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Protectionism on rise: What Impacts for Business in the
Asia-Pacific? Quar ter ly Resear ch Repor t 2017-#2 by The
Asia-Paci fic Ci r cle (May, 2017) avai lable at
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This Research Repor t has been realised wit h t he
suppor t of our t hought leadership-commit t ed par t ner :
Protectionism is on the r ise. Wi th President Trump?s
ar r ival to power and after months of poli tical
campaigning in the Uni ted States praising ?Amer ica Fi r st?
policies, the idea of protecting domestic mar kets from
globalisation has gained credi t to many. Simi lar ideals are
now being defended in Europe and, overall, the issue of
industr ial preser vation is a major discussion topic which
creates tensions between the biggest economies.
Protectionism is far from being a new concept. Policies
aimed at preser ving domestic mar kets from external
competi tion and pressure have been put into place and
relied upon for year s, at var ious levels.
At the international level, protectionism has been a focus
point for decades and, over the past sixteen year s, has
created many policy and regulator y deadlocks. At the
regional and domestic levels, unsurpr isingly, the necessi ty
to preser ve mar kets for external pressures has also long
been a reali ty.
As far as the Asia-Paci fic region is concerned,
protectionism as i t is cur rently developing might however
be a chance. Whi le change wi ll unquestionably requi re a
signi ficant amount of time from a legal point of view, the
region has already star ted to r ise in terms of trade
diplomacy and might gain signi ficantly on the global
poli tical leader ship side of things in the medium run.
Economically, the region wi ll sooner or later benefi t from
this change in trade dynamics.
Protectionism on rise: What Impacts for Business in the
Asia-Pacific? Quar ter ly Resear ch Repor t 2017-#2 by The
Asia-Paci fic Ci r cle (May, 2017) avai lable at https://goo.gl/y1o1mJ.
Protectionism has become a trendy word recently and appears to
be on the rise in various parts of the world, starting with the
United States. In reality, however, complex negotiations have
eroded trade leadership at the WTOlevel and the trade policy
dynamics in Washington and Brussels seem compromised.
The Asia Pacific, as a result,might attract more and more interest
from a political leadership and business perspective
5 The Asia-Pacific Circle | Quarterly Report 2017-#2
About thi s Resear ch Repor t :
The Asia-Pacific Circle | Quarterly Report 2017-#2 6
Wi th Brexi t in the European Union, President Trump
setting policies aimed at putting US interests fi r st, and
China pushing i ts economy forward, 'protectionism' has
become a big and trendy word lately.
Yet, protectionism is not a new phenomenon. It has long
been a key aspect of international relations, par ticular ly at
the ver y global level where countr ies reuni ted under the
auspices of the Wor ld Trade Organization (WTO) have had
a hard time to achieve results acceptable to all.
As far as the Asia-Paci fic region is concerned, however ,
protectionism as i t is cur rently developing at the wor ldwide
level might be a chance. Poli tically, the region could gain in
terms of global leader ship. Economically, i t would benefi t
from a signi ficant change in trade dynamics.
I | Protect ionism: complicated global dynamics
Protectionism has long been a major international policy
and regulator y challenge. In fact, after 60 year s of
negotiations, i t sti ll is a sour ce of tensions globally.
Cont inuing discussions, for 60 years
As far as the international communi ty is concerned, the
breaking of bar r ier s to trade has long been a major
objective and numerous global negotiations ? known as
'multi lateral' negotiations - have taken place over the past
60 year s.
These star ted pr ior to the discussions on trade in goods
under the General Agreement on Tar i ffs and Trade (GATT)
and led to the creation of the Wor ld Trade Organization
(WTO) following the Mar rakesh Agreement of 1993.
Addi tional effor ts had been made at the time in relation to
cross-border trade in ser vices under the General
Agreement on Trade in Ser vices (GATS) but these
negotiations have reached limi ted results. Due to
ar chi tectural reasons, they have only given negotiating
countr ies some incentives to open mar ket selectively.(1)
Wor th noting, however , are the successes achieved in 1995
wi th regards to intellectual proper ty r ights protection.
(1) See WTO ? Ser vices Trade - avai lable at https://goo.gl/n3SYCE.
Dif f icult ies in quant ifying out comes
In practical terms, however , the di rect contr ibution of the
mar ket-opening trade policies conducted since the late
1950?s is a permanent topic of conver sation.
Based on a World Development Report released by the
Wor ld Bank in 1987, exper ts have long argued that trade
tar i ffs pr ior to the GATT negotiations used to reach 40% on
average. This number is however being questioned as an
'urban legend'(2) and, all in all, the publicly avai lable data is
mainly technical, largely indigest and di fficult to translate
into plain English.
