China and the US both have a role in promoting free trade in the Asia-Pacific region
Dan Steinbock says even before Trump’s scepticism, the US used trade as a geopolitical weapon against China, and now truly ‘free’ trade in the Asia-Pacific needs to include both major powers
In reality, the world of free trade is now in the kind of flux that has not been since the post-1945 era.
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After the fifth round of Nafta talks ended amid simmering tensions, Canada and Mexico have hedged their bets against a potential collapse by pushing for deals with new partners, particularly China and other Asian countries.
Nafta is America’s post-cold war blueprint for other free trade deals. It came into force in 1994, amid the globalisation boom. Despite the fanfare, accusations of misconduct surfaced barely a year after the deal.
President Bill Clinton’s alleged abuses of public power led to a special counsel in the 1990s. Mexico’s president, Carlos Salinas, was appointed World Trade Organisation director general, but fled Mexico as his brothers were prosecuted in a multimillion-dollar fraud case.
In public, Nafta was promoted as a receipt for regional success, yet its record has proven mixed. While the agreement benefited consumers in three countries, it also contributed to investment outflows, unemployment and offshoring.
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Recently, US officials sought to subdue Nafta tensions by extending the timetable for renegotiations but that has poured oil on the simmering fire. In Mexico, tight elections in mid-2018 will complicate Nafta talks; in Canada, conservatives are positioning for 2019 elections.
Yet, in the 1990s, Washington’s trade bureaucrats embraced Nafta as a blueprint that could be extended elsewhere. The proposed free trade agreement of the Americas (FTAA) was the first case in point.
Meanwhile, Washington sought to extend Nafta with non-trade-related concessions through the FTAA. Instead of opening South America to free trade, the agreement split the region into two blocs, as Brazil’s president predicted.
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Through the cold war, most Americans believed in international engagement, which had bipartisan support in Washington. Since the cold war ended, Americans have grown more sceptical of, even hostile to, international commitments.
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In November, 11 countries announced their commitment to resurrecting the TPP without the US. But a new deal will have to be signed and ratified by each country.
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In 2006, C. Fred Bergsten, then chief of an influential think tank, the US Peterson Institute for International Economics, made a forceful statement in favour of the free trade area of the Asia-Pacific. If the agreement could be achieved, he argued, it would represent the largest single liberalisation in history.
Oddly enough, the Obama administration set this aside to focus on the geopolitical TPP talks.
Dr Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (US) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). See https://www.differencegroup.net/
Correction: An earlier version of the article referred to allegations in the 1990s of fraud over the purchase of Airbus jets in Canada, and said former prime minister Brian Mulroney was blamed for it. This is misleading. In fact, Mr Mulroney later sued the Canadian government for libel, and subsequently received an apology and financial award in an out-of-court settlement. We are sorry for the omission.