Can RCEP replace TPP?

(Baonghean) - Yesterday (February 27), senior officials from 16 Asia-Pacific countries participating in negotiations for the Regional Comprehensive Economic Partnership (RCEP) began a new round of talks in Kobe, Japan. With the Trump administration having decided to withdraw the US from the Trans-Pacific Partnership (TPP), could RCEP become the leading option to replace the TPP?

Leaders from the 16 RCEP member countries participated in the announcement ceremony of the Joint Statement in Kuala Lumpur, Malaysia, in November 2015. (Source: Xinhua)

Candidate #1

The latest round of negotiations for the Regional Comprehensive Economic Partnership (RCEP) is taking place in a rather unique context, arguably the most favorable conditions since its inception. The new US President, Donald Trump, has kept his promise to domestic voters and officially announced the US withdrawal from the Trans-Pacific Partnership (TPP).

With this declaration, the TPP agreement is theoretically no longer valid. This is because the US accounts for over 50% of the total GDP of all member countries, while the TPP agreement is only valid when ratified by the parliaments of at least six member countries with at least 85% of their GDP.

In this context, the RCEP agreement suddenly became the leading alternative for countries in the region. This is because 7 out of the 16 countries participating in RCEP are also members of the TPP. It should be recalled that the RCEP agreement has 16 member countries, including the 10 ASEAN countries and partner countries such as Australia, China, India, Japan, South Korea, and New Zealand. Negotiations began in 2013, with the aim of establishing deeper economic cooperation between ASEAN and its partner countries, focusing on trade in goods, services, and investment. If achieved, RCEP would create an economic region accounting for nearly 30% of global trade value.

Are they evenly matched?

In reality, according to economic experts, RCEP can hardly be considered equal to TPP in all aspects. Specifically, the TPP agreement went beyond the limits of liberalization of goods and services, emphasizing areas important to developed countries such as business conditions, standards, regulations, and intellectual property protection... while RCEP is mainly assessed as focusing only on tariff reductions and service liberalization.

However, although RCEP's objectives are not as "comprehensive" as TPP's, this agreement possesses aspects that TPP lacks. These include the first-ever connection between the world's two most populous nations, China and India, and between Asia's two leading economies, China and Japan. Another crucial factor is the political will of China, the country leading the RCEP agreement.

Public opinion recognizes that the RCEP agreement, without the participation of the United States, is a key step China is taking in its pursuit of increasing influence in the Asia-Pacific region. China had already been quietly accelerating RCEP negotiations while the TPP was still brimming with hope. Now, with the TPP facing complete collapse, China has no reason not to finalize RCEP as planned in 2017.

Regulations concerning patent rights in the pharmaceutical industry in the Asia-Pacific region will be discussed at the latest round of RCEP negotiations in Kobe, Japan. (Source: Bloomberg)

Will RCEP reach its goal ahead of schedule?

Despite many favorable factors, RCEP may not reach its goal as quickly as China hopes. Like many other international agreements, the question of whether all members can reach a consensus on regulations concerning a range of issues such as intellectual property and e-commerce, as well as the technical challenges in achieving common terms, will inevitably be obstacles.

Looking at individual countries, India and Indonesia are currently considered "not really enthusiastic" about trade liberalization. Similarly, competition between India and China will also pose significant obstacles. Even in the latest round of negotiations, disagreements are expected regarding tariffs within the framework of agreements between Japan and China, and between Japan and India.

Therefore, some argue that RCEP participating countries should not focus too much on this agreement but should conduct bilateral economic dialogues in parallel. Furthermore, the US withdrawal from the TPP does not mean that the Trump administration will exclude the Asia-Pacific region from its foreign policy.

Therefore, according to analysts, countries participating in RCEP, including Vietnam, probably need to balance and adjust their strategies to develop appropriate long-term plans. Because in the current context of globalization, besides TPP, RCEP will have many other good and suitable trade cooperation frameworks that countries can choose to join.

Phuong Hoa