VINACHEM

Kurt Tong is managing partner at strategic advisory firm The Asia Group in Washington and a member of the advisory board of the American Association of the Indo-Pacific. He previously served as U.S. ambassador for Asia-Pacific Economic Cooperation.

In 2016, Asia-Pacific Economic Cooperation leaders, including Chinese President Xi Jinping and his then-U.S. counterpart Barack Obama, endorsed a shared vision of a Free Trade Area of the Asia-Pacific, a regionwide free trade agreement that would include all APEC members.

While distressed by China's increasingly noticeable tendency to flout global trade and investment rules, most APEC members in that pre-COVID, pre-Trump era looked forward to lowered barriers to business that would, in turn, increase prosperity.

In 2023, however, despite volunteering to play the role of annual APEC host, the administration of U.S. President Joe Biden is focused on a different agenda of "friend-shoring," de-risking and denial of Chinese access to advanced technologies.

At the same time, the U.S. government is allocating massive funding to select manufacturing sectors and union-centered job creation and job protection policies. It is an approach that, in the words of National Security Adviser Jake Sullivan, dismisses the previous focus on removing barriers to trade and investment as the pursuit of "oversimplified market efficiency," and states that positive economic effects from trade were "a promise made but not kept."

Some APEC nations that share the U.S. view of China as a competitive threat and geopolitical nemesis, including Japan and Australia, have adopted elements of the American approach, particularly with respect to their investment and technology relations with China. A few key economies in Europe, such as Germany and the U.K., seem likely to follow suit. But even these China-skeptical nations have not adopted the deeper trade pessimism of the U.S.

Indeed, multilateral trade liberalization, even with China, has rolled on with the U.S. on the sidelines.

In June, the Regional Comprehensive Economic Partnership entered into force for 15 members states, including China, establishing the world's largest trade bloc. Soon after that, the U.K. signed on to become the 12th member of the Comprehensive and Progressive Trans-Pacific Partnership, a bloc which is also considering applications from China and Taiwan.

Southeast Asian nations, meanwhile, are in the process of strengthening the ASEAN Trade in Goods Agreement, which governs intrabloc trade. ASEAN is also in talks to upgrade its bilateral free trade pacts with China and South Korea, and is developing a blocwide Digital Economy Framework Agreement to try to set market-opening rules for one of the world's fastest-growing digital consumer markets.

The 14-member, U.S.-led Indo-Pacific Economic Framework (IPEF) talks are meanwhile set to shortly produce a plan for clean energy financing in Asia after just a year and a half of negotiations. This will build on the group's success in May in reaching agreement on a useful framework on information exchanges to improve supply chain reliability.

On trade issues, however, the IPEF is set to produce next to nothing, just minor progress on matters like customs facilitation. The group has made no progress on stated White House priorities centering on labor rules and environmental policy.

When the IPEF was first launched, the Biden administration said it would "pursue high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localization." Yet the U.S. has now walked away from pushing proposals in this area at the World Trade Organization and the IPEF will have nothing to show on this front this year.

APEC's agenda-setting and the organization's programming have had several rough years. No in-person summit of bloc leaders was held in 2019, 2020 or 2021 due to COVID travel restrictions or, in one case, domestic unrest in Chile.

Most APEC members probably rejoiced when the U.S. raised its hand to take on 2023 hosting duties two years ago. Indeed, regional business leaders, as well as American CEOs, are expected to descend on San Francisco in large numbers for the APEC CEO Summit that will be held in parallel with the official APEC meetings.

Public- and private-sector leaders from Asia will be looking to make deals and create more growth. They do not want to see the region's optimistic agenda of trade and investment liberalization further subordinated to Washington's pessimistic geopolitical rivalry with China, or to U.S. domestic political priorities tied to the looming 2024 election contest.

When looked at in the rearview mirror, APEC 2023 in San Francisco may be seen as a pivotal moment in the history of Indo-Pacific international economic policy and diplomacy. The ironic part of the story is that the host may find itself isolated at its own party.   – Nikkei –