Social media lounge view on the first day of the APEC Peru 2024 Economic Leaders Week on November 10, 2024 Photo: VCG

Editor's Note:

The upcoming 31st APEC Economic Leaders' Meeting will be held this week in Lima, Peru. Facing unprecedented global risks and challenges that cannot be addressed by any single economy alone, Asia-Pacific economies are expected to conduct closer cooperation to withstand turbulence and build a community with a shared future for mankind. In an interview with Global Times (GT) reporter Ma Ruiqian, Jayant Menon (Menon), a senior fellow at the Singapore-based ISEAS-Yusof Ishak Institute, shared his insights on how APEC facilitates economic and trade cooperation in the Asia-Pacific region and the role China can play in fostering an open, dynamic, resilient and peaceful Asia-Pacific.

GT: Chinese President Xi Jinping's attendance at this year's APEC Economic Leaders' Meeting fully shows the high importance China attaches to Asia-Pacific economic cooperation. What significance does this meeting hold, and what can we expect from it?

Menon: This meeting is taking place at a time when dramatic changes and turmoil are happening globally. APEC was designed as a forum to promote globalization or to guard against the rising tide of protectionism. It is particularly important right now, given the overall climate of rising protectionism and anti-globalization sentiment. 

This APEC meeting is happening at a critical time. APEC is one of the international forums that brings together the US and China, creating an opportunity to deal with the escalating China-US trade and technology tensions. The vehicle is provided by APEC. The question is, will it be used? And that's the challenge that lies ahead for APEC.

GT: How do you view the role of the Asia-Pacific region in global economic growth, and what is the significance of APEC in promoting international and regional economic and trade cooperation, especially for the Global South?

Menon: The Asia-Pacific region is now the epicenter of the world economy and increasingly becoming the center of economic activity. So, it plays a critical role in the global economy. APEC, as the largest organization representing members from this region, has a crucial role in ensuring that global growth continues, especially during these challenging times.

For China, the world's largest trading nation, a functioning multilateral trading system is crucial. APEC plays an increasingly important role, especially at a time when multilateralism is under threat. Multilateralism has been undermined, primarily by the US, which blocked the appointment of new judges to the WTO Appellate Body. The US feels that the WTO has gone beyond its mandate. As a result, the dispute settlement mechanism, which is a jewel in the crown of the WTO, ensuring that trade is conducted in an orderly and rules-based manner, has been handicapped. APEC can try to fill that void, and the Putrajaya Vision 2040 aims to do so by ensuring a rules-based order in the absence of the WTO fulfilling that role.

The key advantage of APEC is that it brings together both the Global North and South, serving as a forum that links them, especially the US, China and Russia. APEC includes a large number of countries from the Global South, but also from other parts of the world. 

GT: The Putrajaya Vision 2040 you mentioned was adopted by APEC in 2020, which aims to create an "open, dynamic, resilient and peaceful Asia-Pacific community by 2040." What kind of momentum can China bring in advancing this vision?

Menon: The Belt and Road Initiative (BRI) and the Global Development Initiative (GDI) are both ongoing, with one complementing the other. The BRI is more focused on large-scale infrastructure projects, while the GDI is oriented toward smaller, social-sector projects. Many barriers to greater integration are often related to lack of infrastructure, logistics costs and various non-tariff barriers. Both the BRI and GDI can play an important role, particularly in the developing parts of APEC, by reducing these costs and fostering greater trade and investment. This is a key step in realizing the Putrajaya Vision.

Additionally, China has applied to join the CPTPP, which would help support China's rise as a global player, deepen its integration into the APEC region and connect further with the global economy. This can play a significant role in promoting greater growth and integration in this part of the world. It also holds great potential for supporting the growth of supply chains in the region.

GT: How do you view the actions of some Western countries promoting geopolitical maneuvering and trade protectionism in the Asia-Pacific region?

Menon: There are challenges that need to be addressed. The US, as well as Europe, has become more protectionist recently. Everyone needs to play by the rules. The electric vehicles sector is a very contentious area, with significant tariffs imposed by both the US and Europe. I believe that the green transition cannot happen without strong involvement from China. China will have to play a crucial role in the green transition, and this role has become even more important with the re-election of Donald Trump, who had pulled out of the Paris Agreement during his first term. This makes addressing climate change even more imperative and desperate. 

In fact, everyone is now engaging in the subsidies game. The Inflation Reduction Act in the US is all about doing something similar. So, singling out China in this context is quite unfair. 

GT: What is the greatest risk to the economic growth of Asia-Pacific region today, and what principles should regional countries adhere to in addressing these challenges?

Menon: In my view, the greatest challenge facing the Asia-Pacific region is the further escalation of China-US tensions, particularly in the form of the ongoing trade and technology war. This is crucial for the region because ASEAN's supply chains are still heavily China-centered. Whatever actions the US takes against China will flow through to the rest of the region, given the interdependence of these integrated supply chains. So, the Southeast Asian region as a whole is being affected by the escalation in China-US tensions. This is the greatest risk.

In ASEAN, it's often said that we don't want to pick sides. China is our most important trading partner and the US is our most important investment partner. China has remained ASEAN's largest trading partner for 15 consecutive years, while the US remains the largest source of foreign direct investment in the region. We don't want to be caught in the middle, though, in reality, we are caught between them. 

With unilateralism on the rise, ASEAN can play a role in supporting a rules-based trading system, but the real solution has to come directly from China and the US. 
The uncertainty around how things will evolve is concerning. It's crucial for the region that the trade war doesn't escalate out of control. 

The process of decoupling is already happening, which is unfortunate because it's costly and leads to a lot of wasted resources. This is the new reality that we must adapt to, but it will come at a cost, both to US consumers and the global economy. 

This is the price we pay for the ongoing geopolitical tensions.