Abstract. The article examines the prospects for creating an Asia-Pacific Free Trade Area (APFTA), a Regional Comprehensive Economic Partnership (RCEP), and a Transpacific Partnership (TPP). Russia’s participation in negotiations to create a free trade zone and in integration projects in the Asia-Pacific Region is determined by its long-term geoeconomic and geopolitical interests. The latter may be considered the more relevant of the two. They are important not only for Russia’s participation in Asia-Pacific economic integration but for promoting Eurasian integration within the Eurasian Economic Union (EAEU).
Russia, now beginning a strategic turn toward the East, cannot remain on the sidelines of integrational processes in the Asia-Pacific Region (APR), which is gradually but inexorably being transformed into a new center of the world economy. It is important that Russia become part of the APR as soon as possible, while the rules of the game are being devised in order to best serve its own trade and economic interests and acquire the experience it needs to survive.
Plans for setting up an Asia-Pacific Free Trade Area (APFTA) were announced at the APEC Summit held in Beijing in November 2014. A major initiative to establish a Regional Comprehensive Economic Partnership (RCEP) based on the ASEAN countries and their partners was discussed, as was a US-backed project for a Transpacific Partnership (TPP). It remains unclear if these initiatives will proceed in parallel or compete with one another, but their implementation will in any case provide a powerful impetus to the development of trade and economic relations on the regional and global levels.
We can say now that the institution of an APFTA “took the form of fierce competition between two blocs. The United States had actively lobbied for the establishment of a Transpacific Partnership (TPP) that would have guaranteed a full lifting of barriers in the trading of goods and services…. For China and its state protectionism of sensitive branches of the economy that ensure economic growth and employment (and are, therefore, vital to political stability), the conditions of the TPP would prove to be unacceptable. Moreover, Beijing suspects that the United States wants to create a trading bloc in Asia without China’s participation in order to exclude the PRC from integrational processes. It is for this reason that China is attempting to fight the TPP by promoting its own alternative project, the RCEP.”1
Russia’s participation in the negotiations to establish a free trade zone and integration projects in the APR is driven by its long-term geoeconomic and geopolitical goals. At present, therefore, while Russia is looking for a “point of entry” into this process, the latter may be considered the more relevant of the two.
As the authoritative expert V.P. Obolensky notes, “Russia, having concentrated on building the Eurasian Economic Union that, against the background of the projected global integration community, would seem to be at best a secondrank body, remains essentially on the sidelines of the tectonic shifts now occurring in the world economy…. Objectively, the Russian Federation must now choose: It will either limit itself to a purely regional economic zone, or it will join one of the two economic superblocs now taking shape (the TPP or the RCEP).”2 If this really is the dilemma, a sober assessment of the country’s own capabilities is of less importance than its ability to correctly judge the direction and promise of the current negotiations in order to determine the possibility and advisability of Russia joining in them, the strategy and objectives of its participation in the negotiations, and the format and tone in which they will be conducted.
In the latitude of its set of issues on the ambition and coordinating of the tasks it requires, the TPP exceeds the other formats for negotiations and agreements on liberalizing trade and investment ties in the region, including ASEAN Free Trade Area (AFTA); consultations on establishing an ASEAN Economic Community; negotiations on establishing a free trade zone between China, South Korea, and Japan; talks on setting up the RCEP; and so on.
