Recently, my American Enterprise Institute colleague Philip Levy and I published an International Economic Outlook, entitled ‘Tales of the South Pacific: President Obama and the Transpacific Partnership.’ In this analysis, we made the case for the Obama administration to move with dispatch in asserting U.S. leadership in the construction of a new Asian economic architecture that would be broad and inclusive. And we argued that the Trans-Pacific Strategic Economic Partnership (TPP) agreement was an ideal vehicle through which to achieve this goal.

Since then, bolder moves by the People’s Republic of China (PRC) have increased the urgency for the Obama administration to advance a strategic vision of the U.S. role in a nascent Asian economic architecture. And on her recently completed fourth trip to Asia, Secretary of State Hillary Clinton took the first steps to attempt to fill the leadership vacuum in Asia.

The TPP, a trade and economic agreement among four nations (New Zealand, Chile, Singapore, and Brunei) was signed in 2005. As a vehicle for the United States to advance its interests in Asia, it has a number of attractions.

First, the United States already had negotiated bilateral free trade agreements (FTAs) with two leading members, Chile and Singapore;

Second, the TPP itself is a comprehensive FTA, modeled on the so-called U.S. FTA ‘Gold Standard’ that includes nearly complete free trade in goods within a short time-span, plus substantial advances in services, investment, health and safety regulations, competition and government procurement policy, and dispute settlement;

Third, it contains explicit provisions for expansion to include new members from the Asian region and could serve as the foundation for trans-Pacific regionalism built upon the existing Asia Pacific Economic Community (APEC) forum.

In its final year, the Bush administration agreed to open negotiations to join the agreement; and after a year’s delay, the Obama administration announced during the president’s trip to Asia in November that it would also ‘engage’ in the negotiations with the ‘goal of shaping’ a regional agreement.

But President Obama confronts deep divisions within his own party over trade policy and a huge, problematic domestic agenda that has taxed the administration’s resources.

Yet recent events and trends within Asia may well portend a stepped up pace for Asian regionalism—and heightened danger that the United States will find itself on the outside looking in, with substantial economic discrimination against U.S. industries, farmers, and workers.

On a broad scale, competing visions of a trans-Pacific vs. an intra-Asian regional future have once again moved to the fore – within the past year, Australian Prime Minister Kevin Rudd has pushed hard for an inclusive Asia-Pacific Community that would include the United States and India; conversely, the new Japanese Prime Minister, Yukio Hatoyama (to the consternation of the United States and its allies in East Asia), has put forward a proposal for a more narrowly based East Asian Community that implicitly excludes the United States.

Hatoyama’s off-the-wall proposal is just the latest in a series of hasty and ill-conceived reactions by Japanese prime ministers to a potent new fact relating to Asian regionalism – the relentless and unremitting pressure from Beijing to construct a narrow, exclusive Asian institutional architecture that it can dominate. This drive actually began almost a decade ago, when the PRC pivoted immediately upon achieving membership in the World Trade Organization and put forward a highly attractive proposal (China agreed to cut key agricultural tariffs immediately) for an FTA with the Association of Southeast Asian Nations (ASEAN). Japan and other Asian nations were caught completely off-guard and have been struggling to match or counter the PRC ever since.

This brings us back to the United States, Asia, and 2010. On January 1, with great fanfare in the Chinese media, the PRC and the ten members of ASEAN completed what the China Daily proclaimed as the ‘world’s largest free trade area.’ (The metric here was clearly population, not economic activity, where the FTA ranks behind the European Union and the North American Free Trade Agreement in value.) From January 1, 90 per cent of the tariffs between the PRC and the six original members of ASEAN will go to zero; for the other four, least-developed ASEAN nations the target for zero is 2015. The eight-year negotiations also include previous commitments in the areas of services and investment. It should be noted that—as critics claim—there remain large gaps, including hundreds of ‘sensitive’ goods exceptions (viz., motor vehicles, chemicals, electronics) and shallow liberalization in important service sectors.

Still, this was an important and highly symbolic milestone, with Chinese commentators lauding the benefits for 1.9 billion consumers who can tap into regional production of about $6 trillion per year. In 2009, two-way trade between the PRC and ASEAN topped $230 billion, more than triple the amount in 2003 at the outset of the serious negotiations.

Chinese analysts, almost certainly prompted by the government, were quick to use this occasion to put forth economic and political arguments for ASEAN and the other nations of East Asia to take the next steps leading to an ‘Asian-wide trade community.’ Pan Guoping, writing in the China Daily, bluntly argued that, ‘The financial crisis … has shattered the U.S. dominance of the world economy’ and Asian countries should make good use of the great opportunity … to be unfettered from the economic neo-colonialism.’ He concluded, ‘The unfair treatment towards Asian countries … can only be surmounted by cooperation among themselves … Asian countries need an institution to coordinate their economic and trade policies.’

Also in the China Daily, another commentator, Zheng Anguang, played upon Asian resentment against Western protectionism as a strong reason for new regional institutions, ‘It should be noted that both China and ASEAN members are victims in this worldwide trend of protectionism.’

Though concrete responses remain scant from the Obama administration, Secretary Clinton put forward the outlines of a strategic vision for Asia in an important speech in Hawaii on January 11 (just before she cut short the rest of her Asian trip to come back to deal with the Haitian catastrophe). She remarked, ‘we start from a simple premise that America’s future is linked to the future of the Asia-Pacific region, and the future of the region depends on America.’ America is not only ‘back in Asia,’ she stated, but ‘back to stay.’

Clinton then set forth elements of the Obama administration’s Asian security and economic strategy, including (on the security front) a commitment to strengthen existing bilateral alliances (Japan, Australia, Singapore) and deepen the human rights, disaster, and security responsibilities of the ASEAN Regional Forum, a security initiative that has languished in recent years.

As to economic integration, Secretary Clinton made clear that APEC would be the central focus of U.S. regional interests, but she suggested that the Obama administration was open to participating in, and even joining, the East Asian Summit and other intra-regional institutions such as the ASEAN Plus Three. Implicitly acknowledging the downside of the recent spate of new regional organizations and proposals, she warned, ‘It is important that we do a better job in trying to define just which organizations will best protect and promote our collective future.’ Finally, she reinforced the U.S. APEC commitment by promising to work with Japan to take advantage of the fact that Japan would host the APEC Summit in 2010, followed by the United States in 2011—with the assumptions that both nations would push to ‘deliver’ advances in regional integration at these meetings.

