China and Economic Integration in East Asia: Implications for the United States

An essential pillar of a US strategy toward East Asian integration is acceptance of the legitimacy and desirability of that process. US acceptance of the economic integration of Europe is the model. Further, the United States--as well as Canada and Mexico--should seek to nest any new Pacific-Asia trade arrangements in a broader Asia-Pacific framework: Creation of a Free Trade Area of the Asia Pacific (FTAAP) would embed Pacific Asia in the Asia Pacific. Another part of the US strategy should be to strengthen the substantive capabilities and political legitimacy of the global economic institutions, especially the World Trade Organization and the International Monetary Fund, to minimize the need for (and appeal of) new Asia-only regional compacts.

Pacific Asia and the Asia Pacific: The Choices for APEC

The Asia Pacific Economic Cooperation (APEC) forum, which set out to achieve "free and open trade and investment in the region" and led highly significant liberalization initiatives in the 1990s, has been stagnating for the past decade. The main cause of APEC's marginalization was clearly the decision of key Asian countries to prioritize economic cooperation within East Asia itself rather than across the broader APEC construct: a focus on Pacific Asia rather than the Asia Pacific. Bergsten argues that for APEC to regain the dynamism and leadership position it enjoyed during its initial decade, it will have to reconcile the strong unresolved tensions between its original main purpose--to "avoid drawing a line down the middle of the Pacific"--and the Asia-centric cooperation priorities of most of its key members. The global environment in which APEC will be operating in the next 20 years is vastly different from that of the past two decades, with the G-20 replacing the G-7/8 as the chief steering committee for the world economy and the informal and de facto G-2 between China and the United States playing an increasingly central role. These dramatic changes in the world economy and global governance patterns will influence the policy choices of countries in Asia but they do not alter the basic issue: Do the Asian members of APEC want a primarily Pacific Asia future or do they want an Asia Pacific dimension as well? Bergsten recommends that APEC renew aggressive leadership of the Asia Pacific. This option would reconcile the "Pacific Asia versus Asia Pacific" debate by embracing both as parallel initiatives. The United States would agree to support Asian regional integration as long as its components were compatible with the global rules, and the Asians would agree to simultaneously liberalize across the Pacific. The Obama administration is formulating a new trade policy for the United States and has already signaled a focus on Asia. The timing offers a golden opportunity for Pacific Asia to simultaneously achieve its regional objectives and solidify its relationship with the United States. APEC could thereby restore the dynamic leadership role of its initial decade and immeasurably strengthen both the region and the world economy as it addresses the likely global evolution of the next 20 years.

Toward a Free Trade Area of the Asia Pacific

At their latest annual summit in Vietnam in November 2006, the leaders of the 21 members of the Asia Pacific Economic Cooperation (APEC) forum agreed to "seriously consider" negotiating a Free Trade Area of the Asia Pacific (FTAAP). The FTAAP initiative may well turn out to be the best, or perhaps only, way to catalyze a substantively successful Doha Round. If it cannot do that, an FTAAP can still offer a Plan B to restore the momentum of trade liberalization, prevent further proliferation of bilateral and subregional preferential trade arrangements, avoid renewed risk of "drawing a line down the middle of the Pacific," channel the US-China economic conflict into a more constructive, less confrontational context, and revitalize APEC itself. Perhaps most important, an FTAAP could maintain US engagement in Asian, and even global, trade relations by providing a basis for congressional extension of trade promotion authority in mid-2007 and a negotiating momentum that the next US president in early 2009 will feel compelled to maintain.

The New Asian Challenge

The initial postwar challenge from East Asia was economic. Japan crashed back into global markets in the 1960s, became the largest surplus and creditor country in the 1980s, and was viewed by many as the world’s dominant economy by 1990. The newly industrialized countries (Korea, Taiwan, Hong Kong, Singapore) followed suit on a smaller but still substantial scale shortly thereafter. China only re-entered world commerce in the 1980s but has now become the second largest economy (in purchasing power terms), the second largest recipient of foreign direct investment inflows, and the second largest holder of monetary reserves. Indonesia and most of Southeast Asia grew at 7 percent for two or more decades. The oil crises of the 1970s and the financial crises of the late 1990s injected temporary setbacks but East Asia has clearly become a third major pole of the world economy, along with North America and Western Europe.

