Playing the Zero-Sum like a Positive-Sum

During his visit to Vietnam, US Secretary of State John Kerry repeatedly asserted confidence in the Trans-Pacific Partnership (TPP). He expressed optimism about the future of the deal on August 7, 2015: “I’m very very confident that the TPP is gonna boost trade, improve worker standards, improve environment standards, have a consequence of really raising the standards of business for 40 percent of the global economy, and for that reason, I’m absolutely confident that ultimately, it is not only gonna be agreed to among the nations but it’s going to be accepted and ratified by the participating countries,” noted Secretary Kerry.

Yet even the Secretary’s “very very confident” verbal stance betrayed the harsh reality facing the pan-regional free trade deal involving 12 Asian Pacific countries. Just over four months ago, after much difficulty corralling the House Democrats, the Senate succeeded in renewing “fast-track” authority for President Obama, enabling him to maneuver trade bills quickly in Congress without the potential hazards of filibusters or amendments. While this victory for the President and pro-TPP business interests came as a hard-won fruit, the real issue of passing the TPP itself – in the consummate form that all member countries agreed to at the TPP Trade Ministers’ Meeting in Atlanta, Georgia in the week of September 30 – remains a herculean task. There were many points of contention for the US at the meeting, including establishing the time horizon for pharmaceutical companies’ monopoly over information on the production of biologics, medicines developed from living organisms. As the 2016 presidential campaign heats up, TPP’s inevitable association with business interests is receiving more critical light.

But putting aside the logistics and the business versus labor disputes, TPP still cannot be considered in politically neutral terms. TPP serves as one of the mainstays of President Obama’s “pivot to Asia” or “rebalance” initiative, a somewhat belated recognition that East Asian regional politics has risen as an integral part of the world stage after years of neglect owing to the war on terror and recent economic downturn. In the context of the recovering American economy, American economic interests behind TPP seem to trump the deal’s diplomatic and political goals: after all, isn’t the U.S. trying to expedite its recovery by promoting a mega-regional Free Trade Agreement (FTA) network and through it, US exports? Surprisingly, however, many analysts point out that a ponderous economy such as that of the U.S. does not stand to benefit from TPP—at least not in the short run. In their 2012 report “China’s Free Trade Agreement Strategies” in The Washington Quarterly Guyou Song and Wen Jin Yuan argue that “the direct economic benefit brought by TPP could be marginal, particularly in the short run,” adding that “this makes some academics believe the real US intention is to gain indirect long-term economic benefits [such as] … ensuring the US’s status as the rule-maker in regional trade regulations.” In their “Multilateralising regionalism: what role for the Trans-Pacific Partnership Agreement?” article published on The Pacific Review, Ann Capling and John Ravenhill expatiate on this seeming contradiction: “The economic gains from removing border barriers among the countries involved in the initial TPP negotiations are likely to be limited… given the small size of many of the economies and the existing PTAs [preferential trade agreements].”

So why is the U.S. pursuing TPP? The answer lies partly in Song and Yuan’s flitting remark that U.S. stands to be “the rule-maker in regional trade regulations” and partly in the fact that China is excluded from this Pacific Rim membership. The repeated, almost brainwashing invocation of setting the bar high—glimpsed in Secretary Kerry’s statements—demonstrates America’s desire to tame China. As Keith Bradsher points out in his New York Times article “Once Concerned, China Is Quiet About Trans-Pacific Trade Deal,” China has been relishing the benefits from such trade restrictions as high tariffs using its identification as a “developing country” since its admission to the World Trade Organization in 2001. In this sense, China too has no incentives on its part to acquire TPP membership. In fact, The Guardian’s Jessica Glenza notes, “China had been invited to join the trade group but balked at restrictions that the deal would have placed on its financial sector and other areas.” At first glance, the paradox of taming the Asian tiger that isn’t even in its cage to begin with seems like yet another American faux pas, perhaps a sequel to the blush in Uncle Sam’s face at China’s most recent success with the Asian Infrastructure Investment Bank (AIIB), what Thomas Renard calls “China’s largest soft power success so far” in his article on AIIB in the Security Policy Brief.