All of this is well and good—but Asia and the rest of the world have also seen the Obama administration falter and dither when it comes to advancing trade and investment liberalisation during its first year in office. If the president and the secretary of state are to build upon the premises and promises of the Hawaii address, then they will have to back up their rhetoric with concrete steps, including the following:

• - Demonstrate a political commitment to expend presidential clout on trade by securing congressional consent to the U.S.-Korea FTA, by far the most significant economic FTA since NAFTA—and a key barometer for Asian trading partners;
• - Work with TPP partners to establish a credible timetable for U.S. accession to the existing agreement. This would also entail the involvement of Congress, as the president would need new congressionally sanctioned trade negotiating authority;
• - Upgrade the desultory trade negotiations with ASEAN (the Trade and Investment Framework Agreement) to full-fledged FTA negotiations—and signal the possibility of diluting, or stretching out, the so-called “Gold Standard” liberalization provisions usually demanded by the United States. The United States could also revisit the stalled bilateral FTA negotiations with Thailand and Malaysia;
• - Begin formal discussions with Japanese leaders to establish common goals and concrete steps to achieve meaningful trade and investment liberalization in APEC at the 2010 and 2011 summits—including at least preliminary discussion of how to integrate existing subregional arrangements (such as the TPP) into APEC. The United States and Japan should also involve key allies—such as Singapore, Korea, Australia, and (possibly) Indonesia—in the discussion and planning. Beijing merits separate treatment, either through joint or individual meetings with Japan and the United States.

Secretary Clinton admonished Asian leaders that while ‘dialogue is critical,’ the time has come to ‘focus increasingly on action.’ To which one must reply. ‘Right on, Madame Secretary—and back to you.’

This piece was first published here at the American.

Dr. Claude Barfield is a  resident scholar at the American Enterprise Institute for Public Policy Research.

Related articles:

1. President Obama, the TPP and U.S. leadership in Asia
2. U.S. trade policy in Asia: Going for the Trans-Pacific Partnership?
3. Competing Asian Communities: What the Australian and Japanese ideas mean for Asia’s regional architecture

The idea that regional architecture in Asia and the Pacific is not up to the tasks it now needs to serve has been around for some time. It has been inspired in part by worries about the untidiness in the competing structures — across the Pacific, of APEC, and within East Asia, of ASEAN +3 and the East Asia Summit (EAS). There has also been a hankering after ‘robust’ regional institutions modelled on the arrangements in Europe or North America, however unsuited they are to Asia Pacific circumstances.

,

What is different about the thinking that led to Prime Minister Rudd’s Asia Pacific Community proposal is that these worries are incidental to its main strategic motivation. The Rudd idea is grounded in the reality of the big shifts taking place in the structure of regional and world power. These shifts in the structure of power have two main implications.

First, Asia’s growth is changing the structure of the world economy and shifting global economic power, and ultimately, strategic weight towards Asia, in particular China and India. Economic and political changes in Asia and the Pacific challenge the primacy of some dimensions of American power. These developments underline the gap in the framework for regional political and security dialogue in Asia and the role that such dialogue could play in helping to manage the long-term change in the structure of Asian economic and political power and political security relations between Asia and America.

Second, the scale of Asia’s impact on the global economy means that there is urgency in energising regional efforts to deliver on Asia’s global responsibilities – in the financial and macro-economy, in trade policy and on climate change – and how that might be assisted through regional structures.

Until the collapse of world financial markets and world trade in the global financial crisis, the East Asian region, including Australia, was preoccupied with managing all aspects of the China boom – the pressure on energy, resource and food markets, the macroeconomic pressures, the looming foreign direct investment and commercial presence – and beginning to think about its long-term political consequences. India too was more and more caught up in the wave. All was premised on the continuing strength of North American and European markets.

East Asian economies should have been more conscious of their role on the world stage and the need to reposition quickly to manage the global system consequences of their own economic success and the dangers presented to its sustainability that the huge imbalances had created on the way. East Asia bore no responsibility for America’s squandering the beneficence of East Asia’s success – the apparently never-ending supply of cheap credit negligently guarded by the private and public custodians of the developed world’s financial system. But in this and in many other global system-making or system-destroying economic and political affairs, East Asia had significant prudential responsibility and it failed collectively at every stage to exercise it.

The reason for this failure is simple.

Despite the emergence of East Asia as a major economic force in the world – China, Japan and the rest of East Asia through to Australia and New Zealand reaching out to India – the East Asian economies collectively could not step up to the mark because regional structures were still not up to the task of effective global participation. The stage was still set for the wrong play – reactive responses to regionalism in other parts of the world, the trivia of regional FTAs and ‘mickey mouse’ financial cooperation – and there was no platform on which to perform globally.

In East Asia, like elsewhere in the world, the risks that we now face in recovery from the global financial crisis, not only economically but also politically, are a consequence of failure in the architecture of governance, including regional architecture, that frustrated a coherent East Asian and international response to the big problems of the day in their global context.

The global financial crisis and the emergence of the G20 has changed all this dramatically and propelled the G20’s Asian members to assume a new role and their proper responsibilities in managing the world economic order. ASEAN is the fulcrum of Asian cooperation arrangements, including APEC, ARF, ASEAN+3 and the East Asian Summit (EAS) but, with the rise of the bigger powers in Asia, and the G20, this is changing.

How can regional architecture be restructured to relate effectively to the new global arrangements?

The starting point is to understand that, while they may have failed to connect Asia’s regional with its growing global interests and responsibilities and they have other weaknesses, the regional arrangements we have in place are huge assets in going forward. APEC is entrenched as the primary trans-Pacific arrangement. ASEAN+3 and the East Asian Summit have assumed an important role in developing the Asian regional agenda. APEC, in its first twenty years, has provided a workable strategy in trade and economic diplomacy in East Asia and the Pacific supporting policies of liberalisation and structural reform, organised around the principle of open regionalism (a strategy well suited to the development, objectives and diversity of the Asia Pacific region). But after the Asian financial crisis and the global financial crisis, these regional arrangements (APEC, ASEAN +3, ASEAN+6) must now relate more strategically to the global arrangements (the G20 group). And there is a whole new political and security agenda to navigate within the Asia Pacific region.

Clearly, the Asia Pacific Community idea needs to relate to these established regional structures – APEC and East Asian arrangements – if it is to be both accepted and serve its underlying political-security purpose. It will only be worthwhile and practical if it limits dialogue to the major players. Hence, although it cannot encompass all APEC’s membership, or all the membership of EAS, a dialogue on political and security affairs needs to represent both as they are presently constituted. It needs to link to, be coordinated with, and draw on the base of all of the established trans-Pacific and East Asian arrangements.

While none of the existing regional institutions addresses all of the key dimensions of regional cooperation that they now need to – providing a collective forum for regional leaders to address the full range of regional and global issues; dealing effectively with the consequences of economic integration, particularly its trade and investment but also its financial and macro-economic dimensions; addressing issues of political change and security; and educating the public and opinion leaders about the region – nor should any one organisation need to perform all these roles. Each of these forums has evolved to serve some or other of these roles and they can all make an input across the range of issues that are now important.

This points to the need for a new heads of government meeting that transcends APEC and EAS (encompassing the Rudd and Hatoyama proposals) that can address the full range of regional and global issues, including issues that might arise in APEC, EAS, ARF or other regional forums and feed into the G20 and other global processes. This summit could eventually constitute an Asia Pacific Council, underpinning the continued development of the regional community. It would not need its own secretariat but draw on APEC and the ASEAN-based groups to develop issues for consideration.

