Getting Asia-Pacific trade bloc on track
China wants to revisit the idea of an Asia-Pacific free-trade zone and while there are many hurdles, it holds the promise of a more integrated world
A new kid has arrived on the global trade block, though in truth the kid has been on the block before, and may only be a temporary visitor this time, too.
China's proposal to revisit the idea of creating a Free Trade Area of the Asia-Pacific (FTAAP) was first mooted at an Asia-Pacific Economic Cooperation meeting in Hanoi in 2006, but there was no concerted follow-up.
The potential implications of such an initiative are enormous.
An FTAAP embracing all 21 Apec countries would account for over 40 per cent of the world's population, about 55 per cent of its gross domestic product and some 45 per cent of its gross trade.
It would include the full membership of the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP), with the exception of India.
Such an initiative would put half the global economy on a track towards non-discriminatory integration. And it would address what is probably the most complicated geopolitical relationship around today - that between China and the US.
A successful FTAAP would have to deal with some of the most intractable issues confronting global trade - and that would give member countries moral authority to appeal to the other half of the global economy to join the journey back to the mother ship in Geneva, and together restore the centrality of the multilateral trading system embodied in the World Trade Organisation.
This would be a remarkable demonstration of political leadership and vision - commodities that many today are inclined to assign antique value.
What, then, are the chances? Is the proposed revival of the FTAAP more shimmering mirage than concrete vision?
The answer lies in thinking about why it may not happen - as well as why it should.
First, the road to travel would be long and hard. Beijing is only calling for a feasibility study, which is a far cry from a negotiating commitment.
On the other hand, in 2010, Apec leaders said that the TPP and RCEP were parallel tracks towards a regionwide agreement, so the idea is not entirely out of left field.
Moreover, China chairs Apec this year and has proposed as its theme "Shaping the future through Asia-Pacific partnership". Don't belittle the notion that rotating Apec host countries typically want their leaders to be able to unveil tangible results at the final summit of the year.
Second, the mere suggestion of an initiative of this nature presupposes a willingness to confront geopolitical demons. Nations still need to get there.
Third, quite apart from the geopolitics, there are hard economic issues to address, and it remains unclear how easy it will be for negotiators to allow common interests to trump lobby-loved sacred cows.
Fourth, Apec is not a negotiating forum. If the FTAAP is to be taken seriously, it will need champions from many nations and proper organisation.
Will the commitment be there, or will the old habit kick in of thinking that words suffice?
Fifth, most governments are engaged in a plethora of negotiations on preferential trade agreements. Some will be tempted to sequence these so as to consolidate advantageous negotiating positions in any FTAAP, avoid the harder political challenges implicit in the broader vision, and silently hope that words alone will indeed keep the lid on anything too demanding.
Why then, should governments move beyond narrower geographical configurations and put inclusiveness back on the map? This opportunity to let Apec serve its members rather than be sidelined from the TPP and RCEP processes may not come around again quickly.
Regional consolidation is a hard sell, and will be harder for the next hosts - the Philippines, Peru and Vietnam - if something is not already in motion.
More fundamentally, governments have not articulated what would come after the TPP, RCEP and the Transatlantic Trade and Investment Partnership (TTIP) mega-regional trade deals, should these achieve closure.
Where would cooperation be taken next? Entrenched divergence among large groups of countries, especially on the regulatory front, can be hard to undo.
That lack of a game plan could spell very bad news for the world economy.
As in the fight against climate change, where too late just means too bad for all, inaction on the economic front can squeeze out irretrievable opportunities.
If there is not a straight line to action in the WTO, which seems to be the case for now, far-sighted governments could look for alternative interim paths towards a sorely needed transition from rivalry to inclusiveness. History would surely be grateful.
Patrick Low is vice-president of research at the Fung Global Institute