When trade ministers from 12 countries wrapped up talks for the Trans-Pacific Partnership (TPP)in Atlanta little more than a year ago, it was widely seen as a major victory for the United States and US President Barack Obama’s pivot-to-Asia strategy.
Trade ministers from the US, Australia and Japan called the TPP an “ambitious” and “challenging” scheme that would cut red tape and “set the rules for the 21st century for trade”.
But when Pacific Rim leaders met in Peru for the Asia-Pacific Economic Cooperation (Apec) summit on the weekend, the tide had turned, with popular sentiment against globalisation, especially in the major developed economies.
The backlash was clear with Britain’s decision in July to leave the European Union and Republican Donald Trump’s victory in the US presidential election two weeks ago.
Eyes have since started to turn to China, which after three decades of rapid economic growth, has become the biggest trading partner for most Pacific Rim nations.
Beijing has underscored its commitment to free trade, with President Xi Jinping telling Apec business leaders on Saturday that “China will not shut the door to the outside world but will open it even wider”.
Observers say China is keen to foster global trade to meet its own needs.
Thomas Rawski, economics professor at the University of Pittsburgh, said China’s economy was more open to imports of both goods and capital than Japan’s or South Korea’s.
“China’s appetite for resources is huge, and cannot be satisfied with imports from nearby countries. Its exports have truly global reach,” Rawski said.
To that end, Beijing is promoting a rival to the TPP called the Regional Comprehensive Economic Partnership (RCEP), which is gaining interest among some TPP members. Peru, which Obama called “the US’ strongest partner in the Americas”, is still holding out hope for the TPP but has opened talks with Beijing to join the RCEP.
Japan and Australia have also called for more progress to conclude the Chinese-led pact.
But Wang Huiyao, president of Beijing-based think tank the Centre for China and Globalisation, said the TPP might not be dead in the water. “It looks like Trump will not completely give up on the TPP but instead introduce a modified version, and China will find itself at a disadvantage because it is excluded from the TPP.”
In addition to his free-trade offensive, Xi’s weeklong trip to Latin America, with stops in Ecuador and Chile, saw China pour in millions in investment and aid into the US’ backyard, including a US$150 million donation to build two hospitals in Ecuador.
Trade volume between China and Latin America has risen more than twentyfold in the past decade, reaching US$236.5 billion last year, according to Xinhua.
Benjamin Creutzfeldt, a researcher at Johns Hopkins University, said there were threats to and pay-offs for Chinese investment in Latin America.
“The risks of engaging with economies as fragile as Venezuela’s, as unpredictable as Brazil’s, or as insular as Colombia’s need to be mitigated,” Creutzfeldt said.
“In this spirit, Xi’s tour of Ecuador, Peru and Chile, is purposeful and promising. Ecuador has succeeded in turning China’s massive loans since 2009 into very real advances in physical infrastructure, strategic investments in science and education, and reaching almost complete renewable energy coverage.”
Creutzfeldt said the success of such development would only grow if other big players in the hemisphere recognised its potential and “recognise that bridges and open borders make the world a better place”.
But taking the lead to define the international trade order is not straightforward, especially for China, which is often criticised for not giving foreign companies fair access to its markets.
“China’s attitude towards foreign investment, like Europe’s, seems to be hardening,” Rawski said.
“China’s weak financial sector and lack of transparency in important areas such as accounting surely hold back internationalisation.”
Observers around the world are also still trying to work out how the Trump administration’s international economic policy will unfold, and whether the vacuum left by the US could be temporary.
“Perhaps there will be no leader in this area – Europe is an unlikely candidate,” Rawski said.
“However, if leadership does appear, it may well come from Beijing.”
Additional reporting by Stuart Lau