There may be sensitivities in creating a new summit involving a limited number of countries, the ‘larger’ players in Asia and the Pacific. But so long as it is structured so that it is representative of all the regional arrangements, these sensitivities need not be important. The most practical proposal and most logical starting point is that this summit should begin by including the Asia Pacific members of the G20, and meet adjunct to the APEC summit. A dialogue among these countries does not entail creating an additional institution as G20 leaders will continue to meet beyond the current financial crisis, encompass the core players in APEC and EAS and meet in conjunction with the annual APEC summit . These are all  important considerations in taking the next steps towards realising vision of an Asia Pacific and East Asian Community.

The clear message is that ‘no one wants more meetings’ and that there is ‘no appetite for additional institutions.’ But there is strong support for developing more effective alignment of regional strategic purpose, a sentiment that is at the core of the idea of an Asia Pacific Community.

If this is an idea that seeks to anticipate and shape our regional political and economic future, it is an idea that cannot be put on hold, take a decade to implement or wait until the United States signs on to EAS, an ASEAN-based, primarily Asian-oriented and still nascent grouping.

The next APEC meeting in Japan, provides an excellent opportunity to convene a side-dialogue of this group, including India, on these issues, likely just prior to the G20 meetings in Seoul, to lay the foundations for a representative Asia Pacific Council that can give leadership to taking the Asia Pacific Community idea forward.

Dr Hadi Soesastro is a senior economist with CSIS in Jakarta and Peter Drysdale is Emeritus Professor in the Crawford School of Economics and Government at the Australian National University. The original version of this essay was submitted as background to the Asia Pacific Community Conference held in Sydney at the instigation of Australian Prime Minister, Kevin Rudd, 3-5 December 2009.

Related articles:

1. Special Editorial – What Prime Minister Rudd’s Asia Pacific Community Conference delivered
2. Rudd in Singapore on the Asia Pacific Community idea
3. Why do we want an Asia Pacific Community?

Imagine a transnational regime with these institutional features:

• Virtually free trade in goods and services, including a ‘mutual recognition’ system whereby compliance with regulatory requirements in one jurisdiction (such as qualifications to practice law or requirements when offering securities) basically means exemption from compliance with regulations in the other jurisdiction. And for sensitive areas, such as food safety, there is a trans-national regulator.

• Virtually free movement of capital, underpinned by private sector and governmental initiatives.

• Free movement of people, with permanent residency available to nationals from the other jurisdiction – not tied to securing employment.

• Treaties for regulatory cooperation, simple enforcement of judgments (a court ruling in one jurisdiction being treated virtually identically to a ruling of a local court), and to avoid double taxation (including a system for taxpayer-initiated arbitration among the member states).

• Government commitment to harmonising business law more widely, for example consumer and competition law.

No, this is NOT necessarily the European Union (EU). These aspects characterise the Trans-Tasman framework built up between Australia and New Zealand, particularly over the last two decades. Sometimes this has been achieved through treaties (binding in international law), sometimes in softer ways (such as parallel legislation in each country), and sometimes even through unilateral abrogation of national sovereignty (New Zealand regarding film classifications!). Both countries are also actively pursuing bilateral and now some regional Free Trade Agreements (FTAs), especially in the Asia-Pacific.

So, why can’t these Trans-Tasman initiatives, and perhaps even some EU developments, provide a template for a true ‘Asia Pacific Community’ – beyond even what Australian Prime Minister Kevin Rudd apparently has in mind, or for an ‘East Asian Community’, as suggested by the new Japanese PM, Yukio Hatoyama?

The region certainly remains very diverse in terms of social and legal or political systems. Yet economic integration has burgeoned since the 1980’s, and will intensify even further as pan-Asian production networks have been forced to turn away from European and US markets in the wake of the Global Financial Crisis (GFC). The ‘diversity gap’ is narrowing significantly as the EU itself expands and becomes more diverse, at least when compared to the more developed democracies of East Asia, Australia and New Zealand. Indeed, the EU’s ‘Eastern Enlargement’ is forcing a marked reconceptualisation of its initial political motivation, which was to engage economic integration to maintain peace not only among major powers like Germany and the UK, but also to counterbalance the new Communist bloc within Europe.

The Cold War has also now thawed in most of Asia, which suggests the need for a similar rethink about why and how ASEAN was established – in the shadow of tensions in and with Vietnam. The 2008 ASEAN Charter as well many initiatives in economic policy particularly since the 1997 Asian Financial Crisis indicate some significant shifts away from traditional informal ways of promoting integration among the 10 member states. And who would have predicted in the 1990s the recent inauguration of the ASEAN Intergovernmental Commission on Human Rights?

Anyway, true respect for diversity within Asia-Pacific countries should include acknowledgement of subgroups that do exhibit greater convergence. For example, Australia and New Zealand share many commonalities with Singapore and even Malaysia, not only in terms of legal systems but also increasingly in standards of living. The economic parallels are even stronger with countries like Japan and now the Republic of Korea, with their originally ‘civil law’ traditions also undergoing significant transformations particularly over the last decade. These three pairs of countries could conceivably join in some more intense forms of economic partnership over the next decade. This has already occurred in the Trans-Tasman context – albeit with a sense of ‘back to the future’ for those two former British colonies.

Appreciation for the potential of subgroups is also found, moreover, within the EU system. It helps get around the problem that we are dealing with dual and fast-moving targets – in Europe and in the Asia-Pacific. In drawing inspiration already from the EU, we should also appreciate that ‘Brussels was not built in one day’. Various institutions have been grafted on or modified, through trial and error, and only some (or new variants) may prove useful for (some) countries nowadays within the Asia-Pacific region.

Countries like Australia need to examine the EU system more comprehensively to identify how such features might be adapted. We must get away from preconceptions generated, for example, by negative experiences in dealing with agricultural trade policy. For its part, the EU needs to overcome difficulties in projecting just what it stands for, particularly in Asia. Ironically, this problem is exacerbated by the EU’s internal diversity and the fact that broader foreign policy powers have been largely left to member state sovereignty.

More generally, the GFC has led to a reassessment of market liberalisation policies themselves. Rudd has consistently protested about the excesses of market fundamentalism, although it remains to be seen whether for example how far this will translate into reforms to consumer protection legislation in Australia (and New Zealand). Such views underpinned his electoral victory in 2007 (although a windback of labour market deregulation was a much higher profile issue). But there was a similar backdrop to Hatoyama’s election victory in Japan this August – what Arthur Stockwin described recently as a ‘political earthquake’. The new Japanese government appears likely to intensify measures to promote consumer rights and product safety, while simultaneously promoting actively both the WTO system and bilateral or regional FTAs. And the former EC Commissioner and now WTO Director-General, Pascal Lamy, has long pointed out that both East Asia and the EU share an appreciation not only of diversity, but also the need to balance free markets with other social and political values (Philomena Murray, ed, Europe and Asia: Regions in Flux, 2008, p7).

What is likely therefore to emerge – or, at least, what we should now be encouraging – is deeper and broader economic integration in the Asia-Pacific (or at least Australasia) that simultaneously incorporates regulatory safeguards to meet the challenges and expectations of our brave new post-GFC world. These innovations may be built into FTAs or negotiated out alongside them, but it needs to be done in a more concerted and comprehensive manner. Collaboration in regulating consumer product safety, financial markets, environmental protection, labour standards and investment regimes are only some of many possibilities explored in my Sydney Law School Research Paper downloadable here.

