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NEWS UPDATES Asean Affairs  12  November 2010

Obscure pact may propel Asia-Pacific trade

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A little-known trade pact promoted by U.S. President Barack Obama has emerged as a key vehicle toward creating a free-trade treaty embracing more than half the world's economy.

With World Trade Organization negotiations in limbo, and warnings rife of a return to protectionism, talks to expand the pact, called the Trans-Pacific Partnership, seem to be the only hope of regaining momentum, analysts say.

The TPP is seen as a vital building block for a Free Trade Area of the Asia Pacific - which would link economies from China to Chile and the United States but currently remains an undefined and long-term goal.

Japan, which is hosting the Asia Pacific Economic Cooperation summit in Yokohama at the conclusion of the G-20, has announced it is exploring the idea of joining the TPP, giving fresh impetus to the process.

"It is a good thing that Japan, which is a huge economic power, will be open to the world," Australian Foreign Minister Kevin Rudd said.

The TPP, he said, was "a very good forum as it holds a high standard on free trade and nearly half of the APEC members have joined the negotiation."

The idea of an FTAAP had been mooted by business leaders and was championed by Washington in 2006 at an APEC meeting in Hanoi.

But the idea received a cool reception from many of APEC's 21 members, some of whom felt it would be dominated by the United States, while others wanted to focus on concluding the WTO Doha round of negotiations.

Diplomats said Washington saw another opportunity to push ahead with a trans-Pacific pact through an expansion of the TPP as it seeks to export its way out of its deep economic troubles and high unemployment at home.

The United States also wants to avoid being marginalized in an increasing web of Asia-centric bilateral and regional free trade agreements that have evolved after the WTO talks collapsed in July 2008.

These include an FTA between China and Asean, as well as plans for an East Asia-wide trade zone linking Asean, China, Japan and South Korea.

Obama elevated the TPP's profile by saying the United States would enter talks to join the group that now has just four signed-up members - Brunei, Chile, New Zealand and Singapore - but which Australia, Malaysia, Peru and Vietnam are also in talks to join.

Other economies are watching closely and could also jump onto the bandwagon, but many are torn between not wanting to be left out, and reluctance to make the deep commitments TPP membership could require.

Back in Seoul, major nations struggled on Thursday to break a deadlock on how to fix problems cramping the world economy as Obama insisted that a strong United States was crucial for a wider international recovery.

A major issue confronting the G-20 is how to craft a new economic order to replace one centered on the United States running huge trade deficits while countries like China, Germany and Japan accumulate vast surpluses.

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