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Asia's Giant US-Free FTA, RCEP, is a Go

Spot the missing country during this mother of all virtual meetings (read more below).
 

This just in: After being on the drawing board for eight years, the Regional Comprehensive Economic Partnership (RCEP) has been agreed to at the regional level.  Featuring 15 countries with a combined GDP of over $26 trillion and a third of humanity, its dimensions exceed all those that came before. Befitting the vast expanse of the "Asia-Pacific," its pan-regional free trade agreement was destined to be geographically expansive as well.

Fitting the times, the region's countries agreed to it during a meeting hosted by the Vietnamese in a virtual Hanoi. RCEP will include China, Japan and South Korea in East Asia; Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam in Southeast Asia; and Australia and New Zealand in Oceania. We are 15 all in all, a mix of developing and developed (Japan, South Korea, Australia and New Zealand specifically) countries. With the US spinning its wheels in the trade negotiation realm--Trump is more interested in leaving than negotiating them--the spearhead for RCEP is, unsurprisingly, China:

Amid questions over Washington’s engagement in Asia, RCEP may cement China’s position more firmly as an economic partner with Southeast Asia, Japan and Korea, putting the world’s second-biggest economy in a better position to shape the region’s trade rules. The United States is absent from both RCEP and the successor to the Obama-led Trans-Pacific Partnership (TPP), leaving the world’s biggest economy out of two trade groups that span the fastest-growing region on earth.

By contrast, RCEP could help Beijing cut its dependence on overseas markets and technology, a shift accelerated by a deepening rift with Washington, said Iris Pang, ING chief economist for Greater China. RCEP groups the 10-member Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand. It aims in coming years to progressively lower tariffs across many areas.

It bears repeating that while news reports emphasize the US falling even further back in the regional FTA sweepstakes having spurned the Trans-Pacific Partnership (TPP), it was never a party to the RCEP negotiations. What's more, the current US "president" is too preoccupied with cooking up inane conspiracy theories about his recent election defeat that he's missed his third straight Association of Southeast Asian Nations (ASEAN) shindig. And considering all Trump the Plump had to do was ask his toadies to set up a virtual attendance this time. Such an exemplary [non-]work ethic:

President Donald Trump skipped summits with his Asian counterparts for the third year in a row on Saturday, even as rival China is set to expand its influence with a massive free trade deal in the region. National Security Adviser Robert O’Brien said Trump regretted he was unable to attend the online summit with the 10 members of the Association of Southeast Asian Nations, but stressed the importance of ties with the region.

Trump attended the ASEAN summit in 2017, but sent only representatives during the last two meetings. A special summit with ASEAN that he was supposed to host in Las Vegas in March was called off due to the pandemic.

Another notable non-RCEP participant (for now) was India. As I've noted elsewhere before, RCEP actually just consolidates free trade agreements ASEAN has with the three aforementioned East Asian nations as well as Australia/New Zealand (ANZ). In this sense, RCEP is actually missing a country, India, which ASEAN also has an FTA with. The Times of India identifies a number of sticking points for Indian negotiators that were not resolved to their linking, making it pull out of RCEP last year: unfavorable rules of origin, large and rising deficits with other negotiating parties, and inadequate protections for its service industries:

India pulled out of the China-backed trade agreement as negotiations failed to address its core concerns. These were threat of circumvention of rules of origin due to tariff differential, inclusion of fair agreement to address the issues of trade deficits and opening of services. 

The deal would have brought down import duties on 80% to 90% of the goods, along with easier service and investment rules. Some in Indian industry feared that reduced customs duty would result in a flood of imports, especially from China with which it has a massive trade deficit. India’s trade deficit with other RCEP countries were also rising.  

If I were uncharitable, I'd put it down to domestic protectionism. The current leadership's allusion to swadeshi (self-reliance) is unmistakable:

For India, it will be an opportunity to strengthen its domestic industries and move towards its dream of becoming self-reliant. A large number of sectors including dairy, agriculture, steel, plastics, copper, aluminium, machine tools, paper, automobiles, chemicals and others had expressed serious apprehensions on RCEP citing dominance of cheap foreign goods would dampen its businesses.

Oh well; India may still join at a later date if it believes it's losing out to the others due to trade diversion effects. Already, there's talk of the US rejoining the TPP's successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Maybe RCEP coming into effect will spur President-Elect Joe Biden--a joiner, not a leaver. 

India pulled out of the China-backed trade agreement as nego ..