Obscure deal key to realizing APEC dream?

YOKOHAMA, JAPAN — A little-known trade pact promoted by US President Barack Obama has emerged as a key vehicle towards ambitions of creating a free trade treaty embracing more than half the world’s economy.

With WTO negotiations in limbo, and warnings rife of a return to protectionism, talks to expand the pact, called the Trans-Pacific Partnership (TPP), seem to be the only hope of regaining momentum, analysts say.

The TPP is seen as a vital building block for a Free Trade Area of the Asia Pacific (FTAAP) — which would link economies from China to Chile and the US but currently remains an undefined and long-term goal.

Japan, which is hosting the Asia Pacific Economic Cooperation (APEC) summit in Yokohama this weekend, has announced it is exploring the idea of joining the TPP, giving fresh impetus to the process.

“It is a good thing that Japan, which is a huge economic power, will be open to the world,” Australian Foreign Minister Kevin Rudd said in an interview with the Japan’s Asahi Shimbun newspaper.

The TPP “is a very good forum as it holds a high standard on free trade and nearly half of the APEC members have joined the negotiation,” Mr. Rudd said.

The idea of an FTAAP had been mooted by business leaders and was championed by Washington in 2006 at an APEC meeting in Hanoi.

But it a received a cool reception from many of APEC’s 21 members, some of whom felt it would be dominated by the United States, while others wanted to focus on concluding the WTO Doha round of global trade negotiations.

Diplomats said Washington saw another opportunity to push ahead with a trans-Pacific pact through an expansion of the TPP as it seeks to export its way out of its deep economic troubles and high unemployment at home.

The US also wants to avoid being marginalized in an increasing web of Asia-centric bilateral and regional free-trade agreements that have evolved after the WTO talks collapsed in July 2008.

These include a free-trade agreement between China and the Association of Southeast Asian Nations (ASEAN) as well as plans for an East Asia-wide trade zone linking ASEAN as well as China, Japan and South Korea.

Without a pact linking both sides of the Pacific Ocean, the proliferation of these regional agreements could divide the world into walled-off trading blocs, officials and analysts fear.

Mr. Obama elevated the TPP’s profile last year by saying the US would enter talks to join the group which now has just four signed-up members — Brunei, Chile, New Zealand and Singapore — but which Australia, Malaysia, Peru and Vietnam are also in talks to join.

Other economies are watching closely and could also jump onto the bandwagon, but many are torn between not wanting to be left out, and reluctance to make the deep commitments TPP membership could require.

A lack of progress by APEC, a nonbinding forum that has implicitly admitted it has failed to reach free-trade goals pledged for 2010 by its more advanced economies, has also propelled the shift of focus.

“There is some language about how the TPP could be the ‘pathfinder’ towards the eventual FTAAP,” said Deborah Elms, a trade expert with the S. Rajaratnam School of International Studies in Singapore.

“If there is going to be an effort on the free trade front for the Americans, it will take place through the TPP,” she said.

APEC’s 21 economies — the potential members of a massive trade pact linking both sides of the Pacific Ocean — account for 40% of the world’s population and 54% of its gross domestic product.

Ernest Bower from the Center for Strategic and International Studies in Washington said the TPP “is a significant agreement and the only game in town in Asia when it comes to trade for the US and American companies.”

Passage by the US Congress of the pending US-South Korea free trade accord will be a major boost for the TPP as Seoul is likely to join talks for its expansion and force Japan to act so it will not be left behind, he said.

There is speculation China is also interested although there has been no official comment from Beijing.

Analysts said establishing a free trade zone that cuts across the Pacific Ocean would take time.

“I think in the next few days as the leaders arrive and make comments on TPP we’ll get a better idea of just how much momentum there is,” Woo Yuen Pau, chief executive of the Asia Pacific Foundation of Canada, said in Yokohama. — AFP