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U.S. moves to lay groundwork for Asia-Pacific FTA

September 24, 2008
World Trade\Interactive

The U.S. announced Sept. 22 that it will launch in early 2009 talks on joining an existing free trade agreement among New Zealand, Chile, Singapore and Brunei. U.S. officials made clear that this initiative is intended to be the foundation for a broader Asia-Pacific free trade area that includes the U.S., as opposed to the many regional agreements now being negotiated that do not.

The Office of the U.S. Trade Representative indicated that the United States’ primary motivation in joining the so-called P-4 agreement is to strengthen its economic ties to the Asia-Pacific region. This region is a key driver of global economic growth, a USTR press release stated, representing nearly 60 percent of global gross domestic product and roughly 50 percent of international trade. The average GDP growth rate in the rapidly growing and dynamic countries in this region was 5.3 percent in 2007, compared with the world average of 3.8 percent, and the International Monetary Fund estimates that it will remain higher through at least 2013. Since 1990, Asia-Pacific goods trade has increased by 300 percent and global investment in the region has increased by over 400 percent.

In recent years, however, the U.S. has been excluded from most of the trade liberalization efforts that have proliferated throughout Asia, which the USTR states “will increasingly hurt U.S. manufacturers, agricultural producers, services providers and workers.” The U.S. has been looking for ways to counter this situation, working primarily through the Asia-Pacific Economic Cooperation forum of which it is a member. While APEC has agreed to consider the U.S. idea of a Free Trade Area of the Asia-Pacific, it has been understood that this is more of a long-term effort, given among other things the wide differences in economic development levels among APEC member countries.

Joining the P-4 agreement is seen as a way to accelerate this process. Negotiations are unlikely to be particularly difficult, as the U.S. already has FTAs in effect with Chile and Singapore and Brunei is a relatively small economy. Agriculture and dairy will be sensitive issues for the U.S. with respect to New Zealand, but that country has been pushing for an FTA with the U.S. for years and reaction to this week’s announcement there was overwhelmingly positive. “Unlike international trade negotiations that are lagging because trading partners cannot bridge their differences,” an Inside US Trade article cited New Zealand trade minister Phil Goff as saying, “the P4 is a negotiation involving countries that want to make good progress, want to move forward.”

In addition, officials say, the agreement could grow even bigger in a relatively short time, as several other countries have already expressed an interest in joining. These include Australia and Peru, with whom the U.S. has negotiated FTAs, and Vietnam, which is a member of the Association of Southeast Asian Nations. “I think that other countries studying the APEC region will look at this agreement and believe that this is something they cannot afford to remain outside of,” Goff said. New additions could come even before the first round of talks is held in early 2009 in Singapore.

Although the P-4 initiative is being launched as President Bush prepares to leave office, it is likely to be continued in the next administration, regardless of which party wins control of the White House and/or Congress in this November’s elections. Both Republicans and Democrats have pointed to the importance of U.S. economic engagement in Asia, particularly considering that the Doha Round negotiations have all but collapsed and that China and India are pushing to increase their influence in the region. USTR Susan Schwab drew a parallel to the U.S. FTAs with Chile and Singapore, which were launched just before President Clinton left office at a time when he did not have trade negotiating authority and then concluded and implemented during the next administration.