Thayer Consultancy Background Briefing:

ABN # 65 648 097 ',123

APEC and TPP II, RCEP and
FTAAP
Carlyle A. Thayer
November 5, 2017

Ql: What are FTAAP's [Free Trade Agreement in Asia and the Pacific] advantages
compared to the others such as the TPP [Trans Pacific Partnership], RCEP [Regional
Comprehensive Economic Partnershipl or simply the FTAs [Free Trade Agreements]?
Why do APEC [Asia Pacific Economic Cooperation] members need the FTAAP both
economically and politicalty?
ANSWER: The FTAAP is inclusive of the 2L members of APECThe FTAAP is aq
aspiration at this stage and would represent a trade off between developed and
developing countries. ln fact, there are fifty-four FTAs between APEC members on
the books at present. lndia is not a member.
The core of the TPP comprises 1.2 members of APEC and it was a high-standard
multilateral arrangement that went beyond purely trade and investment issues to
include regulatory rule-making for services, investment, the digital economy, the
environment, protection of intellectual property rights and labour standards. The
TPP was referred to as WTO [World Trade Organization] Plus in its approach,
providing market access to all its members. lt also included 24 separate regulatory
chapters. This meant a high cost for developing countries in bringing their dornestic
legislation into line with TPP standards.
RCEP is a lower-order agreement that attempts to harmonise and lower the tariff
structures between ASEAN [Association of Southeast Asian Nations] and the six
countries with which it has free trade agreements (Australia, China, lndia, Japan,
South Korea and New Zealand). FTAs are general bilateral, NATFA lNorth America
Free Trade Agreement] is an exception it includes Canada, Mexico and the United
Statets. RCEP is referred to as WTO compl;iant with its focus on trade liberalisation.
Its consensus approach means that contentious issues have been excluded from
discussion. This lowers the standard.
An FTAAP would promote economic integration across the Asia-Pacific. APEC
members are formally economies because Hong Kong and Taiwan are members, This
puts a constraint on political cooperation.

Q2: What are the obstacles that have made the FTAAP so cumbersome in recent
years? There are some suggestions that APEC economies (like what happened in
Peru lait year) ignored FTAAP and instead focused on the TPP. What do you think
about this?
 2

ANSWER: The main reason is protectionism. APEC cannot dictate what it members
must do and it proceeds on consensus. Consensus has been elusive because of the
differing national and economic interests of APEC members. A Trump Administration
spokesperson, for example, basically says the prerequisite to the FTAAP is for
countries to sign "free and fair" high standard FTAs with the United States
committing themselves to robust structural reforms based on national work plans
with built in deadlines. Only after these high standard FTAs are completed would the
U.S. consider joining the FTAAP.

Q3: What is the TPP and its future (with/without the United States)?
ANSWER: There is a strong push by Japan and Australia for a TPP LL without the
United States. This will require rewriting the requirement that 80% of the economies
must agree before the TPP can come into force. The US represents about sixty per
cent of the economies. Without the U.S. under the text in the present agreement
there can be no TPP. A major draw card was access to the big U.S. market by
developing economies such as Vietnam. The question is without this incentive what
do developing countries gain by signing up to a TPP 11? Also, the U.S. insisted on a
number of non-trade issues as mentioned above. Without the U.S. and access to its
market, it is likely developing countries would want these higher standards removed.
Q4: Could the FTAAP "replace" TPP?
ANSWER: The sheer size of APEC and Trump's aversion to multilateral trade
arrangements mitigate against the FTAAP getting off the ground. lf eleven countries
can agree on a TPP without the United States they could re-write membership rules
to make it possible for the U.S. to join at a later date. At that time higher standards
could be brought in if they weren't included from the start.
Q5: China is pushing FTAAP ah'ead. Do you think the deal is Beijing's geopolitical
priority?
ANSWER: Xi Jinping has taken the high road to promote globalisation and economic
integration and to oppose protectionism. This is obvious to position China as t'he
leader in this area. Pushing the FTAAP puts the U.S. in a corner as an obstructionist
country holding back progress. China prefers the RCEP.