World Trade at Risk

C. Fred Bergsten The decision by the House of Representatives on April 10 to change the rules for Congressional action on trade agreements drives a gaping hole in US trade policy and poses the gravest threat to the global trading system in decades. By rejecting long-settled procedures that prevented Congressional sidetracking of trade deals agreed by fully authorized Presidents, it instantaneously destroyed the credibility of the United States as a negotiating partner in the eyes of the rest of the world. Unless reversed soon, the House action will severely damage both the US economy and US foreign policy. It will particularly undermine the presumed goal of any new Administration in 2009 to restore our country's standing as a reliable partner in a cooperative multilateral world. It would help if Congress and the present Administration could pick up the pieces and pass the Colombia agreement, and the pending South Korea and Panama agreements as well. But the fundamental problem of US international credibility on trade will remain until a foolproof Trade Promotion Authority, or some equivalent successor, is renewed and indeed ensconced permanently. This can only be done, probably by the next Administration, as part of a "grand bargain" that recognizes the costs of liberalization and thus includes a major expansion of governmental assistance to workers dislocated by trade and perhaps other sources of dynamic change in our economy. In the absence of such a renewed foundation for an open and active US trade policy, both our economy and our foreign policy will suffer severely.

Reforming OPIC for the 21st Century

The mission of the Overseas Private Investment Corporation (OPIC)--created in 1969 through an amendment to the Foreign Assistance Act--is "to mobilize and facilitate the participation of United States private capital and skills in the economic and social development of less developed countries and areas, and countries in transition from nonmarket to market economies, thereby complementing the development assistance objectives of the United States." OPIC pursues this mission by insuring US investors against political risks that include expropriation, currency inconvertibility, and political violence; by financing US investors overseas through loans and loan guarantees; and by providing credits to private investment funds that make equity investments in businesses in underdeveloped countries and regions.

The Coming Resolution of the European Crisis

The economic and financial problems in the euro area are clearly serious and plentiful. An increasing number of commentators and economists have begun to question whether the euro can survive. There are only two alternatives. Europe can jettison the monetary union or it can adopt a complementary economic union. Every policymaker in Europe knows that the collapse of the euro would be a political and economic disaster for all and thus totally unacceptable. Europe's overriding political imperative to preserve the integration project will surely drive its leaders to ultimately secure the euro and restore the economic health of the continent.

China's Rise: Challenges and Opportunities

The global economic crisis has made clear China's importance and expanding role on the world stage. China's Rise: Challenges and Opportunities, explains actions both China and the United States can take that will not only maximize the opportunities for China's constructive integration into the international community but also help form a domestic consensus that will provide a stable foundation for such policies. This book is unique in that it analyzes the authoritative data on China's economy, foreign and domestic policy, and national security. China is confronting domestic challenges that are in many ways side effects of its economic successes, while simultaneously trying to take advantage of the foreign policy benefits of those same successes. * The book from The China Balance Sheet Project, a joint, multiyear project of the Center for Strategic and International Studies and the Peterson Institute, discusses China's military modernization, China's increasing soft power influence in Asia and around the world, China's policy toward Taiwan, domestic political development, Beijing's political relations with China's provincial and municipal authorities, corruption and social unrest, rebalancing China's economic growth, the exchange rate controversy, energy and the environment, industrial policy, trade disputes, and investment issues. The paperback book features a new introduction that addresses events since fall of 2008 and provides context for the book in light of those events.

China's Rise: Challenges and Opportunities

China has emerged as an economic powerhouse (projected to have the largest economy in the world in a little over a decade) and is taking an ever-increasing role on the world stage. China's Rise: Challenges and Opportunities will help the United States and the rest of the world better comprehend the facts and dynamics underpinning China's rise--an understanding that becomes more and more important with each passing day. Additionally, the authors suggest actions both China and the United States can take that will not only maximize the opportunities for China's constructive integration into the international community but also help form a domestic consensus that will provide a stable foundation for such policies. Filled with facts for policymakers, this much anticipated book's narrative-driven, accessible style will appeal to the general reader. This book is unique in that it analyzes the authoritative data on China's economy, foreign and domestic policy, and national security. * The expert judgments in this book paint a picture of a China confronting domestic challenges that are in many ways side effects of its economic successes, while simultaneously trying to take advantage of the foreign policy benefits of those same successes. China's Rise: Challenges and Opportunities from The China Balance Sheet Project, a joint, multiyear project of the Center for Strategic and International Studies and the Peterson Institute, discusses China's military modernization, China's increasing soft power influence in Asia and around the world, China's policy toward Taiwan, domestic political development, Beijing's political relations with China's provincial and municipal authorities, corruption and social unrest, rebalancing China's economic growth, the exchange rate controversy, energy and the environment, industrial policy, trade disputes, and investment issues.