Happy Holidays from the Berkeley APEC Study Center!

The Berkeley APEC Study Center would like to wish all of its friends and patrons a very Merry Christmas and a Happy New Year! We will be taking a break from our blog until January, but until then, please enjoy the Fall 2009 edition of BASC News, which is full of our latest announcements and analysis of the Asian region. Click here to download the Fall 2009 edition of BASC News.

We truly appreciate your continued interest and support. In particular, we would like to thank all of the generous contributors who have made our projects possible, including the Ron and Stacy Gutfleish Foundation, the Center for Global Partnership (part of the Japan Foundation), the East-West Center in Honolulu, the East Asia Foundation, the Kim Dae-jung Presidential Library Foundation, the Institute of European Studies at Berkeley, the EU Center of Excellence, and the Institute of Slavic, East European and Eurasian Studies.

Happy holidays!

WTO Summit 2009: An End to Doha in sight?

Ren Yi Hooi, BASC Research Assistant

The seventh official ministerial meeting of the WTO’s 153 nations was recently held in Geneva from November 30 to December 2, but it passed with barely a whisper in comparison to the furor that greeted the Seattle WTO summit ten years ago. Even the protests were considerably more subdued, with only a few hundred participants rather than the thousands typical of previous summits. With the Doha Round well into its eighth year, it appeared as though none had high hopes for an imminent conclusion, and Director Pascal Lamy did not even plan to have it on the agenda for this low-key meeting. Instead, the first WTO summit since the Hong Kong meeting in 2005 aimed at “examining the functioning" of the global trade regulator during the three-day event and discussed the role of the WTO’s contribution to the global recovery from recession.

However, while the limping Doha Round was not brought up as an official topic of negotiation to avoid rising tensions, it was the subject that was weighing on everyone’s minds. The Doha Round has repeatedly failed to achieve its stated mission of opening rich-country markets to food exports from the developing world. This year’s summit concluded with an agreement to conduct a review early next year on whether a deal in the Doha Round is possible in 2010, and a large number of ministers called for the conclusion of the Doha Round in in both formal plenary meetings and informal working sessions. Many economists and trade policy experts also argued that the WTO should update the Doha agenda to tackle issues such as climate change and food security and reform its work style to serve developing countries better.

What makes the Doha Round different from other previous WTO negotiations is the fact that developing countries are strongly pushing for its move forward, and developed countries, especially the US, are blamed for holding it back. In pointed contrast to the lack of visible Doha progress, a group of 22 developing countries signed their own trade deal to cut tariffs and boost South-South trade. The European Union, Brazil and other economic powers have blamed the U.S. for gridlock in global-trade talks. The lack of US-led progress in the Doha Round is further reinforced by the fact that the Obama administration currently has other priorities and is not in a position to take on its protectionist constituencies in the United States. In response, U.S. Trade Representative Ron Kirk argues that Barack Obama still believes the Doha Round can be concluded during his first term, but that what is now on the table does not deliver "meaningful market access in the part of the world that will be growing and driving GDP growth over the next few years." His statement refers to countries such as India, China and Brazil, which the US has requested to further liberalize their industrial markets.

With the stall in agreement between current and burgeoning major world powers, it appears that this year’s low key Geneva Summit has achieved little in advancing global trade concerns. However, it is possible that the political momentum and energy gathered at this meeting, even without the opening of formal negotiations, could help to support an urgent push to conclude the Doha Round next year should eager countries be willing to compromise.

On the Sidelines of the 2009 APEC Summit

by Peter Volberding, BASC Research Assistant

At the 2009 APEC Summit in Singapore, government leaders pledged increased economic cooperation and regional integration under the slogan “Sustaining Growth, Connecting the Region.” Additionally, in the wake of the global financial crisis, leaders emphasized APEC’s long-term goal of trade liberalization by condemning recent acts of protectionism, particularly between the APEC member countries of the US and China. However, high-profile international meetings have been met with limited success as predictably vapid diplomatic speeches have preempted action.

The recent G20 and ASEAN meetings are prime examples. Both have produced little more than broad overtures of cooperation. The recent APEC meeting seems to have succumbed to a similar fate. While APEC leaders productively brainstormed and discussed long-term growth strategies, anti-corruption policies, and programs to facilitate cross-border business exchange, they only produced vague goals and failed to agree on a comprehensive climate strategy (possibly auguring the fate of the upcoming Copenhagen Summit).