The de facto organizer and driving force behind the TPP negotiating process is the United States, which in 2010 saw it as the most promising way of instituting a collective free trade zone in the APR. The United States insisted on including not just the lowering or full elimination of trade barriers in any future agreement, but on conditions for investment, manufacturing, and trade within each country joining the partnership as well.3
“[O]ur goals are strategic as well as economic…. [A]cross the Atlantic and Pacific, the United States will aim to build a network of economic partnerships as strong as our diplomatic and security alliances – all while strengthening the multilateral trading system. The TPP is also an absolute statement of US strategic commitment to be in the Asia-Pacific [Region] for the long haul,” said Thomas E. Donilon, National Security Advisor to President Barack Obama, at the Asia Society in New York on March 11, 2013.4
President Obama himself stressed the geopolitical and geostrategic importance of the TPP negotiations in his annual State of the Union Address to Congress in January 2015. Obama pointed out that unlike others taking part in the negotiations (China in particular), the United States would benefit from devising new rules of regional trade, and that the TPP would be an important element of the United States’ “return” to Asia.5
Such an obvious positioning of American geoeconomic and geopolitical interests could not help but provoke some reaction from Beijing. As, for example, Chinese political scientist Liu Bo noted in summarizing the upshot of talk among China’s academics and analysts, “If the United States claims a leading position upon joining, the hopes and participation of other countries will be restricted. In negotiations, the United States considers only its own interests, rather than common interests. This will make it difficult for any TPP agreement to play its role.”
Referring to the results from a special study he conducted, Liu noted further that “The founders of the TPP are relatively small countries with economies of negligible volume. Even though the United States and Japan are participating in the negotiations on joining, the share of countries with developed economies is not great; they would, therefore, be underrepresented in the TPP…. The ASEAN countries have established relations of comprehensive economic partnership via the RCEP. The population of these countries totals 3.5 billion, or half the Earth’s total population; their consolidated GDP is $2.3 trillion, or one-third of the world’s volume of production. They considerably exceed the TPP in size of population and volume of production.”6
As the Xinhua News Agency noted in an editorial, “The TPP is an economic weapon with whose help the United States is nipping in the bud the possibility of China forming ties with its main partners in the Asia-Pacific Region…. According to an estimate by the Peterson Institute for International Economics, the TPP could lead to China losing around $100 billion in exports annually.… [A]lthough the United States did its best to draw certain Asia-Pacific countries into setting up the TPP, China, the main economic force in Asia, was excluded from this union. Such a regional economic organization for economic cooperation based on geopolitical competition vitiates the maximum effect of this collaboration. The opposite is true: it weakens the drive toward economic integration in the region.”7
Following its Win-Win negotiation strategies, China officially welcomes any opportunity to liberalize trade on the regional and global levels, and does not reject the possibility of retreating from its declared position. China’s Deputy Minister of Finance Zhu Guangyao, therefore, noted in his October 2014 address to the Institute for International Economics that there had been some discussion of the TPP in China, but the concensus at the moment was that China should integrate itself into the world system of trade, including trade agreements “with high standards” like the TPP. In the opinion of The Diplomat Magazine, Zhu linked the possibility of China joining the TPP with the objectives of economic reform set by PRC Chairman Xi Jinping, emphasizing that these two policies mutually reinforced each other.8
The flexible and multioptional Chinese position on this issue sets a great example for Russia. The challenge posed by the future TPP is driving Beijing to encourage international cooperation in the APR and raise the level of its Asia policy’s institutionalization. To accomplish this, Chinese scholars and analysts propose the following in particular: Extend the mechanisms of bilateral and multilateral cooperation beyond the region, especially where American influence is slight or nonexistent. Special attention should be given to collaboration within the BRICS format and following through on the Silk Road Economic Belt project. Push for a free trade agreement between China, Japan, and South Korea. Be ready to join talks on the TPP at an appropriate moment, based on China’s own interests and in light of international agreements that have already been signed. If the United States tries to slow the progress of reforms in the PRC by raising such sensitive issues as property rights, the liberalization of finance, and the problematic nature of state enterprises, it would make no sense to push for membership in the TPP. Develop its own export-driven enterprises so that they offer specific goods on the international market and minimize the possibility of their being substituted with goods from other countries. “Act in accordance with changes around the world to raise China’s aggregate competitive ability. According to the theory of the redistribution of forces, if a recovering country reaches 80% of the capacity of a hegemonic state, there will be a balance of power sufficient to challenge the stronger power.”9 Russia of course cannot blindly copy the Chinese experience. The high level of the proposed TPP agreement’s mandatory requirements are a major barrier to Russia’s inclusion in the negotiating process. These issues include in particular a number of tariff restrictions on the most sensitive groups of goods in Russia’s trade infrastructure, along with non-tariff restrictions on goods whose quality control standards in Russia differ considerably from the rules proposed for the TPP agreement. Among these are questions of competition, electronic commerce, government purchases, intellectual property, and food and plant safety measures.10
No less (and perhaps even more) important to Russia is that it, unlike such trade and economic giants as the United States and China, is currently interested not so much in the liberalization of regional trade as in improving its transparency and facilitating trade and economic interdependence by creating a fair, consistent, and balanced trade and economic system in the APR that corresponds to the priorities and level of development of the Russian economy, especially its export-oriented manufacturing industries.
