Asia-Pacific regional integration--with or without the United States? Stephen Jacobi discusses the outlook for regional trade and investment in a profoundly changed situation.

• Author: Jacobi, Stephen
• Position: Report

Long-held principles of economic co-operation and integration are being challenged by political change in the United States and new questioning about the pace and impact of globalisation. Past models have been driven by business change and the growth of global value chains. The Trans-Pacific Partnership marked an attempt to enable regulatory systems to encompass this change. There are other pathways towards the goal of freer trade and investment in the Asia-Pacific region, including the RCEP, although it lacks ambition. American leadership is not yet being replaced by Chinese. In this situation, New Zealand must continue to explore all options for integration, including TPP (II).

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This year is definitely not a case of 'plus 9a change, plus c'est la meme chose'. A new president in the White House is challenging the model of past American leadership in the global economy and with that long-held principles and practices of economic cooperation and integration. This coincides with a new questioning around the world of the process of globalisation, how its benefits are shared and its challenges managed.

I am perhaps a little brave to explore these issues--the president has been in office for less than a month (somehow it seems longer!) and his administration is not yet completely in place. I am certainly of the view that we need to let time elapse before being too definitive about the policy choices New Zealand might have to make in the light of these profound changes in the global environment.

It is not too early to start thinking about how we might position ourselves. In this article I will explore:

* where the process of economic integration in the Asia-Pacific region has led us thus far

* how this process might be challenged in the months to come, and

* what we here in New Zealand need to be doing.

I am writing mainly from the perspective of the New Zealand International Business Forum, a group of senior business leaders concerned with New Zealand's engagement in the global economy. These themes are relevant across the range of my work with organisations including the New Zealand China Council, the APEC Business Advisory Council and the Australia New Zealand Leadership Forum.

One of the much repeated criticisms of the ill-fated Trans-Pacific Partnership (TPP) was that it was not a trade agreement at all. I read as much in a recent blog on the website of the Foundation for Economic Education. Rather than a simple agreement to lower tariffs for mutual benefit, the writer alleged, the TPP morphed into a massive international regulatory regime over 5000 pages long. It was weighed down by numerous non-trade provisions aimed at appeasing non-trade special interests. (1)

It is not my purpose here to attempt to rebut the many criticisms of the TPP but this particular one calls for a little more economic education! Of course, the TPP was a trade agreement --the larger part of those 5000 pages are taken up by complex schedules outlining the process for the elimination of tariffs. (We can debate whether the TPP is a 'free' trade agreement since in some limited cases, albeit ones of interest to New Zealand, the goal of zero tariffs was not reached.) But there is a much bigger picture here and it is really not complicated--trade is not trade anymore.

Trade has been replaced by a set of much more complex economic interactions between firms and whole economies. Professor Peter Petri and colleagues, in a report to ABAC in 2015, captured this well when he said:

Businesses (today) engage in more varied activities, with a wider range of partners, and in more markets than ever. Major technological and economic trends are disrupting the business environment, including the emergence of global value chains, the digital/Internet revolution, the rise of a giant middle class, and dramatic improvements in connectivity. (2) Many of the objections to the TPP overlook the fact that the business model in the region has changed and that global and regional value chains, where production occurs across multiple jurisdictions, are, in the words of Professor Petri, 'an Asia Pacific innovation'.

New Zealand is not immune from this movement. New Zealand manufacturers and processors of natural resources, including food and forest...