Revival of the Regional Comprehensive Economic Partnership

Countries Involved in the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership
Countries Involved in the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership

 

The Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP) are both free-trade agreements in Asia that have been under negotiation for a number of years.  Often seen as competitors, however, the former is led by China and the latter by the United States.  By February 2016, the RCEP had fallen behind the TPP, whose negotiators had already signed an agreement and returned it to their twelve member countries for ratification.  Their RCEP counterparts were still mired in talks.

 

Even so, the TPP’s negotiations were by no means a cake walk.  Concerns in Japan over agricultural issues and in Southeast Asia over the TPP’s “deep” standards repeatedly delayed an agreement.  Indeed, there had been too many delays.  By the time a deal was reached, the United States, the pact’s biggest member, had begun what turned out to be a particularly bitter presidential election and one in which the TPP became a lightning-rod issue.  Even the pact’s early advocates, like former Secretary of State Hillary Clinton, who was one of the presidential candidates, strongly disavowed it.  In such a political climate there was little chance the U.S. Senate would ratify it.

 

The election of Donald Trump as the next American president sealed the fate of the TPP in the United States.  Soon after, President Barack Obama abandoned his efforts to ratify the pact.  Trump himself declared that the United States would withdraw from it after he is sworn in as president.  That threw the future of the TPP into turmoil.  It also breathed new life into the RCEP.  Capitalizing on the TPP’s disarray, Chinese President Xi Jinping reassured participants at the Asia Pacific Economic Cooperation summit in late November that China would renew its efforts to conclude the RCEP.

 

RCEP vs. TPP

Why does that matter?  What, apart from some of their member countries, is the difference between the two free-trade agreements?  Traditionally, countries conclude free-trade agreements to lower or eliminate tariffs, and thus encourage trade.  While that has generally spurred economic growth in developing countries, it has also tended to hollow out legacy industries in developed countries.

 

Consequently, developed countries, like the United States, have sought a new approach to free trade.  Embodied in the TPP (and its sister free-trade agreement, the Transatlantic Trade and Investment Partnership), that approach requires member countries to adopt domestic policies that would “raise labor and environmental standards, impose disciplines on government-owned corporations, strengthen intellectual property rights enforcement, [and] maintain a free and open internet.”[1]  In that way, developed countries argue, trade would be not only freer, but fairer too.  Indeed, some in the Obama administration even saw the TPP as part of a grander vision for a “rules-based international order.”

 

Naturally, developing countries feared what impact such policies would have on their protected companies and industries.  For example, the TPP would require them to end their preferential treatment of state-owned enterprises in government procurement, something they were reluctant to do.  Nevertheless, developing countries were ultimately persuaded to join the pact because of the added benefits they could gain from greater access to the markets of developed countries.

 

On the other hand, the RCEP is a far more traditional free-trade agreement.  It does not share the lofty ambitions of the TPP.  It does not concern itself with “behind the border issues,” like the preferential treatment in government procurement.  Rather, it simply focuses on reducing and eliminating tariffs.  Countries can limit competition wherever they see fit.  On the surface, that sort of pact would appear easier to negotiate.  But developing countries must carefully consider the terms of such a pact, because they can lock countries into being part of regional supply chains whose ultimate benefits accrue elsewhere.  Given that there are thousands of categories and subcategories of goods to consider (not mentioning the fact that many of those are shuttled between countries before they are assembled into a final product), negotiations are bound to be complex.

 

Impact of RCEP

Still, the RCEP is back on center stage.  If successfully concluded, it could change the structure of Asian trade in ways that would put China firmly at the center of commerce in the region.  That, some worry, would accrue even more political as well as economic power to China.  But given the prevailing sluggish global economy, what matters to most developing countries is reaping the immediate benefits from freer trade.  Unsurprisingly, a couple of countries at the APEC summit quickly seconded China’s interest in reviving the RCEP’s negotiations.  It is now up to China to make it happen.

 

[1] John Lyons, Mark Magnier, and William Mauldin, “China Steps In As U.S. Retreats on Trade,” Wall Street Journal, Nov. 23, 2016, pp. A1, A6.