The key to taming China with “high [trade] standards” in the absence of its membership in TPP may lie in the arguments put forward by the Asian Development Bank’s (ADB) Shintaro Hamanaka. Citing Oran R. Young and others, Hamanaka notes that by circumscribing a region, a state can easily become “the most powerful state … [by] dominating other members in terms of material capacity,” a type of regional hegemony reliant on material capacity, something he dubs as “structural leadership.” It is only through this “politics of exclusion” or the “exclusion of rival states” that states are able to assert leadership. In this respect, excluding China in TPP was the first step in demarcating the bounds of American claims in the Asia Pacific.

But such a state requires the means of establishing those bounds. “Power also depends on rules,” Hamanaka writes, claiming that “if the set of rules established is convenient to some countries but not to others, it is likely that countries which find the rules convenient can assume leadership.” It is this leading state that can easily establish the rules or the “agenda,” to borrow Hamanaka’s words; this state is then empowered further by the established agenda that best suits it. Hamanaka calls this positive feedback loop the “Power Agenda Paradox.”

According to Hamanaka, the agenda of concern for the U.S. is economic liberalization, while that for such developing countries as China is economic development. Indeed, while TPP focuses far more on liberalizing various industries, the Regional Comprehensive Economic Partnership (RCEP) propounded by China — TPP’s Chinese twin that excludes the U.S. — accentuates “regional integration,” to cite what the Singaporean government released on the pending agreement. Walking into Asian territory, the U.S. is drawing the lines to reinstate itself in the sphere it knows it’s best suited for: economic liberalism. Seeing the uninvited guest barge into its territory, China is drawing lines for itself too, making use of the us-and-them politics of exclusion.

Such competition to set the agenda isn’t lost on experts other than Hamanaka.

Kaewkamol Pitakdumrongkit, assistant professor at the Nanyang Technological University (NTU), echoed Hamanaka’s argument in his interview with the CNBC in Kit Tang’s article, “RCEP: The Next Trade Deal You Need to Know About”: “RCEP's agenda includes discussions about intellectual property rights (IPRs), e-commerce, etc. Do all RCEP members have the same IPRs or e-commerce environment? I don't think so. Then how can we develop rules which are compatible or applicable to all members?” he noted, essentially demonstrating China to be equally engaged in America’s stratagem of rule-setting.

For China, the motivation to promote regional cooperation through its own agenda-setting powers comes from two sources. The more important motivation is the need to find an alternative to its membership in institutions like the TPP. Tang’s CNBC article quotes Ma Jun, the chief economist at the People's Bank of China (PBOC), who reported that China may lose out on a potential 2.2 percent hike in its GDP due to its exclusion from the TPP. Deborah Elms, the Asia Trade Centre’s executive director, cited in same article, elaborates on China’s dilemma from its vantage point: “If you're not in the TPP and you don't have agreements with the European Union, that's a bit alarming [because] your major trading partners are not connected to you. So [China] will want to make sure that the supply chains in Asia work to their benefit as much as possible.” In this way, RCEP would help China glean the economic benefits of an expansive FTA network from an alternative source, as it attempts to mitigate costs by bypassing higher standards that developed nations must observe.

From a more strategic and political perspective, however, China’s aim for regional cooperation may come from a different motivation. As The Guardian’s Michael Boskin claims, “it is much easier to build mutually beneficial trade relationships than it is to resolve military and geopolitical issues, such as … resolving tensions in the South China Sea. … [Strong] trade relationships have the potential to encourage cooperation – or, at least, discourage escalation of conflict – in other, more contentious areas.” Though his insight was on the American rationale for TPP, it is equally applicable to China’s RCEP. In a sense, by emphasizing regional cooperation through RCEP, China is fostering the growth of a “security community” in East Asia, a concept put forward by Karl W. Deutsch where cross-country issues are resolved peacefully within a shared value framework. Establishing such a community — however “peaceful” it may end up being in reality — will facilitate Chinese regional hegemony.

