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Chapter 5Comparing Interregionalism: APEC, OBOR, and TPP
In this chapter we take stock of each interregional function behind the ‘new regionalism’ megaregional dialogues of APEC and the TPP. Like the previous chapter on OBOR, we address each function one-‐by-‐one to identify whether each function exists in APEC and the TPP, and if so, to what degree is it present. Once the details of a function are identified, each section below ends by discussing how the features of the each function compare between APEC, the TPP, and OBOR.
5.1 Realism: Balancing
Figure 5.1 The Balancing Functions of OBOR, APEC, and the TPP
Source: Created by the Author
Much of the literature on the balancing function of interregionalism uses APEC as empirical evidence. APEC presents a prototypical example of triadic institutional balancing because it is seen as a reaction to the European common market and the CUSFTA.129 The creation of the European Single Market in 1986 set off a ripple effect in the other triadic regions by first prompting the negotiations of NAFTA.130 Together, the strengthening of regionalism in Europe and North America then went on become a motivation for Asia-‐Pacific cooperation. For the United States, APEC was a safeguard against subregional integration in East Asia while countries in Asia saw APEC as a way to check the regional agreements of NAFTA and
129 Valeria Valle, “Interregionalism: A Case Study of the European Union and Mercosur,” Global Applied Research Network, Working Paper No: 51/08, (2008), 5.
130Zhimen Chen, “NATO, APEC, and ASEM: triadic interregionalism and global order,” Asia Europe Journal, no. 3, (2005): 361.
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the European singe market. By 1993, APEC stimulated balancing measures against itself as European powers became worried of their waning influence in Asia. This concern eventually led to the first ASEM summit in 1996.
As mentioned in the last chapter, the TPP is the key initiative of the Obama administration's 'Pivot to Asia.' As U.S. National Security Adviser, Thomas Donilon puts it, “the centerpiece of our economic rebalancing is the Trans-‐Pacific Partnership.”131 Surprisingly, the US was not an original member of the TPP. The idea of a Trans-‐Pacific Strategic Economic Partnership began on the sidelines of the 2002 APEC Summit. At the time, the partnership only included New Zealand, Chile, and Singapore; Brunei would join a few years later in 2005. The partnership was dubbed the Pacific Four (P-‐4). It wasn’t until 2008, that the United States – under President Bush – decided to join the TPP bandwagon. The 2008 Report on the Trade Agreements Program declared, “US participation in the TPP could position US businesses better to compete in the Asia-‐Pacific region, which is seeing the proliferation of preferential trade agreements among US competitors and the development of several competing regional economic integration initiatives that exclude the United States.”132 Under Obama, ‘the Asian Pivot’ is a way for the United States to reassert itself in Asia and to balance China's continued rise. The Asian-‐
Pacific region continues to grow in strategic importance for the United States and the pivot symbolizes a gravitational shift in the foreign, economic, and military policies of the US to the region. The United States wants to continue to influence the rule-‐making process in the region, as it has done in the past with APEC and the ADB.
From their perspective China's rise threatens its ability to do so.
It is no surprise that the balancing function is clearly evident in all three megaregional agreements. Of all six functions of interregionalism, Ruland believes that balancing is often the greatest motivator of interregional dialogues. For APEC, TPP, and OBOR, the triadic context of the world’s power centers has had a similar
131 Ian Ferguson, Mark McMinimy, Brock William, “The Trans Pacific Partnership (TPP) Negotiations and Issues for Congress,” Congressional Research Service, March 20, 2015, 10.
132 T Rajamoorthy, “The Origins and Evolution of the Trans-‐Pacific Partnership,” Global Research, no. 275, July 1, 2013.
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influence on their creation. Whenever the scale is tipped in the favor of one region, the other two regions seek to reestablish a power equilibrium. Between APEC and OBOR, both megaregional dialogues have involved a concerned Asian region that was worried about the warming relations among countries in Europe and North America. In the years leading up to APEC’s creation, the regional concern was the strengthening of trade liberalization with the European Common Market and NAFTA. Now for OBOR, the concern, led by China, is that most of Asia is being left out of the TPP and TTIP. Both APEC and OBOR were set to put Asia back on equal footing with North America and Europe. With regards to OBOR and the TPP, the relationship is intertwined. The balancing act between the two is an extension of the relationship between the United States and China. The TPP and OBOR are essentially balancing against one another. Both China and United States are competing for the ability to foster and set the standard on trade liberalization in Asia. As we mentioned in the last chapter, Obama has even publicly stated that China should not be the one to write the rules on trade. Although they may differ on trade policies, the TPP and OBOR are similar in that the driving force behind their balancing is being led by a hegemonic power. Overall, the balancing function is very much similar across these three megaregional dialogues, and in the case of OBOR and TPP, closely related.
