Why APEC Still Matters, And Why China's Own Trade Pact Isn't Dead Yet

As usual with a major international event, China has pulled out all the stops to host the Leaders' Meeting of the Asia Pacific Economic Cooperation (APEC) forum in Beijing this week, taking drastic steps to curb the capital city's notorious air pollution problem, and detaining petitioners and dissidents in large numbers.

But the prestige of hosting such an event goes hand in hand with China's growing regional ambitions, analysts told RFA.

These include the pursuit of a rival regional trade pact to U.S. President Barack Obama's favored Trans Pacific Partnership (TPP), which has been seen by officials in Beijing as a thinly-veiled bid to contain China's growing regional power.

Chinese officials have hit out at China's exclusion from initial negotiations, although analysts say the country is still far from being able to meet the minimum requirements for entry.

Whether China is successful in developing the embryonic Free Trade Area Asia-Pacific (FTAAP) pact will depend largely on how successful the Obama administration proves in rallying its allies, for whom the 100 percent tariff-free entry conditions of the TPP have proved a sticking point, independent China scholar Gong Shengli told RFA.

"If the TPP becomes a reality fairly quickly, then the FTAAP will be dead in the water," Gong said. "But if the TPP and WTO both end up stranded [in long-term negotiations] ... then China's FTAAP could still have a prayer."

Chinese foreign minister Wang Yi has said Beijing wants to see some reference to the FTAAP in the APEC leaders' communique following the Nov. 11-12 leadership summit.

But Washington has been putting pressure on Beijing to drop this idea, according to a recent report in the Wall Street Journal, which estimated that China has far more to gain from the FTAAP than from the TPP, even if it is eventually invited to join the latter.

Long-term negotiations

According to Xu Dianqing, professor of economics at Canada's University of Western Ontario, said any negotiations on the FTAAP would take a very long time.

"Any FTAAP would come as a result of long-term and complex negotiations; it's not realistic to expect any consensus or agreement on it in the short term," Xu said.

"All of those whose interests would be affected in all the countries would need to engage in horse-trading."

He said China's biggest concern over TPP is that it seeks to set up an entirely different model for governing trading relations that would render both APEC and the WTO obsolete.

"The TPP wants to toss aside both APEC and the WTO and set up an entirely different regime," Xu said.

"What's more, the basic requirements for entry into the TPP are very high, to the extent that even Japan would have problems meeting U.S. requirements to open its agricultural markets, let alone any of the other countries," he said.

He said Washington's exclusion of China from the initial negotiations over the TPP have far more to do with geopolitical strategy than trade.

"TPP still has a very long way to go, and a TPP without China's involvement will be worthless," Xu added. "A lot of Asian countries don't want to get caught up in power struggles between two superpowers."

"That's why APEC is still a realistic entity, while the TPP is closer to wishful thinking."

APEC proposals

Some regional trade officials have already spoken out in favor of an APEC free-trade zone that includes all of the region's economic powerhouses.

Speaking on the sidelines of the APEC Economic Leaders' Week on Friday, Pacific Economic Cooperation Council chief Eduardo Pedrosa said it is important to "take concrete steps" towards an APEC free-trade area including China, Japan and the United States.

Meanwhile, APEC will make an announcement setting up a cross-border investigation and extradition pact to fight corruption across the region, which currently lacks extradition treaties between China and many of its Asian neighbors.

Details of the mechanism, which will link law enforcement agencies from across the region, will be included in next week's communique, and are expected by many analysts to be a natural extension to Chinese President Xi Jinping's domestic anti-graft campaign.

According to APEC Secretariat executive director Alan Bollard, agencies will be able to pass on cases to each other, work out ways to prosecute and convict offenders, and recover assets smuggled overseas for the first time.

"Now, we have practitioners who [will] get together to talk about particular cases and look at sharing information and sharing powers provided that can be done in line with the laws of the individual economies," Bollard was quoted as saying by the South China Morning Post.

Xi's administration launched "Operation Fox Hunt" in July to track down corrupt officials of the ruling Chinese Communist Party who leach illegally acquired funds overseas, often to invest in property.

Reported by Wen Jian for RFA's Mandarin Service. Translated and written in English by Luisetta Mudie.