'Disruptive, lacking in economic sense'

Updated: 2013-06-18 07:24

(China Daily)

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Trade | He Wei

Editor's Note: As the United States pushes for the establishment of the Trans-Pacific Partnership (TPP), it has raised wide concerns whether the attempt is meant to contain the development of the world's second-largest economy. Below are two opposing views from economists and researchers:

Two parallel trade agendas in Asia have led to widespread concern among observers over whether the United States intends to encircle China via economic means.

The Asian track of free trade talks, namely the Regional Comprehensive Economic Partnership, is largely being driven by the Association of Southeast Asian Nations.

It aims to bridge differences and provide more direct interactions among major economies that are hampered by history or geopolitics.

The Asia-Pacific track, while initiated by four small APEC economies including Singapore and Brunei, was energized by the entry of the US in 2009. In the best scenario, it might eventually lead to a region-wide Free Trade Area of the Asia-Pacific.

According to Vo Tri Thanh, vice-president of the Central Institute for Economic Management in Vietnam, the Asian template has more room for exceptions and avoids imposing constraints on the domestic regulations of economies at different levels of development and with different political systems.

"While Asian agreements typically seek gradual liberalization, the Trans-Pacific Partnership strives to create a comprehensive, '21st century' template for economic partnerships and seeks to develop common, high-quality rules to restrict possible interference with international commerce," he said.

China's attitude toward the TPP has grown more open, based on recent remarks from government officials. For instance, the spokesman for the Ministry of Commerce, Shen Danyang, said in May that China "will study the possibility of joining the TPP on the basis of equality and mutual benefit".

Hong Lei, spokesman for the Ministry of Foreign Affairs, said China is open-minded about the TPP initiative, saying it is conducive to economic integration and common prosperity in the region.

But he suggested that differences among Asian economies be taken into account, and he added that concerned parties should set standards of relevant trade agreements in line with actual international trade conditions and individual nations' realities.

Hong also warned that excessively tough standards may exclude developing economies from trade agreements, affect the agreements' validity and damage the interests of all concerned parties.

'Disruptive, lacking in economic sense'

The TPP mechanism is being politically hijacked by the US, said Tan Khee Giap, co-director of the Asia Competitiveness Institute at the National University of Singapore's Lee Kuan Yew School of Public Policy.

As one of the founding members of the TPP, Singapore is "greatly disappointed" by recent developments related to the fledging agreement, Tan said during the annual Shanghai Forum at Fudan University.

Singapore is now as supportive of the Regional Comprehensive Economic Partnership as it is of the TPP, its own initiative.

The RCEP is a 16-party free trade agreement that would include ASEAN members plus Australia, China, India, Japan, South Korea and New Zealand.

The intention of the TPP is to form a treaty that opens up service trade, investment, intellectual property rights and other areas of economic and political interest. But the US has complicated things in a way that will make it more of a political bloc, he said.

Tan referred to a study that referenced the dwindling importance of the US to ASEAN economies in terms of trade and production. His research indicated that US influence in the region had severely dropped over the past 20 years.

"When Singapore says it needs more US engagement in the region, we are calling for economic integration, as Singapore wishes to diversify its investment portfolio and lessen its dependence on China for the sake of asset security. But we don't want to see a contrived encirclement of China," he said.

A case in point is the participation of Vietnam, said Tan, a nation that is even further away than China from meeting the TPP standards.

"No one will say it out loud, but the US is simply trying to bring in more nations that are hostile toward China over geographic or maritime disputes," he said.

The unstated goal of the TPP is to create a "high-level" trade agreement that excludes the world's second-largest economy, said Lin Guijun, an economist and vice-president of the University of International Business and Economics in Beijing.

Lin said the TPP is, in essence, a "disruptive" arrangement that lacks economic sense. He argued that most of the TPP participants are not key players along the Asian production line, and that they also lack comparative advantages among themselves.

"For example, we see both Japan and South Korea in the talks. Since the two countries largely have overlapping comparative edges, it is not a wise choice for them to be under the same framework," he said.

"That is a big club to be barred to Chinese entry," said Financial Times columnist David Pilling, who noted that the TPP may represent about 40 percent of annual global gross domestic product and one-third of world trade.

He said one of the rationales is to turn back the clock to trade policies that existed before China's 2001 accession to the World Trade Organization.

"The view that China is a freeloader and a cheat rather ignores the fact that today's advanced economies -- including Britain, the US and Japan -- all pursued rampantly mercantilist policies during their take-off phases. But there you have it," he said.

Contact the writer at hewei@chinadaily.com.cn

(China Daily USA 06/18/2013 page15)