By Bob Davis
BEIJING--China wants to use a November international summit to
start to put in place a new free-trade zone among Pacific rim
countries, despite the objections of the U.S., Japan and others
that such a move could delay other Asia-Pacific trade deals already
being negotiated.
The fight over what's known as the Free Trade Area of the Asia
Pacific dominated a weekend meeting in Qingdao, China, of trade
ministers from the 21-member Asia Pacific Economic Cooperation
forum, who agreed Sunday to move ahead slowly on the idea after a
long night of negotiations.
"We're as keen as China to give it a push," Australia Trade
Minister Andrew Robb said of the Beijing proposed plan. "APEC is a
powerful forum; if you get all the nations there to agree, others
will agree too."
Beijing came into the weekend session looking for an endorsement
of the new trade zone, known as the FTAAP, by 2025 and for backing
for a "feasibility study"--trade lingo for the analytic work done
before the launch of a new round of trade talks, said trade
ministers. They didn't get either, but they came away with enough
to claim something of a victory.
APEC, which works by consensus, agreed to put in place a working
group, chaired by the U.S. and China to "kick off and advance the
process in a comprehensive and systematic manner toward the
eventual realization of an FTAAP," according to the group's
communiqué. Mr. Robb said the group would do much the same work as
a feasibility study.
China's Commerce Minister Gao Hucheng said in a statement that
the meeting would "lay a solid foundation for promoting the
ultimate realization of the Asia-Pacific free trade zone." U.S.
officials, interviewed over the weekend, said regional trade deals
now being negotiated needed to take priority over a new round of
negotiations. Ultimately FTAAP could be built on the foundation of
such trade deals, U.S. officials said.
FTAAP is important to China for several reasons, said trade
officials. APEC leaders will gather in Beijing in November for the
first major international summit in China since Xi Jinping assumed
power, and Chinese officials want to demonstrate they can show
global leadership. The proposed trade deal is also part of
competition with the U.S. over which nation will dominate trade
policy over the coming decades in Asia. The U.S. is leading
separate regional trade talks that so far don't include China, and
China is involved in talks that exclude the U.S.
"China has this year said they'd like the FTAAP to be one of the
big headlines," said Alan Bollard, executive director of APEC. "The
idea has been talked about since 2010. China wants to make it more
concrete and more specific." APEC officials have talked generally
about free trade in the region since the group started holding
leaders' meetings in 1993--with U.S. officials often doing the
pushing. Such ideas have gotten nowhere.
Now the U.S. is focusing on the Trans-Pacific Partnership, a
major trade deal between 12 Pacific rim countries that would cut
tariffs, open up agricultural trade, strengthen intellectual
property protection and set standards for state-owned industries.
China isn't a member of TPP talks, which have foundered, in part,
over the breadth of the undertaking. The APEC ministers who are
also involved in TPP jetted from Qingdao to Singapore on Sunday to
continue TPP discussions there. The U.S. hopes that the TPP would
set the standards for Asia trade--and ultimately for China as
well.
China, on the other hand, is part of negotiations between 16
Asian nations to create what's called the Regional Comprehensive
Economic Partnership, which even negotiators acknowledge is less
ambitious and less further along than TPP. Layering an Asia Pacific
trade deal on top of RCEP could give China different ways to
influence trade policy in the Pacific and blunt the U.S. objective
of having TPP set the trade policy standards.
"There's a contest between U.S. and China to see who leads" on
regional trade liberalization, said Tim Groser, trade minister for
New Zealand, which is a part of both the RCEP and TPP deals. "We'll
wait and see who has the wherewithal to put deals together and
marshal forces to get them enacted. We're not putting all our eggs
in the TPP basket."
At the APEC session, the U.S. managed to slow the Chinese
effort. Negotiators from both nations worked late Saturday night
and into Sunday to craft language that both could live with. The
two sides ditched the goal of 2025 for now and scrapped talk of a
"feasibility study." U.S. officials felt that creating the working
group would help make the new free trade talks secondary to the
completion of TPP.
"As the [APEC] leaders recognized back in 2010, the pathways
toward an FTAAP lie outside APEC, in TPP, RCEP and other
negotiating forums," said U.S. Trade Representative Michael Froman
in a statement.
Mr. Froman had another bone to pick with China during the
weekend session--trying to get Beijing to sign on to an updated
version of the Information Technology agreement which eliminates
tariffs on high-tech goods. China hasn't been willing to agree that
certain semiconductors, medical equipment and other high-tech goods
should be tariff-free, in part, because it is looking to build up
domestic industries in those areas--to the frustration of the U.S.
and other of China's trading partners. Malaysia Trade Minister
Mustapa Mohamed said "negotiations have not progressed much" and
urged "key players" to "move away from their entrenched
positions."
Mr. Froman said in a statement that "the United States came to
China with new ideas for how to press the negotiations forward,"
though he didn't name them. Mr. Robb, the Australian trade
minister, said that the two sides would look again at two dozen
items that China has balked at making tariff free and convene later
in the summer to see if they had made progress.
Write to Bob Davis at Bob.Davis@wsj.com