With TPP trashed, RCEP emerges as likely alternative

Published on
December 1, 2016

As U.S. President-elect Donald Trump has announced his intention to scrap the Trans-Pacific Partnership Agreement, some of America’s trade partners in the Pacific region are looking to the Regional Comprehensive Economic Partnership (RCEP) to fill the void.

Though usually described as a Chinese-backed plan, RCEP originated from an attempt to forge individual free-trade agreements between the Association of Southeast Asian Nations (ASEAN) and six other countries—Australia, China, India, Japan, South Korea, and New Zealand—into a trade bloc. China would be the biggest country economy in the group, while the U.S.A. would be excluded.

The pact would differ from the TPP in being more narrowly focused on eliminating tariffs and barriers to trade in services and investment, with less emphasis on intellectual property rights protection, environmental and labor standards, free competition for government purchases, and restrictions on state-owned enterprises. This makes it more attractive to China, which would have had a hard time meeting TPP rules.

The main beneficiaries of the agreement are likely to be Vietnam, Thailand and Myanmar, as according to an Economist Intelligence Unit study sponsored by ANZ Banking Group, companies it surveyed are most interested in opening production facilities in these three countries. Broad access through a free-trade agreement to the huge Chinese market while avoiding that country’s rising costs is the main appeal.

For seafood, it would mainly facilitate the movement of Indian and Vietnamese shrimp to China, and may stimulate some movement of further processing of seafood from China to Vietnam.

The agreement has the potential to expand, with Peru recently sending out feelers to join after the derailing of TPP. However, Peruvian Minister of Foreign Commerce and Tourism Eduardo Ferreyros Kuppers was quoted as saying at the recent Asia-Pacific Economic Cooperation (APEC) summit in Lima that with negotiations well under way, China wants to conclude the pact with the present negotiating partners before considering enlargement of RCEP.

At the time, Ferreyros Kuppers was still hoping that Trump might reverse himself. This became more unlikely when the president-elect released a video outlining his plan for the first 100 days of his administration, with pulling out of the TPP listed as an action for the very first day.

Japan’s Prime Minister Shinzo Abe shared the hope that Trump could be persuaded to reconsider, and has gone on with his push to get the treaty approved by the Diet, the legislature in his country. In a televised meeting with the Diet, Abe was heavily criticized, with Renho Murata, leader of the opposition Democratic Party of Japan, questioning his decision to continue to pursue the TPP. Abe replied that he wants to make the symbolic gesture to show Japan’s firm commitment to deal, with hopes to revive it.

Though Japan is one of the countries negotiating to form the RCEP bloc, it would much prefer the TPP, which was seen as isolating its arch-rival China, with which it is engaged in a territorial dispute. The extra protections of the TPP for intellectual property are also important to technically advanced Japan.

Contributing Editor reporting from Osaka, Japan

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