China may wait it out for now

Dan Steinbock
China Daily

Last week, trade ministers of 12 Pacific Rim countries met in Hawaii to conclude the Trans-Pacific Partnership (TPP) agreement.

But the talks failed.

The disagreements in Hawaii do not suggest traditional horse-trading. Rather, the divisions reflect extensive disagreements not only between a dozen TPP countries, but also within the United States.

In the White House, the TPP agreement has been seen as a linchpin of the administration's pivot to Asia, which seeks to embed the US more deeply in the world's most dynamic region, while preventing a "regional vacuum" to be filled by emerging China.

The problem is that the first objective is undermined by the second. During US President Barack Obama's term in the White House, the US administration has strengthened political and security alliances with Japan, the Republic of Korea and the Philippines.

Indirectly, these strategic moves have led to the relaxation of the arms embargo on Vietnam, greater attention to the South China Sea, expansion of counterterrorism cooperation with Indonesia and the upgrading of Malaysia's checks to stop human trafficking.

The US has also normalised relations with Myanmar, a pivotal nation at the crossroads of South, East and South-east Asia.

And yet the South China Sea has seen more friction, terrorist activities have increased, and human trafficking, and division and refugee flows in Myanmar have continued.

The US' objectives share a common denominator to extend current alliance arrangements in (non-China) East Asia to South and South-east Asia.

These efforts are not easily achievable because of regional and national policies.

Asean seeks to hedge between declining US influence and rising Chinese participation. It does not favour the exclusive primacy of one or another large economy.

The same goes for India.

So what are China's TPP options in the near future?

China is internationalising via huge regional initiatives (for instance, the Asian Infrastructure Investment Bank) and bilateral free trade agreements with TPP members Singapore, Chile, Peru, New Zealand and, most recently, Australia.

There are also overlaps between TPP and the Regional Comprehensive Economic Partnership, which is led by China with half a dozen TPP members, including Japan.

China may join the TPP at a later point but only when it makes economic and strategic sense. What about Washington's TPP options?

Before the Hawaii meeting, the Obama administration touted it as a make-or-break moment.

But that was not to be, given the nature of the TPP.

The optimistic TPP scenario is now history.

While the agreement could still materialise in some form, it is about to be trumped by the US presidential politics; the Federal Reserve's impending rate hike, which has potential to further divide US allies; and the expected rise of the Chinese yuan to a major reserve currency, heralding de-dollarisation in the future.

When and if the TPP will be completed, economic gains will be moderate.

But a TPP without China would have substantial geopolitical implications.

Truly inclusive, free trade is a different story. But that's not what the TPP is about.

It's decision time for Malaysia

Martin Khor
The Star

Malaysia is one of the countries resisting the US push for very strong intellectual property clauses that will affect the prices of and access to medicine.

But we also have serious reservations on two problematic chapters - state-owned enterprises and government procurement.

The rules in these chapters will affect some of the core policies of the country. On the state-owned enterprises (SOEs), Malaysia also faces quite a drastic change in policies if it joins the Trans-Pacific Partnership (TPP), which seeks to break the tight connection between the government and its agencies and enterprises.

Besides these two issues, other contentious TPP topics include how giving more rights to foreign companies that own patents will lead to higher prices of medicine.

Malaysia may benefit from having access to markets of other TPP countries; on the other hand, they too have greater access to our market.

Since Malaysia's tariffs are on average higher than those of the US, we could expect to open up relatively more where the US is concerned; and similarly with regard to Singapore.

The time for making a decision whether to join the TPP is fast approaching as the TPP must be concluded now to suit the US political calendar.

Ambitious vision can drift off course

Editorial
The Yomiuri Shimbun

It is extremely regrettable that the TPP negotiations ended in failure.

As things stand now, the ambitious vision of creating a huge free trade zone in the Asia-Pacific region may drift off course.

The 12 countries must understand the urgency of the situation and resume talks quickly. In the latest talks, progress was made on many issues, including tariff cuts and investment rules. However, the countries concerned failed to settle specific issues.

The negotiations became tangled, in particular, over the extent of data protection to be granted to companies that develop pharmaceuticals and hold patents on them.

The United States, home to many leading pharmaceutical companies, initially called for 12 years, while Australia and New Zealand, both of which want to use generic drugs as early as possible, called for five years or fewer.

Splitting the difference, Japan proposed eight years, but the countries failed to come to terms.

A miscalculation developed as New Zealand demanded that Japan, the United States and Canada expand their import quota for its dairy products by a large margin, on condition that it makes a concession on drug patents.

Other countries tried to talk New Zealand into dropping this excessive demand, but it did not relax its hardline stance. There is no denying that this weakened the momentum for last-minute compromises.

New Zealand cannot escape the impression that it attempted to bring the issue to a conclusion favourable to that country by shifting to a hardline stance just when the momentum for reaching a broad accord was building up.

In negotiations such as these that intricately involve the interests of many countries, it is vital for each country to display a spirit of compromise from a broad perspective.

There is no telling, however, how the talks will unfold, particularly when taking into account the political schedules of participating countries.

In Canada, a general election is scheduled for October, while in the United States, presidential primaries will start in January next year. In Japan, a House of Councillors election is slated for next summer.

The longer the negotiations take, the more difficult it will be for countries to make compromises on such issues as the opening of markets.

•The View From Asia is a weekly compilation of articles from The Straits Times' media partner Asia News Network, a grouping of 22 newspapers. For more, see www.asianewsnet.net

The disagreements in Hawaii do not suggest traditional horse-trading. Rather, the divisions reflect extensive disagreements not only between a dozen TPP countries, but also within the United States.