 

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China’s New Missiles and U.S. Alliances in the Asia-Pacific: The Impact of Weakening Extended Deterrence

Two weeks ago, Chinese President Xi Jinping attended a nuclear security cooperation summit in Washington. At the same time, China has been busily preparing its next generation of nuclear weapons. It has made steady progress on its new DF-41 intercontinental ballistic missile (ICBM). Last December, China conducted two more tests on the missile, including one that confirmed the DF-41’s ability to be launched from a mobile platform. The DF-41 will be China’s first solid-fueled missile with the range to reach the entire continental United States. The new missile’s range will likely exceed that of China’s older liquid-fueled DF-5 (or CSS-4 according to its NATO designation) ICBM. As a mobile, solid-fueled missile, the DF-41 will be hard to track and able to quickly launch, improving China’s nuclear deterrent. Some believe that China might deploy the DF-41 as early as this year.[1]

China has also been developing a sea-based ICBM, the JL-2. Though the JL-2 has a shorter range than the DF-41, China has built four Jin-class nuclear-powered ballistic missile submarines to carry JL-2 missiles closer to their targets. While those submarines are unlikely for the moment to venture far from their base at Yalong Bay on Hainan Island, American officials confirmed that one of them conducted a patrol late last year. [2] Whether or not JL-2 missiles were on board the submarine is unknown. But if they were, that would make the JL-2 even more elusive than the DF-41, again strengthening China’s nuclear deterrent.

Chinese Ballistic Missile RangesChinese Ballistic Missile Ranges

While China’s nuclear arsenal is small when compared to those of Russia or the United States, there is little doubt as to its enduring importance to Beijing. That much is clear in the special status its nuclear weapons program has held over the last half century. As part of its wide-ranging military reorganization early this year, Beijing elevated its land-based nuclear forces, once a component of the army, to a full-fledged service on par with the army called the Rocket Force.

Many Chinese analysts believe that by creating a more robust nuclear retaliatory capability they can ensure that no country would threaten China with nuclear coercion should a crisis erupt over one of its “core interests,” like Taiwan. As one Chinese official once famously quipped in the 1990s, the United States would never trade “Los Angeles for Taipei.” Hence, China has opposed any proposal that might blunt the effectiveness of its nuclear missiles, even indirect ones, like America’s recent effort to deploy its Theater High-Altitude Air Defense system to protect South Korea and Japan from a possible North Korean missile attack. While Beijing may contend that a state of mutual vulnerability would lead to a more stable security environment between China and the United States, it also complicates a key feature of U.S. alliances in the Asia-Pacific.

Since the Cold War, U.S. allies, like Australia, Japan, and South Korea, have enjoyed what is called “extended deterrence”—a security guarantee that the United States would be willing to use its nuclear forces to deter aggression against them. But that guarantee is dependent on the credibility of the United States to act. Naturally, the United States is more likely to act if potential adversaries are unable to retaliate against it. Once fully operational, China’s new missiles, which can directly threaten the United States, will complicate the credibility of America’s security guarantee to its allies, weakening extended deterrence.

Already American credibility to act has been questioned over the last half decade, due to the Obama administration’s repeated hesitancy in foreign crises. The reliability of America’s security commitments concerns many of its allies in the Asia-Pacific, as China’s military capabilities continue to grow. That has led some U.S. allies to reevaluate their own military postures. Japan has even taken steps to change its constitution to enable its military to take on a more “normal” role to safeguard Japanese interests in the region.

Australia has begun to do the same. Since the early 2000s, several Australian policymakers have argued for a more self-reliant defense. In its 2009 defense planning document Australia stated “in terms of military power… we must have the capacity to act independently where we have unique strategic interests at stake.”[3] Then, its defense white paper this year, Australia indicated that it could only assume American military dominance in the Asia-Pacific for the next two decades, rather than for the “foreseeable future” as it had in the past. [4] As a result, Australia is pressing ahead with a defense review that will culminate in the purchase of a raft of new military hardware. Australia is now considering the purchase of Japanese submarines for its navy. A few Australian analysts have even begun to openly wonder whether nuclear weapons should in Australia’s future.

