Sunday, December 10, 2017

Moving forward despite of protectionist turbulence

Eric Chiou

    The year of 2017, from various perspectives, can be viewed as a critical test for the development of regional integration in the Asia-Pacific. Although numerous challenges have appeared and, to different extents, obstructed the further progress of regional integration in the area, the fact shows that the determination of most countries in the Asia-Pacific region to continue deepening regional economic integration has not been wavered. The most significant evidence is that the Declaration of the 2017 APEC Economic Leaders’ Meeting has indicated no sign of retreating back from APEC’s consistent commitment on facilitating a free and open regional environment.

     As an APEC host member in 2017, Viet Nam proposed the theme of “Creating New Dynamism, Fostering a Shared Future” as APEC’s annual objectives, which appropriately reveals what APEC members desperately need in the recent years of economic uncertainty, due to increasingly prevalent trend of anti-globalization. Indeed, in the aftermath of the 2008 Global Financial Crisis, the world economy has not totally recovered from the greatest recession since the 1930s, but remained weak and fragile. Hence, it is critical for countries to make collective actions and to pursue new dynamism for fostering the global economy.

     On the other hand, owning to the devastated consequences of the 2008 Global Financial Crisis, for preserving national interests, many countries have turned their sails toward the direction protectionism. In other words, free trade, economic globalization, and regional economic integration have no longer been perceived as self-evident maxims, but the subjects need to be reexamined and reconsidered. In other words, the vision of global economic future is no longer the same among states, neither is an ultimate goal that most states would pursue and cherish. As a result, APEC needs to “foster a shared future” to prevent the further deterioration of economic disarray in the region.

      In the year of 2017, several challenges have posed negative impacts on the progress of regional integration in the Asia-Pacific region, and therefore undermined the achievements that APEC has been accomplished in the past decades. The first challenge comes from the US president, Donald Trump and his American First Policy, as well as his preference of unilateralism and denouncement of multilateralism.

      Although he merely came to power less than one year, Trump’s trade policy has brought significant and overwhelming impacts on the direction of the global economy. Right after his inauguration, Trump waited no time to withdraw the US from the Trans-Pacific Partnership (TPP) and left other 11 TPP members to wonder about the future of this pending trade pact. In addition, the Trump administration also intends to reopen negotiations with its FTA partners in order to maximize its national interests. South Korea and the other two members in the North American Free Trade Agreement (NAFTA), Canada and Mexico, were forced to surrender to US pressures and agreed to renegotiation. The US unilateral trading policy and conducts have not only impeded progress of regional integration, but also induced more unstable factors in the world trade.

       The second challenge in the region is the further postponement of the conclusion of the Regional Comprehensive Economic Partnership (RCEP). In 2010, APEC had indicated that both TPP and RCEP are pathways to APEC’s final goal of the Free Trade Area in Asia-Pacific (FTAAP). Since Trump decided to withdraw from TPP, RCEP has been highly expected as the last resort to save regional integration from a total collapse in this region. Nevertheless, the unbridgeable divide between RCEP members have let its negotiation extremely difficult to achieve consensus. Therefore, the conclusion of RCEP has been postposed again to 2018. The expectation of RCEP to play a major role in leading regional economic integration in the Asia-Pacific region has proved in futile.

       Nevertheless, despite two challenges mentioned above, some encouraging signs are worthy of noticing in terms of regional integration. The first is the revival of TPP, despite no US participation. The TPP-11 countries have reached an agreement in November and decided to replace TPP with the new name, “the Comprehensive and Progressive Trans-Pacific Partnership” (CPTPP), representing this new regional integration initiative without the US.

      This development reveals that despite the lack of the US, other 11 TPP members are still willing to keep their commitments to fostering regional integration, which implies that the majority of TPP members consider that the establishment of this regional integration initiative is largely beneficial to them. In other words, the US unilateralism and protectionist tendency have not deterred other countries from making efforts to deepen regional economic integration.

       The second is that China becomes a self-appointed vanguard of global free trade and a defender of economic globalization. Relevant remarks regarding Chinese trading policy can be seen from the Chinese president Xi Jinping’s speech in the APEC Leaders’ Summit this year. Though oddly, but not surprising, China assumes the leadership of economic globalization which is discarded by the US, and proclaims its steadfast commitment to free trade and open markets. After all, China is the largest beneficiary from the latest economic globalization in the recent decades. Maintaining an open global market as well as free flows of trade and investments certainly fits its national interests and economic goals.

In contrast, the US is properly the victim of the recent globalized economy. Due to the growth of outsourcing and the loss of manufacturing jobs, these developments have severely eroded the fundamental health of American economy, which have not only triggered serious problems of unemployment and social instability, but also worsened US trade deficit and increased US debt. Hence, it is understandable why the Trump administration has decided to turn its back on the WTO and adopts unilateral or bilateral approaches to pursue its interests.

The final is the APEC’s commitment on promoting a free and open trade and investment in the Asia-Pacific region. In this year’s APEC Leaders’ declaration, despite US objection, APEC leaders have overcome discords and reached consensus on advancing free and open trading and investment, which shows that most APEC members have decided to pursue the approach of deepening regional integration.

In the world of mounting economic uncertainty, it is critical and vital for APEC to unwaveringly persist the path of further free and open market environment, since this path will bring benefits to most countries in the region. Meanwhile, as APEC makes its commitment on further trade liberalization, it is also important for APEC to be considerate to understand the concerns and anxieties from some countries which experience negative impacts from regional integration. After all, a prosperous and durable economic development in the Asia-Pacific region should positively contribute to all countries' economic growth in the region, which is the only way that APEC could earn more robust and comprehensive support from members in the region.

(Eric Chiou is an Assistant Professor of National Chiao Tung University)

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