Author: Gary Clyde Hufbauer, PIIE
On 15–17 November 2023, US President Joe Biden will host 21 APEC leaders in San Francisco. But not all invited heads of state will attend the gala event. Facing criminal charges, Russian President Vladimir Putin will almost certainly stay home in Moscow. Other presidents and prime ministers may be compelled to tend to urgent domestic business.
Both Biden and Putin skipped the November 2022 APEC meeting in Bangkok, enabling Chinese President Xi Jinping to steal the show. One headline event in San Francisco could be the Biden–Xi bilateral meeting, unless a fresh eruption of US–China disputes keeps Xi in Beijing.
Another headline could be a Biden meeting with Indian Prime Minister Narendra Modi. India has been trying to join APEC since the institution was founded in 1989, but has been blocked first by its own protectionist policies and more recently by China. Now that the United States and India are steady geopolitical compatriots, Biden might invite Modi to side meetings in San Francisco that coincide with the APEC agenda.
Apart from these headline meetings, what accomplishments might leaders announce? Last year as host, Thailand revived the bold concept of a Free Trade Area of the Asia Pacific (FTAAP). The US agenda for APEC 2023 has nothing so ambitious. The theme announced in December 2022 is ‘Creating a Resilient and Sustainable Future for All’ — noble words but devoid of concrete goals and measurable mileposts.
The US State Department serves as the United States’ lead agency for APEC matters, but other departments exert greater control over trade and investment policies. The US Trade Representative and the Commerce Department share the trade turf, while the Secretary of the Treasury chairs the powerful Committee on Foreign Investment in the United States which monitors inward investment. The Treasury is in the process of acquiring new authority to prohibit outward investment to China and may use CFIUS to carry out that role.
Under the Biden administration, the US Trade Representative, Secretary of Commerce and Secretary of the Treasury have spent more time restricting commerce than removing barriers. Indeed, the strongest point of continuity between the Biden and Trump administrations is trade and investment policy.
Former president Donald Trump loudly, and Biden softly, both regard globalisation as bad for the United States. They see no benefit in lowering tariff and non-tariff barriers that keep foreign products out of US markets. Nor do they applaud US firms that invest abroad. For Trump, tariffs are a beautiful thing. His campaign for a second term promises higher tariffs. For Biden, ‘Buy America’, reinforced by generous subsidies, paves the path to prosperity. As well, Biden has amplified Trump’s policy of making trade policy the junior partner of security policy in the geopolitical contest with China.
The current US policy posture doesn’t leave much room for constructive engagement in APEC. But there has been no lack of APEC meetings during 2023. Starting with the December 2022 kick-off, the United States has hosted 15 meetings with ministers and senior officials to prepare for the heads of state meeting in San Francisco. Topics covered include finance, central banking, transportation, food security, disaster management, health, energy, women and the economy and trade. No doubt a great deal of useful information has been shared on national practices and policies.
But none of the preparatory meetings during 2023 laid the groundwork for fresh national commitments to promote closer economic ties within APEC. The landmark 1994 APEC meeting in Indonesia declared the famous Bogor Goals — ‘the long-term goal of free and open trade and investment in the Asia Pacific … no later than the year 2020’. At the time, US President Bill Clinton enthusiastically praised the Bogor Goals.
Times have now changed. With the onset of US–China geopolitical conflict, and with US doubts about globalisation, the Bogor Goals no longer feature as the APEC centrepiece.
For those APEC members that still welcome global engagement, trade and investment negotiations have long migrated to other forums. Indeed, many APEC members have come to see its role as a ‘sandbox’ to float proposals, leaving actual negotiations to other bodies. Multiple bilateral free trade agreements have entered into force between APEC members. Fresh regional agreements have been forged between ASEAN members, between China, Japan and South Korea, and in North America, where the North…
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The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.
The World Trade Organisation’s 13th Ministerial Conference
The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.
Challenges in Dispute Settlement and Agricultural Trade Reform
However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.
Geopolitical Tensions and the Future of Trade Relations
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Getting Vietnam’s economic growth back on track
Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.
Vietnam’s Economic Roller Coaster
After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.
Trade Performance and Monetary Policy
Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.
Challenges and Prospects
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Thailand’s post-pandemic economic recovery still trailing behind
Thailand’s economy is struggling to recover from the impact of the COVID-19 pandemic, with slow growth in GDP and GDP per capita. The government has implemented short and long-term policies to address economic challenges.
## Thailand’s Economic Slowdown
Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures, unlike other ASEAN countries. The Thai economy was severely affected by the pandemic, causing a slow economic recovery. The country’s large informal economy and dependence on tourism made it particularly susceptible to the impacts of the pandemic. While economic growth in 2023 was driven by activities in the travel sector, the manufacturing sector continued to contract, and merchandise exports continued to decline.
## Government’s Economic Policies
The new government’s short-term economic policies include providing a one-time digital cash payment to approximately 50 million residents, debt relief measures, and efforts to cut energy and electric train costs. Long-term economic measures consist of new free trade agreements, green industry projects, and a land bridge project. However, these measures have faced criticism from Thai economists due to significant fiscal implications and rising public debt-to-GDP ratio.
## Challenges in International Trade and Industrial Policies
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