For the first time since joining APEC in 1998, Russia in 2012 thus became the country chairing the organization and adopted a policy of upholding the priorities of transparency and interdependence in trade and economic relations in the APR, since this would help it become an active and interested participant in the talks on new regional trade rules. Such a course also suits the country’s longterm geopolitical interests associated with strengthening its presence in the APR and improving Russo-Chinese relations of comprehensive partnership and strategic interaction.
In an interview with the Chinese media on the eve of the November 2014 APEC Summit in Beijing, RF President Vladimir Putin said, “We believe a free trade agreement ought not to fragment but rather supplement the multilateral trade system, make its consolidation easier, and help increase interdependence. Neither should regional associations resist or clash with one another. We must base such agreements on openness, equality, and consideration of the needs of each economy. Regional integration ought to be of a transparent nature and ensure the exchange of information among all negotiating processes.”
V. Putin then added, “It is obvious that the Transpacific Partnership is the latest attempt by the United States to create an architecture of regional economic cooperation that favors it. At the same time, I would suggest that denying membership to such powerful regional players as Russia and China would hardly allow effective trade and economic cooperation to develop.”11
The difference between the concepts of the APFTA and TPP became one of the key topics of debate at the November 2014 APEC Summit in Beijing. Dr. Xu Wenhong, an associate professor at the Chinese Academy of Social Sciences’ Institute of East European, Russian, and Central Asian Studies (IEERCAS), emphasized that “In comparing the TPP and APFTA, we can say that the latter is a comprehensive Asia-Pacific free trade plan that includes all of the major players of the Asia-Pacific market.” Ooi Kee Beng, Deputy Director of Singapore’s Institute of Southeast Asian Studies (ISEAS), noted in turn that against the background of the rather slow progress being made by Washington’s model TPP with its extremely harsh conditions, China’s plan for an Asia-Pacific Free Trade Area is moving forward quite well.12 Speaking at the APEC Economic Cooperation intergovernmental forum working session in Beijing President V. Putin gave high marks to the Beijing road map prepared under China’s chairmanship for moving toward the Asia-Pacific Free Trade Area. “The measures it envisions will help harmonize the integrational initiatives now being taken across APEC territory. A large number of trade agreements that differ in both their depth of liberalization and their members number are now in force in the APR,” noted V. Putin. “This of course also poses the potential danger of the region being divided into individual associations competing among themselves. To counter this, we must base our actions on the principles of transparency and openness … while mutually considering the interests and abilities of all parties. We also believe that any new agreements ought not to be detrimental to the multilateral trade system of the WTO.”13
Russia, therefore, fully supported the provisions of the Beijing road map, which noted the need to “increase the transparency of long-standing and recently concluded regional and free trade agreements (RTAs and FTAs) by raising the effectiveness of APEC’s mechanism for the exchange of information among RTAs and FTAs. This will help coordinate the development of collaboration in the interests of creating the Asia-Pacific Free Trade Area and nudge its economies toward establishing a political dialogue and organizing other measures for the exchange of information within this mechanism…. This APEC mechanism will supplement the mechanism of transparency for RTAs within the WTO, in which the member economies will also work to maximize their participation.” 14
Russia also supported the APEC Action Plan adopted at the Beijing Summit to strengthen interdependence over the period 2015-2025. As part of the APFTA working group set up by resolution of the Beijing Summit, Russia and China intend to promote interdependence within APEC and uphold the principle of interbloc communication, while insisting that the Eurasian Economic Union (EAEU) be included in building up the APFTA.
