With all of the acronyms for different trade deals going on simultaneously, I cannot help but mention another one–RCEP. In the alphabet soup of trade acronyms, this one stands out as having important implications for US trade in the Asian region.
RCEP, which stands for Regional Comprehensive Economic Partnership, is designed to integrate economies throughout the Asian region. RCEP is also a trade deal strongly supported by China, the world’s second largest economy. President Obama’s absence at the Asia-Pacific Economic Cooperation (APEC) summit this week in Indonesia, during which he intended to push for the conclusion of the Trans-Pacific Partnership (TPP) talks by the end of this year, created more room for China’s President Xi Jinping to promote an alternative trade deal, RCEP.
RCEP negotiations began in May 2013 and are expected to conclude in 2015. The goal of the RCEP is to reduce trade barriers for goods and services, encourage investment and establish dispute settlement procedures. The degree of trade liberalization may be minimal, according to a number of reports. (See CSIS and ABC News reports) The trade deal will consist of 16 countries—10 members of Association of South East Asian Nations (Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam), Australia, China, India, Japan, South Korea and New Zealand. All economies combined produce a GDP of $17 trillion and represent about 40 percent of world trade.
China is the biggest trading partner for many of the RCEP members. The United States is not a part of the RCEP, thus giving China more leverage in the area of trade in the region.
TPP negotiations have been taking place since 2010. TPP would be the largest trading bloc since the North American Free Trade Agreement was signed. The TPP is estimated to produce $28 trillion worth of trade in goods and services, an increase from NAFTA’s $17 trillion trade in goods and services. So far, there have been 19 rounds of negotiations, with the most recent taking place in August of this year. The talks include 11 other countries—Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru. China is not among the TPP trading partners, although some of the TPP members are a part of the RCEP trade talks.
President Obama is eager to complete the TPP negotiations by the end of this year. US trade representative Michael Froman expressed optimism during this week’s APEC summit that a deal would be finalized soon. With the challenges pertaining to the agreement and, now, the US political crisis, the 2013 deadline seems less likely. (Listen to audio clip highlighting the controversial issues that may hinder the TPP negotiations)
The RCEP is a looming challenger to the TPP. An inability to finalize the TPP and get it approved in the US Congress threatens the administration’s trade agenda as a tool to promote economic growth and boost employment. Furthermore, US producers of goods and services will lose out on preferential access to the Asia-Pacific market. Most importantly, the United States’ inability to push its own trade agenda due to internal conflict does not look good to our global economic partners.
For now, China may benefit from gaining more influence in the Asian region. Interestingly enough, next year’s APEC summit will be held in Beijing.
It is imperative that the US government ends its domestic political theatre. Otherwise, its influence and trade policy agenda will shift to the background on the world stage.
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