Apec miracle: how the US and China can look beyond TPP and RCEP for Asia-Pacific trade harmony

Zha Daojiong says Beijing and Washington could use their Apec membership as the scope to work towards the establishment of a Free Trade Area of the Asia-Pacific, to benefit all Pacific Rim economies

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Zha Daojiong

Published: 5:30pm, 6 Aug 2017Updated: 5:52pm, 6 Aug 2017

A Free Trade Area of the Asia-Pacific could free smaller economies from having to choose between joining either China or the US. Illustration: Pepe Serra

As diplomats and negotiators quicken their pace to put together the annual gathering of heads of state under the Asia-Pacific Economic Cooperation framework, one question is inevitable: can the meeting this year deliver progress on rules for region-wide trade and investment?

It really does not take too much of a sceptic to dismiss such questions out of hand. After all, unlike previous years, the largest economy in the group, the United States, has stopped being involved in the Trans-Pacific Partnership (TPP) negotiation process – acting instead under the dictum of “America First”.

China, the second largest economy, has put forward its own trade and investment platform, called the “Belt and Road Initiative”. The plan can be said to be the Chinese version of a results-oriented approach to economic diplomacy.

Then there is Japan, the third largest in the group, which is still actively trying to make enactment of a “TPP-minus (the US)” a reality.

Indeed, if the governments of the top three economies do not see eye to eye on working towards commonly accepted rules in economic interactions down the road, the prospects for achievement in trade liberalisation are dim at best.

Japan’s Prime Minister Shinzo Abe is seen through a window of his plane as he arrives for an Apec summit in Bali, in October 2013. Photo: Reuters

One needs to bear in mind, meanwhile, that World Trade Organisation rules do bind all the Apec economies. But those rules are more reflective of product flows and value chains around 1995, when the decision was made to upgrade the General Agreement on Tariffs and Trade (GATT). It was the inadequacy of GATT/WTO rules that led to the search for schemes like the TPP and Regional Comprehensive Economic Partnership (RCEP).