Eduardo Pedrosa: International cooperation is not all "give and take"

Interview

As the sphere of international cooperation increases its span, decision makers find themselves having to deal with complex issues sometimes beyond their comprehension. It is rather clear that without a proper connection with the civil society, experts and analysts, they may not be capable to take effective steps in a certain sphere. In his interview to RIAC, Secretary General of the Pacific Economic Cooperation Council Eduardo Pedrosa reflects on the current state and nature of second-track diplomacy in general and in the Asia Pacific in particular.

Interview

As the sphere of international cooperation increases its span, decision makers find themselves having to deal with complex issues sometimes beyond their comprehension. It is rather clear that without a proper connection with the civil society, experts and analysts, they may not be capable to take effective steps in a certain sphere. In his interview to RIAC, Secretary General of the Pacific Economic Cooperation Council Eduardo Pedrosa reflects on the current state and nature of second-track diplomacy in general and in the Asia Pacific in particular.

Let’s start with a brief overview of your impressions of the forum, the plenary session, your special meeting, the panels you attended.

It has been very interesting for me, especially as a non-Russia specialist, to hear Russian perspectives of the Asia Pacific region. It is very different from the general tone that we are used to here in East Asia and the Asia Pacific region. Russia is, by virtue of its geography, both a European and an Asia Pacific country. Many of the issues that we discussed over the last two days have been seen through that prism: we need to keep our engagement with Europe, but also maintain a clear view of Russia’s future interests in the Asia Pacific. So that has been very interesting.

Turning to the Pacific Economic Cooperation Council (PECC), now, I think it is quite clear that second track diplomacy is very important, and we understand the virtues of this kind of diplomacy. But as far as I understand, the key is to somehow connect first and second track diplomacy. What is the best way to do that? How do we harmonize the interests of the experts and practitioners? How do we really make it work?

I think there are two very distinct things to bear in mind in terms of second track diplomacy. The first being the networks themselves. As it stands, academics, businesspeople, and even government officials, in an unofficial capacity, come together through PECC to discuss some of the big regional trends. I think the advantage of this is this is not in the negotiations themselves; there are no “hard interests” at stake in these discussions. It is a genuine sharing of perspectives on some of these key developments. This is what enables PECC to address issues that the formal governmental processes are not yet able to. So the second track process, if you like, builds a body of knowledge, an understanding of any particular issue, which can then be fed into the first track, the official processes, when governments see that there is space to do so. For example, during the 1990s there really was very little discussion on regional financial cooperation. After the economic crisis, the Asian economic crisis, space opened for this.

What happened in PECC is that we created a “Finance Forum”, bringing together experts on financial issues from the government, academia and businesses. They considered what lessons we can learn from the financial crisis. One of those was the double mismatch in currencies and maturities through which the local banking system was lending at long maturities in local currencies and borrowing from the international financial systems at short maturity in U.S. dollars. So when the international banking system withdrew that money, they were left with no funding available for the longer-termed denominated assets. So part of that process within PECC involved thinking about what needed to happen in terms of the creation of local bond markets, the widespread reliance on the banking sector among Asian companies, and forms of visual surveillance to make sure it is possible to anticipate risks and formulate the necessary policy adjustments before those risks become systemic and the risk of contagion to other regional economies develops.

That was in the early part of the first decade, from 2000 to 2005. Since then we’ve seen a growth in local currency bond issuance, the Asian Development Bank has set up the Asian bond fund monitor, and ASEAN+3 group has a monetary unit. So in that sense, what I see is a transfer of ideas and knowledge from track two to track one. I can give you a lot of examples.

Another example is regional trade agreements. We have seen a global proliferation of regional trade agreements from a very low number in 1980s and 1990s, and this pace is accelerating tremendously. Again, in the early 1990s, a lot of work was done on identifying the best practices for FTAs. What needs to happen is to ensure that these blocks act to promote regional and global integration rather than offering exclusive processes. Now, after this work was done, the APEC process formally started following its own agenda on FTAs and RTAs, and started designing chapters for FTAs.

I see a direct correlation between the thinking within PECC, creating highlights on important issues, and then giving passing this document to officials to deal with and act on. Now there a lot of issues that PECC has worked on that governmental officials have not yet taken up, and we are going to be talking about this in the afternoon session on migration. If you look at the demographics of the Asia Pacific region, there’s a real mix: we see ageing in a lot of societies – Japan and Korea and Singapore are well-known examples of this. I think China is less well known. China’s population will reach an inflection point in around two years’ time, when it begins to age quite rapidly. Russia is very well aware that it has an ageing population. What does this mean in terms of migration? It means that the pressure is increasing. Now, as far as we are concerned, looking to the promotion of regional peace and good relations, we have to think of policy processes for managing this issue. What we see right now is that these major processes are managed bilaterally. We see services chapters in the FTAs, we see, of course, the domestic environment, but there are also bilateral memorandums of understanding between countries.

So that is why that is ahead of the curve, these issues are not really being dealt with in regional fora, but, I think, when the time comes, this kind of knowledge and information will be very useful.

