect on countries located further south along the river bank] climate change, or human rights.

What role will the ongoing eurozone crisis play at this summit?

The eurozone crisis has reminded us that the Asia Pacific is the key right now to a global economy. The G20 in Cannes really left everyone quite troubled, in the sense that not only are there these ups and downs with Greek reform and Italian bond prices. But beyond that, even if Europe avoids complete calamity, we see that probably[for] the next three, five, maybe even ten years, European economies are not going to be that strong.

Where is global growth going to come from? At the moment, Asia’s doing relatively well. [And] America still has many engines of innovation. American companies and people have innovation and creativity that is unsurpassed. So the Asia Pacific partnership will become, if not already, the key driver to the world in this gloomy time.

You were part of a new task force report on U.S.-East Asia relations (PDF) at Asia Society. Would you outline its main recommendations?

While the Obama administration has brought America back to Asia, there are some changes from the last time America was there. One of them is that Asia itself has transformed. It’s much more united, and the role of China has become much more accepted in the region. So America can’t come back, thump the table, and tell everyone what to do. It’s got to find a new way of working with Asia. For Asians too, the formula of just exporting to America, that’s got to change.

While we’re looking at APEC as sort of a high point for American reengagement with Asia, this may not continue because of domestic politics, capacity issues about America’s financial and other commitments to the region. More than that, it can’t continue because what has happened in a way has been the broad summary, the government-to-government discussions, and what needs to happen now is a deepening of the solutions, of the work agenda, and trying to solidify the relationship with Asia. That’s where the U.S.-China relationship needs to be talked about--the critical relationship. If that relationship is troubled, then the U.S. position in Asia will also shift. It will force people to make an either-or choice [between the United States and China].