The Philippines in APEC: Challenges and realities (part 3 and conclusion)

Urgent appeal for presidential decision

My last column requested that the President immediately appoint the new members of the APEC Business Advisory Council (ABAC). Further, I strongly recommend that Doris Magsaysay-Ho be reinstated as one of the three ABAC members. She provides continuity and is responsible for making labor mobility a focus item. ABAC meets in 17 days in Yokohama.

In Singapore in 2009, shortly before APEC Leaders got together for their yearly summit, President Obama surprised many by announcing that the US was joining the Trans Pacific Partnership (TPP) negotiations. The TPP which began as the P4 with original members Brunei, Chile, New Zealand and Singapore, are now engaged in negotiations with would-be members Australia, Peru and the US At the time of Obama’s announcement, most everybody, except the TPP members, saw this as a gambit to draw attention away from America’s failure to take leadership in the trade liberalization front, what with the US-Korea FTA held up in the US Congress and the stalemate in the Doha Round negotiations largely because of America’s doing.

TPP was less politically controversial because the TPP partners only accounted for about five percent of US trade and most of them had existing FTAs with the US Now Malaysia has announced that it has joined the negotiations. Canada and Mexico and even Japan are rumored to be contemplating their participation. Though negotiations still have a long way to go, and the US will have the last say on that, momentum seems to be building up for this regional trade agreement to evolve into a significant trading bloc and with it the demise of APEC as we know it today – a voluntary, consensual arrangement that suited the ASEAN temperament at the time of its founding. In my estimation, this building block approach would be a more realistic approach to getting to a Free Trade Area of the Asia Pacific (FTAAP) rather than a single undertaking.

I wrote about the TPP extensively in a previous column in response to a statement by DTI Secretary Gregorio Domingo early in the new administration. I warned about the need to look closely at what it would require to become a member as well as to its consequences on the viability of ASEAN and APEC as the leading institutions for economic integration in the region. As the US would have it, the TPP would be a “high quality, 21st century” free trade agreement that would require members to undertake comprehensive liberalization not just at the border but also behind borders – including internal regulations governing competition policy – and opening up investments and services to foreign participants. I understand that the President has recently said that the Philippines is seriously considering joining the TPP. I have been an advocate of a more aggressive trade policy and so I welcome this development. However, should the Philippines decide to join, it should only be after it has done a thorough evaluation of what it entails and that we do so in our own self-interest and not because everybody else is doing it. I for one believe that the economic policy and regulatory reforms that would be required will help streamline the Philippine economy and make it more globally competitive. But it would be a painful and contentious process requiring great determination on the part of the President and his allies in Congress.

Obama’s priorities

The coming summit in Yokohama will be President Obama’s second trip to an APEC summit. This time, however, he will be sporting the lumps and bruises of two full years of difficult governance. He will arrive with less charisma than before, but he can still draw on the enormous store of goodwill Asia has for him. Though he will be perceived – as his predecessors had been – like the reluctant son-in-law attending his mother-in-law’s Thanksgiving dinner, he will be welcomed nonetheless by a region beset with lingering anxieties over US disengagement from the region. However much the leaders of the region profess Asian unity and independence, few appear ready to turn their backs on continued US military dominance in the region as China begins to flex its economic and military might, “peaceful rising” notwithstanding. Last year, proclaiming himself “the first Pacific President” in reference to his being born in Hawaii, he declared that relations with Asia were pivotal to the US He backed up this commitment by following this up with a meeting with ASEAN Leaders first in Singapore during the APEC summit and just recently in New York on the margins of the U.N. General Assembly meeting. Still Asia waits for firm action behind the warm rhetoric.

Will he bring any goodies with him this time that will significantly advance APEC’s goal of free and open trade and investments in the region as set in Bogor? No one is holding his breath for a major breakthrough. APEC would have been celebrating the delivery of the first tranche of the Bogor Goals in which developed economy members committed to achieve in 2010 seventeen years ago. As I wrote in the first installment of this column, it was largely a non-event. It became anti-climactic because last year APEC members developed amnesia and concluded that what they really meant by free and open trade was in relative not absolute terms. If this was the case, then with average tariffs in the APEC region now down to 5.1% from 17.4%, then indeed it is relatively free and open – not quite what we had in mind back in 1994.

The US has not yet tipped its hand on what its priorities will be for APEC 2011 when it takes over the chairmanship. Each host wants to be remembered for a signature achievement. I have to admit I have no clue what that might be as of today. In general terms however, I believe that the US agenda will be consistent with pursuing the elements that make up what it calls a “high quality, 21st century” free trade agreement that it is pushing the TPP to be. The US will place all of these under the umbrella of “regional economic integration” which goes beyond just market access for goods. So count on services, investments, IPR, and environment to be American priorities.

China in APEC

Finally, I have to say that China’s rise as a global economic heavyweight (having surpassed Japan as the world’s second largest economy) is not matched by the extent of its participation in multilateral economic fora such as the WTO, the IMF and the OECD, where it has been reluctant to take on a leadership role. This goes for China’s participation in APEC as well which has been rather muted. Chinese Taipei’s participation may have been a factor but I suspect China still feels uncomfortable about APEC’s goal of creating an Asia-Pacific “community” – which it insisted should be spelled with a small “c” and not a capital “C”. I think the situation now, where China has become deeply integrated with the APEC economies, should make them less uncomfortable and therefore prepared to take a more active role in APEC. I would suggest that President Aquino is perfectly suited to make this suggestion because as a newcomer to the APEC scene, he is not inhibited by the experience of China’s reticence in the past.

President Aquino’s bow in APEC

President Aquino’s exposure to other Asia-Pacific Leaders in the context of APEC, is a singular moment that should remind him that the people voted for him because they believe he can give them a better life. APEC is after all a meeting of “Economic Leaders” who are in a position to profoundly influence the prosperity of their people by virtue of their being Political Leaders. At the end of the day, as Bill Clinton’s political strategist James Carville liked to remind the Clinton campaign staff, “it’s the economy, stupid”. –Roberto R. Romulo (The Philippine Star)