I have just attended a special meeting on Russian-Vietnamese relations, and one of the speakers said something very troubling. He said that there is no such thing as international peace, there is no such thing as understanding, no such thing as adequate communication among experts, as everybody is motivated by self-interest alone, this is what rules politics, and we can only play at peace, we can only show off without achieving any real or deeper understanding. Do you think that second track diplomacy solves this issue or is it also an illusion?

I do not think it is an illusion. It is very real. What we tend to see, especially in the academic sector, is a learning process. An academic may work domestically on an issue, but when he goes to international meetings he gets to see the perspective of his counterparts on the other side. And it is true that through this process of sharing, we are able to, if you like, achieve a degree of convergence. I don’t think that it is all “give and take.”

I think there is a genuine attempt to find to the approach that will work best in our mutual interest. And this really is a foundation focused on Asia Pacific cooperation, at least, it is in our mutual interest to see each other develop peacefully and rapidly as is evident from the leaders’ statements, and this is highly unique. If you step back a bit in this process, and you think about what has happened in international relations over the course of history; in case of Europe you have incumbent powers, like France, like Great Britain, or in the past the Austro-Hungarian Empire, the Habsburg dynasties, and of course, the Romanovs. In that process, as new dynamic economies emerged (for example, Germany in the 18th or 19th century), what happened? We had conflict that stretched over a two-hundred-year period.

Have you seen the emergence of conflict in the same way today? The answer is no. But look at Japan. Japan emerged after the Second World War extremely rapidly. Now, while there were tensions with the United States in the 1980s (you can see this in a number of the cases, brought against Japan in WTO) there was no conflict. In the case of China, over the last 30 years China has emerged to become the second biggest economy in the world. Has the international system been able to accommodate China’s rapid rise? The answer is yes. Yes, there are tensions, but the system itself has been able to accommodate. I think that’s one of the crucial benefits of Asia Pacific cooperation: that it has created a space for this emergence of new powers, and the mutual understanding of what is in all our interests.

You can see that in the United States it benefited the U.S. consumer. Look at the price of goods. I don’t have the facts to hand, but where the average U.S. consumer spent, say, X dollars on clothing, over time that amount has actually gone down. When you look at the details, the number of items that they purchase has increased. What does that mean? If consumers have more choice and they buy more, but the actual price of the goods has fallen, there is an improvement even for Americans’ quality of life, so, alongside the growing tensions in the relationship, there are tremendous benefits from China’s emergence. There were high-level tensions when there was a movement to boycott Wall-mart. This lasted for about three days, until the consumers realized that they quite like having cheaper available goods, and the boycott stopped. So while there are tensions, I think that, rationally, this is in their interest.

Let’s talk about understanding among Asian nations. Is this the reason for ASEAN seeing all this success? Some go so far as to call this organization the most successful integration organization since the EU. And at the same time, the states within this organization are highly disparate: in terms of ideology (especially where Vietnam is concerned), and in terms of economic development. Is this the reason for ASEAN’s success? If not, what is the main reason for its success?

ASEAN is a very complex question, but if you go back in history, before the creation of ASEAN, tensions in South-East Asia were high. Today we have border disputes, but a level of trust has been built up as ASEAN developed. It recognizes that it is in ASEAN members’ mutual interests to cooperate and come together, rather than allowing the differences between them to get in the way of the cooperation. During the 1960s there was a period of confrontation or ‘konfrontasi’-Malaysia and Indonesia had disagreements, the Philippines and Malaysia have a territorial dispute. The thinking was that if we can set aside our differences and come together, we will reap better benefits for our citizens. And that has really been the underlying principle of ASEAN cooperation. I think, it has been a tremendous success.

Returning to the subject of second track diplomacy. In Russia, many experts have claimed that in our country the connection between second track and first track, between the experts and the practitioners, is very weak, and that ideas that are generated by analysts are not transferred properly to government. Why do think this is the case and how can we deal with the problem? What would you recommend?

This is a challenge every country faces: how best to bring together disparate interests within the country in the formation of foreign policy? You see a lot of attempts to achieve more coherence and a better understanding of what’s happening. The context is that economies today are much more integrated than they were in the past. You have huge tourist flows, huge student exchanges, business exchanges, and these all take place on their own. Foreign policy or foreign affairs or interactions are no longer solely the purview of our foreign ministry. In the past we had an embassy, and that was the only face you saw of a particular country. Today that’s not true at all. So, what needs to happen is some sort of mechanism to create dialog between these groups that are all very active.

You see the attempts and various white paper exercises underway in Australia right now. They have a white paper exercise for the Asian Century. Australia is really trying to consider how it should engage in the region. Canada has just issued a task force report. It is a track two paper that argues for better strategic engagement with Asia. This means attempting to bolster its presence in APEC, engaging with the EAS, engaging with ASEAN, engaging in second track processes like PECC.

So, there are many things that can be done, like white paper exercises. I don’t know if that is something that Russia does, but it can be something that draws attention to any particular set of relations. So I would say that’s one thing. Having a national committee for Asia Pacific cooperation can be very useful, at least once a year all the institutes or experts come together with government and business to discuss what’s happening in the Asia Pacific and what Russia’s positions could be. And of course, people will update each other on what we are doing and provide that intellectual foundation for the government to consider and push forward in the official track.

Interviewed by Anton Tsvetov, RIAC program assistant