Gauging future of Asia-Pacific economic rchitecture

Jagannath Panda
The Regional Comprehensive Economic Partnership (RCEP) remains the most attractive free-trade mechanism for regional economic integration after the US withdrawal from the Trans-Pacific Partnership (TPP). But how exclusive is RCEP to Asia-Pacific economic integration?
Conceding the fact that the prospects of regional economic integration are still in flux, dignitaries and experts in the recently concluded Jeju Forum for Peace and Prosperity 2017 from May 31 to June 2 in Jeju, South Korea, broadly agreed that the future of Asia-Pacific economic integration is closely dependent on the Regional Comprehensive Economic Partnership (RCEP).
The RCEP remains the most attractive and comprehensive free-trade mechanism for regional economic integration after the US withdrawal from the Trans-Pacific Partnership (TPP). But how exclusive is RCEP to Asia-Pacific economic integration? No matter how encouraging the signs are in favour of the RCEP after the US withdrawal from the TPP, the future of Asia-Pacific is still heavily dependent upon the TPP as much as it is on the RCEP.
Given the key Asia-Pacific economies’ adherence to both the RCEP and the TPP, the dialogue of Asia-Pacific economic integration is still open.
Speculation is mounting over the successful conclusion of RCEP negotiations. With the end of the 18th round of the RCEP negotiation meeting held in the Philippines in May this year, expectations are high that the negotiations over this trading mechanism, which primarily focuses on market access to trade in goods, services and investments, among other areas, are on the verge of early conclusion.
The RCEP negotiation, which was formally launched in November 2012 after the idea was first mooted in 2011, is expected to intensify cooperation in other areas such as regional economic and technical cooperation, remove barriers to trade and investment by protecting and enforcing intellectual property rights (IPR), promote dispute settlement mechanism, and encourage the promotion of competition and economic transparency.
RCEP finalisation is expected to deepen the process of Asia-Pacific economic integration, accounting for almost 45 per cent of the world population, with strength of over $21 trillion of gross domestic product (GDP), involving ten ASEAN members and its six dialogue partners, comprising China, India, Japan, South Korea, Australia and New Zealand.
Much, however, depends upon a fair and successful RCEP negotiation, which seems to be difficult at the moment due to a lack of unity among ASEAN and its dialogue members.Trouble within RCEP
Diversity among the RCEP members, involving both less developed and developed economies, remains the main bottleneck. Even after 18 rounds of negotiations, RCEP members are still unable to build a consensus on negotiating criteria on most issues. Reports suggest that the 17th and 18th rounds of negotiation witnessed China and Japan having serious disagreement over tariff reduction.
China aims for an early conclusion of RCEP with “low-quality” deals whereas Japan with Australia is pushing for “high-quality” tariff deals focusing on services and investment. The proportion of products supposed to be included in trade in goods is also yet to be completed.
ASEAN’s proposal of tariff reduction has not received consent from the dialogue partners, including China and India. The intellectual property rights (IPR) and investment chapters still remain controversial. Opacity and secrecy over negotiation have also been major hurdles.
Beyond the technical negotiations, difficult political relations among the ASEAN members and the continuing political rivalry between the key dialogue partners have not helped the process.
Growth of nationalism, conflicts over the South China Sea and the disputes between China and Japan – the two big economies in RCEP – have also been obstructive.
India’s pitch for concurrent negotiation over trade in goods and services has been cold-shouldered by the other RCEP dialogue partners.
Given the China-India strategic complexities, indications are that Beijing might decide to push for RCEP conclusion without India. If this happens, it will truncate the RCEP vision and agenda. The hopes to revive the TPP, especially by Japan and Australia and other Pacific countries, would also further delay the RCEP conclusion.
Seven of the RCEP members – Japan, Australia, New Zealand, Vietnam, Singapore, Malaysia, and Brunei – are still part of the TPP. Without the United States, the TPP might appear to be a pale trading bloc at the moment, but a successful economic integration at the pan-Asia-Pacific level is possible only if both the RCEP and the TPP continue to coexist.
Alternative approaches
Canada recently held a meeting in Toronto to discuss the prospects of the TPP within a spirit of 12-1 (without the United States) framework. The meeting signalled that Canada seems to be parting from its biggest trading partner, the United States, where additional factors such as disagreements on NAFTA, dairy sector and softwood lumber have been contributing factors.
Japan is also serious about pushing forward the TPP even without the US. Japanese Prime Minister Shinzo Abe recently stated that Japan is a “flag-bearer of free trade” and would aim for an early realisation of the TPP. To reinvigorate the TPP, six-country ratification is required, accounting for 85 per cent of the total GDP of the original 12 members. South Korea, though still undecided over TPP, is trying to explore if it can still be in both trading mechanisms of the RCEP and the TPP minus the US simultaneously.
What has made regional economic integration more complex and uncertain is, however, an alternative mode of approaches of key economies in Asia-Pacific. Chile and Peru have shown interest in joining the RCEP for some time. Chile and Peru are TPP-bound economies, where the trading negotiation mechanisms are of a higher standard in this Trans-Pacific networks than in RCEP.
New economies from Asia-Pacific may also be inclined to join the RCEP, either at the conclusion of the current negations or in the post-current negotiations. Beijing’s attendance at the Chile dialogue, held in March, on “Integration Initiatives in the Asia-Pacific Region” is a serious development in this context. Although Beijing has clarified that attending the Chile meeting was more about Pacific Alliance and Asia-Pacific economic integration rather than about the TPP, there is speculation that Beijing might reconsider joining the TPP.
Not to forget, China didn’t earlier choose to join the TPP, viewing the TPP as a part of the US “pivot to Asia” strategy. With the Trump’s decision of the US withdrawal from the TPP, it has opened a new range of opportunities for Beijing, both in immediate East Asia as well as in Asia-Pacific context.
Given its not-so-cordial relationship with Beijing, however, Japan may stand between China and the TPP. Tokyo may not agree for renegotiation for Chinese entry into the TPP, since lowering the negotiation criteria of the TPP would not be in Japan’s economic interest. But China’s Asia-Pacific outreach is still far superior to that of Japan, where Beijing holds enormous influence among the remaining 11 TPP members.
No matter what would be the Chinese approach, both the RCEP and the TPP would continue to evolve from their original character and composition. That clearly opens up the trade architecture in Asia-Pacific.
(The writer is Research Fellow and Head of the East Asia Centre at the Institute for Defence Studies and Analyses (IDSA), New Delhi. This article is a modified version of the author’s speech at the Jeju Forum for Peace and Prosperity 2017 in Jeju, South Korea, where he was an invited speaker)

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