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Chinese checkmate

Chinese checkmate
A Free Trade Area of the Asia-Pacific (FTAAP), by no means a new concept, was successfully pushed by Chinese President Xi Jinping at the APEC Summit in Beijing on 11 November, projecting it as ‘historic’, in a move aimed at countering US-dominant trade moves in the region.

The 21-member APEC, of Pacific rim nations, including the United States, China and Japan, now in its 25th year, gave an in-principle endorsement for FTAAP, and decided to launch a ‘collective strategic study’ for it by APEC officials who would report by the end of 2016.

President Obama, taking part at APEC Summit, commended China’s focus on what APEC could contribute to the realisation of the Free Trade Area of the Asia Pacific and expected many regional initiatives under negotiation would contribute to eventual realisation of FTAAP which would link together all economies in ‘a high-standard 21st century agreement’.

Allaying suspicions that USA with its ‘Asia pivot’ sought to ‘contain’ China, US officials said the endorsement for FTAAP showed how US and China could work together to both advance their bilateral and economic agenda.

The APEC Summit declaration noted that FTAAP would be realised on the basis of the conclusion of the ‘ongoing pathways’– US-sponsored Trans-Pacific Partnership (TPP) comprising 12 regional countries without China, and the latter’s seemingly retaliatory initiative, ‘Regional Comprehensive Economic Partnership’ (RCEP). Differences have stalled progress in both regional FTAs.

APEC accounts for 40 per cent of world population, 54 per cent of global output and 44 per cent of trade. The proposed FTAAP is estimated to add 2.4 trillion dollars to the global economy while the 12-nation Trans-Pacific Partnership, which has backing of US Congress, is also claimed to account for one-third of global trade.

President Obama’s other larger Trans-Atlantic Trade and Investment Partnership (TTIP) negotiations with the European Union is also yet to gain momentum. US Senate Republicans seem agreeable to extend a ‘fast-track’ authority which will facilitate the president to conclude trade negotiations in a time-bound manner and the deals would not be subjected to subsequent amendments by the Congress, though the president himself has not so far sought for it.

The four Summits across Asia-Pacific, APEC being followed by ASEAN and Summits in Burma and later by G-20 Summit in Brisbane, Australia (Nov 15-16), are taking place in the backdrop of China’s aggressive assertion of its sovereignty over the East and South China seas, disputed by Japan in the North and by some of ASEAN countries like Vietnam and the Philippines.

It has also brought into contention the United States and other Asian nations including India which favour a peaceful settlement of disputes with respect to the UN Law of Sea Convention and ensuring maritime security for all nations for free flow of commerce.

China has, however, been in recent years expanding its military strength and its long-term strategy is to minimise US presence in Asia-Pacific region. President Xi holds that ‘the people of Asia should run the affairs of Asia’.  China is already close to overtaking the United States as the world’s largest economy.

With its financial clout and reserves exceeding four trillion dollars, it has also been spreading investments far and wide in all continents, building infrastructure and accessing natural resources, and thus forging stronger trade and economic relations with developing countries across Asia, Africa and Latin America. China is steadily expanding also its foot print through such investments
In BRICS, China promoted a 100-million dollar investment bank which will operate outside the framework of IMF and World Bank and other international financial institutions. India is also a major participant and would provide the chairman for the bank. Besides, China recently sponsored a 50-billion dollar Asian Infrastructure Investment Bank (AIIB). Twenty countries including India signed up for it, seen in the developed world as a vehicle for advancing Chinese interests.

The US officials said they welcomed the idea of an infrastructure bank for Asia but ‘we strongly urge that it meets international standards of governance and transparency’. China is set to be its largest shareholder with a stake of up to 50 per cent.

President Xi has also announced a contribution of 40 billion dollars to set up a Silk Road Fund, at a dialogue meeting of participating countries, aimed at strengthening connectivity and improving cooperation in the country’s neighborhood. The fund will be used to provide investment and financing support to carry out infrastructure related to connectivity for countries along the ‘Silk Road’, and would ‘break the bottleneck in Asian connectivity by building a financing platform.’

Russia and China have been getting closer together with a multi-billion dollar gas deal, Beijing financing a vast pipeline network to receive natural gas from Russia for 20 years or more and they share identity of views not welcoming US interventions in the trouble spots in the Middle East. The President, Mr Putin visiting Beijing was a special invitee at the APEC Summit and the Chinese President hopes Russia would be joining APEC some time.

India long ago had applied for membership but some countries had proposed a moratorium on new members. Prime Minister Modi was earlier mentioned in Chinese press reports as among the special invitees of President Xi Jinping for the APEC Summit.  Maybe, given some differences voiced in India on bilateral developments, this contingency for Mr Modi to include a Beijing visit in his crowded foreign tours did not arise.

President Xi has been harping on a new kind of ‘Great Power’ relations between China and USA.  At
their bilateral meeting as President Obama was also on a state visit, he said he wanted to take the relationship ‘to a new level’ and added, ‘When the US and China are able to work together effectively, the whole world benefits’.

While China and the United States remain rivals in free trade blocs, they also bring themselves to some accords now and then. At this Summit, President Obama was able to announce an agreement, as between global partners, to reduce tariffs for technology products. In Burma, at the East Asian Summit, President Obama is expected to feel even stronger in reaffirming United States’ historic role in the Asia-Pacific region. The fact that US economy has become resurgent and gaining strength also plays to his advantage.

Global issues will come up on a much broader canvas at the G-20 Summit which is attended for the first time by Prime Minister Narendra Modi. He is expected to have further discussions with President Obama in continuation of his White House meeting with the American leader on September 30.

A major issue to be sorted out remains India’s negative stance blocking the WTO’s Trade Facilitation Agreement in July last. In New Delhi, Commerce Minister Ms Nirmala Sitharaman said she was hopeful of an accord to sort out India’s stand on food security and pave the way for the approval of the multilateral deal on trade facilitation.

President Obama in a reference to the WTO deal while he addressed APEC Summit in Beijing saying he was confident that ‘there is an opportunity for us to resolve them fairly soon. But it does underscore how challenging it is to maintain and continue to grow our multilateral trading system’.
S Sethuraman

S Sethuraman

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