Some American policymakers have welcomed the change that weaker extended deterrence has brought. Long-time issues of burden-sharing have eased. They believe that a web of militarily stronger allies can deter China from upsetting Asia’s regional order and do so at a lower cost to the United States. If they are correct, it may usher in a new era of stability. But it also means that the United States will be less able to manage crises in Asia-Pacific, as regional countries will have greater ability to act without it. Should American allies do so, they could draw the United States into a crisis that it would have rather avoided. For those who are concerned about that prospect, it provides an added incentive to pursue ever stronger anti-ballistic missile defenses.

[1]China’s top new long-range missile ‘may be deployed this year’, putting US in striking distance,” South China Morning Post, Mar. 29, 2016; Bill Gertz, “Chinese Defense Ministry Confirms Rail-Mobile ICBM Test,” Washington Free Beacon, Dec. 31, 2015; Bill Gertz, “China Tests New ICBM from Railroad Car,” Washington Free Beacon, Dec. 21, 2015; Keither Bradsheraug, “China Said to Bolster Missile Capabilities,” New York Times, Aug. 25, 2012, p. A5.

[2] Bill Gertz, “Pentagon confirms patrols of Chinese nuclear missile submarines,” Washington Times, Dec. 9, 2015.

[3] Australian Department of Defence, Defending Australia in the Asia Pacific Century: Force 2030 (Canberra: Department of Defence, 2009), p. 48.

[4] Australian Department of Defence, 2016 Defence White Paper (Canberra: Department of Defence, 2016), p. 41.

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Now Is the Time: Setting U.S. Policy on Taiwan

On February 11, Taiwan marked a milestone in its relations with China.  The head of Taiwan’s Mainland Affairs Council held direct talks with his counterpart in China’s Taiwan Affairs Office.  Such government-to-government talks have not occurred since the Chinese Civil War split the two sides sixty-five years ago.  Although the direct talks accomplished far less than the quasi-official meetings that China and Taiwan already held to improve trade and travel between them, the talks were an important step in Taiwanese President Ma Ying-jeou’s efforts to warm ties with mainland China.  Certainly his efforts have calmed tensions across the Taiwan Strait, which reached a peak during his predecessor’s term as president.  But lest there be too much optimism, a gulf (not only of water) remains between the two sides.

For the moment, Taiwan’s political leaders are focused on the regional elections that lay ahead this year and, perhaps for Ma, the legacy that he will leave behind.  Both of the major political parties on Taiwan have recently taken a second look at its bridge building with China.  Under Ma, the Kuomintang (KMT) has taken the initiative to build those bridges in order to boost Taiwan’s flagging economy.  But many within the KMT’s rank-and-file remain wary of further movement that could lead to Beijing’s rule over Taiwan.  Meanwhile, the Democratic Progressive Party (DPP), which once unabashedly advocated for independence from China, is now increasingly split between those who still want independence and those who want to open talks with China, if that is the direction their island nation is to go.  And so, as Taiwan’s political leaders position themselves for electoral success later this year, they are also implicitly crafting their parties’ policy narratives for Taiwan’s 2016 presidential elections.

Yet for all the discussion within Taiwan about how to approach China, few seem concerned about how the United States would react.  That is remarkable because the United States is the island nation’s security guarantor from Chinese attack.  Can one attribute Taiwan’s lack of attention on the United States to its confidence that America’s security guarantee is beyond question?  Or can one attribute Taiwan’s attitude to the growing perception in Asia that despite the Obama administration’s “pivot” or “rebalance” toward the region that American military might and political will to guarantee Asian stability no longer seems quite assured, at least relative to China’s rise.  Such a perception has already motivated countries, like Japan and the Philippines, to seek reassurances from Washington of its continued commitments to them.

And so, perhaps Taiwan’s political leaders, anticipating a gradual weakening of American resolve to defend their island nation, have chosen to deepen their ties with China, while they can still negotiate with some measure of strength.  But whether they want to admit it or not, their behavior also influences American determination to maintain Taiwan’s freedom from China.  On the other hand, they cannot wait for the United States to come to a consensus regarding Taiwan.  In Secretary of State John Kerry’s most recent visit to China, North Korea and the East China Sea were the top issues of discussion; it is unclear whether Taiwan even reached the agenda.