From both the geoeconomic and geopolitical points of view, it would be to Russia’s advantage to start talks on establishing the APFTA with links to the negotiations on the RCEP, rather than on the TPP (to which neither Russia nor China have been invited). Russia’s inclusion in the multilateral institutions being set up by the PRC for regional development (among which are the Asian Bank for Infrastructure Investment (ABII) and the Silk Road Foundation) are also of extreme importance to the anticipated socioeconomic development of East Siberia and the Russian Far East, and to speeding up the integrational processes within the EAEU.
The creation of the ABII, which is destined to become a powerful financial instrument for the development of infrastructure projects in the APR and a valuable supplement to the work of the International Monetary Fund (IMF) and the World Bank (WB), objectively corresponds to the new challenges of the world economic order and reflects the changes in it. Since 2010, countries with developing economies have actively supported the idea of reforming existing international financial institutions controlled by the countries of the West.
All attempts to reform these institutions in favor of new financial players have ended in failure because of US resistance. China and other countries with developing economies have long protested against their reduced representation in international financial institutions. As Dmitry Dobrov has noted, the decision to institute the ABII shows that Beijing has decided not to wait for kindness from the West and independently moved toward revamping the world’s financial relations. 15
At the talks on setting up the ABII, Chinese representatives presented a number of European countries with the position that China would not have the right of veto. This proposal turned out to be of crucial importance in persuading Great Britain, France, Germany, and Italy into joining the ABII. None of the new bank’s founding countries would have the right to dictate their own positions, in contrast to the long-held practice in international financial institutions supported by the United States. The U.S.A. would, for example, have the right to block certain important decisions by the IMF, even though its voting proportion in the Fund is less than 20%. This has justifiably been criticized by the remaining countries. 16
The United States and Japan first assumed the expected skeptical position with respect to the ABII, viewing it as a rival to the IMF, WB, and the Asian Development Bank (ADB). A more pragmatic approach has prevailed, however: according to the Wall Street Journal, the United States has proposed forming a partnership with the ABII and international financial institutions that Washington supports. The White House would like to use existing development banks for the cofinancing of projects along with the new financial institution. Indirect support would also serve another long-range US goal: being certain that the standards of the new institution will be oriented toward avoiding the issuing of problem loans, violations of human rights, and environmental risks. In addition, the United States would be able to pave the way for American companies to participate in tenders for projects of the new bank.17
On the eve of opening the spring session of the World Bank and the International Monetary Fund in Washington in April 2015, the heads of the WB and IMF announced that their organizations were ready to strengthen cooperation with the ABII in order to realize the great potential of the region. “There is an enormous need for infrastructure in the developing world. For the ABII, this is equally true in the case of Asia. We expect to continue our close collaboration,” emphasized WB President Jim Yong Kim. He noted that his organization currently has much more technical experience than the ABII, along with a great many approaches to preparing for joint projects with the ABII.
IMF Managing Director Christine Lagarde, said in turn that the proposal to create an accountable structure dedicated to regional infrastructure problems was very attractive. “This would be a most welcome organization, with which the IMF plans to cooperate fully,” said Ms. Lagarde.18
Beijing has thus outmaneuvered Washington on both the geoeconomic and geopolitical fields. As the newspaper Hunajiu ribao noted, “China chose a promising idea; the creation of the ABII corresponds to the interests of many countries. The U.S. wanted to put an end to these plans for geopolitical reasons, but it failed to gain support. The United States was thus prevented from carrying out its plan. The US ‘policy of conflict’ ran up against China’s ‘policy of peace’ and, as we can see, the latter clearly had the advantage here.”19
At the opening ceremony of the Boao Forum for Asia, RF First Vice Premier Igor Shuvalov announced that Russia had decided to join the Asian Bank of Infrastructure Investment as one of its founders. He stressed that by taking advantage of the institutional possibilities of the Eurasian Union and the instruments of other initiatives in the region, Russia and its partners would be able to expand collaboration not only in the area of providing energy resources but in the field of high technology in transportation, industry, construction, communications, and agriculture as well.20
No less important is the inclusion of Russia and the EAEC in executing the Silk Road Economic Belt (SREB) megaproject initiated by China. On November 8, 2014, PRC Chairman Xi Jinping announced that China has earmarked US$40 billion to institute a Silk Road Foundation in order to provide financial support for projects within the One Belt, One Road initiative. The Silk Road Fund was registered in Beijing on December 29, 2014 and has been operating officially ever since.