In other words, the outcomes of successive trade policies
remain di fficult to quanti fy.(3)
By the end of the 1990?s, for instance, the WTO repor ted
that 22.500 pages of tar i ff-related commi tments had been
accounted for. The WTO, in addi tion, suggests that
developed economies, developing economies and transi tion
economies respectively made commi tments regarding 99%,
73% and 98% of thei r goods-related tar i ff lines, against
78%, 21% and 73% pr ior to the Uruguay Round talks
conducted between 1986 and 1994.(4) Yet, the data merely
deals wi th tar i ff lines and does not reflect trade volumes or
values and thus remains di fficult to interpret and assess.
A lack of global leadership
A key point is that the effor ts to curb protectionism at the
global ?multi lateral?level over the past twenty year s have
lacked leader ship. In fact, the general negotiations which
have taken place under the WTO since 2001 (the Doha
Round) have remained largely inefficient.
In retrospect, developing countr ies have focused on the
gaining access to the agr icultural mar kets of developed
economies. Meanwhi le, the latter have kept protecting and
subsidising thei r domestic mar kets against foreign
competi tion whi le requesting mar ket-opening policies in
relation to financial ser vices, competi tion and more
modern issues not of interest to the developing economies.
In late 2016, after year s of deadlocks, the WTO Minister ial
Conference held in Nai robi finally announced the end of
the Doha Round, thus admi tting the inabi li ty of the
international communi ty to treat protectionism as a
common pr ior i ty.(5)
(2) Chad Bown and Douglas Irwin, 'The urban legend: Pre-GATT tar i ffs of 40%' VOX Center for
Economic and Policy Resear ch (CEPR).
(3) Year ly Tar i ffs Profi les are published by the WTO, ITCand UNCTAD; See also the WTO
information page on Tar i ffs.
(4) See Under standing the WTO - 'Tar i ffs: more bindings and closer to zero' avai lable at
https://goo.gl/MHmOFu. See also WTO - Member s?Commi tments on Goods Schedules - at
(5) Tenth WTO Minister ial Conference, Nai robi 2015.
The Asia-Pacific Circle | Quarterly Report 2017-#2 7
Other international influencer s seem to be in a di fficult
posi tion to lead too. In Mar ch 2017, in par ticular , the G20
meeting which reuni ted the finance minister s and central
bank representatives from the 20 major developed and
developing economies fai led to include a commi tment to
resist all forms of protectionism as normally practiced over
the last decade.(6)
Hopes regarding the Trade Facilitat ion
Hopes towards easier cross-border trade have nonetheless
emerged recently, following the entr y into for ce on 22
Februar y 2017 of the Trade Faci li tation Agreement (TFA).
The TFA is an impor tant step forward and is descr ibed by
the WTO as ?the fi r st multi lateral deal concluded in the 21
year histor y of the Wor ld Trade Organization?.(7)
In more practical terms, however , the instrument is about
creating a framewor k and an implementation body (the
TFA Faci li ty) on custom procedure faci li tation.
As formulated by the WTO, the TFA aims?
?to improve transparency and predictability of trading
across borders and to create a less discriminatory
business environment. The TFA's provisions include
improvements to the availability and publication of
information about cross-border procedures and
practices, improved appeal rights for traders, reduced
fees and formalities connected with the import/export
of goods, faster clearance procedures and enhanced
conditions for freedom of transit for goods. The
Agreement also contains measures for effective
cooperation between customs and other authorities
on trade facilitation and customs compliance
The TFA, in other words, is not about reducing protectionist
policies. It is about ?the simpli fication, modernization and
harmonization of expor t and impor t processes?or , in more
concrete terms, about dealing wi th the ?bureaucratic delays
and ?red tape??that make trade a tedious operation.
The Asia-Pacific Circle | Quarterly Report 2017-#2 8
(6) G20 Finance Minister s and Central Bank Governor s Communiqué, Baden Baden (Mar ch 2017).
(7) Wor ld Trade Organization, 'WTO: 2017 News i tems - WTO?s Trade Faci li tation Agreement enter s
into for ce' (Februar y 2017).
(8) 'Wor ld Trade Organization,WTO?s Trade Faci li tation Agreement enter s into for ce', (Februar y
Therefore, whi lst the WTO has reached limi ted results as a
policy and negotiation leader over the past 25 year s, the
expectations as to the TFA?s abi li ty to change the rules of
cross-border trade are signi ficant.
