Looking West: Trade and America’s Future in the Asia-Pacific

In 1890, the US Census Bureau’s superintendent, Robert P. Porter, announced the closure of the American frontier. The great American westward trek across the continent that had begun in the 1700s was over. Americans, however, did not cease looking westward. They have continued to gaze west towards the Asia-Pacific region and its great economic possibilities.

Trade has long been central to that vision of America’s presence in the Asia-Pacific. We live, however, in an era in which American trade policy is in a state of flux and likely to remain so over the next decade. But these circumstances present an opportunity for American policymakers concerned about the long term to start imagining how the United States might enhance its economic engagement with a region that looks increasingly to be the world’s economic future.

Consider, for instance, the twenty-one nations that belong to the Asia-Pacific Economic Cooperation (APEC) forum. According to the Office of the United States Trade Representative, APEC accounts for “approximately 38 percent of the world’s population, 60 percent of the world’s total GDP and 47 percent of the world’s trade.” In 2023, total APEC GDP (which includes US GDP) was a staggering $63.8 trillion, and “U.S. goods and services trade with APEC totaled an estimated $3.8 trillion” that same year. These numbers alone suggest that a US economic disengagement with the Asia-Pacific, retreating behind tariff walls, is not in America’s national or economic interest.

To be sure, there are tremendous economic, cultural, and political variations among the nations in the Asia-Pacific rim. Countries such as Vanuatu, Taiwan, Chile, Mexico, Australia, Fiji, and Indonesia are very different. Nor can US trade policy discount the fact that China’s present agenda for the region is at odds with American interests. But it should not be beyond the wit of Americans to work out how, despite these challenges, to garner the enormous economic benefits that would come through wider trade engagement in a region with some of the world’s most impressive growth rates.

From Trade Engagement to Trade Wars

American trade in the Asia-Pacific region dates back to the 1700s. In 1784, an American ship, The Empress of China, became the first American ship to sail from the young American republic all the way to China. Sixty years later, the United States signed the 1844 Treaty of Wangxia with Beijing, thereby securing access to Chinese markets for American merchants.

Nine years later, Commodore Matthew C. Perry sailed his four “black ships” into Tokyo Bay to demand that the hitherto closed world of Japan open its markets to American goods. The result was the Treaty of Kanagawa, signed in 1854. This marked the beginning of a long history of US-Japanese trade that persisted until the 1930s, before being resumed shortly after Japan’s surrender in 1945.

The renewal of US-Japan trade relations formed part of a broader US effort throughout the Cold War to expand American trade globally, helping to counter the expansion of Communism. It was, however, after the Cold War that American trade in the Asia-Pacific region began to grow rapidly, not least because key players—Australia, Japan, and, above all, the United States—believed that multilateral trade integration would produce greater prosperity for all members.

APEC was a primary vehicle for realizing this end. Significantly, APEC membership has never been premised on being a sovereign state. Instead, membership is based on being an “independent economic entity.” Not only did this allow both mainland China and Taiwan to be members of APEC, it reflected the idea of some policymakers in the 1990s that it might be possible to separate trade relationships from military and national security questions. 

The Geopolitics of Trade

The ability of Asia-Pacific nations to make such distinctions has declined in the wake of fundamental changes in the US-China relationship since 2012, America’s decision to withdraw from the Trans-Pacific Partnership (TPP) in 2017, and ongoing clashes between Beijing and three presidential administrations over trade policy. Whether we like it or not, geopolitical contests are back, and the US-China competition is at the heart of them. The Asia-Pacific rim is the primary theatre in which that conflict is being played out.

The temptation for America is to respond to these changed conditions by drawing up the bridge and retreating behind tariff walls. That option is currently popular across the American political spectrum. Indeed, by withdrawing from the TPP, the United States signaled to its erstwhile partners that Washington was no longer interested in being the regional leader in Asia-Pacific trade. The replacement of TPP—the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—has been advanced without U.S. participation, so much so that China has applied for CPTPP membership.

