Economic Incentives Seen as Catalyst for Atlantic-Pacific Partnership

 Economic incentives, specifically the expansion of trade and increased investment in the Asia-Pacific region, could provide the best opportunity for strengthening the Atlantic-Pacific partnership, according to Jon M. Huntsman, Jr., chairman of the Atlantic Council.

These economic incentives could serve as a point of common interest to overcome the geographic and political divisions among the three major players of the Atlantic-Pacific partnership—namely the United States, the European Union, and parts of Asia such as Japan and, in some cases, China.

“Despite the numerous challenges set forth by an increasingly volatile geopolitical climate,” said Huntsman, who previously served as the US ambassador to China and Singapore, “market developments in the Asia-Pacific region offer huge opportunities to the United States and Europe, providing a historic opening to expand trade and investment and strengthen relations generally.”

Huntsman delivered the opening remarks at a Jan. 27 event—Strengthening the Atlantic-Pacific Partnership—convened to discuss security and trade relations within the Atlantic-Pacific partnership. Ellen Frost, senior adviser at the East-West Institute; Yoichi Kato, senior research fellow at Rebuild Japan Initiative Foundation; Niklas Swanström, executive director at the Institute for Security and Development Policy; and Theresa Fallon, director at the Center for Russia, Europe, Asia Studies, took part in a discussion that was moderated by Matthew Kroenig, a nonresident senior fellow at the Atlantic Council’s Brent Scowcroft Center for International Security.

US President Donald Trump on January 23 took the United States out of the Trans-Pacific Partnership (TPP), a signature initiative of his predecessor, Barack Obama. The TPP was seen as an opportunity for the United States to be in the driver’s seat when it comes to writing the rules of global trade.

Kato said the US’ rejection of the TPP could have a devastating impact on the Japanese government because the deal was “not just a multilateral trade mechanism for Japan,” but an agreement of “strategic significance” that could have created “enormous political leverage” for domestic economic reform in Japan.

However, Frost insisted that leaders must overcome the human tendency to think narrowly when dealing with foreign affairs, which she suggested may be best responded to by “real leadership,” rather than the recent “theme of institutionalizing in this discussion—I think we have plenty of institutions.” Kato similarly addressed the need for a broadened approach between the Atlantic and Pacific regions, emphasizing Japan’s diplomatic focus on a strong relationship with the United States.

“Right now we don’t get that invitation for cooperation from the United States,” said Swanström.

The Unites States is negotiating a multilateral trade agreement—the Transatlantic Trade and Investment Partnership (TTIP)—with the European Union.

In their discussion, the panelists agreed that the three regions involved in the Atlantic-Pacific partnership present an opportunity for regional and global success for trade and maintenance of the international rules-based order.

In approaching the Atlantic-Pacific partnership, each of the panelists shared what they perceived to be the key challenges to overcome. Frost identified a “long-term crisis of legitimacy,” among all countries involved in the partnership which she believes has been gradually diminishing since the Asian financial crisis of 1997-98, and magnified by “the failure of both the US and Europe to move quickly enough to give increased voting share to China and developing countries in the international development institutions” as well as “the rise of inequalities” and the “US’ failure to ratify the UN Convention on the Law of the Sea.”

For some time, Asia’s allies in Europe and the United States have not fully met expectations regarding their engagement in the region, and “add to that the economic stagnation in both Japan and Europe,” Frost explained, there is perhaps an unrecognized “slippage” of the long-standing belief in the United States and the European Union as the “underpinnings” of the international world order.

Frost also identified an “immediate crisis of credibility” resulting from the “phenomenon of the [Trump] administration, combined with Brexit, combined with European populism, and the rise of right-wing parties.”

According to Yoichi, there is concern regarding the effects of Asian allies’ emerging focus on “individual economic interests” in the region, rather than “common or universal values.”

For example, there is “no European view when it comes to security,” said Swanström. He described divergent positions throughout Europe regarding a revanchist Russia, immigration, and the defense of regional neighborhoods. “Looking as far away as China,” he said “we’re even more divided.”

Kato referenced the United Kingdom’s presence in the South China Sea, describing it as an “enormous political messaging to the region,” which “multi-lateralized the issue of the South China Sea,” generally approached as a strictly Asian regional issue by China. However, he said, it is unclear how involved the United Kingdom will be in setting a European agenda for the Asia-Pacific.

However, she suggested, “if Europe can take a more active role in its own neighborhood, it can free up US military attention toward Asia.”

Based on these discrepancies, Yoichi described an opportunity for China to capitalize on the current weaknesses of western countries in the region, and cited a necessity for Japan, Europe, and the United States to demonstrate that the international rules-based system can be successful.

“From Japan’s point of view, the regional balance—or strategic environment—is a competition between countries with Western values” such as democracy and a liberal international order and countries like China and Russia, Yoichi said. Fallon echoed this idea of “the battle of the narratives,” that exists between countries like the United States, the European Union, Japan, and China, and further hinders cooperation among various actors in the region.

According to Huntsman, “China’s lack of transparency on a number of [economic] issues,” in addition to security threats such as disputes over the South China Sea, cyber threats, and North Korea’s nuclear weapons program, complicate the prospects for cooperation. Swanström added that although Chinese President Xi Jinping’s administration claims to be “the defender of free trade … I think we have to take that with a great deal of skepticism.”

According to Fallon, “there are legitimate issues between the United States and the EU in regard to trade,” but she asserted that “the EU and the United States can work together and respond directly to Chinese policies that violate these trade rules and possibly destroy the global market through the [World Trade Organization] WTO.”

Jack Gloss is a communications intern at the Atlantic Council.

Image: (from left) Yoichi Kato, senior research fellow at Rebuild Japan Initiative Foundation, joined Theresa Fallon, director at the Center for Russia, Europe, Asia Studies; and Niklas Swanström, executive director at the Institute for Security and Development Policy, to discuss security and trade relations within the Atlantic-Pacific partnership. (Atlantic Council)