Fran O'Sullivan: Hu upstages George W.

COMMENT

The timing could not have been more auspicious.

Even before US President George W. Bush arrived in Bangkok late Saturday for the Apec Leaders Summit he had been upstaged by China's impressive President Hu Jintao.

On Wednesday, China had successfully launched its first man into space in the improbably named Divine Ship V.

It was Hu - rather than predecessor Jiang Zemin who oversaw the project - who welcomed Yang Liwei's return after 14 orbits of Earth. The mantle has now been passed to the next generation of Chinese leaders. With the US' manned space programme in strife following the Columbia shuttle disaster the counter-point was obvious.

On Friday, Hu began his state visit to Thailand. China's economy has sprung back from the Sars epidemic to record 8.5 per cent growth in the first nine months of this year. Hu's approach to his presidency includes a focus on mutual co-operation and peace.

Yesterday as Bush visited the familiar traps, debate was crystallising over the relative influence of each leader. Bush is mid-way through a six-nation whistle-stop tour to whip up support for his global war on terrorism. Regional leaders are also being asked to give more help in the rebuilding of Iraq. The obvious exception on Bush's itinerary is New Zealand.

Terrorism is one theme that political leaders will discuss when they meet today. But the Thai hosts - notwithstanding the carrot of a free-trade deal with the US - have already expressed confidence that they could deal with the threat of terrorism in their own backyard without calling on Uncle Sam.

The story of this year's Apec Summit is as much about the emergence of a new superpower to challenge US hegemony as it is about traditional Apec preoccupations such as trade liberalisation.

To be sure, the trade ministers from the 21 Asia Pacific countries represented at Apec did try to breathe new life into the stalled world trade talks. Even Japan and South Korea, which had balked at signing up to further agricultural liberalisation at the World Trade Organisation's recent talks in Cancun, made major compromises.

The ministers met WTO Director-General Supachai Panitchpakdi on the sidelines of the summit. But in reality it was the Apec trade ministers themselves who drove the show with US Trade Representative Robert Zoellick once again playing a leadership role.

In essence the ministers have agreed to accept the draft framework pulled together at Cancun by Mexico's Foreign Minister Louis Derbez as the basis for official discussions in Geneva mid-December.

The political leaders will play with the words before it is rolled out in a leaders' statement tomorrow. The statement will inevitably be hedged with terms such as flexibility so that countries such as Malaysia, which also opposed the Derbez text in Cancun, can muddy their position if they choose. With outgoing Malaysian Prime Minister Mahathir Mohamad in a stroppy mood, anything is possible.

The Apec nations do not include the powerful European Union which has said it is not bound by the Cancun text. The ACP group, African, Caribbean and Pacific nations which also balked at the Cancun framework, will still need to be melded into discussions ahead of the Geneva talks. Not all the G22 developing nations bloc are represented at Apec, particularly Brazil, the unofficial leader. But again China has stepped up to the plate here and given a steer on G22's behalf.

Where the going will get interesting is if Bush tries to use the summit to pressure Hu to revalue China's currency. Bush - facing rising domestic protectionism as he heads into presidential elections next year - may be tempted to make the claim that China's failure to float its currency is giving its exporters an unfair advantage against US manufacturers. There are signs that Hu will not be swayed by any Bush rhetoric.

On the Apec agenda the goal for free and open trade within the region by 2020 remains. A move by Thailand and Singapore to bring the 2020 deadline for developed countries forward to 2015 did not gained much support.

But the process of regional integration is also being hastened by bilateral and regional free-trade deals. Asean leaders want to establish their own EU-style economic community. China has announced it wants to do a deal with Asean nations.

Asean does not want Australia and so far has not shown interest in New Zealand either. The US is also competing for its share of attention, again except New Zealand.

What seems clear is that New Zealand will have to play a very skilled game if it is not to be left out of the patchwork of Asia-Pacific deals under way. So far, we have bagged only Singapore on top of the existing CER deal with Australia. Chile is under way, Hong Kong has stalled and studies for bilateral deals with Thailand and Mexico are in hand.

But nothing is happening yet with the major players.

The Thai Prime Minister has painted a picture of the WTO effectively being the umbrella for the free-trade deals. Thaksin Shinawatra said a multilateral trading system could only work in broad terms. "It is like when you want to choose a wife. We can agree on the general [desirable] characteristics of women. But when it comes to the details, each of us may have different opinions [about a wife] in order to stay together for the long term."

Thaksin's analogy does not work for countries such as New Zealand, which has few suitors. If the WTO harem does not come together we're likely to be left on the shelf.

* Fran O'Sullivan is an observer at the Apec CEO Summit.