ASEAN and Partners Launch Regional Comprehensive Economic Partnership

As the East Asia Summit (EAS) concluded in late November, regional leaders formally agreed to launch negotiations on the Regional Comprehensive Economic Partnership (RCEP). The RCEP aims to be the largest free-trade bloc in the world, comprising all 10 ASEAN nations and the 6 other countries with which the group has free-trade agreements (FTAs)—China, India, Japan, South Korea, Australia, and New Zealand.

The notable absence of the United States should not signal alarm. The RCEP permits external countries to join later and does not prohibit members from acceding to other free-trade groupings, such as the Trans-Pacific Partnership (TPP) agreement in which the United States is active.

Q1: What is the Regional Comprehensive Economic Partnership?
A1: The RCEP is an ASEAN-led trade agreement linking the economies of 16 Asia-Pacific countries. The grouping includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 percent of world trade. Negotiations are slated to begin in early 2013 and are expected to conclude by the end of 2015.

The idea of the RCEP was first introduced in November 2011 at the ASEAN Leaders Summit in Bali, as officials attempted to reconcile two existing regional trade architectures. China supported the East Asia Free Trade Agreement, which restricted the grouping to ASEAN, China, Japan, and South Korea. Japan, on the other hand, favored the Comprehensive Economic Partnership in East Asia, which added three countries: India, Australia, and New Zealand.

ASEAN leaders struck a balance with the RCEP, adopting an open accession scheme that would allow other members to join as long as they agree to comply with the grouping’s rules and guidelines. As it currently stands, only ASEAN and its FTA partners will participate in the negotiations. However, contrary to reports that claim the United States is barred from joining, membership is open to other countries.

During the August 30, 2012, ASEAN Economic Ministers Meeting in Cambodia, officials endorsed the RCEP’s guiding principles. The RCEP will cement ASEAN’s central role in the emerging regional economic architecture and seek to harmonize the “noodle bowl” of differences between the various ASEAN FTAs. It will seek to promote greater regional economic integration, progressively eliminate tariff and nontariff barriers, and ensure consistency with the World Trade Organization’s rules.

ASEAN trade officials say the RCEP is expected to tackle trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition policy, and dispute settlement.

However, vast development gaps within ASEAN prevent the RCEP from pursuing aggressive trade liberalization policies. The guiding principles acknowledge the diverse circumstances in developing countries, such as Cambodia, Laos, Myanmar, and Vietnam, and include flexibility for special and differential treatment. The RCEP also mandates economic and technological cooperation to reduce development gaps.

Q2: What will the RCEP mean for its members?
A2: Though formally considered a free-trade agreement, the RCEP anticipates the bare minimum of trade liberalization. Its numerous flexibility caveats ensure that no member has to adopt trade policies with which it disagrees, and it protects sensitive industries from exposure to enhanced competition. This condition made it possible to attract less-developed countries to the grouping and ensure wider membership. However, differential treatment may emerge as an obstacle to greater integration and a crutch for countries unwilling or unable to reform.

Nevertheless, members believe they will feel economic benefits as the RCEP develops. Export-driven economies in Southeast Asia are expected to gain greater access to the burgeoning domestic markets in China, Japan, and India. Likewise, the RCEP is expected to spur investment from more-developed countries to less-developed ones and integrate them more fully into regional economic activity.

Q3: How is the RCEP different from the Trans-Pacific Partnership?
A3: The TPP includes the United States and seeks to link Pacific countries in the Americas and the Asia Pacific. The original signatories were Brunei, Chile, Singapore, and New Zealand, but negotiations have expanded to include the United States, Australia, Peru, Vietnam, Malaysia, Mexico, and Canada. Observers often put the TPP and RCEP in competing camps, with the former favored by the United States and the latter by China.

The TPP requires much deeper economic liberalization from its members. Unlike the RCEP, it includes provisions to protect labor rights and environmental standards, reform state-owned enterprises, strictly protect intellectual property, and boldly eliminate tariffs. Furthermore, the TPP is not expected to allow participating countries to press for carve-outs for sensitive industries.

Critics of the TPP argue that its high standards dissuade developing countries from joining the grouping, and they position the RCEP, which seems to make fewer demands for economic change, as a much more attractive alternative. Additionally, ASEAN’s central role in the RCEP is starkly different from the TPP, in which all partners are technically equal, although many countries are looking to see what measures the United States is pursuing.

Despite these differences, the RCEP does not preclude members from joining other trade agreements like the TPP. Prime Minister Julia Gillard of Australia, who is embracing both the TPP and the RCEP, has described the two separate negotiations as “two paths to the same destination.” During President Barack Obama’s visit to Bangkok ahead of the EAS, Thailand expressed interest in joining the TPP. Japan has also expressed interest in joining. And Australia is not alone—Brunei, Malaysia, New Zealand, Singapore, and Vietnam are also already participating in both groupings.

Murray Hiebert is senior fellow and deputy director with the Chair for Southeast Asia Studies at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Liam Hanlon is a researcher with the CSIS Chair for Southeast Asia Studies.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2012 by the Center for Strategic and International Studies. All rights reserved. 

Murray Hiebert
Senior Associate (Non-resident), Southeast Asia Program

Liam Hanlon