China pulls back in bid for free-trade pact after tough talks with US
Compromise agreed with reluctant United States over Beijing's push for new Asia-Pacific pact
China has agreed to drop a gear in its push for a new regional free-trade pact after discussing it with the United States, according to officials from both sides familiar with the talks.
The pact, known as the Free Trade Area of the Asia Pacific (FTAAP), is a key initiative that China wants to promote at next week's Asia-Pacific Economic Cooperation forum in Beijing.
China has now agreed only to mention the idea in an annex to the final communiqué to be issued by Apec leaders. The annex will declare the launch of a "collective strategic study" of the FTAAP idea, according to a US official close to the talks.
It is a compromise by China, which is frustrated by Washington's lukewarm reaction to the idea, said a Chinese official familiar with the situation.
The FTAAP was initiated by the US years ago but Washington later shelved it in favour of the Trans-Pacific Partnership (TPP), which excludes China. Beijing picked up the FTAAP idea this year and initially planned to announce the launch of a "feasibility study" during the Beijing gathering.
Beijing originally aimed to complete the FTAAP by 2025, the US officials said. But after discussing the issue with Washington, it has now agreed to change the "feasibility study" to a "collective strategic study" and drop a target date, the US official said. He said Washington told China that the wording for its original goals were "misleading".
"We told them that's not a good thing to do because when you use the word feasibility study, it's used in trade talks as implying the launch of a negotiation towards a free-trade agreement," the US official said.
"So we said if you used that you would mislead people into thinking Apec is actually going to launch a free-trade agreement negotiation."
After about six to seven months of negotiations, the Chinese side eventually agreed, the official said. "It took some time for them to understand that because they want it to be ambitious," he said.
The "collective strategic study", to be completed by 2016, would be a joint effort by Apec economies to look into options of making better use of more than 80 trade agreements in the region, the US official said.
Many see Beijing's push for the FTAAP as an effort to rival the TPP. It also comes as China seeks a more active role in shaping the region's trade framework as the size of its economy approaches that of the United States.
China, known as the "world's factory", is gradually upgrading its economy and shifting from being a primary foreign investment recipient to a major investor. A platform like the FTAAP could help China speed up its investment in the Asia-Pacific region, said Zhang Jianping, a senior researcher under the National Development and Reform Commission.
"If FTAAP is realised, China will be able to allocate resources across the Asia-Pacific region at a lower cost," said Zhang, who is also a participant at the Apec meeting.
A Chinese official, speaking on condition of anonymity, said China was frustrated by the US reaction. "The US wants to impede FTAAP, and they want to promote TPP during Apec. This is really annoying for us," he said.
According to the Chinese official, Washington insisted on holding TPP talks on the sidelines of Apec but had eventually agreed to keep such efforts low-profile.
Robert Wang, US senior official for Apec, said the US and China had "worked very closely together to try to study how we can increase Apec's contribution to the eventual realisation of FTAAP".
Regional officials appear to have difficulties reaching agreements on the Apec agenda, as several sources said Wednesday's final meeting among senior trade officials lasted hours longer than planned.
Apec trade and diplomatic officials usually hold meetings before their leaders gather together at the end of the week-long event. More than 20 world leaders will be in Beijing for a two-day summit on Monday and Tuesday.