This reflects a pattern in which China has used more recent trade agreements to expand its influence and its distinctly neo-mercantilist economic model throughout the region. A good example is China’s participation in the Regional Comprehensive Economic Partnership (RCEP) that came into effect in 2022 and brought together a mixture of 15 high-, middle-, and low-income Asia-Pacific nations (including US allies like Japan, Australia, South Korea, and the Philippines). Thanks to RCEP, Chinese businesses—many of which are state-owned enterprises—have been able to expand their participation in the Japanese economy in ways that had previously eluded them.

These developments should cause American policymakers to ask themselves some tough questions. In what world, they might ponder, does it make sense for the United States to allow Beijing to slowly turn the Asia-Pacific rim into a Chinese-dominated economic lake from which America is excluded or excludes itself? And how precisely would a slow US retreat from one of the world’s most dynamic economic regions promote America’s national security or serve its economic interests?

Liberalize Trade, Advance America

One way for the United States to counter these trends is to re-engage economically in the Asia-Pacific region and make trade liberalization and a commitment to open markets a centerpiece of its approach. By presenting itself as the Asia-Pacific champion of free trade, the United States would offer a stark contrast to the Chinese model of neo-mercantilism, which, like all forms of mercantilism, is ultimately about control rather than prosperity.

There are multiple approaches that America could adopt to advance its end goal, such as increasing US influence through trade liberalization and bolstering US economic growth that would result from this. One step would be to revisit existing Free Trade Agreements (FTAs) with long-standing US allies, such as Korea, Australia, and Japan, and negotiate further liberalizations of trade between these countries. That would certainly help counter Chinese pressures in these nations, putting more distance between them and the United States.

This could be accompanied by America opening negotiations for FTAs with countries like Indonesia, who have large exports to China but do not have a bilateral trade agreement with China and are worried about China’s growing sway throughout South-East Asia. US FTAs with these countries would help orient them away from China while simultaneously widening access to their markets for American exporters.

A second step would involve some willingness on America’s part to eat humble pie. Doing so, however, would be worth it. And that would be to request America’s re-admission to the CPTPP.

In retrospect, America’s withdrawal from the original TPP was a serious error. America could have been the leader of a free trade pact in the Asia-Pacific rim that (as President Barack Obama repeatedly stressed throughout 2016 in the face of attacks on TPP by Hillary Clinton and Donald Trump) explicitly excluded China from its membership.

Many CPTPP members would welcome US reentry, not least because it would increase their access to the world’s largest economy, as well as reduce the pressure on them to admit China to the CPTPP’s ranks. Indeed, membership in the CPTPP would put the United States in a position to push this trade pact further in distinctly anti-mercantilist directions, thereby positioning the CPTPP as an alternative to the Chinese approach to trade throughout the Asia-Pacific.

Opposition, Domestic and Foreign

If the United States were to pursue a robust free trade approach to the Asia-Pacific region, two major obstacles would quickly arise. The first would be China’s existing influence throughout the region and its willingness to retaliate against less powerful countries that refuse to play along with Beijing. Another would be domestic US opposition of the type that is inclined to portray any extensive American trade with the rest of the world as a zero-sum game in which America is inevitably the loser. This would include President Trump and a cross-section of Republicans and Democrats in Congress.

Overcoming these impediments would be difficult at the best of times, and America is not presently living through such a period. That, however, only underlines the importance of making the argument to Asia-Pacific rim nations and everyday Americans that advancing a trade liberalization agenda on multiple fronts throughout the region would achieve three key objectives.

First, it would strengthen America’s ability to counter China’s expanding presence. Second, it would go some way to repair the United States’ presently damaged reputation for leadership and engagement in a critical part of the world. Third, it would enable American businesses and consumers to reap the considerable economic benefits that result from expanding the depth and breadth of market exchange throughout the Asia-Pacific region.

Yes, persuading policymakers, legislators, and Americans at large of the wisdom of this path forward would be a hard-sell, especially at a time when any proposal for trade liberalization attracts immense political opprobrium. It would be a shame, however, if America turned its back on a frontier that offers so much economic opportunity to anyone—or any country—enterprising enough to seize it.

Samuel Gregg is the Friedrich Hayek Chair in Economics and Economic History at the American Institute for Economic Research. He is a contributing editor to Civitas Outlook.