Trade agreement showdown at Beijing summit

THE race is on between the United States and China to dominate the rules-setting game for trade by being the first to be able to announce plans for a free trade area in the Pacific Rim. China hopes to use its position as this year's chair of the Asia-Pacific Economic Cooperation (Apec) forum to propose a feasibility study on a Free Trade Agreement for the Asia-Pacific (FTAAP), first mooted in 2006. In other words, negotiations towards an FTAAP would commence, for all practical purposes.

But if the Trans Pacific Partnership (TPP) can be concluded, or substantial and credible progress demonstrated so that an impressive announcement can be made at the Apec meeting in Beijing this week, the US would steal the thunder from China. If such an announcement is not forthcoming or not credible, China will likely announce a "Beijing Road Map" for a free trade agreement (FTA) of the Pacific Rim, building on Apec rather than the TPP. Billions of dollars in trade are at stake. It will be difficult for leaders from the TPP countries to ignore a declaration endorsing a feasibility study for the FTAAP if they cannot offer an alternative.

Reports on whether the US has been able to dissuade China from floating the proposal have been mixed. The US has succeeded in leaving the door slightly ajar for the TPP to play a future role by blocking reference to a deadline for completion of the FTAAP by 2025. Although deadlines can be missed, as the TPP itself demonstrates, setting one implies it is not just a vision but a plan bounded by a timeframe. The fear is that pursuing the FTAAP could derail the TPP by dispersing attention.