According to the Organization?s resear ch:
?The range of trade cost reduction will be between 9.6
per cent and 23.1 per cent. African countries and
LDCs [the Least Developed Countries] are expected to
see the biggest average reduction in trade costs (in
excess of 16 per cent) from full implementation of the
TFA. Full implementation will reduce trade costs of
manufactured goods by 18 per cent and of
agricultural goods by 10.4 per cent. Full
implementation of the TFA also has the ability to
reduce time to import by over a day and a half (a 47
per cent reduction over the current average) and time
to export by almost two days (a 91 per cent reduction
over the current average).?(9)
I I | Consequences of global t rends: more
negot iat ions and inf luence-contest s
Mentioning this histor ical and largely international
background shows that whi le protectionism has long been
considered a problem on a global scale, state actor s have
never been capable to curb i t.
The consequence of this fai lure is straightforward. Fi r st,
the fai lure of states to reach global agreements has led to
an impor tant number of parallel smaller -scale
negotiations. This trend, in turn, has had impor tant
impacts in terms of economic, poli tical and legal
leader ship, both internationally and regionally.
More negot iat ions have taken place
The main consequence of past trade deadlocks is the
multiplication of free trade and investment agreements
over the past twenty year s.
On the one hand, countr ies have attempted to limi t the
negative impacts of mar ket protectionism by negotiating
free trade concessions on a bi lateral and tai lor -made basis.
Fur thermore, a simi lar trend can be obser ved in relation to
foreign investment promotion and protection agreements.
(9) Wor ld Trade Organization,Wor ld Trade Repor t 2015, 'Speeding up trade: benefi ts and
challenges of implementing the WTO Trade Faci li tation Agreement' (2015).
The Asia-Pacific Circle | Quarterly Report 2017-#2 9
(10) For more information on the var ious free trade agreements, see the Asia-Paci fic Ci r cle 's
websi te - 'The Poli tical Economy Explained" at https://goo.gl/5WBPrQ.
(11) For more comments and analyses on the poli tical developments sur rounding the FTAAP, see
the Asia-Paci fic Ci r cle's websi te at https://goo.gl/NwTvUq.
(12) See note 11.
For instance, the Office of the Uni ted States Trade
Representative (USTR) cur rently lists 20 bi lateral agreements
on trade and 41 bi lateral agreements on investment
promotion, but other sour ces list 68 agreement wi th
investment provisions involving the US wi th foreign trade
par tner s.
Globally, more signi ficantly, international exper t agencies
accounts for 3.304 treaties aimed at promoting foreign
investment on a purely bi lateral scale.
On the other hand, and because the system has over time
created what is regular ly descr ibed as a regulator y ?noodle
bowl?, trade and investment negotiations have followed a
wider and more inclusive approach.
Recently, large treaties known as ?mega-regional agreements?
have been negotiated and concluded, wi th the aim of
reducing protectionism on a regional scale, by faci li tating
mar ket access and foreign investment throughout var ious
countr ies at a time.
The trend star ted in the 1990?s wi th the signature of the Nor th
Amer ican Free Trade Agreement (NAFTA) between the US,
Canada and Mexico. This was more recently the case wi th the
Trans-Paci fic Par tner ship (TPP) negotiated between the US
and eleven Asia-Paci fic countr ies or wi th the Transatlantic
Trade and Investment Par tner ship (TTIP) between the US and
the European Union. Ear lier this year the European
Par liament approved the text of the Comprehensive Economic
and Trade Agreement (CETA) between the EU and Canada.
The Trade in Ser vices Agreement (TiSA), finally, is also being
discussed behind closed door s between twenty-three WTO
member s including the EU to fur ther the ser vices
negotiations once conducted under the WTO.(10)
In the Asia-Paci fic, the Regional Comprehensive Economic
Par tner ship (RCEP) agreement is cur rently being discussed
between the ASEAN countr ies and six of thei r trade par tner s,
including China, Australia or India. China, in addi tion, is
slowly br inging i ts Free Trade Agreement of the Asia-Paci fic
(FTA-AP) project into place.(11)
These negotiations have influence as a common denominator.
One way or another , they have largely been influenced by the
leader ship of major power s, par ticular ly the USor the EU.
The Asia-Pacific Circle | Quarterly Report 2017-#2 10
At the global level, in other words, the idea of breaking
protectionist bar r ier s to trade has largely been about global
poli tics. In the case of the TPP an influence contest between
the Uni ted States and China has long mattered. The TPP, in
fact, has even been descr ibed by commentator s as a ?path?
paving the way to a future and broader Chinese-led
I I I | Protect ionism at the foref ront
Yet, despi te international negotiations and regional
ini tiatives, protectionism is more than ever at the forefront,
par ticular ly for the major countr ies.
