Friday, November 20, 2009

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.

Friday, November 13, 2009

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.

Tuesday, November 3, 2009

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 14th 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.