US Should Join Efforts to Negotiate East Asian FTA

By James Wallar

Market in Shanghai. Would EAS serve as a broader platform for U.S. trade focus than TPP? Source: d'n'c's flickr photostream, used under a creative commons license.

CSIS took another great initiative in launching the Trans-Pacific Partnership (TPP) series on January 6.  It is important that this series not fall prey to a Washington-centric focus. The first session, which began with a keynote address by Michael Froman, deputy national security advisor for international economics, ran the risk of doing so, but this was avoided by the brilliant presentations by Matthew Goodman, senior economics advisor at the State Department, and Susan Schwab, former U.S. Trade Representative, who lifted the veil on the broader Asian context.

Few would dispute that the U.S. government needs to be engaged in Asia, where more than half the world’s growth is generated and where U.S. political security interests loom large. The U.S. government’s Asia “pivot” is a welcomed and necessary redirection of the U.S. administration’s energies.  The question is whether the TPP is a sufficiently robust platform for the United State’s Asian engagement.

“Where are the markets?” was Schwab’s rhetorical question. Countries participating in the TPP negotiations account for a small share of U.S. trade.  China, India, Korea, Japan, and Indonesia, where the real markets are, are not yet part of the TPP. The speakers at the CSIS conference did not give comfort that any of them would be welcomed to join soon.  We were informed that the TPP negotiations will continue apace. Which countries will want to join an agreement that they have not been involved in shaping to reflect their economic interests?

Economics and foreign policy are two sides of the same coin, an excellent point made by Goodman.  Without major Asian economic players in the TPP negotiations, it is difficult to see how the U.S. government can link its diplomacy with its economic agenda.

None of the speakers talked about the East Asia Summit (EAS),which the United States joined for the first time in November.  The EAS has all of Asia’s big economic players, is where the U.S. government is pursuing its regional security interests, and has an economic agenda.  In short, the EAS has the markets and the link between diplomacy and economics.

The EAS has a vision of an East Asian Free Trade Agreement and, eventually, a Comprehensive Economic Partnership.  China has advanced the former; Japan the latter. In November, the EAS established working groups on goods, services, and investments. All EAS members have free trade agreements (FTAs) with ASEAN, except for the United States and Russia.  These working groups are to identify common elements of these existing FTAs with a view to creating the new East Asian FTA.  Meanwhile, China, Japan, and Korea have agreed to meet in January to begin discussions on a three way FTA.  Unimaginable until recently, an FTA linking Asia’s largest trading nations would most likely drive the EAS trade agenda.

U.S. officials explain that they will pursue U.S. security interests in the EAS and use APEC and the TPP for economic issues.  It is not clear why decoupling security and economic interests is the best way to advance U.S. interests in the region. Using these venues made sense before the United States joined the EAS.  Now, however, the U.S. administration has the opportunity to use economic leverage to advance security issues – in the way that the United States helped Europe.  Agreement by EAS on new trade rules increases the likelihood that those rules could be injected into the World Trade Organization.  That would be better for everyone.

James Wallar is senior vice president, International Group of Nathan Associates.  Wallar previously served with the company as an advisor in the ASEAN Secretariat in Jakarta and before that held various positions in the U.S. Treasury Department.


Leave a Reply

Your email address will not be published. Required fields are marked *