Xi Heralds Age of China-led Globalization at APEC Summit
By Alvin Cheng-Hin Lim

Xi Heralds Age of China-led Globalization at APEC Summit

Nov. 22, 2016  |     |  0 comments

China took over the reins of the global push for free trade during the November 2016 summit of the Asia-Pacific Economic Cooperation (APEC) in Lima, Peru. While the US and its allies were reeling from the recent election of Donald Trump as US president — and in particular, his pledge to scrap the US-led Trans-Pacific Partnership (TPP) once he comes into office in January 2017 — Chinese President Xi Jinping pushed the APEC member-economies to accelerate their negotiations towards the completion of two alternative regional trade agreements (RTAs), namely “the 21-member Free Trade Area of the Asia-Pacific (FTAAP) and a 16-member Regional Comprehensive Economic Partnership (RCEP)” (“China pushes,” 2016). The shift in leadership from the US to China of the future development of globalization comes as no surprise, given China’s strategic interest in maintaining globalization for its economic growth. As Zheng (2016) points out, free trade remains “beneficial to the developing countries, including China, which is most in need of globalization.” Hence, President Xi pledged during his keynote address at the APEC summit:

“Openness is vital for the prosperity of the Asia-Pacific … We will fully involve ourselves in economic globalization by supporting the multilateral trading regime, advancing the FTAAP and working for the early conclusion of the negotiations on the Regional Comprehensive Economic Partnership.” (“China pushes,” 2016)

The TPP — along with the other US-led regional RTAs, the Transatlantic Trade and Investment Partnership (TTIP) and the Trade in Services Agreement (TiSA) — represented the ills of globalization which Trump successfully campaigned against during the election. The TPP member-states had completed their negotiations on the terms of the agreement in October 2015, and the treaty was awaiting final ratification, in particular from the US (Lim, 2015). With Trump’s election, the fate of the TPP, TTIP, and TiSA are all in doubt. US President Barack Obama had hoped to push through ratification of the TPP during his final weeks in office, but the refusal of congressional leaders to accept the TPP for consideration during this lame-duck session effectively ended this slim possibility (Yuhas, 2016).

In the meantime, while some TPP member-states like Vietnam have chosen to suspend their domestic procedures to ratify the TPP, other member-states like Japan and Singapore will be moving ahead with ratification. As Japanese Prime Minister Shinzo Abe explained: “If we stop our domestic procedures, the TPP will be completely dead. It will be impossible for us to curb protectionism” (Othman, 2016a; “TPP leaders,” 2016; “Vietnam shelves,” 2016). The leaders of the TPP member-states are hoping that the incoming Trump administration may be persuaded to reverse its anti-TPP stance, but if this does not happen, they are prepared to treat the TPP as delayed, and will patiently wait for a future TPP-friendly administration to be elected in the US. As Australian Prime Minister Malcolm Turnbull points out, “free trade is a long game” (“Turnbull hopes,” 2016).

The RCEP, which was proposed during the 2011 summit of the Association of Southeast Asian Nations (ASEAN), seeks to strengthen ASEAN’s economic cooperation with its free trade agreement (FTA) partners, namely China, Japan, South Korea, India, Australia, and New Zealand, and thereby create “an integrated market that spans 16 countries with a combined market of over 3 billion people and a combined GDP of about US$19.78 trillion based on 2011 figures.” With the doubt cast over the viability of the TPP by the incoming Trump administration, non-Asian TPP members like Peru have become interested in joining the RCEP, which would expand RCEP across the Pacific into the Americas (Dube, 2016; “ASEAN and FTA Partners,” 2012).

The FTAAP, which would cover all 21 APEC member-economies, would be a mega-RTA that is significantly larger than either the TPP or the RCEP. According to an economic analysis, the FTAAP would generate income gains 8 times greater than that of the TPP, and 3 times greater than that of the RCEP. Indeed, the FTAAP’s “income gains could approach $2 trillion, or nearly 2 per cent of world GDP in 2025” (Stephens, 2014). Following its exclusion from the TPP by the Obama administration, China had been advocating for the RCEP and the FTAAP; now with the TPP poised to be scrapped by the Trump administration, other nations have begun to see the RCEP and the FTAAP as the only path forward for the world economy to enter the next stage of globalization (Lim, 2015; Murray, 2016).

Xi called on the leaders of the APEC member-economies to “actively guide globalization, promote equity and justice, and make globalization more resilient, inclusive and sustainable, so that people will get a fair share of its benefits and will see that they have a stake in it.”

In his keynote address at the APEC summit, President Xi described the FTAAP as being “critical for the long-term prosperity of the Asia-Pacific,” and called on the leaders of the APEC member-economies to “firmly pursue the FTAAP as an institutional mechanism for ensuring an open economy in the Asia-Pacific” (“China renews call,” 2016). Singaporean Prime Minister Lee Hsien Loong pointed out that apart from RCEP, other regional arrangements like the ASEAN Economic Community may serve as “building blocks” to move the APEC member-economies towards establishing the FTAAP. Another such building block may be the recently proposed FTA between ASEAN and the Pacific Alliance nations of Chile, Colombia, Mexico, and Peru (Halim, 2016; Othman, 2016b).

During the US election campaign, some observers noted that voters in areas devastated by globalization — including Democrats in the American Rust Belt — were supporting Trump as a sign of their repudiation of globalization (Lim, 2016). In view of the political challenges posed by the global rise of anti-globalization sentiment, Prime Minister Lee noted that globalization has the potential to “cause disruption, and result in both winners and losers,” and as such, countries pursuing globalization need to implement “inclusive policies like affordable healthcare and investing in lifelong learning” in order to mitigate against globalization’s negative social and economic impacts (Othman, 2016b). President Xi likewise called on the leaders of the APEC member-economies to “actively guide globalization, promote equity and justice, and make globalization more resilient, inclusive and sustainable, so that people will get a fair share of its benefits and will see that they have a stake in it” (“China renews call,” 2016).

Opposition to globalization is not solely based on frivolous grounds. The plight of the losers of globalization is starkly reflected in their ill health and mortality. A demographic analysis conducted after the US election found that counties with worse public health indicators were more likely to have voted for Trump (“Illness as indicator,” 2016). Illness and death have been the costs borne by those lacking the necessary human capacity to reap the economic rewards of globalization:

“The public-health crisis unfolding across white working-class America is hardly a secret. Last year Angus Deaton, a Nobel-prize-winning economist, found that the death rate among the country’s middle-aged, less-educated white citizens had climbed since the 1990s … Drinking, suicide and a burgeoning epidemic of opioid abuse are widely seen as the most likely causes. Some argue that deteriorating health outcomes are linked to deindustrialization: higher unemployment rates predict both lower life expectancy and support for Mr. Trump, even after controlling for a bevy of demographic variables.” (“Illness as indicator,” 2016)

While the Trump administration does recognize that globalization brought economic growth to the developing world, it sees such development as having come at the expense of American workers, with the bonanza of industrial jobs in Asia brought by global production chains being correlated with deindustrialization in the US. As Steve Bannon, President-elect Trump’s designated Counselor, pointedly observes, “the globalists gutted the American working class and created a middle class in Asia” (Wolff, 2016; Gosselin & Dorning, 2015). To restore the industrial jobs lost to globalization, the Trump administration plans to offer a program of economic nationalism:

“It’s everything related to jobs … I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.” (Wolff, 2016)

It remains to be seen if this program of economic nationalism will be accompanied with protectionist trade measures, or if the Trump administration will recognize that free trade can offer benefits to American workers. If the Trump administration does implement a program of protectionism, then the world economy will indeed enter a new age of China-led globalization.


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