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 negotiations in Kobe, Japan. In the context of the Trump administration's decision to withdraw the US from the Trans-Pacific Partnership (TPP), could RCEP become the top choice to replace TPP?

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

Candidate No. 1

The new round of negotiations for the Regional Comprehensive Economic Partnership (RCEP) took place in a very special context, which can be considered as the most favorable conditions since its inception until now. The new US President Donald Trump kept his promise to his domestic voters and officially announced the withdrawal of the US from the Trans-Pacific Partnership (TPP).

With this statement, the TPP Agreement is theoretically no longer valid. Because the US accounts for more than 50% of the total GDP of all member countries, while according to regulations, the TPP Agreement only takes effect when the parliaments of at least 6 member countries with at least 85% of GDP approve it.

In such a context, the RCEP Agreement suddenly became the top alternative choice for countries in the region. Because 7 out of 16 countries participating in RCEP are also members of the TPP. It should be recalled that the RCEP Agreement has 16 member countries including 10 ASEAN countries and partner countries such as Australia, China, India, Japan, South Korea and New Zealand. Negotiations began in 2013, the purpose of RCEP is to establish deeper economic cooperation between ASEAN and partner countries, focusing on trade in goods, services and investment. If achieved, RCEP will create an economic area accounting for nearly 30% of global trade value.

Equally matched?

In fact, according to economic experts, if put on the scale, RCEP can hardly be placed on par with TPP in all aspects. Specifically, the TPP Agreement has gone beyond the limits of liberalization of goods and services, while emphasizing important areas for developed countries such as business conditions, standards, regulations and intellectual property protection... Meanwhile, the RCEP Agreement is assessed to mainly focus on tariff reduction and service liberalization.

However, although the goal of RCEP is not as “comprehensive” as TPP, this agreement has some points that TPP does not have. That is the first connection between the two most populous countries in the world, China and India, or between the two leading economies in Asia, China and Japan. One factor that cannot be ignored is the political determination of China - the country leading the RCEP Agreement.

Public opinion has recognized that the RCEP Agreement without the participation of the United States is a step that China focuses on in its roadmap to increase its influence in the Asia-Pacific region. China has been quietly accelerating the RCEP negotiation roadmap when the TPP Agreement was still full of hope. At present, when the TPP is facing the risk of complete bankruptcy, China has no reason not to complete RCEP early in 2017 as planned.

Patent rules for 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 the finish line soon?

Despite these favorable factors, RCEP cannot “reach the finish line” as quickly as China expects. Inevitably, like many other international agreements, whether all members can agree to set out regulations on a series of issues such as intellectual property, e-commerce, etc. or not; technical challenges to reach common provisions will be barriers.

On a country-by-country basis, India and Indonesia are currently considered “not very enthusiastic” about trade liberalization. Competition between India and China will also be a major obstacle. Even in the latest round of negotiations that have just begun, there are expected to be many disagreements on the scope of tariffs within the framework of the agreement between Japan, China and India.

Therefore, there are also opinions that the countries participating in RCEP should not focus too much on this agreement but should conduct bilateral economic dialogues in parallel. Besides, the US withdrawal from TPP does not mean that the Donald Trump administration will remove the Asia-Pacific region from its foreign policy.

Therefore, according to analysts, RCEP participating countries, including Vietnam, may need to balance and adjust to come up with appropriate long-term strategies. Because in the current context of globalization, besides TPP, RCEP will have many good and suitable trade cooperation frameworks for countries to choose to participate.

Phuong Hoa