It fails the TPP’s basic aim of creating a substantial agreement and a clear timetable for tackling outstanding issues in the negotiations — and it ignores the distractions likely to swamp the US in late 2012.
Attention will now turn to Bali and the East Asia Summit (EAS), widely regarded as focused on political and security issues and without an economic agenda — but that is mistaken. Asian economic integration has progressed a great deal due to the EAS process. For example, the EAS has been important in helping to facilitate debates over the relative importance of ASEAN+3, with its associated East Asia Free Trade Agreement, and ASEAN+6, with its Closer Economic Partnership for East Asia.
While financial and non-financial integration are yet to be combined in Asia, continued preoccupation with trade in the vein of 1950s tariff debates is a clear sign of outdated thinking. Economic integration will go beyond market access issues at the border to several aspects of regulatory cohesion whether it is pursued in Asian or Asia Pacific venues. Tariffs, for example, remain important to particular exporters, but most international businesses are more concerned with other barriers to their operations across national borders.
Asian processes are likely to have a greater focus on infrastructure development and a greater commitment to narrowing development gaps. The latter will likely result from the adaptation of supply chains to local circumstances and by encouraging innovation throughout these supply chains, rather than through continued flows of aid. Significantly, with political gridlock in the US and the rigidity of US ‘trade’ diplomacy, Asian countries should have plenty of room to coordinate and control their own Asia Pacific institutions and focus on such initiatives.
Still, many think the TPP has an advantage over the processes associated with the EAS, since the former has proceeded to a negotiating stage; and even some Asian officials affirm that American-led processes — negotiations — generate quicker and clearer conclusions than Asian processes. Some rebalancing away from Western-oriented negotiations to Asian consensus building should nevertheless be expected.
APEC’s founding purpose, for example, seems to have been a desire to link the West Pacific with the East Pacific by reconciling Asian processes of consensus building and Western notions of reciprocity through binding commitments and monitoring. Managing the tension between consensus and commitment has been an enduring theme throughout APEC’s history.
Today, several global trends are starting to push the emphasis toward consensus building.
First, wider participation in international economic processes and modern communications technology mean that international negotiations occur in national capitals, rather than plenipotentiaries meeting in seclusion (as in the early GATT rounds). The idea of ‘single undertakings’ was a device to promote compromise among likeminded negotiators and to socialise the concept of binding in the 1950s. Despite still having some merits, this approach is often a barrier to achieving widespread agreement among economies. Selecting members of a club is much more a matter of consensus than negotiating reciprocity.
Second, the width of the integration agenda contrasted with reciprocal agreements on tariffs is another point in this same direction. Several observers, most recently the Pacific Economic Cooperation Council in its statement to APEC this year, have concluded that the offer and acceptance modality of conventional negotiations is not appropriate for the barriers which are important in retarding services trade.
Third, events in the last year have raised questions over the West’s emphasis on concepts such as binding, agreements, monitoring and verification, and sanctions. While many observers are still sceptical of ‘voluntary cooperation’, consensual objectives and peer-review, recent events in Europe cast serious doubt over any unqualified preference for black-letter negotiated agreements.
Though a completed piece of paper, signed and dated, is an easy way to denote success, the term ‘negotiation’ should also signal each party’s commitment to reaching an agreement — and the relative commitment of participants in Asia Pacific and Asian processes is yet to be tested.
Some observers believe the US promotes ‘deep’ agreements with ‘massive political commitments’, while the only alternative is a ‘China-led model’ which is ‘relatively shallow and easier for governments to join’. They are likely to be wrong on several fronts. The current models are shallow and deep in different ways, but it is the Asian model which best accommodates supply chains and the importance of innovation. The sole notions of ‘US-led’ and ‘China-led’ are both superficial. Instead, the challenge for the US and its political institutions will now be to accommodate other TPP members. For Asia, its processes often draw on all members — and its challenge will be to regulate this approach.
Gary Hawke is a Senior Fellow at the New Zealand Institute of Economic Research and Professor Emeritus and former Head at the School of Government, Victoria University of Wellington, New Zealand.