And, if it is still too difficult to use the ‘E’ word in contemporary discussions about an Asia-Pacific Community, surely there exists more scope to highlight some EU-like analogies already found in the Trans-Tasman context. Indeed, ignoring that context reminds me of the scene in Moliere’s comedy where a main character suddenly exclaims:

‘Good heavens! For more than forty years I have been speaking prose without knowing it! [Par ma foi, il y a plus de quarante ans que je dis de la prose, sans que j'en susse rien!]’ (‘Le Bourgeois Gentilhomme’ [1670] Act II, Scene iv).

Related articles:

1. Economic integration: Will Asia go regional?
2. U.S. trade policy in Asia: Going for the Trans-Pacific Partnership?
3. Competing Asian Communities: What the Australian and Japanese ideas mean for Asia’s regional architecture

At the fourth East Asian Summit, held on 25 October in Thailand, the leaders of Japan and Australia had the opportunity to air their ideas about the future form and function of East Asian regionalism.

As Acharya notes Australian PM Rudd and Japanese PM Hatoyama appear to have competing visions about how to re-order the region. But, at this stage, if only because both proposals share a level of deliberately in-built vagueness, it’s not easy to tell. Hatoyama, for example, seems ambivalent – or at least unsure – on what role the US ought to play in the region.

While Hatoyama is still unsure about membership, Rudd’s Asia-Pacific community signposted US participation from the outset. This is unlikely to be where it ends up. Indeed, there are already signs that the Japanese and Australian positions are beginning to merge.

In many ways this is only to be expected.

Japan and Australia have a record of diplomatic cooperation and joint leadership in regional institution-building. While that might not be the case this time round, there are some structural reasons [pdf] which suggest it likely.

Japan and Australia have common national interests in managing the relationship with China and the desire for a US presence in East Asia. China’s rising power recommends US involvement in Asia to both for similar reasons.

Yet the Japanese leadership is still ambivalent about US participation. What is likely to shift it on this?

For one thing, ASEAN is still the base on which regionalist projects have to be constructed — so the proposals from Australia and Japan will ultimately have to be mediated by ASEAN. Hatoyama’s rhetoric in the lead-up to the trilateral summit last month suggests that he believed that Japan might carry the day on the formation of an East Asia community. Lack of progress at the trilateral summit, made clear, if it needed to be, the continuing importance of ASEAN. As ASEAN invites the US into the region, via the Treaty of Amity and Cooperation, Hatoyama may well decide to ‘go with the flow’.

Yet, as one ASEAN official has noted ASEAN’s support for US participation is split 50:50; with the archipelagic southeast states in favour and those bordering China more ambivalent. The split in ASEAN derives from China’s rising and positive influence in the region. China has pushed forward its credentials as regional leader – this year offering Southeast Asian states a US$10 billion China-ASEAN investment fund (chiefly for infrastructure building). These circumstances make ASEAN states less likely to push the US issue.

the second thing has to do with China. It is possible that China is backing away from a strong position on US participation. China’s Ambassador to ASEAN Xue HanQin (薛捍勤) is reported as saying that the US could be a participant in an East Asian Community. Whether this reflects a real change in Chinese policy is yet to be seen. Has China embraced the cynical strategy of sinking a proposal by endorsing it? Certainly Chinese foreign policy makers must be aware that a strong move to exclude the US might have exactly the opposite effect. This uncertainty on both sides has created a situation in which neither China nor Japan is willing to discuss the role of the US in East Asia, for fear of harming their bilateral political relationship.

Where does all this put Australia?

With ASEAN still divided on the issue of US involvement, and China-Japan circling it, Australian diplomacy will need to be active to pay off with the outcome Rudd wants. That could require some ‘double edged diplomacy’ — convincing Japan that ASEAN really does support US involvement and carrying ASEAN along with it. Australia has been able to play this role in the past, and may now have to do so again.

In the end, Japan’s and Australia’s positions on US participation may well be squared. What is less clear is in what institutional form that might be done best, leaving everyone confident in their own diplomatic victory.

Related articles:

1. Competing Asian Communities: What the Australian and Japanese ideas mean for Asia’s regional architecture
2. Is there a ‘Japanese’ concept of an East Asia Community?
3. Rudd in Singapore on the Asia Pacific Community idea

This is the season for regional-integration initiatives in Asia. Two new initiatives were tabled at the East Asia Summit in Hua Hin. The new Japanese prime minister, Yukio Hatoyama, wants an East Asian Community. The Australian prime minister, Kevin Rudd, has proposed an Asia Pacific Community.

Both ideas seek to further regional economic integration, but their membership and content remain unspecified. There is talk of folding the ‘noodle bowl’ of free trade agreements (FTAs) in Asia into region-wide FTAs: a Northeast Asian FTA, comprising China, South Korea and Japan; an ASEAN Plus Three (APT) FTA that would unite northeast and southeast Asia; and an ASEAN Plus Six FTA that would subsume APT and India, Australia and New Zealand. There are also east-Asian initiatives on financial and monetary cooperation.

Regional-integration proponents argue that the global economic crisis has accelerated the decline of the USA and the rise of emerging powers, notably China. The severe contraction of export demand in the West, and the probability that it will not return to pre-crisis growth rates for some time, strengthens the argument that Asian economies should ‘rebalance’ to exploit regional sources of growth. That demands regional integration through stronger regional agreements and institutions. Not least, an Asian regional bloc, with up to half the world’s population and a third of global GDP, would be the third pole in the global economy; its collective power would transform global politics and economics.

What is achievable? Here it is important to distinguish Asian hype from Asian reality.

Economic integration is most developed in east Asia. Intra-regional trade as a share of east Asia’s total trade has increased to about 55 per cent – somewhere between EU and NAFTA levels and much higher than other developing-country regions. Intra-regional foreign direct investment (FDI) has also increased. But a big chunk of intra-regional trade and FDI, centred on ICT products, is in the form of production-sharing arrangements for export of final goods to the West. In other words, east-Asian regional integration is tightly linked to global integration. Apart from that, east Asia has highly fragmented markets in manufacturing, services and agriculture.

South Asia is the most malintegrated region in the world. Its intra-regional trade is barely above 10 per cent of its total trade; and intra-regional trade is about 5 per cent of regional GDP. India’s trade with its neighbours is under 3 per cent of its total trade.

Finally, east and south Asia are much less open to finance than they are to trade and FDI – due to highly restrictive national policies governing financial markets. Asian countries are far more connected with global financial centres in the West than they are with each other.

Now look at regional-integration initiatives. To begin with, Asia’s FTAs – 54 at the last count, with 78 in the pipeline – are ‘trade light’. They are largely limited to tariff cuts, but have barely tackled non-tariff regulatory barriers in goods, services and investment – much bigger obstacles to regional commerce than tariffs per se. And they are bedevilled by complex rules of origin requirements that blunt the effect of tariff elimination.