5.2 Liberal Institutionalism: Institution-‐Building, Agenda-‐Setting, Rationalizing, and Promotion of Development
Institution-‐Building
Figure 5.2.1 Institution-‐Building Functions of OBOR, APEC, and TPP
Source: Created by the Author
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The organization of APEC hinges on a soft institutional structure based on a series of annual and regular policy meetings, a small secretariat, and lower-‐level working groups and committees. APEC’s institutionalization is often described as
‘soft’ because there are not binding rules imposed on its members to implement liberalization policies. In fact, members often approach APEC as an economic forum rather than a hardcore institution.
Since 1989, APEC has held annual Ministerial Meetings of foreign and economic/trade officials from each member. Starting in 1993, APEC began holding annual Economic Leaders’ Meetings, comprised of the heads of government from each member, immediately after the Ministerial Meetings. The Economic Leader’s Meeting is the main component of APEC’s organizational structure. It has also brought prestige to the organization, while also putting pressure on the members to actually accomplish something. The role of the Economic Leader’s meeting is to set and discuss current affairs and the proposals set out by the Ministerial and Sectoral Meetings.
Besides these annual leader’s gatherings, there are also regularly held Senior Official and Sectoral Ministerial Meetings. These meeting are held three to four times a year to polish the proposals that are generated from their designated committees and working groups.133 The Sectoral Ministerial Meetings oversee the progress from the ECOTECH Committee and the working groups that cover areas such as education, energy, environment, finance, SMEs, IT, tourism, trade, transportation, and woman’s affairs. Meanwhile, the Senior Officials Meetings handle proposals from the Committee on Trade and Investment, the Budget and Management Committee, and the Economic Committee. Under these major committees, the lower-‐level working groups and committees often decide the agendas of these meetings. Another important part of the organizational structure is the APEC Business Advisory Council. This council is made up of business leaders from each member economy and convenes with all the committees to discuss how the proposals can be better suited to the business environment in the region. The
133 Pacific Basin Economic Council, “Asia-‐Pacific Economic Cooperation,” Business Matters.
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last piece of the APEC structure, the Secretariat, is essentially used to maintain records, provide logistics, and help coordinate the committees.134 An executive director, who is chosen every year by the host economy, leads the secretariat.
Echoing the consensual nature of the APEC process, decision-‐making is done through committees. APEC meetings operate based on consultation and consensus to agree on non-‐binding commitments. When a consensus is reached, member economies must then submit their own individual action plans through which to implement the agreement. Unfortunately, the effectiveness of APEC’s institution has been called into question for some time now. APEC is often criticized for its lack of formalized decision-‐making body and an enforcement mechanism through which it can implement and monitor its policy commitments.135
With regards to the TPP, there is no formal institution to oversee the partnership; instead a Trans-‐Pacific Partnership Commission has been created to handle the implementation of the agreement. The commission is made up of ministers and officials from each member country and meets annually. As stated in chapter 27 of the agreement, the commission has been given broad powers not only to enforce the rules (“consider any matter relating to the implementation or operation of this Agreement”) but to also interpret them (issue interpretations of the provisions of the Agreement”) as well as change them (“consider any proposal to amend or modify this Agreement.”).136 Essentially it is the legislative, executive, and judicial branch all wrapped into one preeminent decision-‐making body. The commission also oversees all the working groups and committees created under the agreement. The Trans-‐Pacific Partnership can be likened to the European Commission, as it is also an unelected rule-‐making body with hardly any oversight.
Much like the meetings of the APEC, the TPP Commission makes its decisions by consensus.137 Specifically, the commission uses a ‘negative consensus’ rule, meaning
134 Vinod Aggarwal and Charles Morrison, “APEC as an International Institution,” Working Paper presented at the Twenty-‐fifth Meeting of PAFTAD, Osaka, 1999, 19.
