“The FTAAP Dilemma”, a Commentary by Malcolm Cook

2016/75, 24 November 2016

Donald Trump’s victory has made APEC’s Free Trade Area of the Asia-Pacific (FTAAP) aspiration more important and more difficult. Trump’s promise to withdraw the United States from the Trans-Pacific Partnership (TPP) agreement immediately raises interest in alternatives like the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) process and FTAAP. China’s decision to make the FTAAP aspiration the focus of its APEC year in 2014 bolsters FTAAP’s credibility. The Lima Declaration on FTAAP released at the end of this year’s summit predicts that “efforts in support of the realization of the FTAAP will serve as a driving force to further advance regional economic integration.”

Yet, APEC, a lightly institutionalised consensus body, faces three new challenges in its role supporting FTAAP and its newfound salience:

    • Since embracing the FTAAP aspiration in 2006, APEC leaders have identified the TPP as one of two pathways to the TPP. The other was the then nascent ASEAN-led efforts that have since coalesced into the RCEP process. (Source: APEC) The TPP is the most advanced pathway and the only one that includes states from both sides of the Pacific. The alternate RCEP pathway is still only a work with much progress still required. APEC’s FTAAP aspiration may have to detach itself from these pathways and stand alone to take advantage of this new interest.
    • The United States is APEC largest, most advanced and most powerful economy. An APEC-linked trade agreement that excludes the United States would be akin to a European Union agreement excluding Germany or an ASEAN one excluding Indonesia. The United States under a Trump administration is unlikely to leave APEC but could well complicate any APEC “efforts in support of the realization of the FTAAP.”  FTAAP may have to wean itself from APEC incubation.
    • The TPP’s travails have unleashed proposals for totally new agreements. The host of the APEC Summit, Peru President Pedro Pablo Kuczynski, has talked about a TPP alternative that excludes the United States and includes both China and Russia (Source: Reuters.Com). Indonesia’s Vice President, at the APEC Summit, floated the idea of an ASEAN-Pacific Alliance agreement without the United States or China (Source: JakartaPost.Com).
Trump’s victory and likely trade policy has raised interest in APEC’s FTAAP aspiration while making it more difficult to turn this aspiration into reality. Future Asia-Pacific economic integration could well be led by China with a lesser role for APEC.

Dr Malcolm Cook is Senior Fellow at the Regional Strategic and Political Studies Programme at ISEAS-Yusof Ishak Institute.

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.