Trade negotiators of sixteen Asian countries met in Singapore last week in ongoing negotiations to create the world’s largest trade pact to date, and what they were discussing is not the Trans-Pacific Partnership Agreement (TPP). Rather, it’s the lesser known Regional Comprehensive Economic Partnership (RCEP). According to Japanese Foreign Affairs Ministry Deputy Director-General Masaki Yasushi, last week’s RCEP negotiation yielded “major progress” in defining common rules for tariff reduction and elimination. The sixteen participating countries plan to hold a ministerial meeting in Burma in late August, followed by another working meting in India in December.
What is the RCEP? It is a region-wide trade agreement initiated by the Association of Southeast Asian Nations (ASEAN) at the East Asia Summit in 2012 in large part as an alternative to the TPP. If ratified, it would integrate the entire Asian region into the largest economic bloc in the world.
ASEAN, composed of ten small developing nations in the giant shadow of China and the more advanced economies of Northeast Asia, reached a consensus statement in 2007 that it would establish an ASEAN Economic Community by 2015.
Before we discuss the impetus behind this initiative, stop to test your knowledge and see if you can name all ten ASEAN nations. (Scroll down to the bottom of the article to see the answer.)
China’s Rise, U.S. Pivot, and the Origin of RCEP
China’s rapid industrialization in the past three decades has transformed the entire Asian region into one enormous integrated workshop, with China as its hub and producing for the world. Electronic and IT parts and components made in Malaysia and Thailand, for example, are shipped to China, where they are assembled, then exported to the United States and the rest of the world. While, on the one hand, China’s rapid growth fueled the growth of the entire region, increased integration, on the other hand, made the region vulnerable to the risks of dependence on China’s economy and hence, the fluctuations of the global market. In other words, a decline in consumer demand in the west can lead to stagnation in China, which can in turn mean an economic downturn for the entire region. Concerned about becoming subsumed under China’s economy, the smaller developing countries in Southeast Asia banned together to preserve and advance their own economic interests. As a bloc, they negotiated bilaterally with China, and the other regional economic powerhouses Japan, South Korea, Australia, and New Zealand, and gradually built a network of free trade agreements with itself in the center. In the late 2000’s ASEAN began to position itself as a key player, setting the pace and vision for economic integration in the region.
Meanwhile, the United States faced what many dub as the greatest economic crisis since the Great Depression. Desperate to revive its ailing economy, the United States turned its gaze across the Pacific to Asia – vast, resource-rich, and full of promise of opportunity. The United States not only jumped on the bandwagon of market penetration in Asia but aims to be at the helm to integrate the entire region under a neoliberal economic framework that suits western corporate interests. It also wants to make sure it, not China, is in control. Speaking to the Australian National Assembly in November 2011, President Obama declared, “As the world’s fastest growing region – and home to more than half the global economy – the Asia Pacific is critical to achieving my highest priority [of] creating jobs and opportunity for the American people.” (Replace “people” with “corporations,” and you have his true meaning.)
This signaled what many refer to as the U.S. “pivot to Asia” doctrine – essentially, using all its military, diplomatic, and economic might to ensure hegemonic control in the region. Although still mired in the Middle East with no clear exit strategy, the United States is shifting 60% of its naval fleet to the Pacific and building a network of U.S. bases in the region to encircle China. It is also aligning with unsavory, neo-authoritarian rulers in the region – the grandson of a class A war criminal in the case of Japan and the daughter of a former dictator in the case of South Korea – in order to carry out its pivot strategy.
And then there is the Trans-Pacific Partnership Agreement (TPP) – not just an economic arrangement that advances corporate interests at the expense of the working class on both sides of the Pacific, but also a geopolitical tool to undercut China’s influence in the region and eventually force China to agree to U.S. economic rules. As New Zealand Law Professor Jane Kelsey points out, that’s basically what President Obama said in his presidential debate against Romney in 2012 – “We’re organizing trade relations with countries other than China so that China starts feeling more pressure about meeting basic international standards. That’s the kind of leadership we’ve shown in the region. That’s the kind of leadership we’ll continue to show.” The TPP’s strict IP protection, rules against “anti-competitive” state-owned enterprises and “unjustified and overly burdensome” regulation are all aimed at China, says Kelsey – either to “create a model that dominates the Asia-Pacific and forces China first to adjust, and ultimately to accede to the TPPA” or target “China’s alliances and operations in third countries to undercut its economic foothold and strategic influence.”
