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Speeches and Papers

Asia-Pacific Regional Economic Integration and Architecture

by C. Fred Bergsten, Peterson Institute for International Economics

Speech delivered via video at the conference on Asia-Pacific Regional Economic Integration and Architecture at Auckland University, New Zealand
March 25, 2010


I'm delighted that the ministry and the New Zealand Asia Institute are hosting this very important conference on Asia-Pacific Regional Economic Integration and Architecture, and it's a great pleasure for me to be here with you. I apologize for not being able to come personally, but it's a great privilege to have a chance to make some lead off remarks and to participate in your session in that way.

Your conference is of course very timely, particularly with the first negotiations on the Trans-Pacific Partnership (TPP) just having taken place in your neighbor Australia. That will be a central part of my remarks today, and I think that provides a particularly timely point of departure for the conference.

I'm especially pleased to take part in this discussion in New Zealand. The Trans-Pacific Partnership would produce free trade between New Zealand and the United States, and that's a topic on which I, along with my good friend and colleague Rob Scollay who's with you today, had a chance to do some initial research and publishing a few years ago in trying to advance the idea of a free trade agreement between our two countries. So maybe that's now underway. I very much hope so, and it makes this session in Auckland particularly important.

I'm particularly pleased to address the topic of your first session on the importance of greater economic integration in the Asia Pacific Region. I think both the challenges to that idea, but also the opportunities for advancing that idea are greater than ever before, and that makes the particular discussion extremely timely and important today.

The challenges to Asia-Pacific Architecture and Integration are increasingly important and intense because Asia itself, on an Asia-only basis, is clearly headed toward greater regional integration. We can see that clearly in the trade area with the series of 10 + 1 agreements, but also a whole host of other negotiations, which I think inexorably will lead to some kind of East Asian free trade agreement. Likewise, on the monetary side, the Chiang Mai Initiative continues to evolve and expand, headed toward some kind of Asian Monetary Fund, whether it's ever called that or not. So to be a little inflammatory with language, I think we are headed inexorably and eventually toward an Asian bloc: an Asian group in certainly economic terms that will be the biggest part of the world economy, the most dynamic, and most reputably growing part of the world of economy.

And that, of course, has huge implications for the rest of the world. It will discriminate against the outsiders causing negative economic effects on them; and with respect to the United States and this side of the Pacific Ocean, it does raise the specter of "drawing a line down the middle of the Pacific" in the memorable term that Secretary of State Jim Baker enunciated over 20 years ago. That would in some sense produce disintegration of the Asia-Pacific Region rather than further integration of it, which was the whole idea behind APEC and which you're discussing at this conference today.

I think it's also fair to say that such potential division between Asia and the United States would have consequences ranging beyond the purely economic. I think it would eventually and inevitably spill over into the political and even security areas and raise real risks for the continued ties between the two sides of the Pacific. This, of course, would be particularly important and worrisome for countries like New Zealand, but also for many others in the region who have close ties with the United States as well as with their Asian neighbors. Those countries don't want to have to choose between Asia and the United States, and so a disintegration of the Asia-Pacific would be very worrisome indeed, perhaps even calamitous for those countries. So there are big challenges, given that Asian integration raises real risks to Asia-Pacific integration.

At the same time, we have huge opportunities to move forward on the Asia-Pacific front. The positive initiative that the Obama administration has taken by joining the Trans-Pacific Partnership negotiations is really quite a consequential and even monumental change. For its first year, the Obama administration took no positive initiatives on trade at all.

The Democratic Party is divided over the topic, the American public is divided, and the administration simply finessed the issue. Now, however, it has taken a very forthright and strong initiative to join in the TPP talks.

This is for two reasons: One is the recognition of what I said before, that Asia is moving toward creating a bloc that would be very disadvantageous for the United States, risky in foreign policy as well as economic terms, but also because on the positive side the administration recognizes how critically important Asia is to the world economy and to the world more broadly.

It realizes that trade and economic relations are central to overall relations across the Pacific and therefore sees the need to come off the dime, to finally get active on trade by moving, given its objectives, its recognition of the overarching importance of Asia and the need to move forward positively on trade in order to advance the overall relationship between the two sides of the Pacific.

So the administration has decided to restore full US participation in the Trans-Pacific Partnership talks. It has consulted actively with the Congress about that and gotten a green light to go ahead and proceed. And all this is really extremely important not just in terms of US relations with Asia, important as those are, but for overall US trade policy, because we know that only with forward movement toward liberalization can one head off the very strong pressures to backslide into protectionism.

That's a threat here in the United States, and the TPP initiative therefore provides new momentum to help in moving against that. It seems to me that the initiative of the Obama administration to join in this effort so actively provides a real opportunity for Asia to reengage the United States.

