Officials from eight Asia-Pacific nations have begun talks being billed as laying the groundwork for what could become the largest free trade area ever seen.
The talks seek to add the United States, Australia, Peru and Vietnam to the Trans Pacific Partnership, a free trade agreement that groups Chile, Singapore, New Zealand and Brunei. The eight countries are home to 470 million people and account for a combined gross domestic product more than US$16 trillion. But business groups and governments are cautiously hoping for much more.
The most optimistic vision is that an eventual free trade zone could emerge, embracing the entire region, including giants China, Japan and Korea and even possibly India.
New Zealand-United States Council Executive Director Stephen Jacobi says business is excited at the possibility of such a deal, but that there are challenges in reaching such a broad agreement.
"The hope is that TPP would be a template for the broader free trade agreement of the Asia-Pacific region and that would include China and the United States. But I think there are a lot that would have to be resolved before that could happen in the near term," said Jacobi. "For the time being, we just want to build this agreement with as many participants as we can and there are eight parties and that would be a significant deal both for Asia and the United States and so we should try and make progress on that first and see who we add on later," he said.
Jacobi says the aim would be to create a new generation of trade deals with a greater focus on promoting investment, trade in services and bringing regulations in countries into line with each other.
"Business is changing in the region and it's not just about trade anymore, it's also about investment. It's not just about goods," he said. "It's also about services. It's not just about border issues like tariffs, but it's behind the border issues like rules and regulations and the sorts of economic policies different countries have. So it has to be very broad in terms of its coverage and it has to be very broad in terms of its participation," Jacobi said.
Geoffrey Brennan, the Australian head of the APEC Business Advisory Council, says a new regional free trade agreement would an alternative to the Doha round of World Trade Organization negotiations, which stalled amid divisions about agricultural tariffs.
He says, if the Melbourne talks lead to a significant trade deal, which could happen in the next three to five years, that could un-stick the Doha round.
"A regional FTA, particularly if it's forward-looking in the issues that it addresses, offers a lot more value in the shorter term and also sets a good foundation of what can be done more broadly and even possibly on a global basis," he said.
Analysts caution that talks are still in the early days, but say a significant jump in trade liberalization might be around the corner.