The APEC Summit illustrates the economic potential of Asian-Pacific markets. The foundation of a Transpacific Partnership has been agreed upon and Russia gets closer to becoming a member of the WTO.
Normally, only Asian-Pacific economic partnerships should be discussed here in Honolulu, but the financial crisis in Europe can’t just be ignored. “Every day, I am concerned about the possible solution for the European debt crisis“, said Doug Oberhelman, CEO of Caterpillar Inc, the major US earthmoving equipment maker. However, the crisis hardly affected his business. Oberhelman is looking into the future with confidence. The reason for that is: “our ability to do business successfully, no matter what the circumstances are.”
Caterpillar has created 30,000 jobs worldwide since 2010, 12,000 of them in the USA. And the expansion continues with investments and construction sites in Indonesia, Japan, Thailand, and India. A new factory for smaller construction machines is currently being built in North America. Record sales are expected for 2011.
All eyes on China From “Made in China” to “Created in China”
China shows itself unaffected, too. “The effects of the European crisis are minor”, said Xiao Gang, Chairman of Bank of China. His bank only owns a small fraction of the European government bonds, and none from Spain or Greece. It’s similar for other banks in his country. China could even profit from one of the possible effects of the financial crisis: should European banks withdraw their capital from the Asian- Pacific market, this would be “a good possibility for Chinese banks to expand their business”, said Xiao Gang.
China is under pressure on this APEC Summit in Honolulu. During a meeting of the accompanying APEC CEO Summit on Saturday (November 12, 2011), US President Barack Obama insisted that the Chinese should “play by the rules”. As an example, he referred to China’s currency, which is generally considered undervalued. “This is something that has to change”, said Obama, otherwise the USA would take action on its own. Obama added in reference to intellectual property rights, “It is not acceptable for us not to get the kind of protection we need in a large marketplace like China.” Xiao Gang didn’t respond to that, but he explained that China is changing – from products “made in China” to products “created in China”. Moreover, the banking system would need to be adapted to the changing global conditions in the long run.
Asian Growth, at the expense of Europe John Chen, President of a SAP subsidiary
According to John Chen, President of the software company Sybase Inc, a subsidiary of the German company SAP, it is just a matter of time until China gains an interest in having a currency that is able to move liberally within the market and in strengthening the protection of intellectual property. “The Chinese currency will become stronger. It’s just a question of how quickly”, Chen explained in an interview with DW-WORLD.DE. In the past five years the Yen has already grown by nearly one third, he explained, and sooner or later the Chinese would have to conform to the system as well, especially “if they want to further invest in foreign markets”.
Chen is also expecting a change concerning the issue of protecting intellectual property: “China is working intensively on applying patents itself, which is why they are also interested in protecting their intellectual property”. This as well is just a matter of time, said Chen. However, Western countries should keep on putting pressure on China. Currently, half of Sybase’s business is being conducted in the USA, 35 percent in Europe and the Middle East, and the rest in the Asian-Pacific region. The latter is growing: business in China has increased by over 25 percent in recent years, according to Chen. He expects redistribution in favor of the Asian markets within the next three or four years, and “the APEC will be the location of growth” for the next 10 to 20 years. If only by a few percent, the losers would then be: the Europeans.
Europe is debating – China is acting
Even if China is getting chastised for its currency policy, it is still in high demand as a business partner. At present, Tethys Petroleum Limited delivers gas to Europe from Kazakhstan, Uzbekistan, and Tadzhikistan via pipelines owned by the Russian company Gazprom. This being the only route to export the gas, Gazprom is able to rule the price. This could change in the near future, explained David Robson, the company’s president, in an interview with DW-WORLD.DE. “In 2013, there will be a new pipeline that connects our oil and gas fields with China. Then you will be able to choose, “and then it’s all about the best price that can be achieved with the gas.” Presumably, the decision will be made between the one and the other market, said Robson.
Europeans can only stay competitive by building the Nabucco Pipeline, which has been planned for a long time and which takes a more southern route to the West through Turkey. But it doesn’t look like it’s going to happen at the moment: “We’re talking about Nabucco since I went to school”, said Robson half-jokingly, “I don’t know when it will become a reality.” At the same time there is an interest for Central Asian gas from India and Pakistan, where the construction of a pipeline should be completed by 2016.
Thus, there is considerable competition for Europe, even though China still has to make some changes when it comes to the reduction of trade barriers in order to import gas, said Robson. However, Europeans also have to make an effort if they like to continue to buy gas from Central Asia. Until now there was a lack of political will to make the Nabucco pipeline become a reality. As opposed to China, which realizes its goals quickly, there are “a lot of debates in Europe, but in the end nothing happens”.
Russia gets closer to becoming a member of the WTO
Russia as well is highly interested in economic relations with China. Just recently, a $4 billion Russian-Chinese investment fund was founded. But Kirill Dmitriev, CEO of the holding Russian Direct Investment Fund, also sees synergies with Asia and Europe. “Russia”, he said, “can help Europe during the current crisis”.
Russians have a reason to be happy, as they have come significantly closer to becoming a member of the World Trade Organization. It looks like they might have come to an agreement on all open questions, said Dmitriev. The next APEC Summit will be held in 2012 in Vladivostok, and then Russia’s entry in the WTO could be signed. Due to this Russia would come a lot closer to international standards, explained Russia’s President Dmitry Medvedev in Honolulu.
Transpacific Partnership agreed upon The United States also change their priorities
In Honolulu, the foundation of a Transpacific Partnership (TPP) was already agreed upon. This partnership includes a free-trade zone between the USA, Australia, Brunei, Malaysia, New Zealand, Peru, Singapore, and Vietnam. “There are still plenty of details to work out, but we are confident that we can do so“, said President Barack Obama in Hawaii. That way, trade and investment barriers can decrease, exports are able to revive, and, moreover, more jobs can be created in the USA. Japan announced that it wants to strive to enter the TPP as well.
Here in Hawaii it is not only obvious that Asian markets are booming, but also that US priorities regarding foreign policy are shifting. In a speech on Friday, Secretary of State Hillary Clinton already explained: the wars in Iraq and Afghanistan are winding down, a new era of trade begins, and the central location in this era is Asia.
Author: Christina Bergmann, currently in Honolulu, Hawaii
Editors: Michael Borgers
Translation from German into English: Eileen Bradley, Language Connections
For the original article in German, please visit: http://www.dw-world.de/dw/article/0,,15529208_page_2,00.html