However, the 2009 APEC Summit was undoubtedly a huge success—just not by the traditional metrics of an international meeting. Certainly the event helped increase dialogue among global leaders. But the real progress was made outside the summit’s walls, in those often overlooked ‘sideline meetings.’

For example, President Barack Obama met with Singaporean Prime Minister Lee Hsien Loong on the sidelines of the APEC Summit, and discussed the United States’ intention to negotiate membership in the Trans-Pacific Partnership Agreement. Obama also became the first US President to meet with all 10 nations of ASEAN—including Myanmar. Furthermore, his personal diplomatic meetings included political and economic leaders from Mexico, Australia, Indonesia, and Russia.

Taiwanese and Chinese trade delegations met in the hopes of reviving a stalled Economic Cooperation Framework Agreement (ECFA), highlighting Taiwan’s visible, yet unofficial, influence in the region. Taiwan also commenced negotiations with Singapore on customs cooperation. Moreover, Chinese President Hu Jintao and Russian President Dmitri Medvedev met for the second time this year, hailing growing economic and political ties. The Russian and South Korean foreign ministers met to discuss the persistent North Korean threat.

Trade deals were also at the forefront. Before the start of the APEC Summit, delegations from Thailand and Peru celebrated the finalization ceremony for an FTA that reduces or eliminates tariffs on over 70% of bilaterally traded goods. Just a few days prior, Peruvian President Alan Garcia additionally negotiated the anticipated Korea-Peru FTA, which is expected to be finalized soon. President Obama further hinted that the stalled KORUS free trade agreement could be revived.

With the number of high-level international meetings on the upswing, there will be no shortage of broad, noncommittal gestures from global leaders. However, simply because these summits do not produce readily tangible results does not mean progress was not achieved. Sideline meetings have proven to be highly effective in promoting regional integration. So perhaps before we bemoan the ostensible lack of progress, we should take a second look at the broader impact of international summits.

India: Next in Line for an FTA with EU?

by Michelle Chang, BASC Research Assistant

On Oct. 15th this year, the European Union inked a free trade agreement with South Korea that has been in negotiations since 2007. The FTA caused much controversy among the European auto sector as auto makers expect the deal to asymmetrically benefit Korean auto makers. Nevertheless, trade officials on both sides pushed forward with the FTA that has a potential value of €100 billion to both economies and would speed up recovery from the current economic crisis. Expected to come into effect early next year after approval by the European Parliament, the FTA is considered the EU bloc’s greatest trade success to date.

The successful signing of the S. Korea-EU FTA has given EU renewed hope and momentum to push for new trade agreements. India seems to be its next major target.

EU is currently India’s largest trading partner. According to the European Commission’s 2007 statistics, EU goods exports to India were valued at €26.2 billion while goods imports from India stood at €29.4 billion. With a potential market of over one billion people, India is also one of EU’s most important trading partners. The India-EU FTA talks were launched in 2007 but have not made significant progress. After the Indian general election in May this year, India emerged with a stronger and more stable government than before, setting up a better political framework for bilateral trade talks.

With the India-EU Summit scheduled for November, trade officials on both sides have made significant efforts in the past few weeks to reinvigorate their trade negotiations. Such ambitious goals have been made to boost bilateral trade to $200 billion in the next four years.

However, while much energy is put into speeding up the completion of this FTA, there are many disputes that need to be resolved. Neither EU nor Indian trade officials are expecting the completion of the FTA anytime soon.

First of all, there have been major disputes over the inclusion of issues beyond trade in the trade deal. The EU already has to make a compromise by excluding climate change issues in the talks. However, EU’s intention to include labor issues in the deal is met with India’s definite and uncompromising opposition. The latter insists that it would not agree to anything beyond pure and simple trade issues.

Secondly, India has proposed asymmetrical tariff liberalization that requires the EU to cut more tariffs than India. Not surprisingly, this proposal is not well received among EU member states.

Thirdly, the issue of public procurement has attracted much concern. Due to the federal nature of India, India can only liberalize the public procurement market on the federal level while unable to impose liberalization on state markets. While this issue has caused much dissatisfaction among EU states, it is something for which the Indian government can do little due to the nature of its political system.

Both EU and India are genuinely pushing for the speedy signing of their FTA, but the different political, economic, and social circumstances faced by the two parties have made the road ahead full of obstacles. Many compromises have indeed been made by both sides. Yet it is still uncertain how many more compromises are needed to satisfy both sides and if they are willing to go so far. Nevertheless, the existing disputes can be interpreted as a sign that both sides are very much engaged in the bilateral talks. More importantly, the two parties are not wiling to sacrifice quality for speed. The signing of a comprehensive agreement that is satisfactory to both sides can help avoid potential disputes in the future.

