Nothing could surpass the importance of the APEC leaders’ meeting, which came at the end of a year paved with ambitious intentions.
Did the recent summit in Beijing live up to the best hopes?
Before the leaders’ meeting, I would have said on balance no – although this is not for want of trying.
Much more has been achieved than I expected, and much more than the inauspicious global setting might have allowed.
The global economy is still spluttering; Japan’s shock new “quantitative easing” has in particular rattled nerves over the state of Japan’s economy; China’s economy is growing at its slowest pace since 1990; Obama has just lost control of the US Senate and is staring lame duck status in the face; tensions over Ukraine made it unclear whose hand Putin would be willing to shake; and half a dozen APEC members are at loggerheads over inconsequential rocks in the south China Sea.
Fair to say that APEC’s leaders never previously met against such a conflicted backdrop.
China’s achievement was not just in the Herculean efforts across Hebei to clear Beijing’s polluted skies, or the sumptuous hospitality (Maotai bottles were in full flow in banquets perhaps for the first time since Xi’s anti-corruption campaign began early in 2013).
While security hovered discretely on nearby street corners during the APEC meeting, China’s leadership without question injected huge energy into making the 2014 APEC year a memorable one – conscious of this year’s anniversaries to be celebrated: APEC’s own 25th anniversary, and the 20th anniversary of the now-iconic “Bogor Goals” which set the 21-economy region on a course toward “free and open trade and investment” by 2020.
China’s achievements both for the year and for the Beijing meeting in particular were substantial.
On the diplomatic front, it was no small feat to choreograph Putin, Abe, Obama and Xi Jinping around each other for four full days.
While the frisson is always going to be palpable, significant progress was made. Some was theater and symbolism – like Xi and Abe meeting for the first time since Xi became President.
There was clearly no love there but a fragile foundation was laid to begin improving relations.
Some leader exchanges were more substantial – like China’s gas deal with Putin. Russia has a high level of paranoia about letting significant Chinese investment loose in Siberia, potentially undermining Moscow’s control of its “Far East”.
Some was very pleasantly surprising – like Sino-American agreement on a new Information Technology Agreement (ITA) that will bring down tariffs on lots of electronic goods and components.
This ITA deal has been blocked for more than two years over disagreements between China and the US, and the breakthrough was as welcome as it was surprising.
The ITA breakthrough is doubly helpful, because China’s refusal to sign on to a new ITA has for the past year been cited by the US as a key reason why China should not be invited to join critically important services liberalization negotiations – called the TiSA – now in progress in Geneva.
There are 23 economies, accounting for about 75 percent of global services trade, negotiating TiSA, and if the block on China were lifted, this would hugely augment the TiSA as a plurilateral deal with global force.
When China took over chairmanship of the APEC from Indonesia at the beginning of the year, it set an ambitious three-pronged agenda worthy of the landmark anniversaries being celebrated: regional economic integration; economic reform and innovative development; and building infrastructure and regional connectivity.
From the outset, the centerpiece of the first prong – regional economic integration – was in jeopardy.
China decided it wanted its main deliverable to be an APEC commitment to a Free Trade Area for the Asia Pacific – FTAAP – that would by 2025 embody the iconic “Bogor Goals” of free and open trade and investment in the region.
It was a brave thing to shoot for. The US and others negotiating the Trans-Pacific Partnership have been consistently adamant over the year that no regional initiative should be allowed to put the TPP in jeopardy.
They have blocked and tackled from day one on the FTAAP plan. Beijing’s cold dry air has literally crackled with static electricity as China and the US have arm-wrestled over the FTAAP.
So news that agreement has been forged in the Beijing meeting (lubricated, I think, by breakthrough on the ITA strongly advocated by the US) was significant: an impressive tribute to persistence and patience on both sides.
On the infrastructure front, China will claim significant progress.
At the APEC Finance Ministers’ meeting in Beijing two weeks ahead of the leaders meeting, they won regional agreement on a new Asian Infrastructure Investment Bank (AIIB) that will work alongside the World Bank and the Asian Development Bank to improve investment flows into critically needed regional infrastructure.
Beijing will declare victory too on the connectivity agenda. A fascinating and ambitious new “Connectivity Framework” has been forged which will cluster much APEC work into three key areas – physical connectivity; institutional connectivity; and people-to-people connectivity.
It will be left to the Philippines as APEC chair in 2015 to put flesh on the bones of this framework, but this looks like providing a genuinely interesting new approach to regional integration.
Beijing will also claim credit for significant progress by finance ministers on the post-2008 efforts to build deeper and more transparent capital markets in Asia based on insights learned in the 2008 crash.
For someone who spends almost three months a year in unglamorous APEC meetings in unglamorous cities across the region throughout the year, it is mildly irritating to be in Beijing and to recognize that for most people, the APEC party that has just come to an end, with its funny-dress photo-ops, will be regarded as the total sum of what APEC amounts to – an inconsequential talk-shop.
In truth, the real value of APEC sits elsewhere – in unsexy workshops where top officials learn from each other, and without the distraction of political theatre, help to train officials to implement the ambitious liberalization initiatives embodied in high-sounding “leaders’ declarations”.
But this doesn’t make headlines. It does not get the pulse pumping in the way that putting Putin and Obama in the same room together does.
This article appeared in the Hong Kong Economic Journal on Nov. 15.
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