US v China: Trade recipes for Asia

Asia\'s free trade future has become a contest between Chinese noodles and a US steak dinner.

The chief chefs are facing off, but some of the other cooks appear in both kitchens. In the last few days, it has become possible to point to an explicit competition between US and Chinese recipes for Asia\'s trade structure. Australia is one of those working in both kitchens.

The US vision is expressed in the effort to create a Trans-Pacific Partnership (TPP), a negotiation now deep into its 14th round. The alternate Chinese way of doing things, the Regional Comprehensive Economic Partnership (RCEP), was unveiled on 1 September in Siem Riap, Cambodia. 

Consider the membership and the absences in the two meals.
 
Australia joined the effort for Trans Pacific-Partnership in 2008 and the rest of the line-up is the US Brunei, Chile, New Zealand, Singapore, Malaysia, Peru, and Vietnam. In June, the other members of the North American Free Trade Agreement, Mexico and Canada, finally joined the US in the negotiations. The big absences include China and India, and a Japan which has expressed some interest in the TPP but not much more. America says the door is always open, but that invitation comes with some heavy caveats.

The new Asian trade vision is expressed by the RCEP, the comprehensive partnership first endorsed by ASEAN leaders at their summit in November 2011. In Siem Reap, six other countries – Australia, China, Japan, India, South Korea and New Zealand – joined with the ASEAN ten to work on the comprehensive partnership. This is all the countries in the East Asia Summit except for the two newest members, the US and Russia. Leaders will formally launch the negotiating process at the EAS in November. [fold]

Australia expresses enthusiasm for both efforts. Canberra says its highest trade negotiation priority is the conclusion of the TPP. The Trade Minister, Craig Emerson, thinks about half of the TPP\'s chapters are close to being finalised \'but concedes some of the most difficult negotiations will come in 2013.\' Perhaps that is why Emerson, in Cambodia, was laying the love on the new trade baby: \'This agreement would be the perfect vehicle for advancing Australia\'s interests in the Asian Century.\'

To return to the chef metaphor, Beijing will decide the key ingredients and strength of the spices in the RCEP. As Emerson notes, a central aim of the RCEP is to head off concerns about a developing \'noodle bowl\' of overlapping trade agreements in the region. In that bowl, most of the noodles have one end in China, which is the number one trade partner for just about everybody in East Asia. The role India and Japan will play in the negotiations will be fascinating, but the head chef clearly stands in Beijing.

The deal is good for ASEAN because not all of its members are in the TPP. And RCEP has some of the language both ASEAN and China like, such as allowing decisions to be made through any agreed modality and enabling special and differential treatment of ASEAN members. 

This column has lamented the diabolical possibility that Australia\'s focus on the TPP could lead it to the strange position of aligning itself against China both in its traditional alliance stance but also in a new regional trade structure. That problem has now changed its form in a major manner. With this new parallel set of trade negotiations, Australia can try to work both the US and the China sides of the street. 

The Asia Times thinks the RCEP will have some advantages over what the US is trying to do with the TPP because of \'the presumption that RCEP will not fetishize corporate rights and access (or human rights, labor rights, or environmental quality, for that matter), and will achieve a modus vivendi with the cozy intermingling of government and business that has characterized the Asian economic miracle thus far.\'

So the contest is between the Asian future imagined by the lawyers and lobbyists in Washington against Asia\'s mandarins and the moguls. The difficulty for the US would be to step back from the gold-plated deal it wants to engage the big players.

The US does not even bother to think about getting China into the TPP and Beijing returns the blank look. South Korea, having just battled through the agony of securing a bilateral free trade agreement with the US, is not keen on repeating the experience. Japan would be a huge catch. The TPP represents only 6% of US trade; Japan alone is worth that figure. Having got Mexico and Canada to join the TPP, the trick for Washington will be to offer Japan something that Tokyo can\'t see on offer with less pain from the RCEP.

As Bernard K Gordon noted in Foreign Affairs, the US is trying to impose its expansive approach to intellectual property, including criminal enforcement of copyright and patent law, through a negotiating process notable for its secrecy:

If the Obama administration fails to accommodate reservations about intellectual property rights and make the talks more transparent, there is a growing possibility that the TPP could collapse. The resulting failure would represent a major defeat for the Obama administration and undermine its goal of ensuring a long-term presence for the United States in the Asia-Pacific region. 

Mickey Mouse and Apple may have overplayed their hands. 

As with diplomacy, now with trade, Australia is being asked some interesting questions about what it wants from the US and hopes for from China. The test for Canberra is to help cook US steak and Chinese noodles simultaneously without getting burnt in the kitchen or indigestion in the eating.