Leadership made in USA
The word ?protectionism?has become par ticular ly present
in the Uni ted States lately, where the protective measures
taken dur ing the 80's to preser ve the US car industr y from
Japan have over the last year s been replaced, for instance,
by heavy taxation on Chinese steel (in excess of 600%)
aimed at preser ving the US metallurgic industr y from
foreign subsidised competi tion.(13)
Wi th the ar r ival of President Trump to power , even more
recently, a shi ft is cur rently operating from global US
leader ship on free trade to a 'Amer ica fi r st' ideology in
which trade bar r ier s are now being praised to the
detr iment of global trade leader ship.
The Trans-Paci fic Par tner ship (TPP) agreement negotiated
by Washington - and which would have given USindustr ies
access to eleven countr ies in the Asia-Paci fic - has become a
feature of the past because of i ts excessive opening of US
mar kets. The coal industr y is now gaining public suppor t,
pipelines are being bui lt to boost domestic oi l & gas
producer s. Repor ts, in fact, suggest that 1 tr i llion wor th of
infrastructure investment is cur rently being considered by
the Trump administration for the next ten year s, wi th
pr ior i ty being unsurpr isingly given to US steel
?Our goal as a nation must be to rely less on imports,
and more on productsmade here in the USA?(15)
The Asia-Pacific Circle | Quarterly Report 2017-#2 11
(13) See The Asia-Paci fic Ci r cle, 'The US ? China agreement on steel over capaci ty: impacts on trade
& international affai r s?' (2016) avai lable at https://goo.gl/wl3etF.
(14) ?Trump's protectionism to have seesaw effect on steel mar ket?(Nikkei Asia, Januar y 2017).
(15) See ?Donald Trump Warns of Penalties If U.S. Fi rms Take Jobs Abroad?(Wall Street Journal,
December 2016); See also ?Trump vow penalties for companies that outsour ce Amer ican jobs?,
(Infowar s, Februar y 2017).
In an attempt to preser ve and foster Amer ican jobs ? whi lst
containing and reducing the countr y?s trade defici t wi th Asia ?
in addi tion, President Trump has repeatedly warned that
penalty-based policies would be put into place to deter US
companies from outsour cing production abroad.
President Trump, finally, recently pushed defiance a li ttle
fur ther by taking a stand against the Wor ld Trade
Organization?s dispute settlement mechanism. Simply put,
whi lst the system was created so as to create harmony through
fai r and reliable dispute resolution, the Whi te House is now
increasingly br inging forward the idea that ?Amer icans are not
di rectly subject to WTO decisions?that would go against USfai r
A conf licted European Union
In Europe, protectionism is both a target and a way of li fe.
Officially, mar ket opening is an ideal that the European
Commission is tr ying to achieve, both internally and through
free trade agreements wi th Asian and South-Amer ican
countr ies. In reali ty, industr ial champions are preser ved,
member countr ies are seeking ways to fight the unfai r
competi tion created by the free movement of wor ker s inside
the Single Mar ket.
Chinese steel is also taxed - although less than in the US(16)- and
the Common Agr icultural Policy aims at suppor ting European
farmer s through substantive subsidies.
The French presidential elections raised concerns over the
future of Europe unti l the fi r st quar ter of 2017 but the UK
mar ked 2016 wi th an exploding Brexi t which suggested that
the European free mar ket dynamic would face impor tant
challenges in the next year s, both in terms of internal
functioning and in terms of external influence. In fact, the
CETA and TTIP free trade agreements wi th Canada and the US,
have been per ceived as threatening European mar kets by
populations increasingly questioning liberalisation policies
and liberalism as an economic and societal model.
A cont roversial Chinese model
In China, protectionism has also taken var ious forms.
Many cr i ticisms are being formulated against restr ictions
imposed on foreign investor s or in relation to mar ket access
and public contracts.
The Asia-Pacific Circle | Quarterly Report 2017-#2 12
(16) See note 13 above.
Monetar y policies have been widely questioned for
suppor ting the Chinese economy on international mar kets.
Bei jing, also, has histor ically suppor ted i ts economic model
by relying on heavi ly subsidised state-owned enterpr ises
(SOEs), par ticular ly in the coal and steel sector s which,
cur rently, would not be sustainable wi thout such public
Hence, many talks have taken place - par ticular ly between
the US and the EU - to determine whether China does
indeed have a mar ket economy and whether anti -dumping
tar i ffs can be imposed on Chinese products.(17)
In the main, however , i t is clear that Bei jing?s economic
policy model leaves the main big player s unsatisfied. To the
Uni ted States Trade Representative, in fact:
?Many of the problems that arise in the U.S.-China
trade and investment relationship can be traced to
the Chinese government?s interventionist policies and
practices and the large role of state-owned
enterprises and other national champions in China?s
economy, which continue to generate significant trade
distortions that inevitably give rise to trade
The trend, however , is unlikely to change in the shor t or
medium term, i f only because China has no real wiggle
room for doing so.
