THIS year's APEC summit, held recently in Hawaii, stood out with its theme of a "closely intertwined regional economy" amid the worsening European debt crisis and sluggish US economy.

At the summit, US President Barack Obama announced that the US has reached a consensus with eight other APEC (Asia Pacific Economic Cooperation) members on the adoption of a Trans-Pacific Partnership, or TPP, for stimulating growth primarily in Asia, the world's most economically vibrant region.

Although the three largest Asian economies - China, Japan and South Korea - are left outside the pact, the fact that eight US allies, such as Australia and Singapore, welcomed the US initiative represents a victory of sorts for the superpower. Of course, if the US can one day get South Korea and Japan on board, the TPP's increasing economic significance will lift its political influence in the region.

It is widely known that Asia has seen years of uninterrupted growth. Many Asian nations' holdings of US debts undergird the US desire to build a long-term, stable relationship with Asia. Moreover, Asia promises to be a robust and lucrative market for the US in the long run.

However, due to the IMF's failure to properly handle past financial crises sweeping Asia, there is a region-wide mistrust of Uncle Sam and centrifugal tendency to grow independently of the US economy and the dollar.

The US has some consolation, though. Asia is divided over many historical issues, and small nations have taken to forming alliances with big powers in pursuit of their interests. This quest for protection affords the US an opportunity to realize its strategic economic vision for the region.

American brainchild

The TPP is a typical US brainchild for Asian economic cooperation.

In this sense, whether Reuters is right about the TPP as a US "balancing act" to counter China's rise, China will have more to lose than to gain from joining the club now. Nonetheless, the US architect of the TPP's framework stands to benefit tremendously from its comparative advantage.

TPP's regulations, covering 21 areas, barely reflect or respect the fact that development levels vary wildly across the countries concerned. Its one-size-fits-all liberal economic principles on protection of intellectual property rights (IPR) and openness of fundamental industries are even stricter than WTO rules.

This is detrimental to countries like China whose domestic industry is still far from full-fledged and national competitiveness is lagging. The TPP was dismissed by several major countries, such as India.

The Japanese public also voiced strong opposition. This is because Japan's farm products and health care providers, long-time recipients of state subsidies, would lose huge market shares to competitors offering same goods and services for lower prices under the TPP. Yet despite domestic disapproval, Tokyo expressed, albeit grudgingly, its willingness to participate in discussion about TPP membership, partly to preserve the Japanese-US alliance.

Japan's TPP announcement took South Korea somewhat by surprise. Now that it has signed bilateral free trade agreements (FTA) with the US, European nations and many Asian nations, Seoul has less cause to worry about declining gains from lowered tariffs. But it is cautious on whether to be bound by the TPP and undermine its own bargaining power.

Numerous US multinationals established their foothold in Asian markets long ago. So once the TPP formally takes effect, America will benefit the most from it. Although the tariff cuts would be applicable to other Asian nations, the high logistics costs of their exports to the US and lackluster industrial clustering will add to their operational costs and offset the dividends of tariff reduction. Besides, the US is years ahead in technological innovation and capital management.

The TPP can thus be viewed as an updated version of the "Washington Consensus" the US once touted and peddled to developing nations. Whenever US growth is hindered at home, it will trumpet "liberalization standards" favorable for competition in a foreign market where it has a clear edge. Hopefully, this time the US will come to the aid of countries that adopt its standards when their economies are in trouble, instead of shirking responsibility and accusing them of "bad governance."

Vicious infighting

China, for its part, disagrees with the TPP framework for two reasons. First, why bother creating another vehicle of cooperation now that Asia already has plenty of them? And will Asia's overall interests be fully represented in the TPP? After all, a plethora of economic groupings might only lead to vicious infighting among them for trade and investment.

Second, for all its newfound economic clout, China, with its immature industrial structure and lack of prowess in corporate management, is woefully unprepared for freewheeling competition.

By providing technological support, developed countries will contribute to China's prosperity and in turn to world economic recovery. That's far more meaningful than securing higher profits through imposition of IPR barriers. Seemingly fair competition is sometimes not so fair. We cannot call the match fair if boxers of different weight divisions square off in the ring.

Of course, China's decision to stay outside the TPP doesn't indicate estrangement from its Asian neighbors. On the contrary, the significance of such cooperation looms large given the complex regional political situation. It's just that we have more pragmatic alternatives to this TPP.

China can deepen its internal market reform through win-win cooperation with Asian governments. The fruits of reform can then be shared via outbound investment and stronger trade ties. This is where China and the US should have many common interests. And when time is ripe, China might do well to join the TPP and achieve common prosperity with its neighbors. That said, a TPP is not at all the only way to get there.

In fact, China has done many things to bolster its cooperation with the rest of Asia. Exaggeration of China's conflict of interests with its neighbors and the attempt to check and isolate its growth through coarse posturing about economic cooperation will not only fall flat, but also sap Asia's economic vitality.



The author is executive vice dean of the School of Economics at Fudan University. Shanghai Daily staff writer Ni Tao translated and edited his article from Chinese.