What about region-wide FTA initiatives? An APEC FTA initiative (FTAAP – Free Trade Area of the Asia Pacific) has gone nowhere: political and economic divisions in such a large, heterogeneous grouping are manifold and intractable.

Would regional FTAs limited to east Asia, or east plus south Asia, have more traction? To begin with, discrimination against third countries would compromise regional production networks linked to global supply chains in ICT, especially where non-trivial tariffs still exist, and restrict the expansion of global supply chains to other areas of manufacturing, services and agriculture. Moreover, huge economic gaps and enduring political differences – notably nationalist rivalries between China, Japan and South Korea, and between India and Pakistan – will stymie Asian regional integration for some time to come. Hence it is psychedelic cloud-nine politics to expect a strong, comprehensive FTA in Asia. Rather the result is likely to be a very low common denominator – another trade-light FTA that would add to an expanding noodle bowl.

Then there are east-Asian initiatives on financial and monetary cooperation: the Chiang Mai Initiative on currency swaps; the Asian Bond Fund and the Asian Bond Market Initiative; an Asian Currency Unit; an Asian Financial Stability Dialogue; and an Asian Economic Secretariat. But regional monetary and financial cooperation is embryonic and very soft. It is utopian to expect it to become much harder anytime soon. Realistically, it can only firm up gradually through modest steps such as increasing regional liquidity arrangements, improving regional economic-policy dialogue, and extending initiatives to India.

So far, regional economic integration – overwhelmingly in east Asia – has been market-led and bottom-up. It has come about through unilateral, non-discriminatory liberalisation of trade and FDI, with accompanying country-by-country competitive emulation. That is how east Asia attracted Japanese, American and other multinationals and inserted itself into global supply chains. Regional integration has not come about through top-down regional policy initiatives. The key to future regional and global integration is renewed unilateral, non-discriminatory liberalisation, this time going beyond border barriers to tackle behind-the-border regulatory barriers. That, more than anything else, would extend multinationals’ supply chains in the region, and open up regional markets for domestic producers and consumers.

Asian regional institutions can be useful at the margin. They can be ‘chat forums’ for policy dialogue and exchange of information, gradually improve mutual surveillance and transparency, promote trade facilitation and ‘best-practice’ measures, and (at best) cement unilateral liberalisation and help to prevent its reversal in difficult times. But more ambitious regional initiatives are inadvisable, indeed unachievable. That holds for regional FTAs. Better, therefore, to be pragmatic and realistic – and stick to terra firma.

Razeen Sally is director of the European Centre for International Political Economy.

An earlier version of this article appeared here at The Wall Street Journal.

Related articles:

1. Competing Asian Communities: What the Australian and Japanese ideas mean for Asia’s regional architecture
2. Asia Pacific socio-economic regional architecture: Beyond FTAs and ‘Business As Usual’
3. Hatoyama’s East Asia Community and regional leadership rivalries

Yesterday in Washington, Singapore’s Lee Kuan Yew was presented with a Lifetime Achievement Award by the US-ASEAN Business Council. It was an occasion dignified by tributes from two former US Presidents and presentations from former Secretaries of State, Henry Kissinger and George Shultz.

Lee’s speech traversed the implications of the shifts in world power and the institutional changes that are under way or in contemplation, and deserves close study, especially for those who are students of how thinking in Singapore might develop towards the Rudd and Hatoyama proposals for renovating regional architecture.

Lee reminded his audience that he had lived through some epoch making changes: British colonisation; Japanese military conquest and occupation of East Asia that shattered Western colonial empires; the Cold War between the US/western Europe and the Soviet Bloc; and the dissolution of the Soviet empire.

And now, he said, the world was in the midst of another momentous transformation.

Lee’s point was that when President Barack Obama announced at the Pittsburgh G20 Summit that G20 would replace G8, what he did was acknowledge the end of the post-World War II world order. ‘An American President’, he said, ‘has taken a realistic view of the changed world, although for the next two to three decades, America will remain the sole superpower.’

‘No one’ he added, ‘can predict how the G-20 will evolve. It does not herald a multi-polar world with parity between the different poles. Europe, a large economy, is no longer a global strategic actor. India and Brazil have influence in their own regions. Russia is a major nuclear power with vast quantities of oil and gas and control of gas pipes across Eastern and Western Europe, and China will have global heft and influence in two decades. But, a changed world order is upon us.’

Lee’s point is yet too little understood and rarely so well made as it was in his speech.

The implications Lee sees for East Asia are equally important.

China’s rise is one facet of East Asia’s modernisation growth story that began with rise Japan and the Meiji Revolution in 1868. In China, it began in December 1978 with the open-door policy of Deng Xiaoping. India opened up to the world in 1991. China and India can and will catch up with the West in science and technology. They will restore Asia to its leading position before European colonialism enveloped them. The world order will be re-balanced.

‘Growth has created growing strategic complexity between China, Japan, South Korea, India, ASEAN and Australia. Each will try to position itself to achieve maximum security, stability and influence. The consensus in ASEAN is that the US remains irreplaceable in East Asia. But it can no longer be alone and manage the new complexities to maintain stability.’

Hence, he noted, the search for some new architecture, such as the concept of a community in East Asia.

It has several manifestations: APEC, ASEAN+3, the East Asia Summit, Australia’s Prime Minister Rudd’s notion of an Asia Pacific community and, recently, Japanese Prime Minister Hatoyama’s vaguely-defined East Asian Community.

‘Community’ is too amorphous a term to describe the search for a new architecture. But the underlying strategic concerns that led to these proposals are real.

Lee concluded that it would be a serious mistake for the region to define East Asia in closed or, worse, in racial terms. In building any new East Asian architecture, the US must be an important part of it.

‘China is not ready or willing to assume equal responsibility for managing the international system. The US is still the world’s largest economy and market of last resort. The US dollar will remain as the premier international reserve currency, although the Euro, China’s RMB, Japan’s Yen and others will also eventually become reserve currencies. But it will take time to rebalance global savings and global consumption, especially China’s. But it must happen and will happen.’

Related articles:

1. Squaring the Japanese and Australia proposals for an East Asian and Asia Pacific Community: is America in or out?
2. An Asia Pacific Community: an idea whose time is coming
3. Competing Asian Communities: What the Australian and Japanese ideas mean for Asia’s regional architecture

The just concluded Fourth East Asia Summit (EAS) in Thailand will long be remembered as the venue for seemingly competing ideas from Australia and Japan for reorganizing regional cooperation in Asia. But will it also be known for having altered the course of Asian multilateralism?

At one level, the two proposals, Australia’s Asia-Pacific Community, and Japan’s East Asian Community, are timely. Multilateral institutions in Asia seem to have hit a crossroads. APEC, whose leaders’ forum meets next month, shows signs of having outlived its usefulness and purpose. The EAS has not set any clear and concrete goals. ASEAN remains active and useful, but its capacity to lead wider regional institutions has increasingly come into question.

