Prospects for Regional Economic Integration

By Meredith Miller

December 19, 2013

Despite the glimmer of life that emerged from the December WTO ministerial meeting in Bali—which generated a new agreement on customs and food security—countries in the Asia-Pacific region are in full pursuit of a slew of bilateral and multilateral free trade agreements, initiated in the absence of progress in the Doha Development Round.

The most significant agreement for the United States is the Trans-Pacific Partnership (TPP), an FTA that would knit together twelve APEC economies into an arrangement that liberalizes approximately one-third of world trade and also covers new “21st century” issues such as e-commerce, cross-border investment, and intellectual property (IP) rights. The TPP also includes an open accession clause and is intended to be a building block toward an eventual Free Trade Area of the Asia-Pacific (FTAAP). Despite impressive progress, TPP members have struggled to resolve issues such as agricultural tariffs, IP rights, and preferential treatment of state-owned enterprises and will not meet their self-imposed deadline of concluding the agreement in 2013. Nonetheless, the TPP is the signature economic initiative of President Obama’s rebalancing strategy toward Asia and a concerted effort is being made to conclude the agreement as soon as possible, with the next round of talks scheduled for January.

Critical to the eventual outcome of TPP negotiations will be congressional approval of trade promotion authority (TPA). TPA would allow for a congressional up-or-down vote on trade pacts without amendment. The U.S. trade representative Michael Froman has said that TPA will give U.S. negotiators the credibility and authority they need to push through the last remaining obstacles to concluding the deal. Yet approval of TPA is not a foregone conclusion given the intensely partisan atmosphere in Washington. Some legislators have objected to giving up their congressional prerogative, while others have argued that the TPP should address currency issues. Congressional leaders have pledged to submit the bill in January and are hoping for swift passage in the first quarter—before President Obama’s announced April visit to Asia, which has become the new de facto deadline for concluding the TPP.

However, the TPP is not the only multilateral agreement that Asian stakeholders are considering. Next year is also critical for ASEAN to make progress in creating a fully integrated economic zone, the ASEAN Economic Community, which it has committed to achieving by the end of 2015. In addition, this January will see the third round of negotiations on the Regional Comprehensive Economic Partnership Agreement (RCEP) between ASEAN members, Australia, China, India, South Korea, Japan, and New Zealand. Scheduled to conclude in 2015, the RCEP would create an integrated market with a combined GDP of approximately $20 trillion.

Last but not least, China’s chairmanship of APEC could open the door for Beijing to play a leadership role in integrating the region’s two “mega FTAs,” the TPP and RCEP. Indeed, China has declared that the first priority for APEC in 2014 is advancing regional economic integration, and Foreign Minister Wang Yi recently stated that China would consider the TPP and other FTA initiatives with an open attitude. China is also eager to highlight and strengthen its own economic reform agenda. Hosting APEC will shine an international spotlight on the country’s economic diplomacy and offer China an opportunity to lead the discussion of how to best realize APEC’s vision of an FTAAP.

Meredith Miller is Senior Vice President of Trade, Economic, and Energy Affairs & Outreach and Director of the Washington, D.C., office at NBR. She manages research programs on economic, energy, and trade issues in Asia and guides engagement with Congress as NBR leverages its network of experts to bring objective, detailed analysis of strategic developments in Asia to policymakers. She also leads NBR’s media and online outreach programs.