We've had leading Asian statesmen here in Washington the last few months chastising the United States for standing back from Asia, not participating actively, as some of them put it "letting China have the full running." Now the United States is reengaging, and I think it's very important for our friends and colleagues in Asia, including of course New Zealand, Australia, others, to pick up that invitation and to try everything they can to move the initiatives forward in a positive and successful way.

The key point to me is the need to move in parallel on the Asia-Pacific front simultaneously with the movements in Asia itself. The moves toward a Trans-Pacific Partnership, perhaps eventually a free-trade area of the Asia-Pacific, should be viewed as complementary to the Asia-only initiatives but very important to move along with them in a simultaneous way.

Most Americans who are aware of the developments in Asia oppose the creation of Asian regional economic institutions and arrangements. They realize this will discriminate against the United States, they think it's a bad idea; and therefore they want to block it. They also see that an Asia bloc would probably be dominated by China, which would even produce important swings in the global balance of power in a broader sense, and so they oppose the whole idea.

I do not and I don't think our administrations will do so either, on the proviso that there is parallel movement in the Asia-Pacific to complement the movements in Asia itself. I think the Asian integration efforts are a good thing. They do liberalize trade further. On the monetary side, they will provide additional resources to deal with global financial crises and other needs.

They could strengthen political ties within Asia, reducing the risk of future conflict and therefore of drawing the United States in again as has happened so much over the last century. These are the reasons the United States always supported European integration, and I think they will also motivate the United States to support Asian integration.

But again, on the proviso that there is parallel movement on the Asia-Pacific front to avoid the most negative effects of Asia-only integration on the United States, to avoid drawing a line down the middle of the Pacific; and especially important,as I mentioned before, is, to avoid [the situation where] US friends and allies in the region have to choose between Asia on the one hand and the United States and the Eastern shores of the Pacific on the other—that I think is a critically important reason for moving in parallel on the two fronts.

I would stress the need to move in parallel. Some of our friends in Asia have suggested that they support both Asian regionalism and Asia-Pacific agreements but only sequentially. That view suggests getting the Asian architecture in place first and only then moving on to the Asia Pacific. I think that would be a huge mistake. It would defer the Asia-Pacific branch of the tree for a long time.

It would risk creating all the adverse effects I've mentioned in the meanwhile, and so I think the crucial need is to move in parallel. That is why I think the Trans-Pacific Partnership talks are so important. They are clearly a first step toward Asia-Pacific integration. Hopefully, they could lead down the road eventually to a free trade area of the Asia-Pacific, which after all is nothing more than the Bogor Goals initiated by APEC back in 1994, and which continue to be voiced every year as the underlying principle behind the APEC objectives as it continues to try to strengthen relations on an Asia-Pacific basis.

I think we should set a specific goal: The goal should be to reach agreement on at least an initial Trans-Pacific Partnership arrangement by the time of the APEC Summit in Hawaii in late 2011, about 18 months from now. Over that period, we should make every effort to do two things: reach full agreement on a Trans-Pacific Partnership deal among the eight countries who began that negotiation just a few days ago in Australia, but also to bring in additional member countries, additional members from APEC to broaden the group and achieve a critical mass among the APEC membership.

Canada I think is eager to join. Malaysia has talked about it, perhaps one or two other ASEAN countries would join. I would hope Japan would come into the group later this year as it holds the chair of APEC. Korea I think will surely come in as soon as the Korea-US free trade agreement is ratified by the two countries.

The addition of those countries to the original eight would certainly create a critical mass, more than half the APEC membership in both numbers of countries and size of economies, and provide a very meaningful new engine for global and particularly regional economic growth. I think we should set those goals. I think they are realistic.

I think the United States will support them, and I think that should be the objective of the exercise as we proceed with our efforts on Asia-Pacific Regional Economic and Integration for the 21st century. It's been a great pleasure to make these remarks to help lead off your conference in Auckland.

Again, I apologize for not being there in person. I deeply appreciate the invitation to participate. I wish you best success in the conference and look forward to hearing the results of your subsequent discussions. Thank you very much from Washington.


RELATED LINKS

Paper: Submission to the USTR in Support of a Trans-Pacific Partnership Agreement January 25, 2010

Speech: The Future of APEC and Its Core Agenda December 9, 2009

Policy Brief 09-16: Pacific Asia and the Asia Pacific: The Choices for APEC July 2009

Policy Brief 08-5: World Trade at Risk May 2008

Policy Brief 07-2: Toward a Free Trade Area of the Asia Pacific February 2007

Book: NAFTA Revisited: Achievements and Challenges October 2005

Working Paper 97-3: Open Regionalism

Article: Challenges to the Free Trade Area of the Americas October 2002

Working Paper 03-7: Labor Standards and the Free Trade Area of the Americas August 2003