135 Chen, “NATO, APEC and ASEM: triadic interregionalism and global order,” 7.
136 Trans-‐Pacific Partnership, “Chapter 27: Administrative and Institutional Provisions,” Medium, November 15, 2015.
137 Ibid.
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that there is no objection from any party at the meeting. While we can see how the commission will operate on paper, we will have to wait for the TPP to actually go into effect, to observe how the Trans-‐Pacific Partnership Commission acts in practice.
When we compare the function of institution building, we begin to see some distinct differences between OBOR, and the TPP and APEC. First, the most glaring difference is that these institutions take different forms. The AIIB is a multilateral development bank, while the institutional structures of APEC and the TPP is built on a hierarchy of committees and working groups. Second, the purposes of each institution are also obviously quite different. For the TPP and APEC, their institutions exist to set and implement new trade policies and standards. On the other hand, the AIIB’s main objective is to coordinate the support for the construction of new infrastructure and development projects along OBOR. Lastly, the modes through which they operate take diverging approaches. APEC and the TPP both make decisions based on consensus, while decisions in the AIIB require a majority vote.
Agenda-‐Setting
Figure 5.2.2 Agenda-‐Setting Functions of OBOR, APEC, and the TPP
Source: Created by the Author
Although APEC had started out as a vehicle for trade facilitation, in just a few years it expanded its focus to three key areas, trade facilitation, trade liberalization, and economic and technical cooperation, which would become known as the three pillars of APEC. Beginning with the Seattle Summit in 1992, the Clinton
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administration pushed APEC to evolve into an agenda setter for the WTO that was being formed.138 For the United States, APEC was a way to influence trade policy in GATT/WTO while also achieving liberalization objectives in Asia.139 A unique component behind APEC was the commitment to ‘open regionalism,’ meaning that trade policies agreed upon within the forum would not be discriminatory against outside economies.140 By committing to the concept of ‘open regionalism,’ the idea was that APEC would not merely motivate regional free trade, but multilateral trade liberalization as well. At the 1994 leader’s meeting, the Bogor declaration set trade liberalization as the key theme of the APEC vision as advanced economies agreed to liberalize trade by 2010, and developing members by 2020. A year later at the Osaka Leader’s Summit, an action agenda was set to provide a roadmap for reaching the Bogor deadlines. The Osaka Action Agenda outlined objectives for fifteen specific areas:
1. Progressively Lowering Tariffs 2. Reducing Non-‐Tariff Measures
3. Increasing market access for trade in services 4. Liberalizing Investment
5. Aligning domestic standards with international standards 6. Simplifying Customs Procedures
7. Ensuring adequate protection of intellectual property rights 8. Enhancing the competitive environment
9. Liberalizing government procurement policies 10. Enhancing transparency of regulations
11. Implementing WTO Obligations
12. Encouraging cooperative dispute mediation 13. Enhancing the mobility of business people 14. Analyzing impact of trade liberalization 15. Strengthening economic legal infrastructure
Two years later at the 1997 APEC summit in Vancouver, the United States pushed for further liberalization with the Early Voluntary Sectoral Liberalization (EVSL)
138 Linda Low, “Asia-‐Pacific Economic Cooperation (APEC): The First Decade/ Trade Liberalization and APEC,” Journal of Southeast Asian Economies 22, no. 2 (2005): 51.
139 Hanns Maull and Nuria Okfen, “Comparing Interregionalism: The Asia-‐Pacific Economic Cooperation (APEC) and the Asia-‐Europe Meeting,” in Heiner Hanggi ed., Interregionalism and International Relations, (London: Routledge, 2006), 222.
140 Tun-‐jen Cheng, “APEC and the Asian financial crisis: A lost opportunity for institution-‐building,”
Asian Journal of Political Science 6, no. 2, (1998): 22.
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program, which would further lower tariffs and non-‐tariff trade barriers in over a dozen industries by 2010.
Whether or not APEC has been successful in setting this agenda is up for debate. Many Asian members felt that America was merely promoting its own trade agenda. Asian nations had no interest in APEC becoming a micromanager of trade in the region. The more the United States tried to push for trade liberalization at APEC summits, the more resistance it received from developing Asian countries. Another major issue that APEC has had in being able to set an agenda, is the ASEAN norm of consensus that influences the negotiating process. With so many members and no incentive to compromise individual interests for the interests of the group, coming to a consensus is extremely difficult. Multilateral institutions that apply ASEAN norms continue to produce unclear and broad official declarations. So far, APEC has never been able to reach its full potential in advancing trade liberalization under the much-‐celebrated Bogor agreement.