2009 East Asian Summit

By Ivy Ngo, BASC Research Assistant

This past weekend marked the fourth East Asian Summit, which followed on the heels of the 14^th ASEAN Summit, in Hua Hin, Thailand. The key difference between the two summits is the more inclusive discourse of the East Asian Summit: participants include not only ASEAN but also China, Japan, South Korea, India, Australia and New Zealand—a set of countries sometimes collectively referred to as “ASEAN +6.” Main issues discussed at the summit included ratification of the long postponed Cha-am Hua Hin Statement on EAS Disaster Management, mobilization against the H1N1 Influenza virus, discussion of free elections in Myanmar, restoration of diplomacy with North Korea, and a continued direction towards economic liberalization.

The East Asian Summit began in 2005 under then-Prime Minister Mohammed Mohathir of Malaysia. This year’s summit suffered a particularly difficult series of setbacks. Originally scheduled to be held last December in Thailand, the meeting was postponed due to political unrest in its would-be host country. An attempt to hold the summit in April of this year was also thwarted. The summit only took place after the location was moved to Hua Hin (a two-hour drive from Bangkok) and a “No Man’s Land” was enforced around the sleepy beach resort, manned by 18,000 police officers and members of the armed forces.

In addition to its logistical problems, the East Asian Summit has been continually plagued by an existential crisis of sorts, unclear on its purpose and direction. Although the grouping seeks to strengthen ties within the Asian region, the question of who exactly should be included in such a regional community is fraught with tension. Two competing conceptions of an Asian regional community were discussed at the summit by Japanese Prime Minister Yukio Hatoyama and Australian Prime Minister Paul Rudd. A pointed difference between the two proposals is that Hatoyama’s is obliquely mum on the role of the US, while Rudd’s openly welcomes the accession of the US, whose historically powerful influence in Asia has been waning of late. Conversely, the rise of China and Japan has awakened fears of dominance: some have even decried Japan’s encouragement of regional cooperation as a neo-Greater East Asia Co-Prosperity Sphere, evoking the banner under which Japan invaded Manchuria and Southeast Asia during World War II.

These heated accusations have revealed that Asian regional unity is still a long way off, co-opted as it is by pluralistic and contentious politics. Drama has plagued the East Asian Summit since its first meeting, when then-Prime Minister Junichiro Koizumi visited the controversial Yasukuni Shrine. This past summit continued the trend. First, Cambodian Prime Minister Hun Sen announced that he was reserving a cabinet position for ousted Thai Prime Minister Thaksin Shinawatra, recently jailed over corruption charges and a key player in Thailand’s current political instability. Other sources of tension included India’s welcoming of the Dalai Lama at China’s obvious displeasure, the stalled talks with North Korea, the jealous culture war between Malaysia and Indonesia, and Myanmar’s continued draconian human rights abuses. The bigger issue is that ASEAN+6 comprises countries with vastly different systems of political rule, from the red capitalism of China to the parliamentary democracy of India, begging the question of whether any regional community platform can accommodate such variance.

But perhaps the focus should not lie on ASEAN+6’s shortcomings, but on its success, and more importantly, its potential. At the very least, the East Asian Summit and ASEAN serve as broad platforms for engaged dialogue and discussion, crucial elements in the future regional integration of a very large and diverse bloc. This is especially important in light of Thai Prime Minister Abhisit Vejjajiva’s comments that Asia needs to find a new economic model that is no longer dependent on Western markets, signaling a shift toward the idea that Asia is no longer just a producer of consumer goods. An East Asian community as imagined by Prime Minister Hatoyama or Prime Minister Rudd is far from being realized but some shifts in this direction are already at place within public attitudes towards an regional Asian identity.

ASEAN Summit marred by controversy

Ren Yi Hooi, BASC Research Assistant

With the first ever ASEAN-US summit confirmed to take place in conjunction with the annual APEC Meeting in Singapore next month, ASEAN’s importance as a region appears to have gained further recognition on the global platform. However, sticky disputes over human rights issues and friction between some member nations threaten the grouping’s hopes to achieve a fully integrated Southeast Asian community by 2015.

