Major Powers Seek Sway at APEC Lured by Growth Potential

Asia-Pacific leaders pledged to work together to revive growth while keeping to a year-end deadline on a key trade deal, as China touted its increased influence in the region in the absence of U.S. President Barack Obama.

As the Asia-Pacific Economic Cooperation forum concluded in Bali, leaders said in a statement yesterday they would drive a global recovery and implement “prudent and responsible” policies. Many of them will now attend the Association of Southeast Asian Nations summit in Brunei, where China’s territorial disputes in the region are set to dominate talks.

The leaders sought momentum for trade deals such as the 12-nation Trans-Pacific Partnership as an uneven global recovery and volatility in financial markets constrain growth. The meeting was overshadowed by the absence of Obama, who stayed at home to deal with the partial government shutdown, raising questions about the U.S.’s commitment to its so-called “pivot” at a time China has become more assertive in Asia.

“Global growth is too weak, risks remain tilted to the downside, global trade is weakening and the economic outlook suggests growth is likely to be slower and less balanced than desired,” leaders said in the statement.

Negotiators still aim to complete the talks this year, the heads of TPP countries said in a statement yesterday that didn’t mention specific progress made in Bali. “We will further intensify consultations with stakeholders to craft a final agreement that appropriately addresses the interests of our citizens,” they said.

China Slowdown

A slowdown in China and India is reverberating across the region with the World Bank cutting its expansion forecasts for this year and next, putting pressure on policy makers to bolster their economies. The Group of 20 countries repeated their concern last month that stimulus pullback in developed nations may prove damaging to global markets.

APEC leaders said they would be vigilant against protectionism. “While trade growth and investment flows within the APEC region have outperformed the rest of the world, we should nevertheless guard against the pressure to raise new trade and investment barriers,” they said in their statement.

A TPP accord, which involves countries such as the U.S., Australia, Japan, Malaysia and Vietnam, would link an area with about $28 trillion in annual economic output. Countries are seeking concessions for industries such as agriculture, with Prime Minister Najib Razak saying some areas of the talks are cause for “great concern” for Malaysia.

Obama Effect

Rintaro Tamaki, deputy secretary general at the Organization for Economic Cooperation and Development, said “I hope this does not lose momentum,” referring to Obama’s decision to skip the APEC meeting and the progress of TPP talks. Tamaki, a former top currency official at Japan’s Ministry of Finance, spoke in an interview in Brunei yesterday ahead of the Asean meeting.

All the TPP countries are members of APEC, an organization set up in 1989 to advance free trade and investment in an area that accounts for half of the world’s gross domestic product and 45 percent of global commerce.

U.S. and China both touted their partnership credentials to Asian leaders in Bali. U.S. Secretary of State John Kerry -- standing in for Obama -- and Chinese President Xi Jinping each pledged to work with countries to boost trade and investment.

“I want to emphasize that there is nothing that will shake the commitment of the United States to the rebalance to Asia that President Obama is leading,” Kerry said at the APEC CEO summit on Oct. 7. Xi said that “the Asia-Pacific is a big family and China is a member of this family.”

‘Stronger Footprint’

Major powers are asserting themselves in Asia as they hunt for new sources of growth, while assuring leaders they are not trying to dominate smaller countries or contain each other. U.S. officials have sought this year to assure their Asian counterparts that plans for large-scale Pentagon spending cuts over the next decade won’t detract from an economic and military pivot to the region.

China in turn has softened its tone after disputes over waters in the South China Sea rich in oil, gas and fish raised tensions with countries such as Vietnam and the Philippines, agreeing to talks on a code of conduct for the area.

Sea Code

China’s handling of territorial spats has set back its ties with Southeast Asia, said Li Mingjiang, an associate professor at the Singapore-based S. Rajaratnam School of International Studies. “Beijing realizes that and wants to reverse the trend to establish a stronger footprint to compete with the U.S.,” Li said. “In the past half year or so, China has adopted a sensitive strategy to Southeast Asia, more moderate, more engaging, more accommodating.”

Kerry and Xi had two short conversations at APEC, said a U.S. State Department official who asked not to be named according to government policy. The two talked about their shared interest in boosting infrastructure and Kerry thanked Xi for his efforts on the North Korea nuclear issue, the official said.

Territorial issues are likely to come to the fore in Brunei. Moving quickly to draft a code of conduct for the South China Sea is a priority, said Philippine President Benigno Aquino. “I am not saying that we are close to signing the code of conduct, but all parties have been convinced to discuss it,” Aquino told reporters in Bali on Oct. 7, according to a transcript released by his office.

The contest for influence in Asia is unavoidable as the U.S. has treaty allies such as Japan, South Korea and the Philippines, while China sees its rise as a way to regain the leadership role it had for hundreds of years, said Manu Bhaskaran, a Singapore-based partner at strategic advisory firm Centennial Group.

Handshake Spat

“For the rest of Asia, it is far better to have several big powers jostling for influence rather than one,” Bhaskaran said. “If the latter, then that power would ride roughshod over the rest. Far better for there to be a contest for influence, that boosts the bargaining position of the rest of Asia.”

Japanese Prime Minister Shinzo Abe shook hands with Xi at APEC on Oct. 7, the Yomiuri newspaper reported. Japan and China both claim islands in the East China Sea, known as Senkaku in Japan and Diaoyu in China, and there has been no summit between leaders of the two countries in more than a year.

China Foreign Ministry spokeswoman Hua Chunying said Japan had played up the reported handshake. “I think the Japanese side should stop putting the cart before the horse,” Hua said at a briefing yesterday in Beijing, adding the Chinese delegation hasn’t made any report of the issue.

Abe used his speech to the Bali summit to stress Japan’s increased involvement as it builds strategic ties with countries such as the Philippines to act as a counterweight to China’s assertiveness.

“Japan is determined to become deeply interlaced with the economies of APEC while sparing no effort to move the surge of our activities further forward still,” Abe said.

(Corrects to show OECDs Tamaki “hopes” the TPP will not be delayed in ninth paragraph.)
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