But the TPP cleaves the region in half and this has some members of ASEAN worried. Four of the ASEAN 10 (Singapore, Brunei, Vietnam, and Malaysia) have joined the TPP, but countries with slower growth oppose the “elimination of all exemptions on tariffs” called for by the TPP. ASEAN, concerned that the TPP would divide its bloc down the middle and sideline its interests, proposed the RCEP in 2012. China, fully aware that the TPP is aimed at curbing its regional influence, welcomed the ASEAN alternative with open arms and lent its full support to speed up its process. And this is why we now have not one, but two competing regional trade agreements in a race to the finish.
Divergent Models – TPP vs RCEP
How do the two frameworks compare? For starters, the TPP is composed of twelve countries on both sides of the Pacific – the original group of four (Brunei, Singapore, New Zealand, Chile), plus the United States, Canada, Mexico, Peru, Australia, Japan, Malaysia and Vietnam; and South Korea and Taiwan have officially announced interest in joining. The RCEP includes the ten ASEAN member countries (scroll down to the end of the article for the list), plus the big three in Northeast Asia – China, Japan, South Korea – as well as Australia, New Zealand, and the powerhouse on the other side of the region, India.
The two are nearly even in scale. The TPP countries account for 32% of the world’s GDP and 26% of global trade, while the RCEP countries make up 24% of world GDP and 28% of global trade. The United States is the main driver of the TPP, which notably excludes China, while the RCEP, steered by ASEAN with the active support of China, excludes the United States. The original deadline of 2013 to complete the TPP has now come and gone and the Obama administration has made a renewed pledge to reach an agreement by the year’s end. The stated deadline for RCEP is the end of 2015.
“The ethos of the China and ASEAN-led project is fundamentally different from the US-led TPPA,” according to Kelsey. The TPP is touted as “high-level,” which invariably means tariff elimination in all goods with no exemptions, and “comprehensive,” meaning it seeks wide-range coverage, including investment, competition, and intellectual property. The RCEP, on the other hand, has a more gradual approach with modest goals and limited scope, focused mainly on tariff cuts. While the TPP gives no special or differential treatment for less developed countries, the RCEP, says Kelsey, will recognize “the individual and diverse circumstances of the participating countries” and leaves room for flexibility.
According to Peru’s Ministry of Trade and Tourism, the TPP’s ultimate aim is “to become the basis and the means to establish the Free Trade Area of the Asia Pacific (FTAAP)” – a mega-trade bloc that would tear down all barriers to the free flow of capital – much like the once-proposed Free Trade Area of the Americas that was eventually defeated by mass people’s opposition in Latin America. Some argue that the TPP and the RCEP will eventually converge to establish the FTAAP. But this ignores the fact that the interests of advanced TPP countries and those of developing countries in the region are fundamentally at odds. The average per capita GDP of the TPP countries is over US$30,000. The average per capita GDP of RCEP countries pales in comparison at US$5800. The priority for developing countries in the region is to encourage trade in manufacturing while safeguarding their own policy space. The aim of TPP countries, on the other hand, is to expand market access for sectors where they have a comparative advantage, i.e. services and investment.
The TPP is also politically divisive. It is fundamentally “built in a spirit of confrontation and containment, not of cooperation,” according to economist and free trade advocate Jagdish Bhagwati. As long as the United States pursues a policy of encirclement in the region, convergence of the two frameworks into a unified free trade area is nothing more than wishful thinking.
A broad-based movement has emerged on both sides of the Pacific – including rice farmers in Japan and healthcare advocates in Malaysia, as well as labor unions in the United States – and all vow to defeat the TPP. But what about the RCEP? Is it a viable alternative to the TPP or simply a less evil version of a neoliberal framework that is ultimately detrimental to the working class? More importantly, what will steer Asia away from its export-driven economic model, acutely vulnerable to the volatile fluctuations of the global economy, and facilitate economic self-sufficiency for developing nations in the region? As the contest between the TPP and RCEP unfolds, that question is as pressing as ever.
Answer: Malaysia, Thailand, Indonesia, Philippines, Vietnam, Cambodia, Laos, Singapore, Brunei, Burma