Grandiose trade deals: the puzzling case of the ignored Apparel Periphery

China’s November 11 call for a Free Trade Area of the Asia-Pacific (FTAAP) seems to add yet another grandiose trade plan doomed for oblivion to a puzzling set of projects which all miss the obvious: the agreements traders and consumers actually want.

In a November 11 speech to the Asia-Pacific Economic Forum,  Chinese President Xi Jinping urged its 21 members to speed up talks on China’s pet trade liberalization framework: the Free Trade Area of the Asia Pacific (FTAAP) .    The other 20 members agreed to a “roadmap” China proposed for some kind of trade deal between the 21 – adding yet another vaguely conceived, hugely ambitious, megadeal to those already under discussion. If all the precise details have slipped your mind, they are:

• FTAAP. Not quite the new kid on the block (it was  first proposed – by the US – in 2004), the FTAAP would link the 21 APEC members: Australia; Brunei; Canada; Chile; China; Hong Kong; Indonesia; Japan; South Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; Philippines; Russia; Singapore; Taiwan; Thailand; USA; Vietnam.
• The Trans Pacific Partnership (TPP). Due for agreement at the end of the year (as it has been most of the past few years), this is supposed to link – when eventually ratified –  Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, USA and Vietnam 
• Regional Comprehensive Economic Partnership (RCEP). The one all-China invention, the plan is to link Australia, China, India, Japan, New Zealand and South Korea with the members of the Associatrion of SE Asian Nations (Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.  Even the Chinese government-run China Daily admits that “different stages of development and varying understanding on tariff concession”[between negotiators] has “made RCEP progress slower than expected.” Decoded: no-one understood what the RCEP was supposed to be, so no-one can agree anything

• Transatlantic Trade and Investment Partnership (TTIP). EU and US. In 2011, a committee of Europeanb and US experts was asked to look at the feasibility of a free trade area between the two. In early 2013, the start of talks was announced, and some predicted those talks would be finalised by the end of 2014. No significant progress has been reported.

As far as this industry is concerned, none of these ideas have created much excitement – with just one exception. The exception is the TPP: US buyers like it, because it has one member – Vietnam, which currently has to pay full duty on US garment exports – with substantial garment-making capacity, and its TPP membership would offer US buyers the only major Asian manufacturing base that would be duty free. Provided the factories used yarn spun in a TPP member country.

There are several reasons for limited enthusiasm for these plans. One is the absence of any serious involvement of Africa, the Persian Gulf or South America: an absence of limited importance in our industry, but crucially important in others.

Central, in our industry though, is the absence from the party of the Apparel Periphery. That’s the countries outside Greater China, the EU, US, Canada, Australia, New Zealand and Korea with substantial garment-making capacity:

• In Asia: Bangladesh, Pakistan, Sri Lanka, Nepal
• In the Americas: Guatemala, Honduras, Nicaragua, Panama, Costa Rica, El Salvador, the Dominican Republic and  Haiti
• Around or close to the Mediterranean: Albania, Serbia, Bosnia, Macedonia, Turkey, Israel,  Syria, Iran, Egypt, Morocco, Tunisia
• Central Asia

What all those countries share is a serious reluctance to do what the apparently dominant local economy wants. They’ve all got complicated relations with their neighbours, which often (as with Pakistan and India) can make them more interested in undermining a neighbour’s economy than cooperating with them.

That, of course, isn’t the way China (and, sometimes, the US) sees things. Get the leaders on board and their neighbours will soon follow is the automatic assumption. But few businesses operate that way, so the enthusiasm for these mega-deals is mostly among politicians and policy wonks. In the absence of any real public benefits anyone can encapsulate in a few words, lobbyists with a vested interest to oppose these deals get listened to most, and negotiations about those deals rapidly sink on the twin rocks of hostility and complete lack of public interest.

As I’m always arguing: the TTIP, for example, would get greater public support if it could guarantee really free movement of garments.