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Background Brief United States: Implications of Obamas No Show in Bali Carlyle A. Thayer October 9, 2013

[client name deleted] We are preparing an assessment of the Asia Pacific Economic Cooperation (APEC) 2013 forum in Bali. We request your assessment of the following issues: 1. How does the absence of President Obama affect the APEC in general, especially as China is boosting engagement with ASEAN, and the TPP negotiation in particular? ANSWER: The APEC Summit has now concluded and it is obvious that no major decisions were taken to overcome the obstacles to trade liberalisation. The Bogor goals set many years ago have yet to be achieved. The APEC summit is a leaders' meeting and its importance lies not only in multilateral discussions but privately arranged bilateral discussions. For example, Australia's new prime minister Tony Abbott had hoped to meet President Obama for the first time since taking office. Obama's no show will have little impact on economic decisions but it will have a lingering impact on the perceptions of regional leaders about America's ability to provide human and capital resources to carry out its rebalancing strategy. This was a lost opportunity and the next round of summits are a year away. The next APEC Summit will be held in Beijing. To use a soccer expression, Xi Jinping will have the home ground advantage. 2. Will the current round of negotiations for the Trans-Pacific Partnership (TPP) yield any concrete results? ANSWER: The TPP negotiations were in the hands of the ministers who are responsible for trade, investment and other economic matters. America was represented by the United States Trade Representative, Michael Fromm. He already is on record that substantial progress has been made. The White House on October 8th released the TPP Leaders Statement which stated: "our countries are on track to complete the Trans-Pacific Partnership negotiations. Ministers and negotiators have made significant progress in recent months on all the legal texts and annexes on access to our respective goods, services, investment, financial services, government procurement, and temporary entry markets." The ministers agreed to resolve all outstanding by the end of 2013. Progress on the TPP looks positive. But President Obama has not sought fast track authority from Congress to get approval of the TPP once it is completed. Since the

2 TPP will be a treaty it needs to be ratified by the U.S. Senate. This looks doubtful given the poisonous political climate in the United States. 3. What are the benefits and challenges for Vietnam with the TPP? What can Vietnam do to get the best from this partnership? ANSWER: In April the Politburo issued a resolution on international integration and gave priority to economic integration. The resolution stressed that Vietnam should be proactive in all relevant multilateral institutions and arrangements. This includes the TPP. The TPP would give Vietnam preferential access to 40% of the world economy as represented by the other eleven members, including the U.S. and Japan. There is a sporting expression used by coaches to their players - "no gain without pain." This applies to Vietnam. It must reform state-owned enterprises, protect international property rights, make government procurements more transparent and possibly source raw materials from other TPP members rather than the cheapest source. If the TPP agreement includes a provision for the so-called "yarn forward" Vietnam would have to move from purchasing its yarn from China to other countries. If Vietnam used Chinese yarn its garments would be subject to high tariffs. In addition to the benefits of raising Vietnam's international economic integration, the TPP would serve to assist domestic economic reforms. In other words, once Vietnam ratified the TPP all government departments, state enterprises and private enterprises would have to comply with its provisions. This would assist government officials in carrying our reforms. The TPP is a major strategic avenue to raise economic growth in Vietnam back to its previous high levels.

Suggested citation: Carlyle A. Thayer, United States: Implications of Obamas No Show in Bali, Thayer Consultancy Background Brief, October 9, 2013. All background briefs are posted on Scribd.com (search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE in the Subject heading and hit the Reply key. Thayer Consultancy provides political analysis of current regional security issues and other research support to selected clients. Thayer Consultancy was officially registered as a small business in Australia in 2002.