Indeed, it is an open question whether the United States has a clear policy on Taiwan.  Two camps have emerged in Washington: one wants to ensure a Taiwan free from Chinese rule and the other sees Taiwan as a nuisance in the great power relations between China and the United States that are already complex and fraught with other dangers.  Partly out of necessity, the latter camp seemed to have gained the upper hand after the 2001 terrorist attacks on the United States.  Washington needed calm across the Taiwan Strait as it fought two conflicts in Afghanistan and Iraq.  But putting Taiwan on the backburner has made the island’s absorption into China more likely, in which case the most practical American policy would be to help Taiwan obtain the best possible terms for its absorption.  The former camp, probably sensing America’s drift away from Taiwan, has become more vocal.  It urges that American policy take a firmer line on Taiwan—enhancing the island’s defenses and building stronger political bonds with it.  Some within that camp simply abhor the notion that China will snuff out Taiwan’s democracy; others point to Taiwan’s value to the United States, citing the island’s geographical significance to the balance of power in the western Pacific.

Whichever policy direction the United States chooses, it would be wise to start engaging Taiwan’s political leaders now.  Waiting until Taiwan turns its attention to the United States may be too late.  By 2016 when Taiwan’s presidential election cycle is in full swing, the island’s political parties are likely to have hardened their respective positions, making American influence less effective.  Now is the time to begin its engagement.  But that is if Washington can manage to decide which policy it should pursue.

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Will Economics Still Prevail Over Politics in Asia?

Most people today closely associate Asia with robust economic growth, fueled by expansion in infrastructure, manufacturing, and services.  Even though there have been bumps along the way, notably during the Asian Financial Crisis in 1997–1998, both before and after that crisis hundreds of millions were lifted out of poverty.  Throughout the 1990s, many Asians even spoke of a special set of Asian values that contributed to their success.  And while some values have proved to be double edged, many came to see at least one of them reflected in Asia’s general attitude toward international relations—a preference for consensus over confrontation.  That preference, the theory goes, gave rise to the notion that economic development should take precedence over political competition, paving the way for greater regional and regime stability.

Indeed, it may be better said that much of Asia came to choose economic development over political competition not because of any special set of values, but rather because of weariness with many decades of conflict.  Now, after three decades of relative peace and economic prosperity, armed conflict seems a distant possibility to many Asians.  Even on Taiwan, which faces increasing diplomatic isolation and periodic Chinese threats of forced unification, most Taiwanese are relatively nonchalant about the possibility.  And, until recently, something similar could be said of Japanese, who viewed Russia’s territorial claims on their northern territories with greater concern than those of China on the Senkaku Islands (or Diaoyu Islands, if you happen to be in Beijing).

Besides, after the Cold War ended, many Americans believed that their continued engagement with Beijing and in the region would relieve the tensions associated with China’s rise and defuse the need for any arms race in Asia.  From the Chinese perspective, their country’s rise would not be a cause for concern among its neighbors, as it would be simply reasserting its traditional (and rightful) place in Asia.  Indeed, China’s rise would benefit all Asians.  And, in any case, surely no country—least of all China which has so greatly benefited from the extended period of peace—would have much incentive to upset its own economic growth with the potential for conflict.

But clearly those expectations have their limits.  China has grown increasingly strident in its maritime disputes with Japan and the countries that ring the South China Sea.  Meanwhile, China’s dam building on the Mekong River without the consultation of its Southeast Asian neighbors has not endeared the country to those on the Indochina peninsula.  And with Chinese influence spilling into the Indian Ocean, India has grown nervous too.  It turns out that not all of China’s neighbors share its unreserved fondness for the way things were during imperial China’s heyday.  Hence, tensions across Asia have increased as Chinese behavior has become more assertive, matching its enhanced economic and military prowess.  And so, many Asian countries have begun to rearm, most recently Japan, which shifted its military focus southward and boosted its defense budget for the first time in over a decade.

For a time, it did seem as though the prospect for war in Asia had been entirely banished to the shadows.  However, it has become apparent that the ever-greater certainty of peace had bred a sense of complacency that long-simmering tensions would ultimately be amicably resolved or indefinitely postponed.  Today, some of those tensions have resurfaced.  Politics still matter and once again threaten to take primacy over economic ties.  Hopefully, with the renewed attention devoted to them, Asia can put some of these tensions to rest and return to its economic development.  Otherwise, they are likely to augur ill for the future.

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