The proposals were spurred in part by regime change in the respective countries. Both the Rudd and Hatoyama governments are seeking to distance themselves from their predecessors. In Australia, Rudd’s predecessor John Howard gained regional notoriety as America’s self-proclaimed ‘deputy sheriff.’ In Japan, Prime Minister Koizumi’s government once indicated that its regional relationships will be secondary to its alliance with the US. In this respect, the two proposals are welcome news for those who would like to see the advancement of multilateralism in the region.

The Australian proposal was clearly the first on the table, yet the Hatoyama government does not seem to address how its idea of an East Asian Community, which includes Australia, will relate to the latter’s Asia-Pacific Community idea. This is a little odd because Australia and Japan have been close partners in ideas and initiatives for regional cooperation in the past. Both were central to the idea of the ‘Pacific Community’ of the 1970s and 80s, which paved the way for APEC, and very recently, they held close consultations on the idea of creating a coalition of democracies in the region.

But there are at least four issues that will decide which of the proposals survives and in what form.

First, the rationale and specifics of the two proposals will matter a lot. While the Australian proposal has been on the table for some time and has gone through some revisions, there is still no clear sense of what the region is being asked to support. Initially, it seemed, at least to those not terribly familiar with Rudd’s thinking, that Canberra may be proposing a brand new institution. But more recently, the idea seems to be that the Asia-Pacific Community could be a rationalization of existing institutions rather than setting up a brand new one. The Australians are understandably cautious, especially after the initial response to their idea from Southeast Asia which was decidedly mixed.

In advancing the rationale for an Asia-Pacific Community, one suggestion from Australia is that there is no existing institution that covers the whole region (including India) and includes the different issue areas such as economic, security, and environment. But APEC does have an annual meeting that has discussed security issues such as East Timor and 9/11 attacks; it has addressed a host of issues aside from trade. And, lest we forget, APEC was an Australian initiative.

On the Japanese idea, Hatoyama is certainly not the first Asian leader to propose an East Asian Community. After all, the October 2001 report of the East Asian Vision Group set up at the suggestion of the late South Korean leader Kim Dae Jung was titled, ‘Towards an East Asian Community’. Hatoyama’s idea seems to contain elements of uncertainty and even contradiction. In his UN Speech in September, he envisaged a European Union style grouping. Later in an article in the New York Times, he used the rationale of ‘the era of U.S.-led globalism…coming to an end.’ Yet in Thailand, he noted that that Washington remained the ‘cornerstone’ of Japanese policy, and a Japanese Foreign Ministry official said Tokyo will ‘closely discuss and coordinate’ its idea with the US. While nothing prevents Japan from pursuing a close alliance relationship with the US while advancing East Asian multilateralism, there will come a time when adjustments to the alliance relationship have to be made if Japan is to secure genuine Chinese support for the East Asian Community idea.

Second, China’s role and attitude will be crucial to the success or failure of the two ideas. So far, Beijing has welcomed the Japanese idea. On Oct. 21, Assistant Foreign Minister Hu Zhengyue said that China is ‘positive and open’ to the establishment of an ‘East Asian community.’ But, whether it will really go for a regional body that includes India and Australia remains to be seen. Recently, Beijing has favoured the ASEAN + 3, rather than the broader EAS as the basis for an East Asian Community. Beijing also seems to be somewhat lukewarm towards the Australian proposal which more clearly allows space for US participation.

Third, where does the US stand on these proposals? The Obama administration has shown greater support for Asian multilateral institutions than its predecessor. But, despite showing greater engagement with ASEAN, it has not indicated which institutional route it might take. Theoretically, it could seek to revitalize APEC, join the EAS (the road now being cleared by its accession to ASEAN’s Treaty of Amity and Cooperation), or it could sign on to the Rudd proposal. It can also do all of the above. Kurt Campbell, the US assistant secretary of state for East Asian and Pacific affairs said, ‘I just want to assure you … the United States is going to be part of this party. We are an active player and we’re going to want an invitation as well.’ But Washington has other institutional preoccupation, especially ensuring the success of the fledgling G20 forum. And there is also the question of whether the US will be invited to participate. The Australia proposal clearly includes the US while the Japanese proposal is ambivalent. It is not impossible to imagine an East Asian Community without US participation, but failure to take advantage of the current positive US attitude towards Asian multilateral institutions by denying it membership may amount to a historic blunder on the part of Japan and other proponents.

Fourth, what might the role of ASEAN be in the proposed architecture? ASEAN and other nations have been presented with a choice, and a difficult one at that. ASEAN has little interest in taking sides in a competition between Japan and Australia. Japan is a valued partner and an ‘Asian’ nation. But Australia’s proposal includes the US, which will be an important factor for ASEAN. Indonesia, the largest ASEAN member, has developed too close a rapport with Australia not to take the Rudd proposal seriously, but would support whichever proposal gives it a bigger role to play. Indonesia’s own idea for reorganizing Asian multilateralism would be a mini-lateral group of leading Asia-Pacific powers such as Australia, Japan, US, and, of course, itself. Lately, Jakarta has shown some impatience with ASEAN after fellow members forced a substantial dilution of Jakarta’s initial proposal for an ASEAN Security Community, which stressed greater commitment to democracy and stronger security cooperation like an ASEAN Peacekeeping Force.

But ASEAN as a whole will also be seriously concerned about its ‘leadership role’ in Asian multilateralism. Thai Prime Minister Abhisit Vejjajiva said at the Hua Hin summit that ‘Both Japan and Australia proposed bigger communities, which is a test for us…ASEAN must be firmly integrated when we enter a bigger community.’ While he and other leaders ‘listened carefully and attentively’ to the Australian and Japanese leaders, ’they also emphasized…that it wasn’t all that important to decide on some kind of rigid structure at the moment, but to be aware that the regional architecture would continue to evolve.’

Non-ASEAN members have grown a little frustrated with ASEAN’s lack of resolve in shaping the direction of Asian multilateralism. But as in the past, competing ideas from the outside have been good for ASEAN as it puts ASEAN in a position to make the difference. Both Australia and Japan needs ASEAN’s support to make their proposals fly. Past proposals for regional cooperation, such as the Australia-Japanese idea of ‘open regionalism’ and the Canadian-Australian idea of ‘cooperative security,’ had to be brought to ASEAN and modified (localized) to suit ASEAN’s purpose before they could lead to concrete institutions such as APEC and ARF respectively. It is thus likely that the Rudd and Hatoyama proposals will go through a lengthy period of debate and negotiation and allow considerable space for existing ASEAN institutions before they lead to something. The outcome is unlikely to be a revolutionary change in Asian multilateralism, a la a European Union in the east. Rather, it is likely to be an adaptation and modification of extant bodies based on the reconciliation between the ‘competing’ Japanese and Australian ideas, especially if both come to accept US participation.

Dr Amitav Acharya is Professor of International Relations and Chair of the ASEAN Studies Center at American University, Washington DC. He is also a senior fellow of the Asia Pacific Foundation of Canada. His recent book is, Whose Ideas Matter: Agency and Power in Asian Regionalism, Cornell University Press, 2009.

This article first appeared here in the CSIS PacNet Newsletter.

