Asia-Pacific economic leadership: Shifting from the US to China?

The Asia-Pacific Economic Cooperation (APEC) Summit that just concluded in Beijing was no doubt China’s show. Beijing came out looking very much what it is touted to be — the world’s second-largest economy now leading the charge towards a free-trade region known as the Free Trade Area of the Asia-Pacific (FTAAP). For a once-closed economy that was not even part of the global trading system, this is one giant leap. In doing so, China overshadowed and reduced a rival initiative by the United States — the Trans-Pacific Partnership (TPP), which excludes Beijing — to what is a subsidiary platform.

Chinese President Xi Jinping has shown that the agenda of liberalising trade in the Asia-Pacific region cannot but take China into account; indeed, this agenda will be dictated by China from now on. To show how serious it is, the Beijing APEC Declaration came complete with a road map towards the realisation of the FTAAP, though a clear deadline was shelved for now.

With the US outmanoeuvred, the economic power game entered a second stage in Myanmar this week, where the Association of South-east Asian Nations (ASEAN) hosted the East Asia Summit, in which both China and the US are members (with Beijing represented by Prime Minister Li Keqiang).

Interestingly, Beijing saw the revival of APEC as a major platform for regional economic integration — led by China. APEC has actually been the vehicle for trade liberalisation in the Asia-Pacific region since it was formed in 1989. Indeed, the FTAAP is not a Chinese idea, as Singapore Prime Minister Lee Hsien Loong made clear, but an APEC vision conceived in 2004 with its end-goal being a huge Asia-Pacific free-trade area.

But APEC lost its shine over time when no clear big-power champion emerged with the visionary leadership and commitment of then US President Bill Clinton, who hosted the first summit in Seattle in 1993.

During APEC’s downtime years, ASEAN fell back on its own trade liberalisation process, the ASEAN Free Trade Area (AFTA), and preached the message of trade liberalisation to the wider region. Two major platforms then emerged: One was the TPP, for which the US took leadership, with the exclusion of China. The other was the Regional Comprehensive Economic Partnership (RCEP), an outgrowth of the ASEAN Plus Three Summit comprising the association’s three North-east Asian trading partners, China, Japan and South Korea, as well as Australia, India and New Zealand.

China easily dominates the RCEP and insists that it be an East Asian platform — meaning it has no room for the US. This is partly the reason the US is eager to have the TPP as the key pathway to reach the FTAAP.

While the RCEP and the TPP evolve as competing platforms, both China and the US have, of late, downplayed this rivalry. This is just as well for ASEAN, whose members are divided between support for the RCEP and for the TPP. Only four of the 10 ASEAN members — Brunei, Malaysia, Singapore and Vietnam — are currently involved in the TPP negotiations, which demand a higher standard of trade liberalisation. The RCEP, on the other hand, sits better with many ASEAN members, virtually all of which benefit from huge trade with China.

THE ASEAN DILEMMA

But while ASEAN as a whole values China as a close economic partner, the group is also wary about Beijing as a security threat. This has resulted in a two-dimensional relationship — a duality, as some have called it — that ASEAN has with China: A growing economic relationship paradoxically matched by increasing political tension caused by Beijing’s aggressive claims to parts of the South China Sea.

How this two-dimensional relationship could be managed provided the backdrop for the ASEAN Summit this week in Myanmar and the East Asia Summit.

By stepping on the accelerator towards the FTAAP, China has virtually also quickened the pace of ASEAN’s own economic and political integration. The goal of an ASEAN Community — including a fully-integrated ASEAN Economic Community by Dec 31 next year — cannot be further delayed. At the moment, 80 per cent of its integration targets have been realised, with the remaining “hard part” set to be tackled after 2015.

But surely, the next lap cannot be only about tackling the unfinished business. If ASEAN Community 2015 is yet another pathway to the FTAAP, what is the vision of ASEAN after next year? This is where the group’s leaders must put on their thinking caps and collectively forge a road map to a new ASEAN that is a global player firmly situated in the 21st century.

This new vision must take into account the rapidly evolving economic and security architecture in the Asia-Pacific region. As displayed in Beijing this week, it will be a future in which China will not be shy to assert its economic leadership — in the same way it has staked its political dominance in the region.

As ASEAN leaders were convening for their summit in Naypyidaw, US President Barack Obama and Mr Xi in Beijing attempted to reforge the strategic relationship between the US and China, probing each other for a new calculus. Their major bilateral agreement on climate change was achieved in this context. But Mr Obama is a lame-duck President on his way out, while Mr Xi, who is only two years in office, will be around for a full decade to lead a rising superpower.

ASEAN’s dilemma is this: It appreciates the increasingly prosperous relationship that is blossoming with China under Mr Xi. Yet, ASEAN knows it is also entering a potentially tense future with Beijing under a leader who is prepared to flex China’s muscles — as seen in the resulting volatility regarding the South China Sea. Curiously, the tensions over the territorial disputes cooled down somewhat during the busy summit period.

Will ASEAN remain a mere bystander, watching from the wings as the power game continues to unfold between the two giants? Or will ASEAN do something to secure its pivotal position so it can shape the future regional balance in its favour? This key question must have preoccupied ASEAN leaders in Naypyidaw.

ABOUT THE AUTHOR:

Yang Razali Kassim is a senior fellow at the S Rajaratnam School of International Studies at Nanyang Technological University.