Suggested citation: Carlyle A. Thayer, "APEC and TPP ll, RCEP and FTAAP," Thoyer
Consultancy Background Brief , November 5, 2017. All background briefs are posted
on Scribd.com (search for Thayer). To remove yourself from the mailing list type,
UNSUBSCRIBE in the Subject heading and hit the Reply key.

Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.
 Thayer Consultancy Background Briefing:
ABN # 65 648 097 123
APEC: China and the US - Their
Game Plans

Carlyle A. Thayer
Novemb er 91 2017

We request your assessment of the following issues:

Q1. What do the US and China want from each other after the visit of President
Trump to Beijing?
ANSWER: Xi Jinping wants the United States to acknowledge China as an equal,
China's dominant role in the Asia-Pacific, and to respect China's self-defined core
interests. Xi also wants the United States to cooperate with China on a range of
regional and international issues to signal to the world that China is now a major
power.

Beijing wants the United States to accept that even if China applied further sanctions
on North Korea that would not solve the issue of nuclear proliferation. China also
wants to give more prominence to diplomacy to resolve the North Korean issues and
get the United States to cease provocative actions that could lead to armed conflict.
China also wants the United States to end restrictions of the exports of high-level
technology to China.
Donald Trump wants China to apply further sanctions on North Korea such as a cut in
oil exports and the expulsion of Korean workers in China. Trump believes that
Chinese pressure is indispensable to ending ballistic missile and nuclear tests in
North Korea. Trump also wants China to end restrictive trade policy and to balance
bilateral trade. Trump views the US-China relationship as transactional, dealing issue
by issue. ln other words, President Trump is not seeking a G2 relationship in which
the United States and China set the regional and global agenda.
Q2, President Xi Jinping has gained big achievement after the 1-9th National Congress
of the Chinese Communist Party. Some experts consider President Xi as the most
powerful leader of China after Mao's era. Could you give your assessment on
possible changes in foreign policy toward Asia Pacific on issues such as North Korea
and the South China Sea?

ANSWER: The 19th Congress ratified Xi's past policies and there will be more
continuity than change. China will hold firm on its policy towards North Korea. China
is opposed to North Korea's ballistic missile and nuclear tests because they are
destabilizing. China also does not want the Kim Jong-un regime to collapse and for a
reunified Korea to emerge in which South Korea is dominant and remains as ally of
 2

the United States. China also opposes provocative statements and actions by Trump
and the U.S. military.

It was notable that Xi's work report to the 19th congress mentioned the construction
of artificial islands in the South China Sea as one of his accomplishments. China has
set two conditions on negotiating a Code of Conduct: first, that the situation in the
South China Sea remains generally stable and second that there is no interference by
outside powers (read the United States). China will continue to pursue the
diplomatic path while gradually consolidating its military position in the South China
Sea.

China will become more assertive on the regional and global stage to support China's
rise in the expectation that other countries will either accept or acquiesce to China's
leadership. Basically, China's goal of undermining U.S. hegemony in the Asia Pacific
will be stepped up. For example, China will take advantage of Trump's withdrawal
from the TPP to press its Belt and Road lnitiative, support globalization, push the
Regional Comprehensive Economic Partnership and oppose protectionism.

Q3. Currently, there is information about deeper cooperation among the US, Korea,
Japan, Australia and lndia in the security of the Asia - Pacific. Do you think this is a
U.S. initiative to contain China?

ANSWER: While there has certainly been some movement to create a coalition of
likeminded democracies to counterbalance China, the devil is in the detail. lndia
does not want to join the United States in an arrangement aimed at explicitly
containing China. There is debate in Australia whether or not Australia should join
"the quad" along with the US, Japan, and lndia.
It is more likely this coalition plus South Korea will have a North Korea focus and less
relevance to the South China Sea.

