The members ranging from the U.S., Japan and China to Chile and Singapore have about 40 percent of the world’s population, over 50 percent of GDP and 44 percent of world trade. A group that includes the U.S., Japan and China automatically has 39 percent of the world’s GDP according to International Monetary Fund (IMF) data. With the Doha talks stalled and the European Union countries, 21 percent of the world’s GDP, facing a prolonged period of slow growth as they deal with banking and debt issues, the Asia-Pacific region is a logical center of economic, investment and trade growth. The 15 Asia countries in APEC have 2.1 billion people, 31 percent of the world’s population, with China accounting for 1.3 billion people. The IMF projects that “developing Asia” will have GDP growth in 2010 of 8.7 percent compared to 2.3 percent for the U.S., Japan 1.9 percent and the EU 1.0 percent.
The APEC countries accounted for 72.5 percent of U.S. agricultural exports in 2009 with 76.3 percent of consumer oriented products, 72.0 percent of bulk commodities and 65.6 percent of intermediate products. Excluding APEC members Canada and Mexico, the remaining countries accounted for 43.5 percent of U.S. agricultural exports with 57.3 percent of bulk commodities, 35.2 percent of intermediate products and 34.5 percent of consumer oriented products. By being involved in APEC trade talks, the U.S. also has the opportunity to remain competitive with other exporters in the region like Canada, Australia, New Zealand and Russia.
Talks on an economic cooperation framework agreement between China and Taiwan received considerable attention. The agreement may be signed this month and increase two-way trade now at $110 billion per year if tariff differences can be overcome. Taiwan is acting quickly because China, Japan and South Korea have begun a joint study on a Northeast Asia free trade zone.
Taiwanese officials also met with U.S. representatives to discuss a trade and investment framework agreement (TIFA). The U.S. insisted that beef imports, rice import quotas and pesticide residue standards need to be resolved before TIFA talks can move forward. The only free trade agreements (FTAs) Taiwan has now is with five Central American countries and it is seeking talking with Japan, the EU, New Zealand, Australia and the Association of Southeast Asian Nations (ASEAN). China opposes Taiwan having full FTAs with major countries, but Taiwan is hoping to at least establish investment guarantee arrangements.
Australia pushed ahead on an Australia-Japan Free Trade Agreement that has been in negotiations since 2007. An 11th around of negotiations was held in Australia in April with a 12th round scheduled for Tokyo in September. Two-way trade is $49 billion per year and Japanese investment in the Australian economy is $74 billion. The new Japanese government is as committed to trade with Australia as the previous one. Access to Japanese agricultural markets remains a key challenge, which is why Japan does not have an FTA with any major agricultural country.
The second round of talks on the Trans-Pacific Partnership (TPP) to be held next week in San Francisco also received attention. The U.S. will be meeting with Singapore, Chile, Australia and Peru that already have FTAs with the U.S. and with New Zealand, Brunei and Vietnam. An agreement is hoped for by May 2011 when the APEC trade ministers meet again. Other countries, like South Korea and Japan, have expressed some interest in joining the negotiations. Some officials hope that the TPP will evolve into a Free Trade Area of the Asia-Pacific (FTAAP) that APEC has championed for the past 20 years, but has not made substantive progress on.
South Korea is somewhat caught in trade policy crosscurrents. It negotiated an agreement with the U.S. during the Bush Administration, but has been unable to get final agreement from the Obama Administration and Congress. The growing economic and military abilities of China are rebalancing political power in Northeast Asia. China is now the top trade partner for Japan, Singapore, Australia and South Korea. South Korea is weighing the potential for the TPP, but does not see it as a substitute for the FTA with the U.S. Australia and the South Korea are making rapid progress in FTA negotiations, and South Korea has completed negotiations on an FTA with the EU. The stalled Doha talks have left it no choice but to move ahead in new relationships.
Left out of much of the talk about trade agreements at the APEC meeting was Indonesia, a nation of 243 million people opening up more to the rest of the world, including the U.S. In 2008 its President announced his Comprehensive Partnership with the U.S., and President Obama’s twice delayed visit to Indonesia is supposed to happen in a couple of weeks. Its economy of $970 billion in 2009 is the world’s 16th largest, with economic growth of 4.5 percent in 2009, one of only three G20 countries to have positive economic growth. Indonesia has a relatively low GDP per capita at $4,000, but a growing economy is creating opportunities to improve incomes. The IMF projects Indonesia’s economic growth at 6.0 percent in 2010, 6.2 percent in 2011 and 7.0 percent by 2015. U.S. agricultural exports to Indonesia in 2009 were $1.84 billion, with soybeans and products at $783 million, cotton $235 million and feeds and fodders at $232 million.
The Asia-Pacific region has the same problems as the rest of the world with low income workers and political and economic uncertainties, but its political leaders want economic growth and see international trade as a way to help achieve that growth. The U.S. has been heavily involved in the region for the last 70 years and many countries welcome that involvement in support of their economic successes of the past 30 years. For U.S. businesses, workers and consumers, it is the land of opportunity that needs additional attention from U.S. trade policy makers.