The Silk Road Fund is a medium- and long-term fund for development and investment that offers assistance to countries and regions along the Silk Road Economic Belt and the Maritime Silk Road of the 21st Century (the “Belt and Road”) in implementing large-scale projects that will allow the region’s transportation and communications capabilities to expand. As Jin Qi, Chairperson of the Silk Road Fund Board, announced on March 12, 2015, the company’s board of directors, oversight committee, and executive leadership are already in place. Large-scale operations will get under way in the near future.21
The joint document Concept and Action Plan for Cooperation in the Joint Building of the Silk Road Economic Belt and the Maritime Silk Road of the 21st Century was published in March 2015 by the PRC National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce. The document states that work on executing the initiative is open to all countries and international and regional organizations wishing to participate in achieving universal prosperity on the basis of mutual respect and market relations. The Action Plan calls for coordinating political measures, developing infrastructure ties, free trade, financial integration, and exchanges of people to make the maximum use of the unique resource advantages of the participating countries through multilateral mechanisms and multilevel platforms.
During PRC Chairman Xi Jinping’s May 2015 visit to Moscow, the two sides signed the Joint Declaration of the Russian Federation and the People’s Republic of China on Cooperation in Building the Eurasian Economic Union and the Silk Road Economic Belt. Among the top priorities in coordinating efforts for the joint building of the EAEU and the SREB are “creating mechanisms for simplifying trade in those areas where conditions for it are ripe; developing joint steps for harmonizing and guaranteeing the mutual suitability of regulatory rules and standards, trade, economic, and other policies in areas of common interests; and considering the long-term goals of moving toward a free trade zone between the EAEU and China.”22
In making its turn toward the East, Russia is commencing practical efforts to join in the integrational processes in the APR and strengthen its trade and economic presence in the region. This could be a new genre of Russian economics and politics that requires daily painstaking efforts and great attention to subtlety and detail. Only then will it be possible to acquire the experience needed to defend and promote national interests in the fields of international economics and trade properly.
Dmitry Medvedev’s visit to Vietnam and Thailand in April 2015 is, therefore, easily understood. It was important not only for developing relations with these countries on a bilateral level but for joining in the processes of integration in the APR as well.
Vietnam, a strategic partner of Russia and one with which it has traditionally had close relations of trust since Soviet times, could serve as a bridge in Russia’s relations with ASEAN. It was for this reason that while in Hanoi, the Russian premier discussed the prospects for creating a free trade zone (FTZ), not only with Russia but with other EAEU countries as well. Establishing a FTA with Vietnam, ASEAN member, is the sine qua non (a kind of “entry point”) for Russia and the EAEU to participate in setting up the RCEP and APFTA. Moscow and Hanoi agreed to give renewed impetus to bilateral trade and the main historical lines of cooperation. Among these are the electrical engineering and oil and gas industry. We are talking here of the joint production and refining of oil and gas on Vietnam’s continental shelf and on the territory of Russia, on upgrading electric power plants on the territory of Vietnam, and the possibility of building the first nuclear power plant in that country. On May 29, 2015, the states of the Eurasian Economic Union and Vietnam signed an agreement on establishing a free trade zone that now awaits ratification in the parliaments of all its member countries.