On the first day of the ASEAN Summit 2009 in Hua Hin, Thailand, the inauguration of its new human rights body, the Inter-Governmental Commission on Human Rights (AICHR), was overshadowed by the barring of activists from a dialogue with Southeast Asian leaders and tension between the Thai and Cambodian prime ministers.

The summit began inauspiciously with the leaders of 5 countries – Philippines, Cambodia, Indonesia, Malaysia and Brunei – failing to arrive in time for the opening ceremony, causing several activists to walk out in protest to the perceived snub, and the states of Burma, Cambodia, Laos, the Philippines and Singapore vetoing the activists meant to represent their own countries. Without the power to investigate governments or impose sanctions, in any case, AICHR has already been criticized as a body lacking “teeth”; one with more talk than substance. To add fuel to the fire, Cambodia’s Prime Minister Hun Sen compared Mr. Thaksin Shinawatra, the ousted Thai Prime Minister, to Ms Aung San Suu Kyi, the Burmese Nobel Peace Laureate, and declared that Mr Thaksin would be allowed to stay in Cambodia as his economic advisor.

Meanwhile, the region is still scrambling to solve a range of internal challenges, including a trade dispute between Thailand and Philippines, territorial disputes between Malaysia and Indonesia as well as the Philippines and Singapore, and conflicting claims to natural gas deposits in the South China Sea by Brunei, Malaysia, Vietnam and the Philippines.

With such outstanding conflicts compounding the vast political and social differences between member states, ASEAN’s ambitions to create a single market by 2015 look set to be disappointed. Although it is indisputably one of the world’s fastest growing economic regions, what remains to be seen is the political leaders of ASEAN are 1) able to override individual disputes in order to facilitate greater regional cooperation and 2) willing to sink its “teeth” into globally scrutinized issues (i.e. human rights) in a manner that underscores action in addition to talk. It is only with the concerted will to resolve difficult issues for once and for all, that ASEAN will truly be able to integrate into a united global market that is attractive to the world.

Little Prospects for Japan’s Proposed “East Asian Community”

Peter Volberding, BASC Research Assistant

Japanese Prime Minister Yukio Hatoyama’s recent proposal for an East Asian Community is expected to raise eyebrows at Saturday’s trilateral summit in Beijing between the leaders of Japan, China, and South Korea. Inspired by the successes of the European Union, Hatoyama’s prosaic vision aims to foster economic growth and ensure regional stability. But calls for greater Asian integration are nothing new, and are rarely successful—is this proposal any different? Probably not.

What is different is Japan’s interest in regional affairs. The LDP’s half century stranglehold over Japanese politics relied on a close relationship with Washington, often at the expense of Beijing or Seoul. Prime Minister Hatoyama’s sudden shift in foreign policy reflects his desire to reassess Japan’s relations with its neighbors. His promise to not visit the controversial Yasukuni Shrine and his proposal for an East Asian Community, for example, are important first attempts at increasing rapport in Japan’s relations with China and South Korea.

However, the East Asian Community seems to be more about self-interest rather than repentance. The DPJ faces a stagnant domestic economy, and sees increased economic cooperation as a means to increase Japan’s economic growth potential. While the party has certainly prioritized improved international relations, this aim is most likely ancillary to domestic economic goals.

In addition, as many Chinese scholars have eagerly emphasized, this proposal was actually first promoted in the early 1990s—and it became ASEAN + 3. Why has Japan proposed yet another grouping? Japan desires to check China’s growing regional influence. In fact, Japan’s proposed East Asian Community not only includes the ASEAN + 3 nations, but also Australia, New Zealand, and India. This "ASEAN+6" grouping has already been in existence since 2005 in the form of the East Asia Summit (EAS), whose meetings have thus far produced little more than broad statements about energy cooperation. Japan’s not-so-secret intentions to balance China in the EAS have thus far tempered Chinese interest in the grouping, and China will have the same reaction to any East Asian Community consisting of this larger "+6" format.

Finally, the East Asian Community will ironically force Japan to address sensitive domestic issues. For example, a new economic community would undoubtedly pressure Japan to liberalize trade, reduce domestic farm subsidies, and ease restrictions on foreign laborers. Given the heavily entrenched interests of industry and agriculture, I am skeptical that the Japanese government will revisit these policies anytime soon.

If the current problems of the EU are any indication, the East Asian Community faces little prospect of succeeding. Enormous economic and political heterogeneity in Asia preclude any semblance to the European integration model. Furthermore, historical distrust is routinely manifested in public protests against Japan, reducing the likelihood that the Chinese and South Korean governments would agree to increased integration in the near future, even if the plan were advantageous for all parties.

