69 - RCEP and TPP: Comparisons and Concerns

Summary

With the Doha Round getting delayed at the multilateral level and the bilateral free trade agreements (FTAs) generating marginal gains for the private sector, mini-lateral arrangements like Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP) are picking up steam, promising to become the next generation of trade liberalisation process.

While it may appear that TPP and RCEP have relatively similar objectives of trade liberalisation and economic integration, the differences are substantive nevertheless. This paper takes a closer look at both these arrangements.

COMPARING RCEP AND TPP

RCEP, driven by ASEAN, is an FTA between ASEAN and ASEAN's FTA partners — Australia-New Zealand, China, South Korea, Japan and India. It is envisaged to be a high-quality and mutually beneficial economic partnership agreement that will broaden and deepen current FTA engagements. It is expected to be concluded by end-2015 and will involve a region accounting for almost half of the global market and about a third of the world's economic output. It is based on an open accession clause and welcomes participation by any ASEAN FTA partner who chooses to participate later.

TPP, on the other hand, is a US-led process and is presented as a “WTO-plus approach”. Around eleven countries (New Zealand, Singapore, Brunei, Chile, the US, Canada, Australia, Peru, Malaysia, Vietnam, Mexico) have already been negotiating TPP for over a year now, although these do not include major powers like China or India. The US has encouraged other APEC countries to join the negotiations, which are set to be concluded by October 2013.

RCEP will be built on ASEAN's experience and is expected to integrate all five of the ASEAN+1 FTAs into a regional economic framework (Basu Das 2012). Being an ASEAN process, it will be guided by the “ASEAN way” where objectives and commitments are driven by a consensus process. RCEP is likely to be more accommodative of the development differences of the member countries, thus providing flexibility and adjusting mechanisms in reaching the common end-goals. In addition to liberalizing trade in goods, services and investment, it will pay more attention to physical, institutional and people-to-people connectivity and to narrowing development gaps and will be built in response to new developments, such as the emerging international production networks.