U.S.-China Trade Rivalry in Asia Is Overhyped

03/04/2015 01:21 pm ET | Updated May 04, 2015
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The Trans-Pacific Partnership (TPP), the backbone of U.S. President Barack Obama's Asia policy, is down to its final haggling. U.S. negotiators hope they could close out the TPP deal by the summer, despite opposition mounting from both sides of the nation's partisan aisle. When opposition arises from within, exaggerating threats from the outside has practically become a usual practice adopted by some U.S. politicians to divert attention and win domestic support.

There have been many voices in the U.S. that have described the TPP and the Free Trade Area of the Asia-Pacific (FTAAP) as two complete competing trade initiatives, and labeled the "competition" as a China-U.S. tug-of-war in the Asia-Pacific region. They fear that China is trying to gain dominance in Asia-Pacific trade agendas and displace the U.S.-led TPP by pushing for the FTAAP. Although the appearance of rivalry does exist, much of the hype is overblown.

FTAAP, not "Made in China"

Quite a number of media outlets see the FTAAP as a China-led product, but in fact it isn't. It has long been a common vision of APEC economies.

The initiative was first formally proposed by the APEC at its Hanoi Summit as early as in 2006 and endorsed by all the 21 APEC leaders, including then-U.S. President George W. Bush. Noted American economist C. Fred Bergsten, then-director of the Peterson Institute for International Economics, even made a strong statement in favor of the FTAAP, arguing that it would represent the largest single liberalization in history. Interestingly, the FTAAP concept was in fact first developed by the Americans.

Moreover, according to an interview with APEC Executive Director Alan Bollard on People's Daily Online's Elite Talk, a high-profile interview program that features some of the biggest names in the global business community discussing the latest trends in China's business and finance, the FTAAP has long been a shared aspiration of most APEC economies; and as the host of the 2014 APEC summit, China helped to cement the deal. The APEC was grateful for China's engagement in turning the all-encompassing, all-win trade deal from words into action.

"We do see FTAAP as being the big goal out into the future, and China is doing a lot of work looking at the FTAAP," said the APEC boss in the People's Daily Online's Elite Talk.

"China this year would like to bring FTAAP to our attention, and probably agree to work on a study that will help us understand what it means; when we might achieve it; how we might achieve it; and what paths would be followed to get there; could this be the TPP, the RCEP, or a different stepping stone."

According to the interview, the FTAAP is not a Chinese initiative, but an APEC initiative.

FTAAP and TPP could be compatible

The FTAAP is seen by many as a rival to the U.S.-led TPP, which is currently under negotiation with Japan and 10 other Asia-Pacific countries, with the exclusion of the world's second-largest economy. The truth is, the FTAAP is neither necessarily a contradiction nor a challenge to the TPP; the two trade arrangements could be compatible and complement each other.

The FTAAP does not cast aside TPP or any of the on-going regional undertakings; on the contrary, it can be the aggregation of existing free trade arrangements, including the TPP. The FTAAP, which includes both China and the U.S., could be built on the basis of the TPP and other regional talks. Hence, an acceleration and smooth conclusion of the TPP could contribute to the formation of the FTAAP, and this in turn, could also amplify the TPP results to an even wider area, with necessary adaptation.

As Alan Bollard said in the Elite Talk, the TPP could be a stepping stone to the all-inclusive FTAAP. He also said in an interview with CNBC at around the same time that the FTAAP is not necessarily competing with the TPP.

As the case stands, the FTAAP and TPP could run in parallel or even be mutually beneficial to each other.

As the TPP negotiations are nearing completion, opposition from both tea party Republicans and rank-and-file Democrats has emerged. Tea party lawmakers, who have a long history of mistrust of Mr. Obama, could have been expected to balk at the president's request for more power to fast-track the TPP deal through Congress; while resistance from Democrats has proved broad and deep. Hyping China's trade dominance in Asia is merely a political gimmick to win domestic support for the TPP. The FTAAP is a joint effort by APEC economies and have the potential to incorporate the TPP and other existing free trade arrangements, not necessarily conflicting with the TPP.

While the TPP is not attractive to several APEC economies because of its U.S. dominance, the proposed FTAAP, which embraces all of the 21 APEC economies, is meant to be an all-inclusive, all-win trade initiative that "represents the largest single liberalization in history," as the renowned American economist C. Fred Bergsten himself put it.

The United States should walk the talk and work with China to take the leadership role to truly facilitate global economic integration instead of waging a trade war with China and only trying to have a narrow interest that barely a certain number of countries could benefit from. As long as the two parties seek collaboration over conflict, there is reason to believe that the China-U.S. trade engagement in the Asia-Pacific could be a win-win game.