In Bangkok, Premier Medvedev also discussed the possibility of creating a free trade zone between Thailand and the EAEU. During this trip, the first official visit in more than ten years (and the first meeting in 25 years on the heads of government level), the two sides also talked about lowering trade barriers, the growth of mutual trade turnover, and moving on to trade in their national currencies. There was also talk of exporting Russian arms and aircraft to Thailand, increasing deliveries of Thai agricultural products to the Russian market, and establishing joint enterprises for the processing of agricultural products.
It was no accident that upon returning from Hanoi and Bangkok, D. Medvedev amended the road map so that Russian goods would have access to foreign markets. Among the measures for simplifying the export of goods that should be implemented by the end of 2015 was developing the appropriate infrastructure. The new edition of the road map included measures that would allow the greatest possible simplification and speed up the procedures associated with exports (finances, customs, administration), along with expanding the variety of financial and other services.
Russia has thus begun detailed and painstaking efforts to join in the mechanisms of economic integration in the APR. Unfortunately, as Academician Sergei Rogov has pointed out, the Russian Federation’s “critical mass” remains small here – approximately two percent of the world’s population and three percent of its GDP. These ratios are greater for Eurasian integration, but lag behind other regional integrational bodies considerably.23 However, the correct choice of a path and the readiness to follow it to the end is a guarantee of ultimate success. This is important not only for Russia’s participation in Asia-Pacific economic integration, but for developing Eurasian integration within the EAEU as well. The Eurasian Economic Union has begun its efforts to strengthen interbloc cooperation in order to find and secure for itself a competitive niche among the world’s economic giants: the countries of the European Union and Southeast Asia, the United States, and China.
NOTES:
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- Disbalansy transtikhookeanskogo prostranstva [Transpacific Imbalances], V.V. Mikheyev and V.G. Shvidko, eds., Institute of World Economics and International Relations, Russian Academy of Sciences, Moscow, Magistr Publishers, 2014, p. 116.
- Quoted from: URL: http://russiancouncil.ru/inner/?id_4=1783#top
- The Transpacific Partnership (TPP) Negotiations and Issues for Congress, Congressional Research Service, CRS Report, January 30, 2015, pp. 5 and 7.
- Liu Bo, “Soglasheniye o Transtikhookeanskom partnyorstve i kontrmery Kitaya [Transpacific Partnership Agreement and China’s Countermeasures],” Problemy Dal’nego Vostoka, # 6, 2014, pp. 59 and 62.
- URL: http://russian.china.org.cn/exclusive/txt/2014-11/17/content_34070602.htm
- URL: http://thediplomat.com/2014/10/will-china-join-the-trans-pacific-partnership/
- Liu Bo, Op. cit., pp. 63-65.
- P.A. Kadochnikov and T.A. Flegontova, “Perspektivy i protivorechiya peregovorov po sozdaniyu Transtikhookeanskogo partnyorstva [Prospects and Conflicts in the Negotiations on Creating a Transpacific Partnership],” Rossiyskiy vneshneekonomicheskiy vestnik, # 9, 2014, p. 29.
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- Pekinskaya dorozhnaya karta ATES po sodeystviyu prodvizheniyu k Aziatsko-Tikhookeanskoy zone svobodnoy torgovli [Beijing’s APEC Road Map for Cooperation in Moving toward an Asia-Pacific Free Trade Area (APFTA)]. URL: http://www.mid.ru/bdomp/ns-dipecon.nsf/
fc2e4121e6d9ec5343256a0c003fb7d2/506a111d81db9f19c3257db60036dbc8!OpenDocument - URL: http://inosmi.ru/op_ed/20150403/227278991.html
- URL: http://inosmi.ru/op_ed/20150403/227278991.html
- Quoted from: URL: http://www.interfax.ru/business/431516
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- S. Rogov, Doktrina Obamy: vlastelin dvukh kolets [The Obama Doctrine: Lord of Two Rings]. URL: http://russiancouncil.ru/inner/?id_4=1783#top
Translated by Terry C. Fabian