Q4. Currently, CNN has reported that the White House does not have a clear policy
toward Asia - Pacific yet. What is your assessment about this comment?
ANSWER: The U.S. Congress passed a law in 1986 requiring each new Administration
to submit a National Security Strategy (NSS) within 150 days of taking office. No NSS
has been submitted to Congress and insiders tell me a new NSS may be submitted in
the first half of 2018 at the earliest. At the moment U.S. policy is reactive and
overwhelmingly focused on North Korea
Q5. The US has withdrawn from the TPP. lt seems like China is attempting to replace
the US's influence in the region (at least in the area of economy) by its financial
initiatives. Could you give your assessment about the possible response of the US
about this likelihood?
ANSWER: China already has a free trade agreement with ASEAN and is pressing
ASEAN to raise this agreement to a higher level. China has also jumped on board to
support the Regional Comprehensive Economic Partnership. Meanwhile, eleven of
the original signatories to the TPP, minus the United States, have just agreed to
continue negotiations. China's economic influence is dominant because it is the
largest trading partner of virtually every Southeast Asian state. Now China is pushing
infrastructure development through its Belt and Road lnitiative.
 J

Despite Despite China's rise the United States has substantial economic interests in
the region. lt is one of the top three trade partners with most countries. U.S.
investment far outweighs that of China. President Trump in his address to the APEC
CEO Summit committed the U.S. to get the World Bank and other financial
institutions to fund infrastructure. So there will be continued China-US completion in
this area. China has the advantage because it had the largest reserve of funds to
commit.

Q6. What do you think is the message President Xi has sent to other leaders in APEC
20t7?
ANSWER: President Xi offered a strong contrast to Trump's go it alone approach. Xi
has positioned China as the leader of regional economic integration on a multilateral
basis - of course with China at the centre.

Q7. What do you think is thhe message of President Trump has sent to other leaders
in APEC 2077?

ANSWER: Donald Trump has signaled that the United States remains in the economic
game in the lndo-Pacific but on a bilateral basis. Southeast Asian countries, however
dependent they are on China, also need access to the American market. Trump
clearly if indirectly criticized China's economic approach to the region, especially the
role of state owned enterprises and the role of its central government. Trump
pressed for private enterprises to play the key role.

Southeast Asian nations will continue to cooperate with China and support the Belt
and Road lnitiative and at the same time Southeast Asian nations will also
renegotiate their economic relationship to the United States. The difficulty here, as
Trump Administration officials have revealed, is that the United States lacks
sufficient trade specialists to negotiate too many free trade agreements at the same
time. The bottom line is that regional states cannot count on Trump or the United
States to support regional integration through existing or new multilateral
arrangements such as APEC, RCEP or the TPP L1.

the US - Their Game Plans,"

Suggested citation: Carlyle A. Thayer, "APEC: China and
Thoyer Consultoncy Bockground Brief, November 9,2017. All background briefs are
posted on Scribd.com (search for Thayer). To remove yourself from the mailing list
type, UNSUBSCRIBE in the Subject heading and hit the Reply key.

Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.
 Thayer Consultancy Background Briefing:
ABN # 65 648 097 123
Trump's 'Free and Open, Indo-
Pacific Region

Carlyle A. Thayer
Novemb er 91 2017

We request your assessment of Trump's increased use of the phrase

lndo-pacific,
whether it is significant that he uses that instead of Asia-pacific
and whether we
have enough specifics yet to see a detailed lndo-Pacific policy
emerging from his
administration?
ANSWER:

The use of the term lnto-Pacific is not new, Trump appears

to be giving it a new spin...
I have had a long association with the Centre for Defence and Strategic Studies
(CDSS) at the Australian Defence College.
CDSS is the highest defence course in
Australia where senior officers go up to one star rank.
After three years with the Asia-Pacific Centre for Security Studies
in Hawaii (US
Pacific command) I returned to Australia to co-ordinate
the senior course at GDSS for
three years (2002-04)' one major section was on the Asia-pacific.
since then I have
been invited back as a visiting fellow to introduce the
Asia-pacific bloc. Around 4-5
years ago this was retitled lndo-Pacific, the
lndo-Asia-pacific and now back to lndo-
Pacific.