Related articles:

1. Squaring the Japanese and Australia proposals for an East Asian and Asia Pacific Community: is America in or out?
2. Asian regional community building: Don’t kill the messenger
3. Economic integration: Will Asia go regional?

The newly elected government of Japan has already released its vision of how a regional community-building process could be pursued.

Yet Australian Prime Minister Kevin Rudd has been vigorously promoting his own vision of a regional architecture for the past eighteen months. The Australian leader could caution the Hatoyama government on the dangers of going too far, too fast in promoting any one grand vision for regional order-building.

It is always easier to strike down visionaries than to support them. Skeptics of Kevin Rudd’s Asia Pacific Community (APC) proposal exemplify this. The PM has been portrayed as an overly idealistic multilateralist with no concrete plan for putting his vision into effect and with little chance of winning regional support. But such criticism is not only unjustified; it betrays a clear misunderstanding of how postwar Asia’s security order is evolving.

Three basic arguments are most employed by critics of multilateral security community-building. First, they assert that the United States still exercises decisive strategic hegemony in the region. Second, they believe that China and the U.S. are destined to undergo a prolonged struggle for regional primacy. A third assumption is that most Asian states do not like developing strong regional institutions.

Fears that U.S. strategic interests in the region will be compromised by stronger regional institutions are groundless. The U.S. has not projected a strategy of predominance in the Asia-Pacific since the Nixon Doctrine was announced in 1969. Washington instead pursues an offshore balancing strategy, concentrating on deterring potential threats against regional allies with largely autonomous strategic capabilities. America’s ultimate strategic capabilities for maintaining a balance of power no longer involve the uncompromising maintenance of permanent bases on allied soil. They are instead found in U.S. long-range-strike capabilities positioned in Guam, Diego Garcia or at other facilities conducive to neutralizing ‘anti-access’ and ‘area-denial’ threats. Unmanned air combat systems, advances in missile defence and highly flexible offensive and defensive submarine systems are increasingly more relevant capabilities. The extent to which the U.S. ultimately remains a key strategic player in Asia-Pacific politics will depend on how distracted it becomes with increasingly challenging domestic political and economic problems and how tied it remains to a ‘Long War’ against international terrorism emanating from South Asia and the Middle East.

Nor is China content to remain subordinate to the U.S. in the region. But this does not mean the Chinese will contest the Americans in every diplomatic, economic and strategic sector. Likewise, they are too shrewd to automatically fall prey to hedging strategies advanced by other regional actors that would, in their eyes, only prolong U.S. strategic advantages in their part of the world. Hence their disillusionment with the inaugural East Asia Summit (EAS) in 2005 that was developing in ways that was too ‘pan-Asian’ for their taste. Yet Chinese policy-makers have opted to avoid openly contesting U.S. and regional interests, instead electing to pursue an ‘engagement’ strategy towards the new Obama administration.

Accordingly, neither Washington nor Beijing secretly hopes that weak regional security architectures will not become stronger. Indeed, the Obama administration has just endorsed ASEAN’s Treaty of Amity and Cooperation (TAC) as a precondition for its entry into the EAS. Secretary of State Hillary Clinton made a distinct point of attending the July 2009 ASEAN Foreign Ministers Meeting to demonstrate Washington’s new ‘smart power’ strategy. Unlike what some APC critics assert, China has avoided the Manichean strategy of cynically supporting Rudd’s proposal as a way of burying it. A more nuanced interpretation is that each individual Asia-Pacific state is taking its time assessing the APC in accordance with its own national interests which is an unremarkable process hardly unexpected in Canberra.

The most fundamental lesson so far revealed by the regional security community debate is that this discussion should be allowed to continue in vigorous and systematic ways. There is hardly any point in ‘killing the messenger’ before the full meaning of that message is absorbed and systematically considered over the longer-term.

This article first appeared here at the Asia Security Initiative.

Related articles:

1. Squaring the Japanese and Australia proposals for an East Asian and Asia Pacific Community: is America in or out?
2. Competing Asian Communities: What the Australian and Japanese ideas mean for Asia’s regional architecture
3. Realizing the Asia Pacific Community: geographic, institutional and leadership challenges

This week’s lead is from Ambassador Richard Woolcott, Australian Prime Minister Kevin Rudd’s special envoy on developing the Asia Pacific Community concept. Woolcott’s piece is also featured in the second issue of East Asia Forum Quarterly (EAFQ) [pdf]. In the first issue of EAFQ, I noted that there was no effective and collective Asian response to the global financial crisis. Its regional structures were still not up to the task of effective global participation. Much in the last six months has changed the drivers of regional initiative on the global stage, as the essays by Young, Soesastro and Dobson in this issue of EAFQ make clear. The Asian 6 – Japan, Korea, China, India, Indonesia, and Australia – within the G20 have emerged as a regional leadership group. Coordination among the Asian 6 has been an increasingly important feature in their approach to the global dialogues, and at Pittsburgh and in the lead-up to Seoul (we expect). Together with the United States and perhaps Canada and Russia, the Asian 6 appear like the potential core of an Asia Pacific community for security dialogues, the key gap in regional architecture on which Rudd’s idea focused. Woolcott’s consultations reveal three things clearly: there will be no rush towards a new regional arrangement. There is a need to link whatever is invented to what is there now, in the form of APEC and the East Asia Summit. And more discussion is needed about what is sensible and how to do it – for which purpose Rudd has convened a meeting in Australia in December. Meetings in Tokyo and Seoul before that will make important contributions to that dialogue and the EAFQ will undoubtedly come back to the debate again. Woolcott concludes with some justification: ‘I believe the initiative is continuing to gather momentum. In 1989, I thought APEC was an idea whose time had come. Twenty years on – in 2009 – I believe that another Australian regional initiative, that is the development of an Asia Pacific community, based on fostering habits of cooperation, is an idea whose time is coming.’

Peter YuanCai’s has an important piece today on the crisis in leadership at independent Chinese business magazine Caijing. He notes the huge importance of a credible and independent media voice to China’s ambitions to becoming a responsible stakeholder in the international system. He is right. A magazine, such as Caijing, reporting objectively and critically from a Chinese perspective, is more likely to garner international understanding and support of China’s position and difficulties than is the tightly controlled Chinese official media however valiantly it might try.

Related articles:

1. The Death of Caijing?
2. APEC – Weekly editorial
3. Earthquake at Caijing: a litmus test for China’s media freedom

Why did Kevin Rudd put the proposal for an Asia Pacific Community forward in the first place, on behalf of Australia?

What is Rudd’s actual proposal, given that although the broad objective is clear, he is still developing his ideas on the detail of the arrangements he would want to pursue?

What was my role as his Special Envoy, and what were the outcomes of my consultations?

What are the next steps to advance the idea of an Asia Pacific community?

This essay addresses these four questions.

On 4 June last year Prime Minister Rudd put forward his proposal. It can be seen as a response to major global economic and geo-strategic changes, just as in 1989 former Prime Minister Bob Hawke put forward the idea of an Asia Pacific Economic Cooperation forum (APEC) in response to a situation in which he feared the world could be moving towards three major trading blocs – a Dollar bloc, a Yen bloc and a Deutschmark bloc, from which countries like Australia might find themselves excluded.

