The Asia-Pacific Economic Cooperation (APEC) leaders' summit has concluded in Honolulu. Leaders from nine economies, including the United States and Singapore, agreed on the broad terms to create an expanded Trans-Pacific Partnership (TPP) trade pact. Japan, Canada and Mexico meanwhile expressed interest in joining the TPP. Separately, all 21 APEC countries committed to a package of measures to promote green trade and sustainability. Finally, the US and China also discussed the value of the yuan in a bilateral meeting.
Singapore Prime Minister Lee Hsien Loong has described the expanded TPP as a "safety raft" for the Asia-Pacific amid choppy economic waters.
The original TPP was a trade deal signed between Brunei, Chile, New Zealand and Singapore, and is already in force. Six more countries, Australia, Malaysia, Peru, Japan, the United States, and Vietnam have been negotiating to join the group.
The nine countries currently in TPP negotiations now aim to reach a final agreement by July 2012.
Mr. Lee and US President Barack Obama have described the timeline as "ambitious", but achievable. Mr. Lee added it is "one way to put some pressure on the participants to settle soon and not to let it drag on".
The July date also means the TPP might be signed before Mr. Obama faces the US Presidential Elections, giving him a boost as he seeks a second term.
The TPP has been promoted as a 21st-century trade deal that will seek to streamline supply chains, regulations and rules of origin across the region, as well as to facilitate trade of green and digital goods. The idea is that eventually more countries will join the TPP.
"In a larger sense, the TPP has the potential to be a model not only for the Asia Pacific but for future trade agreements," Mr. Obama said.
Many of the proposed trade pact's details remain confidential, but it is clear that countries will agree to a single schedule of tariff reduction - meaning while different goods will have a different timetable of reduction, each country will follow the schedule simultaneously for the same category of goods.
The TPP seeks to take into account the divergent levels of development of the nine economies involved, by helping build up trade capacity and providing less-developed countries some flexibility on how they implement some of the measures.
The final agreement may also include an arbitration process for disputes between companies and states.
Report: An extra raft for troubled waters [TODAY, 14 Nov 2011]
Report: Obama calls for finalisation of trade deal before US election [New Zealand Herald, 14 Nov 2011]
Report: Framework Is Set For New Trade Bloc [Wall Street Journal, 13 Nov 2011]
Japan, Canada and Mexico Intend to Join TPP Talks
At the APEC Summit, Japanese Prime Minister Yoshihiko Noda said his country intends to join the TPP negotiations. Japan's announcement has been widely expected, but entry into the TPP is still controversial in Japan.
"I don't underestimate the difficulties of this because each member country has particular sensitivities, political barriers," Mr. Obama commented. "For Japan, for example, in the agricultural sector, that's going to be a tough issue for them."
The head of the US Chamber of Commerce, Thomas J. Donohue, told reporters that "while I support Japan joining…it is with a very large qualifier, and that is that they join under the same terms that the other players have already negotiated and agreed to play under. That would not be easy for Japan."
The TPP requires member countries to eliminate tariffs and to agree to common regulations allowing businesses to operate seamlessly across borders. Japan's heavily protected agricultural sector is against the agreement, and Japan's health-care sector fears the treaty would result in the dismantling of the country's universal health-care system and replace it with a US-style, market-driven one.
Some Japanese politicians are also against joining a US-centric trade pact that does not currently include larger Asian economies like China, South Korea and India.
Report: Japan's Free-Trade Move Criticized [Wall Street Journal, 13 Nov 2011]
Meanwhile, Canada and Mexico have also expressed interest in joining the TPP talks.
US Trade Representative Ron Kirk welcomed the Canadian and Mexican announcements, saying the US looks forward to consultations with them.
"Along with Japan's similar announcement this week, the desire of these North American nations to consult with TPP partners demonstrates the broadening momentum and dynamism of this ambitious effort toward economic integration across the Pacific," Mr. Kirk said.
The US Congress and other national parliaments must effectively approve the entry of new countries into the TPP negotiations, by authorising governments to pursue trade negotiations with them.
Report: USTR's Kirk welcomes Canada, Mexico interest in TPP [Reuters, 13 Nov 2011]
Aside from the TPP negotiations, another main goal set by the US as APEC host was the promotion of green trade.
On Sunday, all 21 APEC countries committed to cutting tariffs on environmental goods to no more than five percent, also eliminating non-tariff barriers that impede trade in green products.
Together, APEC represents more than half of the world's economy.
"Taking these concrete actions will help our businesses and citizens access important environmental technologies at lower costs, which in turn will facilitate their use, contributing significantly to APEC's sustainable development goals," leaders said in a joint statement.
APEC economies will make a list of environmental goods next year and reduce tariffs to no more than five percent by the end of 2015.
The statement also set an aspirational goal of reducing the bloc's energy intensity, the amount of energy used compared with the economy, by 45 percent by 2035.
Report: Asia-Pacific leaders to cut taxes on green goods [AFP, 13 Nov 2011]
Report: APEC to Cut Tariffs on 'Green' Goods [Wall Street Journal, 13 Nov 2011]
US-China Relations, Value of Yuan
The value of China's currency was discussed when Chinese President Hu Jintao met his US counterpart at the APEC summit.
"The trade deficit and [American] unemployment problems are not caused by the yuan exchange rate. Even a major appreciation of the yuan would not resolve the problems facing the United States," Mr. Hu told Mr. Obama.
Mr. Hu said China follows a responsible exchange rate policy, and is steadily reforming its exchange rate mechanism with the goal of ensuring a market-based and managed floating system that is tied to a basket of currencies.
China's currency, also known as the renminbi, has gained about 40 percent in real effective exchange terms since Beijing abandoned its peg to the US dollar in 2005. The yuan has rallied almost four percent against the dollar in nominal terms this year.
In October, the US Senate voted in favour of a bill aimed at pressuring China over alleged undervaluing of the yuan. The proposed law would permit US companies to seek countervailing duties on goods from countries with an undervalued currency. The scheme has backing from both of America's main political parties, and several Republican Presidential candidates have spoken in support of the bill.
However the Speaker of the House of Representatives, Republican John Boehner, opposes the bill and is thus far blocking it by refusing to allow a vote in the House. The White House has also criticised the proposed law.
Instead of pressuring China over the yuan, Mr. Hu said a quick way for the US to cut its trade deficit with China would be to relax restrictions on high-tech exports to China and make it easier for Chinese firms to invest in the United States.
Currently the US has curbs on high-tech exports it deems sensitive.
But speaking to reporters after the meeting, Mr. Obama used fairly strong language in urging China to change its currency policy. He acknowledged there has been a "slight improvement", but said China’s exporters "like the system the way it is" and are resistant to any moves to loosen the reins on the yuan.
"Changes are difficult for them politically, I get it," Mr. Obama said, "but the United States and other countries, I think understandably, feel that enough’s enough."
Report: President Hu: US woes not yuan-related [China Daily, 14 Nov 2011]
Report: Major yuan rise no cure for U.S. economic ills-China's Hu [Reuters, 13 Nov 2011]
Report: ‘Enough’s Enough’ on Undervalued Yuan: Obama [Bloomberg, 14 Nov 2011]