By William Choong, Shangri-La Dialogue Senior Fellow for Asia-Pacific Security

It is a truism in international relations that might makes right. And most of the time, this usually falls to larger and more powerful states. In the field of global trade, however, Singapore provides a classic example of how a small state punches above its weight.

In his Fullerton Lecture at IISS–Asia on 27 June, Singapore’s Minister for Trade and Industry, Lim Hng Kiang, noted that Singapore’s open economy had enabled it to tap on new trade patterns as a growth engine.

As part of ASEAN, Singapore is making ‘good progress’ towards achieving the targets of the ASEAN Economic Community (AEC) 2015, an initiative that will merge the economies of the ten ASEAN member states into a single market.

Beyond AEC 2015, ASEAN and its six free-trade agreement (FTA) partners – Australia, China, India, Japan, Korea and New Zealand – have also launched the Regional Comprehensive Economic Partnership (RCEP), which seeks to link all the ASEAN trade agreements under a single umbrella.

Beyond the Asia-Pacific region, Singapore is involved in the Trans-Pacific Partnership (TPP), an FTA spanning the Asia-Pacific that involves 11 parties, including the United States. When Japan joins as the 12th member in July, the TPP will represent a free-trade area of nearly 800 million people and a combined GDP of $27 trillion (making it $10tn bigger than the RCEP).

Speaking to the 200 participants, Lim said current FTA initiatives were encouraging. On the other hand, risks to global growth remain. A recent WTO report noted that G20 economies were putting in place more restrictive measures than trade-facilitating ones.

In such challenging conditions, he stressed that countries needed to keep their markets open to keep the global economy going. Lim’s prescriptions are desirable, but there is a chasm between theory and practice.

As he admitted, the TPP will most likely miss its self-imposed October deadline for wrapping up the deal. In addition, further movement on trade deals such as RCEP and TPP will involve governments’ ability to manage domestic opposition to such FTAs. In Japan, for example, a major agricultural union has stressed that it would continue to oppose Japan’s participation in the TPP.

More significantly, the RCEP and TPP – which are led by China and the United States respectively, and as a result, seen as competing blocs – would be affected by the relations between Beijing and Washington.

This is where geopolitics intrudes into the rational and pragmatic business of FTAs. The United States has said that it is not ideologically opposed to China joining the TPP, but Chinese officials think that the TPP – touted as a ‘high quality’ FTA – is explicitly set up to exclude and ‘contain’ China.

Talk about an American plot to exclude China is farfetched. For the United States to contain China would be akin to the United States containing itself: China is already the US’s second-largest trading partner, its third-largest export market and its biggest source of imports. And as two observers have argued, excluding China from the TPP would be tantamount to Hamlet without the Prince of Denmark.

What is true, in the end, is that China’s future participation in the TPP – as well as the holy grail of a FTA for the Asia-Pacific – would be held hostage by painful trade-offs, not only between governments and their domestic stakeholders, but between great powers involved in forging what will be truly historic FTAs.

Watch the lecture.

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