In sum, the U.S.-led model is deep and requires massive political commitments by governments to legally bind themselves and reform current regulations and practices. The China-led model is relatively shallow and easier for governments to join. It is high-profile, with nonbinding agreements expressing general intent and some specifics around tariffs, but it includes little on other commercially important rules and regulations.
Fortunately, President Obama and the United States have begun to address the lack of leadership on trade that has resulted in the serious loss of U.S. market share in Asia. Congress recently passed the Korea, Colombia, and Panama FTAs and will announce, with the eight other negotiating partners, a significant framework agreement for the TPP, signaling that the talks are progressing well toward an agreement.
Passing the U.S.-Korea FTA convinced Asia that the United States is putting presidential political capital behind trade again. That factor was a game changer and has resulted in Japan, Canada, Mexico, and Korea indicating serious interest in joining the TPP, making progress toward the vision of a Free Trade Area of the Asia Pacific seem more compelling and achievable.
Prime Minister Yoshihiko Noda has recognized that Japan cannot survive if it sits on the sidelines while Korea moves ahead with its FTAs with the European Union and the United States. Japanese economic intelligence was spot on when it advised its government that Korea would move to join the TPP as soon as Seoul passes the U.S.-Korea FTA.
Progress on the TPP makes the China-led ASEAN Plus Three model look less compelling than even two months ago. The ASEAN Plus Three has its own secretariat, in Seoul, and has delivered extensive, if shallow, trade integration in East Asia. China’s partners in the ASEAN Plus Three are among the strongest proponents for competing trade and economic architecture.
The rest of Asia wants to trade with China and to receive its investment and low-cost loans for infrastructure development, but it does not want to be dominated by China. Much of Asia also rejects the idea of Chinese governance even in the commercial and economic space—a phenomenon that has been strengthened during the last year and a half as China has tested whether it could turn the screws on its Asian neighbors over questions of sovereignty in the South China Sea by leveraging its new economic dominance. Thrusts by Beijing have been parried.
Strategically, the table is set for President Obama to suggest a U.S.- ASEAN FTA. This move would send the signal that the United States is willing to invest over the long term in strengthening ASEAN as an institution. It would provide a much-needed carrot to help drive political and economic reform in Burma, enhance economic capacity and reform in less-developed economies such as Laos and Cambodia, and move forward immediately with ASEAN nations willing and able to embrace a structure that would be fully compatible with and complementary to the TPP. At the same time, it would strengthen ASEAN as the fulcrum of regional economic and security architecture for Asia.
The end game is to present a compelling case to China to join in the more comprehensive and inclusive economic integration model for the Asia Pacific and to abandon its efforts to put its eggs only into forums that it can dominate, a behavior that sets up eventual structural conflicts in Asia that could divide and destabilize the Asia-Pacific region down the road.
Bringing China aboard and allowing it a leadership role, but convincing it to play by rules that it and its neighbors around the Pacific and Indian oceans define multilaterally, is the surest path to regional peace and prosperity. There is no mission more important if President Obama is to achieve his goal of ensuring that the American people have opportunities, jobs, and a safe world to live in.