The competitive parallelism between TPP and RCEP becomes patent when we take into account how China, Japan, and South Korea, at the sixth trilateral summit held on Nov 1 in Seoul, expressed their renewed determination to conclude RCEP negotiations. This statement, issued as one of the keystone press releases so soon after the meeting made its historic comeback after an over-three-year hiatus, came less than a month after the TPP nations declared the official conclusion of negotiations in Atlanta.

Pitakdumrongkit, in the CNBC article by Tang, commented on this apparent rivalry, invisible yet visible: “I am not 100 percent sure whether the RCEP deal will be struck as soon as this week but the stakes are now higher for RCEP members, especially those that are not in the TPP, because they realize that they are losing out.”

Going back to our starting point, then, how can we understand this mutually conscious rivalry between TPP and RCEP in terms of Hamanaka’s agenda-setting paradigm that explained the logic behind America’s taming of China without its inclusion in TPP?

It turns out that Hamanaka saw through America’s intentions in spearheading TPP: “An exclusion of a particular country does not mean that the excluded country will perpetually remain outside the framework. In fact, TPP may someday include China, resulting from a policy of the U.S. ‘engaging’ or ‘socializing’ China rather than ‘balancing’ against it.” The liberalist “engagement strategy” was what the US has been employing all along toward China, “not … containing China but, for the most part, fostering its growth,” as Thomas J. Christensen wrote in “Fostering Stability or Creating a Monster?” on International Security. The idea of “balancing” China that Hamanaka mentions above is an offshoot of realist ideology, which the US abandoned in exchange for a liberalist one after the end of the Cold War. Raising China as the axis of Asian regional integration, the U.S. envisioned working toward shared interests as a positive-sum game that will benefit all the regional players by ensuring peace and stability, establishing a security community with China as its proxy axis. But this effort backfired unexpectedly as multilateral efforts shepherded by China itself – AIIB and RCEP – and economic interdependence fueled by China’s own astronomic growth began to play their own parts in propping China up. It is now difficult for an increasingly desperate U.S. to maintain its liberalist outlook in East Asia. “If we don’t write the rules, China will write the rules out in that region; we will be shut out — American businesses, American agriculture,” appealed President Obama in his April interview with The Wall Street Journal. The gist of President Obama’s statement is that what the US loses will be gained by China, which defines the crux of zero-sum logic. A rapidly ascending China, now encroaching upon time-tested American hegemony not only in the economic sector but also in the political sector with such soft power successes as the AIIB, has led the U.S. to question if the positive-sum game it has been playing for decades has been zero-sum after all.

Nevertheless, this era is the era of positive-sum logic — or at least, of positive-sum rhetoric. Articles establishing such fledgling cooperative institutions as the AIIB, TPP, and RCEP abound with hopeful language of collaboration. Neoliberal institutionalism is in action. But whether it should remain a positive-sum game has been thrown into question. China’s economic clout is functioning as political leverage in the region. Christensen astutely notes, “Japan’s and South Korea’s high degree of reliance on the Chinese economy makes analysts nervous about whether either country can be considered a reliable US ally, particularly in conflicts that might directly affect US strategic interests, but not their own.” South Korea’s joining of the AIIB in spite of American remonstrations illustrates Christensen’s point. In July 2005, China-led Shanghai Cooperation Organization, obviously excluding the U.S., asked for a withdrawal timeline for US forces in Kyrgyzstan and Uzbekistan. It is a bit difficult now to perceive China’s gain in political power as adding to America’s interests in the region and beyond.

Christensen in his paper proposes a syncretic perspective that merges the positive-sum rhetoric with its zero-sum reality. One of the corollaries of his argument is, of course, to play the zero-sum game as a positive-sum game. Blocking the legitimate increase in voting shares of growing countries like China in the International Monetary Fund (IMF) was definitely not the way to play the game. Asking other states to boycott the AIIB was also not the proper strategy. Stating outright that losing TPP will mean handing over the scepter to China was not the adequate positive-sum rhetoric for the occasion. If the IMF deal is too late, at least membership is still open for the AIIB. Long roads lie ahead of TPP as well. Perhaps the U.S. should stop “setting the bar high” and gradually shepherd China in. It is time for the U.S. to return not only to Asia but also to its liberalist “engagement strategy”—albeit in a way that is, perhaps, not really engaging.