Pan-Pacific free trade

"We recognize that further trade liberalization is essential to achieving a sustainable global recovery in the aftermath of the global recession of 2008-2009," the Asia-Pacific Economic Cooperation (APEC) stated in its final communiqué on Sunday, bringing to a close the summit in Honolulu.

The plans for the Trans-Pacific Partnership hit the headlines across the Asia-Pacific region on Monday but not in China, where it was barely mentioned as part of reporting on the APEC summit.

Much was said, however, about President Hu Jintao’s meeting with his US counterpart Barack Obama on the sidelines of the summit, as well as of bilateral relations with neighboring states. The English-language China Daily praised the friendship between China and Vietnam but omitted to say that the Vietnamese had announced they wanted to become part of the free-trade zone and thus nudge closer to the US.

More complicated relations

"The US is repositioning itself economically," says Ye Tan, an economic journalist in Shanghai. "It is concentrating more on the Asia-Pacific region and this will lead to more complicated relations between China and the US, especially as China wants to increase its exports to neighboring states."

Before the summit, Beijing had already criticized the US plans for economic integration in the region as "too ambitious." And now that Obama has turned up the heat by saying the US is fed up with China's trade and currency practices, the relationship between the two is likely to be strained.

"We're going to continue to be firm that China operate by the same rules as everyone else," he told reporters at the summit, calling on Beijing to create a level playing field for foreign businesses.

China responded that it would not abide to rules it had no part in writing. "If the rules are made collectively through agreement and China is a part of it, then China will abide them," said Pang Sen, a deputy director-general at China's foreign ministry.

Regional balance

The Chinese-US struggle for dominance in Asia is becoming increasingly aggressive. China has already been trying to expand its influence for years, binding states to it via investments, development aid and trade agreements. Last year, China closed a free-trade agreement with the Association of the Southeast Asian States (ASEAN).

However, certain states in the region are wary of China’s increasing economic and military influence, for example in the South China Sea, and welcome the US as a counterbalance.

Yan Te says that for now they have little to worry about: "The US is still more dominant in every respect and this cannot be denied. The question is how much can China challenge the US' power but now it does not have that much to pit against it."

The US is a Pacific power and we are here to stay, President Obama said in Honolulu, as a signal to Beijing. Whether China will opt for cooperation or confrontation with the Americans remains to be seen. If China eventually chooses to be part of the regional free-trade zone, there are still several stumbling blocks that need to be removed, not least the ongoing matter of the yuan controversy and dumping prices.

Author: Markus Rimmele / act
Editor: Shamil Shams