Spotlight: Positive interaction among top three world economies needed to ensure smooth APEC cooperation

As the world's top three economies, the economic relations between the United States, China and Japan are of vital importance to the well-being of the economic cooperation in the Asia-Pacific Economic Cooperation (APEC) organization, experts have said.

The two-day APEC Economic Leaders' Meeting will conclude on Thursday, as leaders wrap up their discussions on enhancing regional economic integration and boosting development amid slow global growth.

As key players in APEC, healthy interaction between the United States, China and Japan will not only promote economic development in the region, but also facilitate the building and improvement of the cooperative mechanism, making an institutional impact on regional integration.

TOP THREE DO MATTER

The continent of Asia accounts for one third of the world's economic output, while APEC economics account for nearly 60 percent of the world GDP.

"How the Asia-Pacific develops will certainly have a major impact on the world," Chinese Ambassador to the United States Cui Tiankai said during a speech in Houston in May.

Highlighting its importance compared with European and Northern American economic zones, a Japanese researcher said that the Asian economic zone, which boasts the fastest growth among the three areas, is the center of the global economy.

Its development will not only benefit regional countries, but also economies outside the continent, said Kiyoyuki Seguchi, research director of the Canon Institute for Global Studies, noting that even the United States is trying to get increasingly involved in Asian economic development so as to bolster its domestic growth.

Commenting on the role of China, the United States and Japan in APEC, Zhao Jianglin, a researcher at the National Institute of International Strategy under the Chinese Academy of Social Sciences, said their influence is two-fold.

On the level of market and trade, the three economies, with their huge economic volume, have been driving the economic growth in the APEC region, she said.

Japan's long-time foreign investment, the United States' imports of products -- especially consumer goods -- and China's rapid growth and increasing influence have constituted the top three economies' very important status in global economic development.

In the first half of 2015, the international trade volume of the United States, though reduced compared with the same period last year, totaled 2187.4 billion U.S. dollars, of which nearly 60 percent was import volume, according to the U.S. Department of Commerce.

The three giant economies are also crucial in shaping the policy of APEC, Zhao said. Interaction on the policy level between China and the United States, such as negotiations on the China-U.S. Bilateral Investment Treaty, will help provide a stable environment for regional economic development and lead the development of a cooperative mechanism for APEC.

Positive interaction among the top three economies can only bring collective benefits to the region, she said.

TPP VERSUS WIDER FTAAP

During the APEC summit held in Beijing last year, the APEC members agreed to start a joint strategic study on the Free Trade Area of the Asia-Pacific (FTAAP), marking the official launch of the region-wide free trade area process.

Feasibility and cost-benefit studies of the FTAAP are currently being assessed on schedule for delivery next year. The free trade zone encompassing the 21 APEC members should potentially be implemented no later than 2025 if agreements can be reached.

Meanwhile, the United States, Japan and 10 other APEC members reached agreement on the Trans-Pacific Partnership (TPP) last month after years of intensive negotiations. The U.S.-led trade pact has drawn criticism for not being inclusive or open.

In a political sense, leaving out China and Russia from the TPP is not giving a good signal, said Prof. Fariborz Moshirian, director of the Institute of Global Finance at the University of New South Wales in Australia.

Moshirian argues that in an ideal world, negotiations for regional agreements like the proposed FTAAP would go through the World Trade Organization, where decisions are economically driven.

Economic modeling in 2014 shows global income gains from the FTAAP would be more than eight times higher than from the TPP, according to a Xinhua report last week.

"The advent of increased bilateral and plurilateral trade agreements between APEC member economies has caused, to some extent, a lack of faith in APEC's overall purpose," said Akihiro Hoshino, senior quantitative strategist of Japan' s Nomura Holdings Inc., noting that regional diplomatic quarrels have done little to bolster the efforts, ambitions and overall objectives of the APEC mechanism.

The free trade area of the Asia-Pacific remains the ultimate vision for APEC as the vision of free trade including every one of those 21 economies, said Matthew Goodman, who holds the William E. Simon Chair in Political Economy at the U.S. think tank Center for Strategic and International Studies.

"I think the U.S. will continue to endorse that as the ultimate vision," the senior adviser for Asian economics said.

"I don't think the U.S. is eager to start a negotiation now, an actual negotiation towards an FTAAP. They need to get TPP ratified and implemented. But ultimately, that (FTAAP) is the path and I'm sure there will be talk about that," Goodman said.

APOLITICAL RESOLUTION

Chinese President Xi Jinping made a landmark visit to the United States in September. Meanwhile, Chinese Premier Li Keqiang, along with South Korean President Park Geun-hye, met with Japanese Prime Minister Shinzo Abe in Seoul earlier this month in a historical trilateral summit after a three-and-a-half-year hiatus due to territorial and historical disputes between Japan and its neighbors.

"It is more necessary to have unobstructed dialogue when conflicts escalate, and all countries need to recognize and prioritize this point," the Japanese researcher, Seguchi, said.

He noted that China, Japan and South Korea confirmed in their summit to accelerate the trilateral free trade talks, and that regional countries should make an "apolitical resolution" to accelerate the process to form the FTAAP.

Seguchi also suggested the top three economies work together to build norms or establish new rules that can be accepted by all sides to form the Asia-Pacific free trade area.

His idea of an "apolitical" approach is echoed by Hoshino, who also stressed the urgency to set aside non-trade related issues.

The United States, China and Japan need to maintain a realistic view of the TPP deal as being a "stepping stone" and be the leading advocates of the APEC's expansion and identity as the predominant force in the region, Hoshino said.

Goodman, who also served as White House coordinator for the APEC and the East Asia Summit forums during U.S. President Barack Obama's first term, pointed out the merits of APEC.

"APEC is a slightly different kind of forum because it involves not negotiations but discussions of how to remove barriers to trade and investment in a non-binding way, in a consensual way," Goodman said.

It's easier to make progress in APEC on some useful liberalization measures than formal negotiations, he said.

As the three largest players in the APEC framework, Hoshino said, the onus of responsibility is on the United States, China and Japan to ensure progressive, forward-thinking dialogue that provides clarity and direction for APEC and encourages both FTA members and non-FTA members to rise above regional disparities for the greater good of the region. (Matt Burgess contributed to the article) Endi