After year s of economic development relying on cheap
subsidised expor ts, the countr y is now facing the limi ts of
i ts approach and needs to operate a strategic pivot.
Investment wi ll become a key aspect ? foreign investment
included ? but Bei jing wi ll cer tainly need time to plan the
necessar y reforms. Default has been allowed on some
major SOEs, and some consideration is being given to the
steel and coal production model, but here again Bei jing
somehow has i ts hands tied because i t faces the r isk of
making hundreds of thousand wor ker s jobless.
The Asia-Pacific Circle | Quarterly Report 2017-#2 13
(17) See Asia-Paci fic Ci r cle, 'Mar ket Economy status or 'non mar ket economy' status? China, EU, US,
WTO and wor ld businesses' avai lable at https://goo.gl/TdKJj1.
(18) Uni ted States Trade Representative Repor t to Congress On China?sWTO Compliance (December
IV | Impact of cur rent t rends on the Asia-Pacif ic
In a nutshell, therefore, the above suggests that whi le policies
aimed at curbing protectionism have been discussed and
implemented globally for decades, in reali ty i t has remained an
impor tant aspect of international and regional relations.
Having said that, the picture drawn previously leaves
signi ficant margin of manoeuvre to the most determined
countr ies and, one way or another , the Asia-Paci fic is likely to
benefi t from cur rent trends for di fferent reasons.
Some protect ionism in the Asia-Pacif ic too?
Cer tainly, Asian countr ies are well aware of what
protectionism is about.
Japan, Korea or Taiwan are well-known for having suppor ted
nascent industr ies in the 1960's and 1970's. Japanese policies,
in fact, are sti ll being questioned.(19)
Over the past ten year s, mar ket protection policies have
fur thermore been conducted in Indonesia, whi lst South Korea
has doubled i ts tar i ffs on raw mater ials impor ts and Malaysia
has attempted to fight domestic unemployment by putting
restr ictions on foreign wor ker s.
Toys manufactured in China have been restr icted in India thus
leading Bei jing to issue a formal communication before WTO
Commi ttees and creating fear s of a trade war between the two
countr ies. As just mentioned, China is also known for
conducting var ious protective and suppor tive policies. Hence,
'protectionism' is no taboo in the region, where leader s have
never really hesi tated to rely on i t whenever necessar y.
Some concerns raised?
Some concerns have been raised that the trend as cur rently
occur r ing in the West could have negative impacts on the
Asia-Paci fic region.
In par ticular , potential US policies aimed at punishing
outsour cing projects to Asia or Mexico suggest that lower
outwards trade flows might be expected.(20)
In addi tion, the TPP Agreement from which the US recently
wi thdrew had the mer i t of br inging to the negotiation table
impor tant aspects of modern trade, such as e-commer ce,
The Asia-Pacific Circle | Quarterly Report 2017-#2 14
(19) See Rei ji Yoshida, 'In statement to WTO, U.S. urges Japan to fur ther open up auto, farm
mar kets', (The Japan Times, Mar ch 2017).
(20) Mike Dorning , Thomas Black and Nacha Cattan, 'Trump?s Threat Damps Companies?Plans to
Move U.S. Jobs Abroad' Bloomberg Poli tics (December 2016).
The Asia-Pacific Circle | Quarterly Report 2017-#2 15
(21) See 'USProtectionism Tops TPP Demise as Threat to APACGrowth' (Fi tch, Januar y 2017).
(22) As already wi tnessed for the Australia ? EU negotiations. See Timeline for Australia-EU free
trade deal extends as Europe eyes new reali ties' (The Sydney Morning Herald, Mar ch 2017).
(23) These include Hong Kong, Macao, China, Singapore, Malaysia, Japan, Australia, Korea, Chinese
Taipei , China, Lao, New Zealand, Thai land, Brunei Darussalam, Vietnam, Myanmar , Cambodia,
Phi lippines, The Russian Federation, Mexico, Peru, Chi le, Canada, the Uni ted States.
financial ser vices, foreign investment, competi tion or public
procurement which, clear ly, would have created impor tant
cross-border trade and investment oppor tuni ties amongst i ts
twelve Asia-Paci fic countr ies.
Hence, cur rent US trade policies could lead to impor tant
missed oppor tuni ties to increase business and growth in the
For instance, as recently noted by the Fi tch rating agency,
these developments might notably impact Vietnam which, as a
result, might have ver y signi ficant hopes as to the potential
outcomes of i ts recent trade negotiations wi th the EU.(21)
Again, however , cur rent developments in the European Union
suggest a slowdown in the European Commission?s free trade
But the Asia-Pacif ic conduct s dynamic policies
Nonetheless, the Asia-Paci fic has remained a dynamic and
attractive region when i t comes to trade policy and the Trade
Faci li tation Agreement mentioned previously is a good
example of this.
