China's Asia-Pacific Dream: A new reality

The newest proposal from China’s President Xi Jinping may eclipse them all. While hosting the Asia-Pacific Economic Cooperation (Apec) Summit, he ambitiously raised an even bigger and more inclusive Free Trade Area of the Asia Pacific (FTAAP) and set this in the context of China’s “Asia-Pacific Dream”.
Yet, the idea of the FTAAP is not new. Apec ministers initiated it back in 2006, with leaders ’endorsements coming in 2010. As such, no one has said “no” to Xi.
But, the reception has been cool. A feasibility study on FTAAP was proposed in May, when the trade ministers met in Qingdao. Nonetheless, the US and Japan have watered this down to a “collective strategic study” to indicate they have yet to decide whether to enter into actual negotiations.
The hesitance relates to problems faced in the TPP, meant to be the economic centrepiece of the Obama administration. Negotiations are now into their fourth year – long overdue and in danger of floundering.
This is not only because of sticking points with Japan over automobiles and some agricultural products. Domestic American politics is another factor. Following the midterm election results, Republicans control the two houses of Congress and may not sign off on any deal brought by the Obama administration.
Both the US and Japan must push through. Otherwise, their credibility to offer leadership in the region will suffer. But this does not mean they should cold-shoulder China’s proposal for an FTAAP.
Trade agreements need not be oppositional. The logic emphasises interdependence and win-win outcomes. The FTAAP offers a long-term perspective to deepen regional economic integration. It is also a possible road map towards convergence of the TPP and the ongoing patchwork of other trade and economic agreements.
The idea is worth exploring, whether put forward by China or any other country. But, coming from President Xi, the proposal underlines an emerging truth: China is becoming the region’s central economy and cannot be easily excluded.
Since becoming a World Trade Organisation member in 2001, China has been actively pursuing economic cooperation and free trade agreements (FTAs) across the region. FTAs with Asean, Singapore, New Zealand and Peru are done.
With South Korea, Beijing has just completed FTA negotiations that, once in force, will eliminate tariffs on the vast majority of traded goods. With Australia, agreements were signed at the G20 summit in Brisbane for easier operation in China of service industries like tourism, finance and education, and to scrap tariffs on agricultural and mining products. With Asean, while differences continue over the South China Sea, expect an upgrade of the Asean-China FTA.
But to achieve FTAAP, several bridges need to be crossed, and indeed to be built.
First, there is the Regional Comprehensive Economic Partnership (RCEP) that seeks to build on existing FTAs that Asean has, separately, with Australia-New Zealand, China, India, Japan and South Korea. If this all-Asian agreement can be forged, this will be a step forward.
Second, an FTA among China, Japan and South Korea (CJK) is due. Talks are into their fifth round, but prospects are mixed. On one hand, a boost has come from the conclusion of the China-South Korea deal. Tense Sino-Japanese ties over political and security issues remain a problem however.
This was evidenced in the very brief and uneasy meeting between the two state leaders on the sidelines of the Apec summit. However, the fact that both leaders did at last meet is some indication that they recognise the rationale to get on. Only if Sino-Japanese ties are normalised can the RCEP and CJK move ahead.
Third, and the most important for the prospects of the FTAAP, is for better ties between the US and China. Relations between the two sides this year seem to be in something of a free fall. But the Xi-Obama meeting at the Apec summit showed that, despite ongoing differences, something positive can be achieved.
Their agreement on climate change has been heralded by both sides and could be a foundation to develop common understanding and collaboration. The elimination of duties on $1 trillion of technology products has signalled that the two largest economies are poised for an investment treaty. Given the deep interdependencies between the two, further cooperation would make sense.
Moving ahead with these initiatives will take not only time but also political will and courage. Political mindsets about great power relations must shift. In the meantime, expect China to play a greater role with other neighbours.
This is the uniting logic in President Xi’s ambitions for maritime and land-based Silk Roads to connect the region, and the launch of the Asian Infrastructure Investment Bank (AIIB) to accelerate infrastructure development. All this can and will be done, whether or not there is an FTAAP.
The G20 has targeted global growth and Asia is searching for engines to keep up its momentum. China is pursuing agreements with those nearby who are willing. Few welcome Beijing as the Middle Kingdom but many must recognise that China is increasingly the central economy.

Simon Tay and Gina Guo are, respectively, chairman and policy research senior executive at the Singapore Institute of International Affairs. The SIIA will co-organise the Asia Pacific Forum 2014, with the Japan Economic Foundation on November 24 to engage international participants on a dialogue on trade and economic development in Asia Pacific.