Getting Stuff Done in Hawaii

November 18, 2011


When all of the Waikiki sand settles around last week’s APEC razzamatazz in Hawaii, Hu Jintao flies back to Beijing, and Obama and his entourage move on to the East Asia Summit in Bali, there will be many who query just how much was achieved – apart from a welcome lift to the Hawaii retail economy.

Lots of journalists – and a lot of business leaders too – tend to be dismissive. They see APEC as just another “hot air-fest” – an opportunity for high profile posturing to election-focused domestic audiences, and grand-sounding declarations that melt to nothing once they are carefully scrutinized. I suppose the TPP – or the Trans-Pacific Partnership – would be counted as one of these. Most would glimpse at the cover of this “next-generation trade agreement” that involves nine economies and excludes both Hong Kong and China, and yawn.

I would not blame them. But I think they are wrong. After a year of heavy engagement in the APEC Business Advisory Council (ABAC) and a week camped in Honolulu meeting rooms looking forlornly out on surfers and Japanese honeymooners making more appropriate use of Waikiki beach, I believe some very important things are happening both in APEC, and in particular around the TPP.

When he United States assumed chairmanship of APEC in November last year, there were many in Asia who forecast a year of counterproductive neglect. Obama had shown little interest in trade issues, and had shown no passion for Asia. But those skeptical forecasts have proven profoundly wrong. Under the mantra of “Getting stuff done”, US trade officials have worked assiduously to make headway on a host of practical fronts. Those who think APEC amounts to a once-a-year leaders’ meeting and a photo op wearing funny shirts will not have noticed these, because this progress occurs during hundreds of meetings that cluster around three major APEC Senior Officials’ Meetings (SOMs). For example, the last SOM, in San Francisco in September, involved a total of more than 50 meetings focused on issues ranging from transport and energy efficiency, to tackling corruption in the construction industry; from tackling food price volatility, to amending and updating a 17-year-old document on facilitating foreign investment; from extending the APEC Business Travel Card scheme to removing barriers to trade in services.

Such nitty-gritty issues may not have the sex appeal of Obama criticizing China and Hu Jintao, but for businesses working in the APEC region, its these things that make the difference.

 

 

For the die-hard cynic, the response would be that these deals and agreements count for nothing, because APEC decisions are not binding on any member economy. But what they see as a weakness, I have come to see as a distinctive strength. Instead of lawyers and lots of stone-walling, we have relaxed and constructive discussions, with best practices thrown on the table, and robust discussion over whether or how these might be appropriate for other member economies.

A “pathfinder” process encourages like-minded economies that want to move ahead on an issue to deal with the practical challenges to liberalization while allowing other economies to sign up at a later date, when they feel they are ready. I am not surprised that the gridlocked Doha process is exploring this “alliances of the willing” approach to salvage something from 10 years of frustration with the multilateral trade liberalizing process.

When ABAC took its suggested amendments to foreign investment rules into the APEC Investment Experts Group, it was first met by a wall of lawyerly resistance. But to the credit of US officials, the lawyers were called off: our “Non-binding Investment Principles” were by definition non-binding, and therefore could build on aspirations, not painstaking legal texts. As a result, three practical and constructive meetings later, new Principles have been agreed. Those who want to sign up can sign up. Those that don’t want to or can’t, need not sign up. Either way, we have agreed a set of best-practice rules for liberalizing economies to foreign investment which describe what we all agree we should aspire towards. Such approaches build trust and a habit of information-sharing. I like it, and it has certainly helped to “Get Stuff Done” over the past year.

The Trans-Pacific Partnership (TPP) is a good example of this. What started as an inconsequential initiative by four small and liberal economies has grown into a significant and substantial project. At a time when many businesses around the world are biting their nails over recession-induced protection, it has kept our region’s governments firmly focused on liberalization – and liberalization in areas that go far beyond the Doha Round agenda. It tackles Government procurement rules (including the infamous “Buy America Act” that protects so many US companies from international competition on billions of dollars of government purchases), and measures to reduce the mess of different regulations that make it so hard for foreign companies to make their products eligible for sale in new markets. It is developing rules on how to oversee trade and investment by state-owned enterprises, and how to strengthen Intellectual Property protection.
 

Leaders of TPP member states and prospective member states at a TPP summit in 2010.


Many in the media have claimed that China is boycotting the TPP initiative, but this is wrong-headed. It is true they have a reluctance to join a negotiation in which they and the US would be the only “elephants” at the table: they are reluctant to see the TPP turn into a bilateral slugging match. But their concern will be diluted if two other “elephants” – Japan and Korea - now join the TPP process. And anyway, they have regarded the parallel and complimentary ASEAN+6 free-trade area initiative as their first priority. As Hu Jintao noted significantly in Hawaii last week: “China supports the goal of regional integration of the Asia-Pacific economy, using the East Asia free trade zone, full economic partnerships in Asia and the Trans-pacific Partnership as foundations.”

As of last week, chairmanship of APEC has now moved to Russia – timely in view of their imminent accession to the WTO after 18 years of often-faltering negotiation. But we start the Russian year with the same trepidation that marked the beginning of the US chairmanship year. Russia has said it wants to use its APEC chairmanship to build out the east Russian economy, and to strengthen Siberia’s links with China, Japan and Korea in particular. For a government that has traditionally focused firmly westwards towards Europe and the US, it is moot whether this commitment to strengthening Asian links through Siberia will be any more than lip-service. Only time will tell. At present the frigid city of Vladivostock that will host the APEC Leaders’ Meeting in September next year appears woefully ill-prepared. Let’s hope our Russian friends have taken to heart Washington’s commitment to “Getting Stuff Done”.


* The translated Chinese version was published in Ming Pao on Nov 17, 2011.
 

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