US gunboat diplomacy in Asia is missing firepower on trade

Hello from Brussels, where most of the attention over the past couple of days has been on Belarus’s weaponisation of migrants at the Polish border and the suspicion that Russian president Vladimir Putin is about to invade Ukraine properly, not just by proxy. We’re sure the famed soft power wielded by the self-styled “Geopolitical Commission” in the furtherance of open strategic autonomy will be along in a second to sort everything out.

Meanwhile, there has apparently been a slight improvement in the combative relations between the UK and the EU over the post-Brexit Northern Ireland protocol. As usual, we largely leave Brexit issues to Financial Times colleagues and their excellent Britain After Brexit newsletter. But we’d note that in December last year Trade Secrets was forecasting (correctly in our view, or the UK wouldn’t be moaning now) that London’s annual capitulation to Brussels was on the way, and our default belief is that something similar will happen again. Today’s main piece looks at influence in the Asia-Pacific, with the US rattling a lot of military sabres but not doing much on the trade front. Charted waters looks at how the vaccine rollout is faring.

The US has cut itself adrift in the Pacific

Last week was the Asia-Pacific Economic Cooperation (Apec) summit, where established tradition holds that a lot gets talked about but less gets done. To be fair, especially to the energetic New Zealand hosts, this time there have been some useful initiatives, including expedited customs procedures and limits on export and import restrictions for pandemic-related medical goods.

However, a much bigger issue is that, although the US turns up to Apec, it is absenting itself from the big trade governance initiatives in the region. Gina Raimondo, US commerce secretary, confirmed yesterday that the Biden administration wasn’t about to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) for the foreseeable future. Instead, it would seek a vaguely defined “robust economic framework” for the Indo-Pacific.

We’re sceptical. Whatever this mythical beast is, it seems hard to imagine it’s going to be more influential than a reciprocal treaty such as CPTPP that covers a huge swath of the issues of modern trade. If Washington isn’t prepared to trade off access to its domestic market, which was the lure to get countries to make commitments in the original Trans-Pacific Partnership (which morphed into CPTPP when Donald Trump pulled the US out), it’s unlikely to get much back.

The reality is that, although Washington dispatches trade folk round Asia with alacrity, those Asia-Pacific countries (Australia, Canada, Japan, Mexico and New Zealand among them) that look to the US as an economic counterweight to China are losing hope.

If you’re tempted to believe the cliché that all trade is geopolitical now, the Asia-Pacific is a powerful counter-example. Washington is building up its rhetoric, its hardware and its alliances in the region to defend Taiwan from China. But there is almost no accompanying trade component. The US wanting to join the CPTPP now would also bolster Taiwan’s own application, put in shortly after China’s. But no.

It’s not an exaggeration to say there was dismay among the US’s instinctive allies in the CPTPP after Katherine Tai’s heavily trailed speech on China last month. The US trade representative focused on the Trump administration’s “phase 1” deal with Beijing, these days chiefly notable for creating a Washington cottage industry to track monthly Chinese purchases of American soyabeans, and said little about a wider strategy.

China’s CPTPP application is the proving ground for its ability to dominate trade governance in the Asia-Pacific, which it continues to pursue despite its inward turn towards a “dual circulation” economy. The process involves first setting up a working party which then starts negotiations proper. It was always going to be a long haul: reforming China’s state-owned enterprises and the country’s policies on data localisation are among the more obvious hurdles. But these things, including timing, are all subject to discretion and negotiation.

Beijing’s initial bid was to join on similar terms to Vietnam, one of the founding members, which has been given multiple derogations and long phase-in periods. The China-sceptic countries say that a trade behemoth cannot be given the same treatment as a low-income founding member. “[Beijing] misunderstands the context of conditions or allowances given to countries like Vietnam,” said a Japanese official. “Most CPTPP members expect higher standards for China.” Another excuse for a go-slow is that the grouping is busy dealing with the UK’s request to join: one byproduct of China’s bid is to make the UK’s accession harder because of the need to emphasise the rigour of the process.

But there are CPTPP countries sympathetic to China such as Singapore and Malaysia (though the latter is yet to ratify the pact), which will argue in favour of more generous terms. A trading power the size of China also has a lot of bribes and menaces it might deploy to bring others on board. Even Australia, one of the most China-sceptic countries, is loath to reject Beijing’s application outright.

Now, if the sceptics knew the US would apply before too long, they might be bolder in spinning out talks and insisting on a tough deal until the cavalry arrived — perhaps saying China wasn’t serious about complying and simply refusing to set up a working group at all. There is no rule against late-arriving applicants jumping the queue if they can show compliance. “There is a possibility that some of the members could simply not allow negotiations with China to start”, an official from one CPTPP country said. “But time is limited and the US needs to move fast.” In fact, it’s not moving at all.

Whether China can meet the conditions for CPTPP membership remains unclear. But at the very least it has inserted itself into another edifice in the trade architecture in Asia while the US looks on and bleats about its worker-centred trade policy and something hand-wavy about Indo-Pacific frameworks. The application alone will affect the dynamics of the grouping. Having already joined the Regional Comprehensive Economic Partnership, which started as an initiative by the Association of Southeast Asian Nations (Asean), Beijing has similarly applied to join the Digital Economic Partnership Agreement (Depa), a New Zealand-Chile-Singapore tech treaty. As with the CPTPP, there are doubts China can comply with its demands, but as with CPTPP its stated intent is enough to dominate the conversation.

We’ve always been a bit sceptical that trade and foreign policy are generally aligned, even in these geopolitical days, or that they routinely reinforce each other when they are. But even on its own terms, CPTPP is such a big symbol of integration in the region that leaving a US-shaped hole in it is a very big deal. The cavalry isn’t coming any time soon. The US’s allies in the CPTPP will have to deal with China’s threats and blandishments on their own.

Charted waters

No one would say that vaccine supply chains have worked perfectly. There have been many snags, chiefly — in our view — the fact that not enough of the pile has gone to vulnerable people in poorer countries.

However, as the chart below shows, billions of vaccines have been delivered. Which, regardless of the snags, is a remarkable achievement in so short a space of time. Claire Jones

Trade links

More on CPTPP. Natalie Black, UK trade commissioner for the Asia-Pacific, told Nikkei Asia ($) that talks on the UK’s application to join the partnership were “moving incredibly quickly”, 

The World Trade Organization later today releases its annual World Trade Report. Watch the launch here. The WTO’s goods trade barometer, meanwhile, shows growth slowing to rates seen pre-pandemic after the sharp bounceback from the Covid-19 crisis.

India has rejected the WTO’s text for its fisheries pact.

Megan Greene, of Harvard Kennedy School, argues in the FT that the deglobalisation narrative is overdone.

The Centre for European Reform warns that data exchange between the EU and UK is imperilled by legal action or the UK’s likely decision to diverge on data protection policy. Alan Beattie and Francesca Regalado