To cut this short, lndo-Pacific was a term used by US and Australian defence
officials
to identify the increasing emergence and importance of the lndo-pacific as a
maritime region linking the western Pacific with the lndian
ocean. part of this was
due to lndia's emerSence and a shift from Look East to
Act East. Also the U.s. pacific
command embraces an area of operations that includes lndia
in the west to Japan in
the east.
This year I went back to GDSS and sure enough the
academic block on the region was
titled lndo-Pacific.
ln 2007, then Prime Minister Abe began to advocate a "free
and open,, lndo-pacific
with a special focus on relations with lndia. Both lndia and
Japan have revived this
term with Abe's return as prime minister. Abe revived this concept
discussions with Australia's prime Minister Malcolm
in 2OL7 in
Turnbull.
Now to fast forward to the Trump Administration: secretary
of State Rex Tillerson,s
visit to lndia resulted in the revival of the lndo-pacific as geographic
a region.
Trump's use of "free and open" has been adopted to
further his aim of negotiating
better bilateral trade deals.
 2

Congressed passed a law in L986 requiring each new Administration to submit a

national security strategy (NSS) within 150 days of coming into office. This deadline
has not been met by the Trump Administration.

The Trump Administration's NSS is still a work in progress and the latest information
is it will be completed by the first half of 2018 at the earliest. Other US regional
security strategies as derivative of the NSS, I fully expect the NSS and the later US
Maritime Strategy will use the term lndo-Pacific. This was earlier reflected in
Australia's Defence White Paper.
Historical note: although the term Asia-Pacific is used, such as APEC, the US
invariably refers to itself as a Pacific power (whereas China argues the US is an
outside power). When Asia was used in the lndo-Asia-Pacific iteration, it was to
overcome criticism that it omitted the Asian landmass - to wit China. But in reality
the US alliance system is maritime focused and the increasing partnership with lndia
lends itself to privileging the term lnto-Pacific.

Suggested citation: Carlyle A. Thayer, "Trump's 'Free and Open' lndo-Pacific Region,"
Thoyer Consultoncy Bockground Brief , November 9, 20L7. All background briefs are
posted on Scribd.com (search for Thayer). To remove yourself from the mailing list
type, UNSUBSCRIBE in the Subject heading and hit the Reply key.

Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.
 Thayer Consultancy Background Briefing:
ABN # 65 648 097 123
APEC: Trump's Address to
APEC CEO Forum
Carlyle A. Thayer
November 10, 2017

What is your assessment of Trump's speech on the lndo Pacific at the APEC CEO
Forum in Da Nang? From our perspective lt looks pretty dark and threatening; and it
does take aim at Beijing.

ANSWER:

President Trump's speech to the APEC CEO Forum laid out starkly his America First
approach - "my way or no way." Trump, like the real estate salesman he is, wrapped
up his deal with reassurance of respect for fairness, reciprocity and sovereignty of
prospective trade partners. Negotiations were to be bilateral; but Trump's offer was
a one-way street.

Trump showed disdain for multilateral approaches and thus undermined APEC's
objective of achieving trade and investment liberalisation on a multilateral basis.
Trump has a zero sum view of trade, all trade must be balanced. Regional states
cannot walk away because they need access to the American market. Regional states
will continue to pursue multilateral arrangements. ASEAN and China will continue
talks on raising the level of their free trade agreement. ASEAN, China and other
dialogue partners (minus the United States) will continue discussing the Regional
Comprehensive Economic Partnership. And eleven key economies, who are APEC
members, will also push negotiations on a TPP 1L, also without the United States.
is pushing the development of an ASEAN Economic Community. They cannot count
on U.S. support, Trump's push for bilateral FTAs will isolate the United States in the
region. ASEAN

On a positive note, Trump fired a shot across the bow of China's Belt and Road
lnitiative by advocating a greater role for the World Bank and Asian Development
Bank in funding infrastructure development in the region. However, regional
demands for infrastructure funding are so great Trump's new approach will have to
compete with China's Belt and Road lnitiative.