Whi le the agreement only recently entered into for ce, 25 on
the 114 countr ies that have rati fied the agreement or iginate
from the Asia-Paci fic. Said di fferently, in fact, all countr ies ?
par t from Papua New Guinea ? that belong to the ASEAN or to
the APEC have already integrated the TFA to thei r domestic
Thus, whi le the wor ld appear s to have di fficulties dealing wi th
bar r ier s to trade, Asia-Paci fic countr ies seem to be determined
to move on wi th more trade.
In addi tion, the pace at which countr ies in the Asia-Paci fic
Region have been involved in negotiating and concluding free
trade agreements points at a strong determination to ease and
foster cross-border trade.
According to Asian Development Bank data, the development
of free trade agreements in the region has been ver y
signi ficant. Whi le there were no FTA negotiation between
1975 and 1999 (despi te 38 agreements being in for ce), a rapid
acceleration occur red from the year s 2000 wi th 10 ongoing
negotiations by 2003, more than 40 in 2007, 60 in 2013 and
near ly 70 as of 2016.
By 2015, 21 bi lateral agreements had been signed amongst
East, South and South-East Asian countr ies alone (against
none in 2000). Dur ing the same per iod, even more
The Asia-Pacific Circle | Quarterly Report 2017-#2 16
(24) Asian Development Bank Asia Regional Integration Center (2017).
(26) See www.asean.org
signi ficantly, 59 agreements were signed between East, South
and South-East Asian countr ies wi th non-Asian Countr ies. By
2016, 147 free trade agreements were signed and in for ce. (24)
Interestingly however , a shi ft has appeared in the way those
negotiations have been operated. Whi le 10 to 16 agreements
were being signed ever y year between 2004 and 2012 (against
3 in 2003), the number s dropped signi ficantly in the next
year s.(25) This, in fact, could be interpreted as a sign of greater
regional integration since, at the same per iod, large ini tiatives
aimed at developing regional scale free trade agreements were
being negotiated. This is notably the case of the TPP agreement
negotiated between 2008 and 2015 by 12 countr ies in the
region and the RCEP agreement negotiated since 2012 between
16 countr ies including the 10 ASEAN member s.
The ASEAN is involved
The ASEAN, in fact, has been doing signi ficant effor ts over the
The ASEAN Free Trade Area (AFTA) has for instance been
lower ing intra-regional tar i ffs through the Common Effective
Preferential Tar i ff (CEPT) Scheme since Januar y 2003, which
led to eliminating tar i ffs on 64.12 per cent of the regionally
traded products by the end of that year. According to the
ASEAN, the average tar i ff for ASEAN-6 under the CEPT Scheme
is now down to 1.51 per cent.(26)
In terms of non-tar i ffs negotiations ? mar ket access
liberalisation ? in addi tion, the ASEAN has been involved in
negotiations wi th India (since 2002), South Korea (2004), Japan
(2008), Australia and New Zealand (2009) and China (ongoing).
All in all, the member s seem determined to look ahead and,
notably, have recently released a ?ASEAN Economic Communi ty
Bluepr int 2025?plan aimed at introducing strategic measures
for the AECfrom 2016 to 2025.
The Asia-Pacific Circle | Quarterly Report 2017-#2 17
(27) 2016 APECLeader s?Declaration, Lima (November 2016).
(28) See note 11 above.
The APECis sending st rong polit ical messages
The APEC organisation ? 21 countr ies which represented
around 30% of the wor ld population, realised about 50% of
wor ldwide trade and approximately 60% of wor ld GDP in 2015
? is par ticular ly playing a role. Poli tically, at least.
Saying no to pr otect ioni sm. Fi r st, whi lst President Elect
Trump announced in November 2016 that his fi r st measure
when enter ing the Whi te House in 2017 would be to wi thdraw
from TPP so as to preser ve US interests fi r st, the APEC leader s
(including President Obama) were meeting in Lima, Peru. And,
in Lima, the Asia-Paci fic took a fi rm stand against
?We reaffirm our commitment to keep our markets open
and to fight against all forms of protectionism by
reaffirming our pledge against protectionism through a
standstill commitment that we agree to extend until the
end of 2020 and to roll back protectionist and
trade-distorting measures, which weaken trade and slow
down the progress and recovery of the international
In other words, whi lst the G20 refused to take a stand on the
matter and President Trump relinquished US leader ship on
global trade policy and rule-making, the APEC leader s ?
including China ? could take over , replacing USleader ship wi th
new regional dynamics.
