The Regional Comprehensive Economic Partnership in brief by James Haft.
At the recent 34th ASEAN Summit held in Bangkok on 22 and 23 June 2019, ASEAN leaders said they were committed to conclude negotiations of the Regional Comprehensive Economic Partnership (RCEP) by the end of 2019. A day before this, at the Bloomberg ASEAN Business Summit, Thai Prime Minister Prayut Chan-o-cha vowed to do all he could to conclude this pact before the end of his one-year tenure as ASEAN chairman.
In November 2012, RCEP negotiations formally began at the 21st ASEAN Summit hosted by Cambodia. This followed the endorsement of the Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership by the 16 economic ministers representing the 10 ASEAN member states, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, and the six Indo-Pacific states, China, Japan, South Korea, India, Australia and New Zealand, which ASEAN has bilateral free trade agreements with.
The RCEP, or ASEAN+6 Pact, will create the world’s largest economic trade sphere in Asia. It will comprise approximately one half of the world’s population, 3.4 billion people, and a total Gross Domestic Product of $49.5 trillion, nearly 40% of the world’s GDP, with those of India and China accounting for more than half of this.
PwC, estimates by 2050 the combined Regional Comprehensive Economic Partnership’s GDP could amount to nearly $250 trillion, or half of the world’s GDP. Over this period, the combined GDPs of China and India could increase to account for 75% of the RCEP GDP.
The Regional Comprehensive Economic Partnership was first proposed following the Obama-initiated Trans-Pacific Partnership (TPP), which comprised the US and 11 Pacific Rim countries, Canada, Mexico, Peru, Chile, Japan, Australia, New Zealand, Myanmar, Vietnam, Malaysia and Singapore. It also would have accounted for 40% of global GDP and 20% of global trade.
According to the Brookings Institution, through the TPP, the US could have added $77 billion annually to its earnings while Japan collected even more, an estimated $105 billion each year. But during the 1016 election, Donald Trump campaigned against this agreement, saying that the US would lose jobs and other advantages, and as soon as he was elected and took office, he withdrew the US, the largest signatory to the deal, which left the remaining 11 flatfooted.
Now, as Trump wages his trade war with China and complains about his ally Japan, the RCEP appears even more attractive to the 16 nations, particularly China and Japan, which as the two largest economies in this bloc could benefit enormously. Some have even described this pact as a de facto China-Japan FTA.
Furthermore, China and India are happy as the RCEP focuses only on standardising tariffs and gradual tariff liberalisation across the region as well as improving market access for services and investment while the TPP included regulations on labour, the environment, intellectual property and state-owned companies in addition to improved market access for goods and services.
Meanwhile, it appears that President Trump has positioned the US on the side-lines, and with the US increasingly looking inward, world trade could evolve into a very different paradigm.
While the US becomes more protectionist, the 10 ASEAN member states and their six Indo-Pacific partners could take the lead in free trade. Still, with only seven of the 20 chapters of the Regional Comprehensive Economic Partnership agreed upon, completion of the pact does remain somewhat elusive.