Twenty years later Rudd came to the view that Australia and other countries of the region needed to respond to a seismic shift in economic influence taking place, from the Atlantic to the Pacific, or from the United States and Europe to Asia, driven mainly by the spectacular economic growth of China and the substantial growth of India, in addition to the established strengths of the Japanese and South Korean economies and the potential for growth of countries like Indonesia and Vietnam. Such an increase in economic influence will be accompanied by the growth of political and security influence, especially on the part of China and India, as well as, potentially, Indonesia.

This major shift in economic, political and security influence will produce new challenges over the next few decades, such as possible competition for scarce resources, not only for oil and gas but also for water and food. There are also a number of important transnational issues such as nuclear proliferation, unresolved territorial claims, climate change, the illegal movement of people, and action to combat terrorism which require multilateral as well as bilateral and trilateral approaches.

As Rudd said in Singapore on 29 May, the countries of the Asia Pacific region have a choice. That choice is really to seek actively to shape now the future of our wider region by finding and establishing the most appropriate consultative arrangements we are going to need; or to wait passively to see what evolves. Rudd believes that it is important to act now to refine regional arrangements in ways which will reinforce and advance a more stable, cooperative and peaceful Asia Pacific region as this 21st century unfolds. Is it not wiser to anticipate likely issues and prepare for them in advance, rather than simply respond to developments as they occur? ‘I do not believe we can afford to sit idly by while the region simply evolves – without any sense of strategic purpose.’

What he has in mind is not an EU type of institution or the creation of some supra-national bureaucracy.

There are three other reasons why it is appropriate for Australia to launch such an initiative.

Firstly, Australia is part of the Southeast Asian and Southwest Pacific region.

Secondly, Australia is committed to ‘active middle power diplomacy’. We already have a sound and established record in acting to promote regional cooperation, the main examples being the creation of APEC in 1989, our role in the Cambodian peace process and our efforts which were instrumental in the lead up to the establishment of the ASEAN Regional Forum.

Thirdly, it is better for a middlesized country like Australia or, say, Malaysia to put forward new ideas for the region than for a major power like the United States, China or Japan to do so. If a major power does so, smaller countries may suspect there might be some hidden or self-serving agenda.

The objective is to see a meeting at heads-of-government (HOG) level of the six major regional countries – United States, China, Japan, India, Russia and Indonesia – and other countries in the Asia Pacific region to discuss in a congenial atmosphere how best to handle the challenges which our region is likely to face.

There are already a range of institutions in the Asia Pacific region dealing with various issues. The main ones are ASEAN, APEC, ASEAN+3 (the 3 being China, Japan and South Korea), the East Asia Summit (EAS, which includes Australia, New Zealand and India), the ASEAN Regional Forum (ARF) and the Shanghai Dialogue.

So why should we be suggesting additional arrangements?

The problem is that none of the existing institutions has the mandate, the membership or the ability to deal comprehensively with all of the economic, political and security issues that Kevin Rudd has in mind. For example, APEC does not include India and its mandate is primarily economic. The EAS does not include the United States and Russia. While the ARF does include all of the principal countries, it is widely seen as being too large, with 27 countries; it does not meet at HOG level; and when a serious regional issue arose, such as North Korea’s nuclear capability, it was handled by a new arrangement, the Six Party Talks, although all six countries were members of the ARF. So there is a clear need for more effective arrangements in the future, especially to deal with political and security issues.

My role as Special Envoy was essentially consultative. Prime Minister Rudd did not want to be prescriptive. Indeed, had he put a firm plan on the table without extensive prior consultation it would have naturally attracted criticism in the region and in Australia itself. Thinking needed to be refined with the benefit of the ideas of regional partners. So, he asked me to consult at a high level with all of the 10 ASEAN countries, with the exception of Burma, and all of the APEC and EAS countries, with the exception of Hong Kong and Taiwan, which, while members of APEC, are not sovereign states. This meant I needed to visit 21 countries. In fact I made 22 visits, because I visited New Zealand first under the Clark government but returned in January after the Key government had been elected.

This extensive consultative mission bought me into personal contact with one monarch, the Sultan of Brunei, two presidents, five prime ministers, and some 33 ministers of foreign affairs and/or trade, as well as a large number of deputy or assistant foreign ministers. In addition I met with a large number of senior officials, academics and those involved in regional think tanks. In all, I discussed Mr Rudd’s proposal with some 300 people.

During this process I submitted, at the Prime Minister’s request, an interim report before he attended the APEC Summit meeting in Lima last November, and a final report in March after I had concluded my last visits, which were to Canada and the United States. Naturally, it was necessary to wait until after the Obama administration had been inaugurated before discussing the concept in the United States.

As Rudd has said, a major aspect of his initiative was ‘to begin the conversation about where we need to go’ to strengthen cooperation in the Asia Pacific region.

What should the next steps be? Kevin Rudd intends to maintain the momentum on the initiative.

In his speech in Singapore he acknowledged that I had reported there was little appetite for the establishment of a new institution. Nor did he want to see the pressures on regional leaders and senior ministers to attend meetings unnecessarily increased.

Rudd said the idea is an important one which needs proper consideration. He said he would brief leaders at the EAS Summit, now scheduled for October 23-25, and also at the next APEC Summit to be held in Singapore on 20 November. He has also written to all 21 heads of government in the 21 countries I visited, indicating that he looks forward to discussing ideas for an Asia Pacific Community with them, including how we might develop our institutions to meet more effectively the challenges we all expect as the 21st Century unfolds. In addition, Rudd announced in Singapore on 29 May that Australia would convene a ‘one-and-a-half track conference’ of prominent government officials, academics and opinion-makers to continue the discussion of the form an Asia Pacific Community should take. This conference is planned to take place in December after the APEC Summit, or early in 2010.

The case for modernising global institutions so that they can respond more effectively to this century’s challenges is strong. The greatest gap in the present global systems is the absence of a driving centre, which reflects the changing balances of global economic, political and security influence. This challenge also applies to regional institutions, including in the Asia Pacific. The G20 is seeking to fill this gap in respect of a coordinated approach to the global economic crisis.

I am encouraged by the level of interest and by the mostly positive reactions, especially at senior government levels, which I have encountered. In coming to this judgment I make allowance for what is often called ‘traditional Asian politeness’ and for the fact that I know personally many of my interlocutors.

I believe the initiative is continuing to gather momentum. In 1989, I thought APEC was an idea whose time had come. Twenty years on – in 2009 – I believe that another Australian regional initiative — that is, the development of an Asia Pacific Community, based on fostering habits of cooperation — is an idea whose time is coming.

Ambassador Richard Woolcott is Prime Minister Kevin Rudd’s special envoy to develop an Asia Pacific Community concept. He was secretary of the Department of Foreign Affairs and Trade from 1988 to 1992.

Related articles:

1. Rudd in Singapore on the Asia Pacific Community idea
2. Realizing the Asia Pacific Community: geographic, institutional and leadership challenges
3. Kevin Rudd’s multi-layered Asia Pacific Community initiative