Like APEC, the TPP is also pushing an agenda of market liberalization, but with a twist. The TPP strives to create a “21st Century trade agenda” that combats the unique challenges that globalization has introduced to modern times.141 The Doha Round agenda is gradually falling to the wayside and has become increasingly irrelevant in the current international trade system. All of the TPP partner countries heavily rely on world trade and value the trade liberalization that the comprehensive FTA would offer.142 The scope of the TPP’s liberalization is unprecedented in that the barriers and the goods and services it covers have never been addressed in the WTO and past FTAs. The TPP will attempt to try to set the regional rules on state-‐owned enterprises, the free flow of data across borders, labor and environmental protection, regulatory convergence, regional supply chains, and transparency.143 As Vice President Joe Biden put it, the “goal is for high standards for the Trans-‐Pacific Partnership to enter the bloodstream of the global
141 Lydia Li, “Trans-‐Pacific Partnership Agreement: An Analysis of Opportunities and Challenges,”
Keck Center for International & Strategic Studies, Fellowship Papers, (2012): 8.
142 Fergusson, McMinimy, Williams, “Trans-‐Pacific Partnership (TPP) Negotiations and Issues for Congress,” 5.
143 Ibid., 4.
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system and improve the rules and norms.”144 Many also see the TPP as way to build upon the provisions that the US negotiated in its previous FTAs throughout the 2000s and take a step toward a Free Trade Area of the Asia Pacific.
In comparing the agenda-‐setting function of interregionalism, we again observe another split between the three agreements, with APEC and the TPP on one side and OBOR on the other. Here we find that the TPP and APEC’s agendas are centered on the ‘software’ side of economic integration. By ‘software,’ we mean the rules that govern international trade and investment integration, which include tariffs and trade and investment regulations.145 Meanwhile, OBOR’s agenda deals more with advancing the ‘hardware’ component, which includes physical supply chain improvements and a wide spectrum of infrastructure projects. Another major difference between the two sides is that the agendas of APEC and the TPP encourage US-‐style rules and standards on things like tariffs, intellectual property, and labor protections. For OBOR, its standards are not as strict as Western-‐style standards.
For instance, AIIB loans do not have the binding requirements for environmental protection and poverty reduction that are common with the Western-‐style World Bank and ADB.
Rationalizing
Figure 5.2.3 Rationalizing Functions of OBOR, APEC, and the TPP
Source: Created by the Author
One of the intentions behind APEC was to serve as a rationalizing vehicle for the WTO. In this sense, APEC would serve as a WTO plus and expedite negotiate liberalization policies under the patronage of the WTO. The foundation of APEC has
144 Fergusson, McMinimy, Williams, “Trans-‐Pacific Partnership (TPP) Negotiations and Issues for Congress,” 1.
145 David Dollar, “China’s rise as a regional and global power: The AIIB and the ‘one belt, one road,”
The Brookings Institution, July 15, 2015.
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been a group of Asian-‐Pacific states seeking to strengthen their bargaining power in the Uruguay Round of GATT negotiations. The concept behind this foundation, open regionalism, was presented as a way to implement trade liberalization more rapidly than the WTO and ensure more effective implementation of WTO Agreements.146 For developing countries, APEC was seen as a way to bring their international trade concerns to the world stage.
APEC was stoutly supportive of all GATT/WTO efforts, particularly the Uruguay Round. In the early years of APEC, the Uruguay Round was in trouble due to numerous obstacles. At APEC’s Annual Ministerial and Summit meetings, officials would discuss how to push through the logjam in negotiations. For example, at Ministerial Meeting in 1992, officials released a statement on the Uruguay Round that reaffirmed their support for an early conclusion of the round and “urged all participants in the Uruguay Round to return to Geneva ready to complete these far-‐
reaching negotiations.”147 The First Leader’s Summit in 1993 is viewed as the most pivotal action taken by APEC to reignite Uruguay Round negotiations.148 With the
reaching negotiations.”147 The First Leader’s Summit in 1993 is viewed as the most pivotal action taken by APEC to reignite Uruguay Round negotiations.148 With the