Fur ther ing r egional development s. Second, when discussing
trade and investment challenges and oppor tuni ties in Lima,
the APEC Leader s also insisted on the necessi ty to increase
regional integration and connectivi ty by, amongst other
pr ior i ties, fur ther pur suing the Bei jing?s 2014 Roadmap aimed
at creating the wide Free Trade Agreement of the Asia Paci fic
As a reminder , although the content and scope of this
agreement is far from precise, the FTAAP was last year
descr ibed as a future counter -TPP agreement and, at some
point, led us to ask a ser ies of questions as to whether parallel
TPP and FTAAP discussions amounted to a trade and influence
game of thrones.(28)
As of today, however , the FTAAP is only a broad project which
wi ll not mater ialise before year s.
Voluntar i st pol i cies on global t r ade ini t iat ives. Thi rd, and as
mentioned above, the APECis taking the lead on implementing
larger ini tiatives. Four days after the entr y into for ce of the
Trade Faci li tation Agreement (TFA) on Februar y 2017, the
Organisation has put i tself in the shoes of a regional leader
and, in a communiqué, has announced i ts decision to ?mov[e]
quickly?towards implementing this agreement.(29)
The point is impor tant.
Poli tically ? and par ticular ly given the protectionist nature of
cur rent international relations ? i t shows the region?s
determination to move on and push trade faci li tation and
mar ket-opening ini tiatives on a large scale.
Economically, in communicating openly on plans to modernise
regional custom systems in line wi th new global standards,
APEC leader s commi t themselves to ?make i t easier for
businesses to trade in the region [and] to reduce the time and
cost of customs?.
Regional pol i t i cal lever age. Whi lst the TFA intiative is
expected to increase global trade by up to USD 1 tr i llion
annually, chances are that the Asia-Paci fic countr ies?decision
to play the trade-openness card wi ll picture the region as being
even more dynamic and progressive. As a result, this strong
poli tical posi tioning is giving the region an impor tant poli tical
As a reminder , fur thermore, the region is also benefi ting from
cer tain effer vescence at the moment. The emergence of China's
One Belt One Road (OBOR) project - even though i t is cur rently
largely imprecise - is attracting tremendous attentions and
promises to increase trade and infrastructure investment from
China to Europe through roads, rai ls, the ai r and sea. China, in
addi tion, has over the past year s developed var ious reforms
aimed at increasing foreign investor s? access to mainland
capi tal mar kets to compensate for signi ficant capi tal outflows
lately, at the stock mar ket level and at the bond mar ket
Hence, there could be an argument towards greater capi tal
liberalisation in the region.
Last but not least, wi th the end of the TPP agreement, many
comments have resusci tated the Regional Comprehensive
Economic Par tner ship (RCEP) ? once cr i ticised for i ts lack of
The Asia-Pacific Circle | Quarterly Report 2017-#2 18
(29) 'APEC Leads Breakthrough Trade Pact Implementation Push', APEC News Release, Nha Trang,
Viet Nam, 26 Februar y 2017
(30) See The Asia-Paci fic Ci r cle, 'The Hong Kong - China Bond Connect?' (Apr i l 2017) avai lable at
The Asia-Pacific Circle | Quarterly Report 2017-#2 19
ambi tion - involving ASEAN countr ies wi th Japan, India and
Korea and by the same token pictured the Asia-Paci fic region
as a growing policy-maker in relation to global and regional
trade. Impor tantly, in reali ty 7 of the TPP par tner s are already
par t of the RCEP negotiations.(31)
China, as a matter of fact, has already star ted to play the
leader ship card. Whi lst the notion of free trade has long
opposed the US to China ? wi th Washington consistently
pointing at Bei jing for a lack of opening on trade issues(32) ?
Chinese President Xi and Premier Li have increasingly and
repeatedly insisted on thei r for thcoming role as free trade
leader s. In Januar y 2017, President Xi called for a new
multi lateral ?stable and balanced?global order whi le, in Mar ch
2017, Premier Li rei terated the approach wi th a clear ?we don?t
want a trade war?statement.(33)
At the same per iod, Bei jing finally warned against US posi tions
questioning the WTO dispute settlement body, as previously
In shor t, whi lst the region is already economically dynamic,
future development prospects combined wi th a poli tical
decision to reject protectionism and a poli tical commi tment to
fur ther free trade talks are therefore sending the message that
the Asia-Paci fic is gaining leader ship.
More t rade par tners to come
In fact, and as already mentioned in the past on Ci r cle's
Asia-Paci fic analyses,(34) Amer ica's trade par tner s are already
reacting, wi th var ious leader s making i t clear that trade
negotiations wi ll continue.
Long descr ibed as a TPP-winner , Vietnam has warned that i t
would fur ther mar ket-opening policies anyhow.
