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Asian Nations Plan Trade Bloc That, Unlike U.S.’s, Invites China
Source: http://www.nytimes.com/2012/11/21/world/asia/southeast-asian-nations-announce-trade-bloc-to-rival-us-effort.html?_r=0
Source Date: Wednesday, November 21, 2012
Focus: Institution and HR Management
Created: Nov 20, 2012

PHNOM PENH, Cambodia — Ten Southeast Asian nations said Tuesday that they would begin negotiating a sweeping trade pact that would include China and five of the region’s other major trading partners, but not the United States.

The proposal for the new trade bloc, to be known as the Regional Comprehensive Economic Partnership, is enthusiastically embraced by China. The founding members, who belong to the Association of Southeast Asian Nations, said at the close of the association’s summit meeting here that the bloc would cover nearly half of the world’s population, starting in 2015.

The new grouping is seen as a rival to a trade initiative of the Obama administration, the 11-nation Trans-Pacific Partnership, which includes many of the same countries but excludes China.

The announcement came as China was facing pressure to back down from its hard-line stance in its disputes with four Southeast Asian countries over ownership of islands in the South China Sea.

Five nations at the summit meeting, including Singapore and Indonesia, demanded changes related to the issue in two communiqués that were drafted by Cambodia, the host of the meeting and an ally of China with no claim to the islands, according to a statement issued by Singapore.

The initial draft of one of the communiqués, intended for the association to issue, said that its members, by consensus, did not want the South China Sea issue to be “internationalized” — meaning that the United States and other countries with interests in the security of the sea, one of the world’s busiest trade routes, would have no say in the rules of the body of water.

China said Monday that such a consensus existed. But the Philippines, an ally of the United States, publicly protested China’s position, and was joined Tuesday by Singapore, Brunei, Indonesia and Vietnam. The final text of the communiqué omitted the reference to a consensus, the statement by Singapore said.

The second communiqué, for the concurrent East Asia Summit, left out any mention of the South China Sea in the initial draft, even though the five members wanted the issue to be included. That communiqué, too, was amended.

In a direct criticism of China’s position on the South China Sea, Prime Minister Lee Hsien Loong of Singapore said at the East Asia Summit that he hoped the Association of Southeast Asian Nations and China would soon start formal talks on a code of conduct that would reduce the risk of conflict over the sea. China has balked at such urgency.

“Talks on a code of conduct will help manage the disputes and prevent conflict which will be bad for everyone,” he said.

The announcement of the proposed trade pact ended the talks on an upbeat note, despite the underlying tensions between the proposal and the Trans-Pacific Partnership, which was announced last year as part of the Obama administration’s shift of focus toward Asia, the region with the fastest-growing economy.

One of the stops on President Obama’s just-completed trip to Asia was in Thailand, in part to welcome its interest in joining the American-backed trade initiative, which has held more than a dozen rounds of negotiations.

China, on the other hand, has gone out of its way to express its support for the new proposed bloc. Its members would be the 10 countries that make up the Association of Southeast Asian Nations, plus 6 nations that have free-trade agreements with the association: Australia, China, India, Japan, New Zealand and South Korea.

“We uphold regional economic integration, and this is a way to fight against the global financial crisis,” Fu Ying, a Chinese vice minister for foreign affairs, said of the proposal at a briefing in Beijing last week, adding, “We will actively support the negotiating process.”

Some analysts in Asia describe the Obama administration’s trade initiative as one element in a policy to contain China, the world’s largest producer and exporter of manufactured goods.

“China’s exclusion is strange, given its huge economic presence in the Asia-Pacific” region, Amitendu Palit, a visiting senior research fellow at the Institute of South Asian Studies at the National University of Singapore, wrote in a recent edition of East Asia Forum. “This has given rise to views that the United States is driving the Trans-Pacific Partnership with the strategic objective of marginalizing China.”

At the briefing in Beijing, Liang Wentao, an official of the Ministry of Commerce, said that China had studied the proposed bloc backed by the United States and had concluded that the bar for meeting its requirements was “very high.” He said China had not received an invitation to join it.

Mr. Obama alluded to it during a presidential debate, implying that one of its objectives was to set the standards for entry above what China could now meet.

“We’re organizing trade relations with countries other than China so that China starts feeling more pressure about meeting basic international standards,” Mr. Obama said.

One criticism in Washington of the proposal supported by China is that countries need to do little to join and would be allowed to continue practices like protecting state-run enterprises.
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