Malaysia can fill its TPP Void: Renew focus on RCEP and AEC as main economic trade initiatives

With the vanishing hope of the long anticipated US-led Pacific Partnership Agreement (TPP), ASEAN countries that rely on a group economic strength need to re-look their economic and trade strategies in relation to the world.

Malaysia, for one, can still look to the China-led Regional Comprehensive Economic Partnership (RCEP) and ASEAN-self initiated Association of Southeast Asian Nations (AEC) set up in 2015 – to see how it can leverage both RCEP and AEC to hedge the country’s growth to the larger Asia economic trade momentum on the world scene.  

~ Enterprise TV Editorial Note

RCEP negotiations still ongoing: Malaysia

CREDIT: Channel News Asia

KUALA LUMPUR: ASEAN chair Malaysia has announced that negotiations for potentially the world’s largest free trade agreement with its FTA partners are still ongoing despite plans to have concluded talks by the year’s end.

Negotiations for the Regional Comprehensive Economic Partnership (RCEP) involved all 10 ASEAN member nations plus Australia, China, India, Japan, South Korea and New Zealand. The economies’ combined output would account to almost 30 per cent of the world’s GDP.

Malaysian Prime Minister Najib Razak made the announcement about the delay at the ASEAN summit in Kuala Lumpur on Sunday (Nov 22).

“We commend the hard work that’s been put forth by the officials,” said Prime Minister Najib Razak. “However considering the challenges faced and the value of constructive engagement more time is needed to conclude negotiations.”

The China-backed RCEP has been viewed as a rival deal to the US-backed Trans-Pacific Partnership (TPP) Agreement, which involves four ASEAN states but not China. TPP negotiations concluded in October.

A joint statement issued by the Heads of State/Government of the RCEP said: “We look forward to the conclusion of the RCEP negotiations in 2016, contributing significantly to regional and global economic integration, providing for equitable economic development, and strengthening economic cooperation.”

With the TPP cratering, Asia could end up with a China-led trade deal that excludes the US

CREDIT: Quartz (qz.com)

US president-elect Donald J. Trump has promised to tear up the Trans-Pacific Partnership on his very first day in the White House. If that happens, then a China-led trade pact that involves half the world’s population, but excludes the US, is likely to fill the void.

The Regional Comprehensive Economic Partnership (RCEP) is an initiative linking all 10 ASEAN countries and six nations with which the organization has existing free trade agreements: China, India, Japan, South Korea, Australia, and New Zealand. The agreement, introduced in late 2011, is much less ambitious in scope than the TPP, and covers more of the world’s less-wealthy countries.

But RCEP countries have outpaced TPP ones in GDP growth:

Currently, the TPP has 12 members and the RCEP involves 16; Only seven of them overlap.

The TPP is a much more “global” alliance, linking Latin American countries with Asia in an attempt to balance out China’s dominance.

These twelve countries may have a free trade agreement, but should also have cyber concerns.

The RCEP, on the other hand, was designed to “anticipate the bare minimum of trade liberalization” among neighboring countries in Asia.

The TPP requires members to commit to heightened standards in areas like labor law, environmental protection, and intellectual property, but the RCEP focuses mainly on tariff reduction to stimulate trade. The RCEP will cover trade in goods, services, investments, technical cooperation, intellectual property, competition, dispute settlement, and other issues, according to a 2015 report from ASEAN.

Asia is, now and for many years to come, the world’s fastest-growing region. If the TPP withers and the RCEP is signed, the US will be left out of the region’s biggest-ever free-trade agreement.

China, excluded from the TPP, is a key supporter of the RCEP. Negotiations over the latter began in 2013 but have been delayed, thanks to pressure from the TPP and China’s territorial disputes with its neighbors. Now, countries are leaning more toward the RCEP.

Australia and Japan, which are also members of the TPP, have previously expressed their wishes to accelerate talks on the RCEP. Hours before Trump’s announcement to scrape the TPP, Japanese prime minister Shinzo Abe warned that the TPP would be “meaningless” without the US. Meanwhile Peru and Chile, which are members of the TPP but not the RCEP, are now seeking to join the China-led deal, Tan Jian, a senior member of China’s delegation at the APEC meeting, told Reuters.

“We encourage that all regional undertakings, including TPP and RCEP, remain open, transparent and inclusive and draw on each other,” APEC leaders said in a Nov. 20 declaration, as they vowed to fight protectionism.

With Trump on track to create a more isolationist US, China is emerging as the world’s strongest proponent of globalization. In recent days Xi has held a flurry of meetings with heads of state, including leaders of some nations, like Ecuador, that Beijing has historically ignored.