RCEP and TPP: Comparisons and Concerns

Summary

EXECUTIVE SUMMARY

1. • Asia is witnessing two different approaches to trade liberalisation — the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP). While TPP and RCEP have quite similar objectives of trade liberalisation and economic integration, there are differences too.

2. • RCEP, driven by ASEAN, is a 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 the current FTA engagements. TPP, on the other hand, is a USled process pushed forward as a “WTO-plus approach”. Around eleven countries (New Zealand, Singapore, Brunei, Chile, the US, Canada, Australia, Peru, Malaysia, Vietnam, Mexico) are negotiating TPP. China or India are not included.

3. • RCEP is likely to be more accommodative to the development differences of the member countries. On the other hand, TPP is said to have more demanding set of commitments — intellectual property rights, labour standards, competition policy, investment rules, the environment and the role of state-owned enterprises. As TPP comprises of members at different levels of economic development, reaching a consensus on the optimal standards will be difficult.

4. • Both have perceived benefits for the Asia and the Pacific region, and are expected to support the international production network. They are likely to address “behind the border” issues or trade facilitation measures, with more specific assistance to SMEs. RCEP and TPP are expected to promote domestic reforms in line with regional goals. It is possible that agreement between a small group of countries like RCEP and TPP may to take care of some of the concerns of the “noodle bowl” effect of overlapping smaller FTAs and an over-arching set of free trade principles may be achievable.

5. • There may be some concern over competition between TPP and RCEP as the regional pacts have similar objectives over trade liberalisation and economic integration. TPP and RCEP may also come into conflict due to the rivalry between the US and China. Besides, any competition between these two agreements may lead to division among ASEAN members, which may undermine ASEAN's centrality in the region.