While economic integration in Asia is an admirable idea, the East Asian Community is not a viable option. Deep-seated political suspicions will thwart discussions, and Prime Minister Hatoyama will leave Beijing empty-handed.

G-20 2009: Promise-Making in Pittsburgh

This week, three BASC Research Assistants take on the recent G-20 summit in Pittsburgh, examining issues of security, institutional change, and the environment.

Crashing the G-20 Party: Line in the Sand against Iran
Ivy Ngo, BASC Research Assistant

The opening statements at the G-20 Economic Summit wasted no time in addressing the revelation of a nuclear facility in Iran. “Iran is breaking the rules all nations must follow”, President Obama said, while Prime Minister Gordon Brown announced, “The international community has no choice today but to draw a line in the sand.” Iran’s refusal to accept fault-–it did, after all, report the facility itself to the International Atomic Energy Agency and maintains the facility is for nuclear energy and not atomic bombs–-has done little to assuage the international community. Even Russia and China, who have been known to hug the fence on global security issues, have condemned Iran’s actions. The ‘line in the sand’ creates two options for Iran: diplomacy or sanctions.

The reaction towards Iran has thus far been hard-line, with little room for negotiation. Could this reaction be too harsh? Headstrong North Korea and Cuba have both been under tough sanctions for decades now, and North Korea has also recently been posturing with its own nuclear development. During his time in office, former President George W. Bush made his well-known assessment of Iran as part of an ‘axis of evil’; the continued harsh attitude towards Iran could entrench it further. Iran’s adamant denial of wrongdoing is laced with resentment. The Iranian recently posted a short opinion piece asking why Iran is excluded from the G-20 considering that it ranks 17th among the top 20 economies, based on Purchasing Power Parity, in lists compiled by the IMF and World Bank.

With the G20 now becoming the central platform to discuss the global economy, it will be interesting to see how the international community reacts, and who will dominate the discussion. So far, the US has refused to engage in direct talks, opting for six party talks with Britain, France, Russia, China and Germany instead.

Institutional Shift: Rising Powers Gain Greater Voice in the G-20
Michelle Chang, BASC Research Assistant

At a time when nations around the world are struggling to climb out of the greatest financial crisis since the Great Depression, the G-20 meeting in Pittsburgh is symbolic of first steps a new world economic order. Its emergence as the primary coordinating body of global economic issues signifies the increasingly undeniable importance of developing countries such as China and India and the need to provide these rising powers with fora in which they can exercise greater influence. Similarly, leaders of G-20 nations agreed to give greater voting power to developing countries within the International Monetary Fund (IMF) to make the institution more representative. At the moment, about 57% of the voting power in the IMF belongs to developed countries and 43% belongs to developing countries, and this shift will make the two groups about even. These actions are long overdue, but hopefully they represent the first of many steps necessary to bring our existing global institutional architecture in line with the changing realities of the international order.

The G-20 and the Environment: Vague Promises Draw Continued Criticism
Ren Yi Hooi, BASC Research Assistant

Despite reiterated promises to build a ‘greener’ economy, the G20 summit failed to propose a concrete set of actions to address environmental issues. While world leaders dedicated a total of $1.1trillion towards boosting the economic and financial crisis, there was no money set aside to protect the environment, disappointing environmental groups who criticized the ‘green effort’ as one characterized by “vague aspirations”. At the summit, leaders affirmed a 15-month-old commitment to put up a new climate treaty in December, pledged to “create green jobs” and resolved to "accelerate the transition" to a low-carbon economy. However, these were seen as inadequate repetitions of old ideas by environment experts and lobbyists, who had wanted to see solid figures and stronger message to re-build a leaner economy run on wind and solar power. The G-20 may be a powerful new forum within which to deal with these complex environmental issues, but if countries hope to truly make progress, leaders must make more concrete commitments to changing the behavior of their respective nations. The current global economic crisis certainly deserves primary focus at the moment, but given the propensity for continual change and upheaval on the international stage, the environment must be prioritized in order to ensure a bright future for all countries.

Northeast Asia: Ripe for Integration?

We are proud to announce the publication of our latest book, Northeast Asia: Ripe for Integration?, now available from retailers such as Amazon.com and BarnesandNoble.com.This book investigates the origins and evolution of Northeast Asia's new institutional architecture in trade, finance, and security from both a theoretical and empirical perspective.