At no time in three-quarters of a century has the world’s support for free trade been so weak. It is in this bleak environment that the leaders of 21 APEC economies met over the weekend in Lima, Peru. When they meet in Seoul next year, with a new American President, their task will be even more daunting. Reasonable people will ask: why bother?
The APEC forum – an Australian initiative – represents more than 60 per cent of the world’s GDP. In 1994, APEC members agreed to the so-called Bogor goals of free trade by 2010 for industrialised members and 2020 for developing members.
Tariff walls came down and economies stepped up their integration. But now tariffs are going up again in America and across the Atlantic in the European Union (EU). The Biden Administration kept in place the tariffs against China that President Trump erected in his first term in his self-declared trade war.
Now, President-elect Trump has promised further tariff increases of 60 per cent against China and 20 per cent against the rest of the world.
These actions have been welcomed in the US swing states, which include so-called rustbelt states, all which Trump won earlier this month.
The EU is giving expression to its innate protectionist instincts, imposing high tariffs on imports of Chinese electric vehicles. And it has refused to make a meaningful market-access offer to a patient and elsewhere highly successful Australian trade minister, Don Farrell, in long-running – but now suspended – negotiations for an EU-Australia trade agreement.
Farrell, a realist, could see no prospect of an improved offer from the EU, giving him the space to finalise the removal of all tariffs imposed on Australia by China in 2020 and concluding a deal with the United Arab Emirates.
At the weekend APEC meeting, leaders agreed a set of initiatives including two developed by the Australian APEC Study Centre at RMIT University, the Department of Foreign Affairs and Trade and the Australian government.
They were support for a movement of APEC economies to paperless trade and a bottom-up approach to progressing a Free Trade Area of the Asia Pacific (FTAAP).
Paperless trade involves digitising the archaic paper-based customs and quarantine clearance processes, greatly reducing the time goods sit wastefully on wharves and at airports. Some modelling estimates the benefits of moving to paperless trade at up to 15 times those from removing remaining tariffs within APEC economies.
Australia’s bottom-up approach to an FTAAP would involve reaching agreement on individual initiatives for the liberalisation of trade and investment, the mutual recognition of qualifications, women’s economic advancement and cooperation on decarbonisation.
Each would form a step towards an FTAAP and, if necessary, could involve a sub-group of APEC economies – so-called pathfinder initiatives – with others free to join if in the future they matched the ambition of the agreement.
Under this pragmatic approach, the ongoing journey towards an FTAAP would be more important than arriving at a destination.
At the leaders’ meeting, Australia’s prime minister, Anthony Albanese, reaffirmed Australia’s support for free trade, earning him praise from China, which seems keen to position itself as a champion of globalisation.
China’s foreign minister, Wang Yi, has twice reiterated to me personally that China supports the rules-based global trading system. Indeed, China is a member of the alternative, plurilateral dispute-resolution system created following the demise of the Appellate Body caused by US withdrawing its support.
President Xi Jinping’s statement at APEC in support of globalisation does not make China a free trader. But in its geostrategic competition with the US, China is advocating economic integration while the US President-elect is championing his protectionist America First tariffs.
A further surprise development at the APEC meeting sends a strong message about China’s intent. While Korea had already volunteered to host APEC in 2025 and Vietnam had done so in 2027, not host had come forward for 2026. China announced its willingness to fill that role.
Recognising that the Trump Administration will be avowedly protectionist, the right course for Australia and other free-trading members of APEC is to press on with liberalisation and economic integration within the APEC region and globally.
It never made economic sense for Australia to retaliate against a trading partner erecting trade barriers by erecting our own. Australia has long recognised this economic truth.
By championing economic liberalisation within APEC and beyond, the Australian government is advancing the national interest and showing the way to other nations. Meanwhile, the US is heading in a protectionist direction not seen in more than three-quarters of a century
Craig Emerson is director of the Australian APEC Study Centre at RMIT University. He was Australia’s trade minister from 2010 to 2013.