Suggested citation: Carlyle A. Thayer, "APEC: Trump's Address to APEC CEO Forum,"
Thayer Consultancy Background Brief , November LO, 2017. All background briefs are
posted on Scribd.com (search for Thayer). To remove yourself from the mailing list
type, UNSUBSCRIBE in the Subject heading and hit the Reply key.
 2

Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.
 Thayer Consultancy Background Briefing:
ABN # 65 648 097 123
APEC Summit - The TPP 11 and
Donald Trump
Carlyle A. Thayer
November L0, 2017

We request your assessment about important developments at the APEC Summit

2017 in Da Nang. Eleven nations have agreed in principle on a Trans Pacific
Partnership (TPP) trade deal after a three-hour closed door meeting last evening
(Nov 9). Can you provide an assessment of the following issues:

L What are TPP members' motivations to take this step and what will come
next? Will the last stop during President Donald Trump's Asia visit to Manila make
any further difference on the fate of the TPP?

ANSWER: We now know from Trump's speech to the APEC CEO Forum that the
United States will only support bilateral trade agreements on U.S. terms and that the
United States will not support multilateral efforts. Trump is running against the
regional tide that promotes further integration by greater trade and investment on
a multilateral basis.

The TPP 11 represents a multilateral trade arrangement that is WTO Plus. ln other
words, it complies with existing requirements plus higher standards in services,
protection of intellectual property rights, environmental and labour concerns. The
more advanced members of the TPP LL favour this approach while the developing
members must make sacrifices to gain advantage. The TPP !1 is like a sport coach
telling his players "no gain without pain."
The alternate is ASEAN's Regional Comprehensive Economic Partnership (RCEP) now
championed by China. This is considered WTO compliant. lt aims to harmonize the
tariff structures between ASEAN and its six dialogue partners. This will now continue
without the United States.
The eleven TPP members need to rewrite the original agreement that took account
of the U.S. dominant economic presence (sixty per cent of GDP of the twelve
members). New Zealand is proposing a change to restrict foreign ownership in
property because of rising housing costs. Canada has thrown in some last minute
concerns. Nonetheless, Japan and Australia are pushing the TPP 11 strongly and
negotiations are likely to commence in 2018.
GeneralComment
President Trump's speech to the APEC CEO Forum laid out starkly his America First
approach - "my way or no way." Trump, like the real estate salesman he is, wrapped
 2

up his deal with reassurance of respect for fairness, reciprocity and sovereignty of
prospective trade partners. Negotiations are to be 'bilateral;' but Trump's offer was a
one-way street.
Trump showed disdain for multilateral approaches and thus undermined APEC's
objective of achieving trade and investment liberalisation on a multilateral basis
across the Asia Pacific. Trump has a zero sum view of trade, all trade must be
balanced. Regional states cannot walk away because they need access to the
American market.
Regional states will continue to pursue multilateral arrangements. ASEAN and China
will continue talks on raising the level of their free trade agreement. ASEAN, China
and other dialogue partners (minus the United States) will continue discussing the
Regional Comprehensive Economic Partnership. And eleven key economies, who are
APEC members, will also push negotiations on a TPP 11, also without the United
States.

ASEAN is pushing the development of an ASEAN Economic Community. They cannot

count on U.S. support. Trump's push for bilateral FTAs will isolate the United States
in the region.

On one positive note, Trump fired a shot across the bow of China's Belt and Road
lnitiative, by advocating a greater role of the World Bank and Asian Development
Bank in funding infrastructure.

Suggested citation: Carlyle A. Thayer, "APEC Summit - The TPP 11 and Donald
Trump," Thoyer Consultoncy Bockground Brief , November 10, 2017. All background
briefs are posted on Scribd.com (search for Thayer). To remove yourself from the
mailing list type, UNSUBSCRIBE in the Subject heading and hit the Reply key.

Thayer Consultancy provides political analysis of current regional security issues a.nd
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.