Donald Trump’s announcement that he intends to pull the United States out of the Trans-Pacific Partnership (TPP) agreement has breathed new life into the largely dormant Regional Comprehensive Economic Partnership (RCEP). It is a rival multilateral free trade proposal that puts China and ASEAN in leading roles.
Signed in February this year, the TPP was expected to liberalise trade among its 12 signatory Pacific Rim nations including the US, Canada, Mexico, Vietnam, Malaysia and Japan. Cambodia’s exclusion from the trade pact was seen as potential blow to the Kingdom’s economy, primarily because the deal would give some of its competitors particularly Vietnam a privileged access to the US market.
Jayant Menon, Lead Economist for Asian Development Bank’s office for Regional Economic Integration, said that the uncertain future of the TPP had galvanised interest in the RCEP, a more inclusive and less-stringent 16-nation Asia-Pacific free trade agreement that includes all 10 ASEAN member states as well as China, India and Australia. With the TPP effectively dead, Menon feels this would provide an opportunity for the RCEP to fill the vacuum and set the scene for trade policy in this region. While it would be tempting to think of the RCEP as a China-centric deal, Menon said that despite China being the dominant economy in the grouping, the trade deal should benefit all signatories if implemented properly.
However, unlike the TPP, the rival multilateral trade proposal does not require its member countries to liberalise trade or enact sweeping economic reforms. RCEP has to become more ambitious in terms of what it needs to achieve, and [its signatories must] avoid concluding an agreement seen as achieving too little in terms of genuine reforms. Analysts say the TPP’s lofty reform goals, and that potential legal entanglements would largely be handled by US Courts, were defining reasons why certain Asian countries including China and Cambodia were unlikely to seek inclusion in the deal.