APEC Summit Boosts U.S. Trade Opportunities in Asia
November 14, 2011
President Obama’s summit with the 21 leaders of the Asia-Pacific Economic Cooperation (APEC) forum on November 13 marked the beginning of a nine-day push by the president to highlight the U.S. “pivot” toward Asia. The APEC summit in the president’s childhood hometown of Honolulu marked the first time in nearly 20 years that the United States had hosted the leaders of the Asia Pacific. The president’s focus in Hawaii was on trade, and the centerpiece of that effort was the Trans-Pacific Partnership. This Critical Questions looks at what APEC did to advance U.S. economic and trade interests in Asia and globally.
The president stressed two clear themes during the summit. First, the United States is intent on reestablishing a U.S. leadership role in Asia after a decade focused largely on the Middle East. “The United States is a Pacific power and we are here to stay,” Obama told CEOs in a business forum on the margins of the APEC summit. “There’s no region of the world that we consider more vital than the Asia-Pacific region.”
Second, Asia is vital to the U.S. economic recovery and the creation of jobs. Obama said that “the Asia-Pacific is absolutely critical to America’s economic growth,” adding “because we’re not going to be able to put our folks back to work and grow our economy…unless the Asia Pacific is also successful.” The president trumpeted the benefits to the United States of free trade at a time when many Americans fear that their jobs are migrating overseas to countries like China where wages are lower.
Obama arrives in Australia on November 16 and then travels to Bali, Indonesia, on November 18 for a summit with the leaders of the Association of Southeast Asian Nations (ASEAN) and the first meeting of a U.S. president with the East Asia Summit (EAS). Both these visits will have a strong security component, with announcements of new access to naval bases in Australia and a strong focus on maritime security and institutionalizing new regional security architecture in Bali.
Q1: What were the most important developments on trade at the just concluded APEC summit?
A1: U.S. officials announced that they and their eight partners in the Trans-Pacific Partnership (TPP) negotiation reached the “broad outlines” of the framework to create a free trade zone in the Asia-Pacific region. In a statement, leaders of the TPP countries said the agreement would provide comprehensive market access to eliminate tariffs and other barriers to trade and investment and be a fully regional pact to facilitate production supply chains among member economies. They said the agreement would be cross-cutting and address regulatory coherence, competitiveness, support for small- and medium-size enterprises, and provide for “robust market liberalization.” The leaders said the TPP would promote trade and investment in innovative products and services and be a living agreement that could be updated to address trade issues that emerge in the future. U.S. officials said it was feasible to complete the trade pact next year.
The TPP is the most significant current trade initiative of the Obama administration and an effort by the United States to integrate more closely with the dynamic Asia-Pacific region. In addition to the United States, the current negotiators include Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam, but the participants hope it will expand into a broader Asia-Pacific–wide agreement called the Free Trade Area of the Asia Pacific (FTAAP), which would cover about 45 percent of world trade. U.S. officials believe the TPP could become a template for future trade pacts and address so-called twenty-first-century issues such as regulatory coherence, competition policy, investment principles, e-commerce, state-owned enterprises, and protection for workers and the environment.
Q2: What’s the significance of Japan joining the Trans-Pacific Partnership? Will Japan be able to fully join the ongoing negotiations?
A2: The TPP received a shot of adrenalin when Prime Minister Yoshihiko Noda announced that Japan, the world’s third-largest economy, would join the trade pact. Noda had faced weeks of difficult discussions in Japan before he committed to joining the trade talks. The prime minister met particularly fierce opposition from the protected agricultural sector. Noda said when he announced the decision that he would “protect what needs to be protected and win what we need to gain” in an effort to allay public fears in Japan.
Japan will now need to meet with all nine member countries and demonstrate that it is prepared to put all goods and services on the negotiating table and meet the high standards being set by the existing negotiators. In the United States, Congress will have to give the final go-ahead for Japan to join the talks, and it will have a 90-day approval period once the president submits a formal request for Japan to participate.
U.S. auto companies are particularly unenthusiastic about Japan joining the talks because they are concerned about how difficult it is for U.S. cars to enter the Japanese market despite low tariffs. The four key senators and congressmen from both political parties responsible for congressional trade policy sent a letter to U.S. Trade Representative Ron Kirk warning that “autos, various agricultural products including beef, insurance, drugs and medical devices as well as a large number of goods and services face serious market access barriers in Japan.” They said that including Japan in the TPP talks “would add dramatically new dimensions and complexities to the TPP negotiations.”
Separately, Canada and Mexico expressed interest in joining the negotiations and observers expect South Korea to jump onboard once its legislature has passed the U.S.-Korea Free Trade Agreement.
Q3: What were the discussions at APEC able to achieve on other trade fronts?
A3: The APEC leaders promised in their joint statement at the end of the summit to “transition toward a global low-carbon economy in a way that enhances energy security.” The United States had pressed for APEC economies to limit tariffs on environmental goods and services to 5 percent by next year, but China and other developing countries insisted that the date be extended to 2015 on products such as wind turbines and solar panels.
The APEC leaders also pledged to step up efforts to open markets and boost regional trade by exempting low-value exports from customs duties and making it easier for air-cargo companies to increase trade. They promised regulatory reform, including “eliminating unjustifiably burdensome and outdated regulations,” to bolster productivity and promote the creation of jobs.
Q4: What did U.S. leaders focus on in their bilateral meetings at APEC?
A4: President Obama, in a private meeting with President Hu Jintao, pressed China to allow its currency, the yuan, to strengthen at a time when China’s exchange rate policy is increasingly being raised as a concern in Congress and among Republican presidential candidates. According to the Chinese news service, Xinhua, Hu and other Chinese leaders insisted that the yuan is fairly valued and that the U.S. trade deficit and unemployment problems are caused by structural problems at home that won’t be fixed by China raising its exchange rate.
Obama, in his public comments, talked about “friendly and constructive competition” between China and the United States, but he said the United States was “rooting” for China’s economy to grow because it would create “an enormous marketplace” for U.S. exports. But he added that China must “play by the rules.”
In another significant development, the United States and the Philippines signed a customs administration and trade facilitation agreement on the sidelines of the APEC summit. The agreement includes commitments on simplified customs procedures in the Philippines that should help increase bilateral trade. U.S. Trade Representative Kirk said in a press statement that the conclusion of this agreement “can be a building block toward Philippine participation in the TPP agreement.”
Murray Hiebert is senior fellow and deputy director of the Southeast Asia Program at the Center for Strategic and International Studies in Washington, D.C.
Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2011 by the Center for Strategic and International Studies. All rights reserved.