NB: A version of this post appeared in the April 22, 2013, Jakarta Globe.
With the start of ASEAN’s Regional Comprehensive Economic Partnership (RCEP) talks expected next month, observers have raised repeated concerns about whether the RCEP represents a challenge to the Trans Pacific Partnership (TPP) free trade talks that have been ongoing since 2008. Some are concerned that Asian countries will have to choose between the two sets of talks, a mutually exclusive choice between a China-centric trade agreement in the RCEP and a U.S.-centric trade agreement in the TPP. Others posit that countries can make that choice based on tactical concerns and progress in negotiations. For example, a recent Jakarta Post article claims that Indonesia, currently in the RCEP talks, can join the TPP if RCEP talks do not progress as quickly.
With the start of ASEAN’s Regional Comprehensive Economic Partnership (RCEP) talks expected next month, observers have raised repeated concerns about whether the RCEP represents a challenge to the Trans Pacific Partnership (TPP) free trade talks that have been ongoing since 2008. Some are concerned that Asian countries will have to choose between the two sets of talks, a mutually exclusive choice between a China-centric trade agreement in the RCEP and a U.S.-centric trade agreement in the TPP. Others posit that countries can make that choice based on tactical concerns and progress in negotiations. For example, a recent Jakarta Post article claims that Indonesia, currently in the RCEP talks, can join the TPP if RCEP talks do not progress as quickly.
Are the RCEP and TPP really
competing for members and agenda items? The
two potential agreements do have some broad similarities.
The TPP encompasses 11 countries (with Japan and Thailand looking to
join the talks soon) with a total GDP of US$ 20 trillion, but notably without
the participation of China. The RCEP encompasses 16 countries with a total GDP
of US$ 17 trillion, but notably without the participation of the United States.
Brunei, Malaysia, Vietnam, Australia,
New Zealand, Singapore (and soon Thailand and Japan) are participating in both
the TPP and RCEP.
Yet most of the concerns
regarding competing and incompatible FTAs are based on fundamental
misunderstandings of both the breadth and depth of the two sets of talks. The RCEP is really a means for ASEAN and its
bilateral trading partners to harmonize the existing ASEAN FTAs with
Australia-New Zealand, China, India, Japan and Korea. The substantive scope of these FTAs vary
widely; most of these FTAs cover goods, services and investments, but some
don’t. The ASEAN-India FTA notably only
covers trade in goods, with a services chapter having taken years to negotiate
and investment not covered at all. The
specific rules contained in these agreements also vary significantly, such as
the rules of origin which determine which goods qualify for preferential tariff
rates.
Furthermore, just as the
RCEP provides an opportunity for ASEAN to harmonize its terms of trade with its
trading partners, the RCEP also provides an opportunity for ASEAN’s trading
partners to harmonize its terms of trade with the ASEAN members. The various ASEAN FTAs are actually framework
agreements for bilateral FTAs; for example, the ASEAN-China FTA is actually a
Brunei-China FTA, a Cambodia-China FTA,
and so forth. Yet although the terms of
such agreements may be consistent with the main framework agreement, their implementation
by individual ASEAN members may not be consistent. Just as vexing is that implementation may be
inconsistent not only with the ASEAN bilateral FTAs, but with the intra-ASEAN
agreements themselves, such as the ASEAN Trade in Goods Agreement (ATIGA).
Thus the RCEP is focused
more on harmonization of existing rules and their application within the
various ASEAN FTAs. This is much less
ambitious than the TPP’s agenda, which covers may items not covered by the
RCEP, such as intellectual property rights, environmental protection, labor,
financial services, technical barriers and other regulatory issues. Yet given the inconsistencies that currently
exist in the various ASEAN FTAs, even this harmonization of existing
obligations is no less important. In
fact, the external influence provided by the ASEAN trading partners may even supply
the discipline and rigor needed for ASEAN to implement the ASEAN Economic
Community by end 2015.
The
RCEP is primarily focused on measures imposed at the national borders and how
to harmonize those measures. The TPP, on
the other hand, is a much more ambitious negotiation in terms of scope because
it covers a wide variety of barriers to trade and investment which occur beyond
national borders. The TPP also covers issues which ASEAN countries have not yet
covered in their intra-ASEAN agreements, such as labor, environment and
intellectual property. Hence the TPP
presents countries with a different set of issues than the RCEP does, meaning
that the two negotiations are not conceptually incompatible.
However,
post-border issues are necessarily linked to border issues, but not necessarily
vice versa. What that means is that the issues involved in
the RCEP are more critical for countries wishing to negotiate in the TPP. In other words, if a country is not able to
deal with the RCEP issues, it will not be able to deal with most of the TPP
issues. Hence Indonesia and other
ASEAN members looking to participate in both RCEP and TPP need to prioritize
RCEP issues.
Finally,
the negotiating dynamics and timing of the TPP and RCEP also impact how ASEAN
members approach the two sets of talks.
The TPP talks are supposed to be completed this year, but with the
impending addition of Japan, no one seriously expects that to happen. The
substantive and procedural issues related to Japan’s joining the TPP talks
means a delay in TPP’s finalization until perhaps the end of the Obama
administration in 2015-16. RCEP, in
contrast, is supposed to be completed by the end of 2015, which coincides with
the initial AEC deadline. Hence
Indonesia can complete its RCEP negotiations, and if it deems itself ready to
join the TPP, it still can, although the complication would be that the TPP
talks would be in their closing stages and Indonesia would have to accept
whatever consensus agreements had already been reached.
How
ASEAN members approach RCEP and the TPP therefore do not depend on political-security
decisions with regard to China and the United States. More prosaically, the practicalities of trade
negotiations mean that ASEAN members will have to give priority to their RCEP
issues first before considering the TPP.
ASEAN members, such as Singapore, who have already done this will find it
easier to “walk and chew gum at the same time,” to use an American
aphorism. Those that haven’t will need
to follow another American aphorism of “learning to crawl before they can
walk.” Either way, the work necessary to
square these circles has to begin now.
