Sixteen Asia-Pacific countries began the third round of RCEP trade negotiations this week in Malaysia as international trade wonks, such as myself, continue to debate whether the TPP trade negotiations between the United States and 11 other Asia-Pacific countries will actually conclude. RCEP, if concluded successfully and implemented, will have 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.
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.
However, the United States continues to negotiate the Trans-Pacific Partnership (TPP) agreement with 11 Asia-Pacific countries—Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru. As you can see, China is not among the TPP trading partners, yet some of the TPP members are a part of the RCEP trade talks.
The TPP negotiations have been taking place since 2010 and were supposed to conclude by December 2013. However, the deadline has passed and the TPP has not been signed. Several members of Congress are also against granting President Obama fast track authority, in which the US Congress can vote up or down on a trade agreement but cannot amend it.
The TPP would create the largest trading bloc since the North American Free Trade Agreement was signed. The same trade deal 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.
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.
Note: The original version of this article appeared on Oct. 9, 2013.
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