Pacific trade pact gains, but friction remains

AP News
Posted: Nov 13, 2011 6:48 AM
Pacific trade pact gains, but friction remains

A further step toward a U.S.-backed free trade bloc handed Asia-Pacific leaders a rare tangible achievement from their annual summit, but highlighted growing competition with China for influence in the fast rising region.

Asia's increasingly vital role as a driver of global growth has added urgency to the campaign to remove barriers and bottlenecks that slow trade and business _ the original mission of the 21-member Asia-Pacific Economic Cooperation forum, whose 21 members join economies huge and tiny, rich and poor.

President Barack Obama, flanked by leaders of eight other nations involved in negotiations on setting up the trading bloc, said he was optimistic the trade pact dubbed the Trans-Pacific Partnership could draft a legal framework by next year.

"It is an ambitious goal, but we are optimistic that we can get it done," he said on the summit's sidelines.

The so-called TPP is billed as a building block for eventually forging a free trade zone that encompasses all of Asia and the Pacific. It now includes only four smaller economies _ Chile, New Zealand, Brunei and Singapore _ but the U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join, and Japan said it hopes to as well.

The plan could help balance influence between the U.S. and an ascendant China, a concern of many in the region.

"There is now an Asian pillar in the global economy," Indonesian President Susilo Bambang Yudhoyono said Saturday. "If we can agree to develop a dynamic equilibrium in the Asia-Pacific and East Asia, the presence of the United States can be a mainstay so that we can ensure the region can grow economically."

But he added, "We see the challenges faced in Europe. We also see and we realize that the world economy cannot be dependent on only the United States or North America."

China, which some economists say is on course to overtake the U.S. as the world's biggest economy this decade, has appeared unenthusiastic about the Pacific trade pact, describing the plan as "overly ambitious." Its reluctance to endorse the proposal likely reflects wariness about being drawn into what has become a U.S.-led initiative that encroaches on its own sphere of influence in Asia.

China also has commitments to rival free trade blocs in East and Southeast Asia.

Chinese President Hu Jintao, in a speech to corporate bosses also meeting alongside the summit, skirted the issue while expressing support for existing trade arrangements and for "achieving economic integration in the Asia-Pacific."

Asked his opinion at the same business gathering, Russian President Dmitry Medvedev struck a neutral stance.

"I do not understand what will be the result of this club when it starts operating," he said. "As for now it's kind of an interesting project. We'll wait and see what it will be like."

Obama welcomed a decision by Japan, the world's third largest economy, to join negotiations for the free trade area. But he acknowledged it will be a challenge, given strong opposition from the country's politically influential farm lobby.

"I don't underestimate the difficulties of this because each member country has particular sensitivities, political barriers," he said. "For Japan, for example, in the agricultural sector, that's going to be a tough issue for them."

While working toward their broader regional goals, countries are still forging separate free-trade deals, aiming to re-energize growth at a time when the world economy most needs dynamism in the Asia-Pacific region to offset the malaise spreading from crisis-stricken Europe.

The U.S. recently clinched long-sought free trade pacts with South Korea, Colombia, and Panama _ agreements that if ratified will bring to 20 the number of countries having free trade agreements with the U.S.

Vietnam and Chile finalized a free-trade agreement of their own at this year's summit, moving to facilitate their growing trade in Chilean raw materials like copper, and Vietnamese rice, coffee, shoes and apparel.

APEC's lack of negotiating power _ all decisions are by consensus _ means prospects for major, immediate changes are slim, though over time its incremental efforts have helped build support for closer economic ties and freer trade.

But tensions remain.

Asked about U.S. trade friction with China in an appearance at the business summit, Obama exhorted Beijing to "play by the rules," citing controls that keep China's currency, which is know as the yuan or renminbi, undervalued as a good example.

"There are very few economists who do not believe that the renminbi is not undervalued. And that makes exports to China more expensive, and it makes exports from China cheaper. That disadvantages American business. It disadvantages American workers," Obama said.

Obama listed a lack of protection for American intellectual property, such as patents and copyrights, as another area Washington found "not acceptable." He also urged China to reciprocate for access to U.S. government contracts by allowing U.S. companies to bid on an equal basis on Chinese projects.

"The bottomline is that the United States can't be expected to stand by if there's not the kind of reciprocity in our trade relations and our economic relationships that we need," he said. "Where we see rules being broken, we'll speak out and in some cases we'll take action."

China has complained over such moves, characterizing them as protectionism.


Associated Press writers Ben Feller, Erica Werner and Jaymes Song contributed to this report.