APEC set to launch study on China-backed free trade area

By Megha Rajagopalan and Michael Martina

BEIJING (Reuters) - Leaders will agree to launch a study on a China-backed free trade area at next week's Asia-Pacific Economic Cooperation meeting in Beijing, an APEC official said, amid controversy over competing U.S. and Chinese visions for regional trade.

China is pushing the Free Trade Area of the Asia-Pacific (FTAAP) at APEC, but some see the proposal as a way to divert attention from the more comprehensive U.S.-backed Trans-Pacific Partnership (TPP) plan being negotiated by 12 countries, not including China.

"A study has always been on the table, and there's been agreement on this, but it's not an opening of negotiations," Alan Bollard, Executive Director of APEC Secretariat told reporters at a briefing on Thursday. Bollard said the plan to conduct the research would be "a big deliverable".

Carried out over the next two years, the study would investigate the possibility of the FTAAP, how long it might take and whether it would "need to go through" TPP or another Beijing-backed framework called the Regional Comprehensive Economic Partnership (RCEP), he said.

The Wall Street Journal reported on Nov. 2 that the United States was trying to block China's efforts to use the APEC summit to push for the launch of a feasibility study on the FTAAP, a move typically seen as an opening of negotiations.

China's official Xinhua news agency said senior officials had "decided to submit the initiatives about the realisation of FTAAP" to the upcoming APEC ministerial and economic leaders meetings, but did not give details.

Ministers from 12 countries will meet on the sidelines of APEC to discuss the TPP, a deal that falls outside of the summit's agenda but aims to tackle the kind of market restrictions still seen in China's economy.

China's Foreign Ministry did not directly address the prospect of the TPP ministers meeting when asked at a press briefing on Wednesday, but said it hoped countries would focus on APEC tasks at hand.

"The topics at this APEC meeting are very rich and will play an important role in promoting the integration of the Asia-Pacific region and the establishment of a free trade area," ministry spokesman Hong Lei said.

"We hope all member countries can concentrate on discussions of integration, and advance the important outcomes of this meeting," Hong said.

"PLANT THE SEED"

China has not been enthusiastic about the TPP, fearing that it is being used by Washington as a way to either force it to open markets by signing up or else isolate it from other regional economies as trade is diverted to TPP signatories.

The TPP is widely seen as the economic backbone of U.S. President Barack Obama's "pivot" to Asia, what some experts view as an attempt to balance China's rise by establishing a larger U.S. presence in the region, including military assets.

Tu Xinquan, Associate Director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing, said the United States wants to first set trade rules with TPP and then integrate China using FTAAP, a process that doesn't sit well with China's government.

"China wants to take part in the rule-making process, rather than join rules," Tu said.

U.S. trade officials reject the idea that they are trying to isolate China with the TPP, which would cover about a third of global trade.

Wang Jiangyu, a trade expert at the National University of Singapore, said China would need time to meet the high standards of an agreement like the TPP, but that simply talking about FTAAP at APEC could help Beijing shift the agenda.

"If China can plant the seed into the mind of APEC leaders and the media and people begin to pay attention to the FTAAP, that itself is a success. China does not need any specific commitment," Wang said.

(Reporting by Megha Rajagopalan; Writing by Michael Martina; Editing by Jeremy Laurence)