Looking East: The Future of Asia and Free Trade

Charlene Barshefsky Charlene Barshefsky

Barshefsky: I would like to see China eventually enter. I don't think it's in the U.S. interest to see two trading blocs form in Asia, one U.S.-dominated, one China-dominated, with some overlapping members but operating on two different sets of rules. That is trade-distortive, and potentially trade-diverting, rather than trade-enhancing. It sets up, in effect, opposing parties in Asia -- which is, I think, a serious mistake. I would like to see China either enter TPP, or for the TPP countries and the countries who are now negotiating a large agreement with China (RCEP) to merge those agreements over time so that there is a unitary agreement in Asia effectively co-headed, if you will, by the U.S. and China (and indeed Japan as well).

The question is twofold: Does China have the capability to enter TPP? Does it have the political will? On the capability side, TPP is a very high-standard agreement and goes well beyond WTO rules. For China right now, that is a stretch. On the other hand, China is in the process of undertaking additional economic reform. To the extent it does that, those reforms could provide a stepping-stone toward yet further reform in order to comply with TPP. Over time I think China should be capable of joining TPP. There will be questions on the environmental side and on the labor side, and with respect to certain other standards, but the general capability should eventually be there.

Which brings us to the question of political will. China does not necessarily like to fit itself into the framework of others, and as China has become more economically powerful, it wants to create its own framework. Therefore, the question of political will will revolve not only around the questions: does China want to make the concessions politically that it would need to make? Does China want to reform its economy in a way politically that it would have to in order to take these extra steps on liberalization? But also: does China want to join what is a U.S.-dominated group? I think for China politically that would be very hard. That's why one potential avenue is through a melding or merging of the China-oriented agreements and the U.S. oriented agreements, but merged on the basis of the higher standards set by the U.S.-dominated agreement.

OR: Let's say that the politics prove too hard for China. How would the U.S. best deal with a growingly powerful China that won't work within these bigger structures and frameworks?

Barshefsky: China has never refused dialogue. One of the things that would need to be done is to set up a mechanism that runs among these various agreements in Asia to ensure that the parties are talking with each other, trying to find avenues of cooperation or harmonization -- even if it's only on an area-by-area or chapter-by-chapter basis. It would be important to try and find ways to smooth over, if you will, the fact that there are different agreements in Asia and find ways to make Asian trade more effective and more holistic, rather than atomized among different groups. That would be in everyone's interest. I think that the members in these various agreements would concur that this would make eminent sense, even if the various agreements couldn't be merged, even if China did not want to undertake the necessary liberalizations, or even if it did, and nonetheless did not want to join the TPP-related disciplines.

Apart from that, I would say the single most important thing the United States can do has absolutely nothing to do with China and everything to do with our own economy. Unless the U.S. is strong economically, our bona fides will be damaged as it was during the financial meltdown and as it will continue to be if we are viewed as economically weak, inward-looking, and tentative. Today, that is the view of the United States in Asia. The U.S. cannot lead and cannot hope to have its agenda set the pace if it is viewed in that way. Our ability to set the agenda in a way that is favorable to the United States is dependent on the U.S. getting its domestic act together, stopping the nonsense, and producing programs -- including with respect to U.S. infrastructure -- that will revitalize our economy on a sustainable, robust basis. There is nothing more important than that.

How can you not have a gas tax sufficient to fund the Highway Trust Fund to repair the roads and bridges, for example? We are absolutely destroying our own country and everyone else around the world sees it. It is so obvious and so painful to watch.

OR: A few interrelated questions. Do you think that the Chinese view TPP and the U.S. Asia pivot more broadly as a threat? Do you think that the Chinese, as their talk of rising peacefully suggests, really have a non-antagonistic agenda? Are you concerned about rising regional tensions, particularly between China and Japan? How should the U.S. cope with that?

Barshefsky: I think the U.S. has to be very careful not to take the bait when China accuses the U.S. of a containment strategy. It is not possible to contain China. The U.S. is very clear on this, as is virtually every other country in the world. The U.S. shouldn't rise to the bait when China demands concessions or alterations in behavior to “prove” that the U.S. is not trying to contain China.

The U.S. isn't trying to contain China. Period. Full stop. What the U.S. is trying to do is to protect its position in Asia -- a historic position, at this point -- and to protect its interests in Asia, to protect its ability to navigate the seas around Asia, to protect its national security which encompasses, because of security alliances, our position in Asia. None of that has anything to do with China or with notions of containment.

This is a canard, and the U.S. needs to forcefully put this to bed -- and then, frankly, go about its own business in protecting its own interests in the region, regardless of what China's rhetoric might be.