Representatives from Peru, the Vice-Minister of Trade for Chi le
admi tted looking at other regional development options, the
Pr ime Minister of New Zealand insisted that 'even i f the US
doesn't want to engage in free trade, President Trump needs to
know other countr ies do'. Meanwhi le, commentator s have
repor ted a ser ies of measures being proposed wi thin the
Mexico Congress as retaliation to cur rent policy shi fts in the
(31) Australia, Brunei , Japan, Malaysia, New Zealand, Singapore and Vietnam.
(32) The Uni ted States Trade Representative cur rently lists 9 disputes wi th China before the WTO,
thus making the US-China relationship the most tense of all. See Office of the Uni ted States Trade
Representative, ?2017 Trade Policy Agenda ? The President?s Trade Policy Agenda?.(
(33) See, ?China pledges to lead the way on global trade?(The Financial Times, November 2016)
and ?Premier calls on Washington to find common ground amid simmer ing tensions over a raft of
issues?(South China Morning Post, Mar ch 2017).
(34) The Asia-Paci fic Ci r cle, 'Trump's TPP & trade policy wi ll make China poli tically great
again'(December 2016) avai lable at https://goo.gl/rB6yQ2.
The Asia-Pacific Circle | Quarterly Report 2017-#2 20
(35) 'EU and China agree on scope of the future investment deal' (European Commission,Januar y
Australia has announced the commencement of trade
negotiations wi th Hong Kong in May, and European countr ies
simi lar ly demonstrate an increasing interest for the region.
The negotiations on a free trade agreement wi th Vietnam have
been concluded on Februar y 1st, 2017 whi le the agreement
negotiated in 2014 wi th Singapore is cur rently wai ting to be
approved by the EU Commission.
Needless to say, of cour se, that the EU already has a signi ficant
amount of trade discussions and agreements in place wi th
var ious countr ies in the Asia-Paci fic region, including South
Korea, Australia, Chi le, Peru, Mexico, Russia - not to forget
Canada wi th CETA. An investment agreement is also being
negotiated between the EU and China, who have par ticular ly
agreed to ?improve mar ket access oppor tuni ties for thei r
investor s by establishing a genuine r ight to invest and by
guaranteeing that they wi ll not discr iminate against thei r
respective companies?. (35)
Hence, whi le financial commentator s have not missed the
oppor tuni ty to talk about a European 'trade pivot' towards the
Asia-Paci fic, i t appear s that the region could, one way or
another , benefi t ? rather than suffer ? from cur rent
protectionist development wor ldwide.
V | So...
So, protectionism has always been a poli tical habi t - not to say
necessi ty, in fact - and i t is likely to remain a major aspect of
international relations in the future. Of cour se, many effor ts
are made to break bar r ier s but, in the main, the ver y idea of
liberalisation and increased mar ket access is to faci li tate
oppor tuni ties globally. Hence, there wi ll always be a need for
protection, one way or another.
As far as the Asia-Paci fic region is concerned, however ,
protectionism as i t is cur rently developing - par ticular ly in the
West - might actually be a chance.
The most recent threats have come from the Uni ted States and
Europe, and whi le Washington wi ll have to manage and
mi tigate an isolation r isk , Europe wi ll also have to face i ts own
Of cour se, the protectionist trends in the West wi ll not have an
immediate impact on the Asia-Paci fic as, in reali ty, agreements
wi ll take a long time to deliver results. Negotiations take
tremendous time and implementation, i f any, also requi res
adaptation and wi ll necessi tate even more patience.
The cur rent shi fts, nonetheless, wi ll send the message that
from a poli tical point of view the Asia-Paci fic emerges as a
region and progressively bui lds i ts own leader ship. Hence, in
the medium term, the Asia-Paci fic wi ll gain in terms of global
trade leader ship and development.
From a business point of view, the shi fts wi ll send the message
that the region wi ll remain dynamic and progress or iented.
Hence, in the longer term and from an economic per spective,
the Asia-Paci fic wi ll benefi t from this change in trade
An impor tant question wi ll need to be tackled, however.
Wi th technological progress reducing the economic benefi ts
provided unti l now by Asian outsour cing oppor tuni ties, i t is
likely that the Asia-Paci fic region wi ll not gain from cur rent
developments i f i t only capi talises on cheap labour and fast
production models. This means, clear ly, that in addi tion to
creating posi tive and stimulating trade policies, the region wi ll
have no choice but to invest massively in innovation and in
tomor row's industr ies. Fai ling which, i t wi ll lose i t's
The Asia-Pacific Circle | Quarterly Report 2017-#2 21
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being made available for discussion purposes only and in no case should
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but, whilst we consider our analyses reliable, our conclusions are only
formulated based on the information available to us at the time of
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regional trends, should be considered as timely opinions and
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evolve. Hence, the Circle provides no warranty of any kind and shall in
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