APEC summit 2015

During the two-day summit (November 19-20), the APEC leaders will consider a free trade agreement including China and Russia, but without the US. The President of the host country – Peru – also a former economist of the World Bank (WB), Pedro Pablo Kuczynski, suggested the idea after President Barack Obama decided to abandon the effort to call for approval of the Trans-Pacific Partnership (TPP) before leaving office in January 2017.

The APEC Summit in Lima will be the first opportunity for world leaders to consider the impact of the unexpected win of Donald Trump for the liberalization of global trade - which is the key mission of APEC since this forum was established in 1989. During the recent presidential election campaign, Trump said that TPP will "rob America” and warned that the US would renegotiate or reject this agreement.

Attending the summit in Peru this time, Obama told APEC leaders that the US would keep its commitments to Asia and recognize the benefits of free trade. But, as the US will be unable to approve the TPP – the document that was signed in February 2016 after a decade of negotiations - will certainly push America to the sideline of trade agreements in the future.

Australian Trade Minister Steve Ciobo said Australia and other members of the TPP still believe that this is a "good deal", but Australia does not intend to ratify this document in accordance with its current content without US involvement. He said the 11 remaining countries in TPP can discuss another trade agreement, but then "the rules of the game must be changed".

Australia is also considering several other commercial options, including the Regional Comprehensive Economic Partnership (RCEP), which consists of 10 ASEAN nations along with China, Japan, New Zealand and Australia, but not including America. Ciobo admitted: "We cannot put all eggs in one basket."

Sharing the same view, the President of Peru said that the TPP can be replaced by a similar agreement, but without the US. He said the Asia - Pacific region still needs a free trade agreement, including China and Russia. He said: "It is necessary to start a new negotiation."

Chairman of the APEC Business Advisory Council (ABAC) Juan Francisco Raffo, at a meeting on November 15 under the framework of the APEC Summit, also reaffirmed APEC’s patience with trade liberalization. He said although APEC is very concerned about Trump’s policies, the organization would continue to focus on promoting trade liberalization and free trade agreements (FTA). He stressed: "Anyone who does not like this idea will be disqualified. If the US refuses TPP or any other trade agreement, we just have to turn to those who stay."

Many countries have predicted that if the TPP fails, many other free trade agreements will "fill the gap". China, which had been marginalized from TPP, of course, will take advantage of this opportunity to recompose the picture of Asian trade by promoting trade agreements of its own. To strengthen its influence in the region, Beijing wants to accelerate the Free Trade Area of Asia - Pacific (FTAAP), which aims to group up all 21 APEC members. China is very interested in RCEP, which does not include America.

Uncertain fate of free trade

A specialist on trade freedom at Harvard University, Robert Lawrence said after Trump’s victory, the future of free trade is "at risk" because the role of the US is huge. According to this expert, the world may not only lose the leadership of the largest economy in the world – the US - in the process of economic integration, but also see the US become a nuisance for global trade.

In a globalized economy to the extent that goods "are produced everywhere", if the largest economy in the world turns to protectionism, it will strongly inhibit trade and investment. Lawrence warned: "The trade policy of the US President-elect D.Trump may mark a major distraction if he applies the program and statements released during his election campaign."

In that situation, APEC should play a central and coordinating role in this region as a prestigious and the most influential economic alliance in Asia - Pacific, to build a prosperous and dynamic regional community.

In 1989, APEC was established as a forum to facilitate discussion on economic growth, trade liberalization and investment opportunities. Today, the 21 APEC members account for 58% of global GDP, 49% of global trade, nearly 40% of the world population, while it has the four major economies in the world as its members. 

Critics say that APEC only makes ambiguous statements rather than serious commitments. However, there are more than 140 FTAs between APEC members initiated by APEC while trade barriers have fallen from 17% to 5%. Despite some shortcomings, APEC remains an important framework for members to exchange ideas and discuss measures to boost trade, especially in the context of the volatile world today.

Duc Dan