Race to build a dominant trade bloc

By Chen Hurng-yu 陳鴻瑜  / 

Wed, Dec 05, 2012 - Page 8

The chairman’s statement issued at the close of the Seventh East Asian Summit (EAS), held in Pnomh Pehn, Cambodia, on Nov. 20, reaffirmed the member nations’ support for efforts to promote regional economic integration. The statement called for boosting trade and investment between EAS member states through such mechanisms as the Regional Comprehensive Economic Partnership (RCEP) proposed by ASEAN, and a proposed free-trade area comprising China, Japan and South Korea.

The idea for an RCEP was first raised at the 19th ASEAN Summit in November last year. The aim was to create a free-trade area covering 16 countries, namely the 10 ASEAN member states, plus Australia, New Zealand, China, India, South Korea and Japan. The reason why these countries have not considered including the US is because the US is actively promoting the formation and expansion of a Trans-Pacific Partnership (TPP), and only a few of these 16 countries have joined or are interested in joining it. Singapore, Brunei, Vietnam and Malaysia are members of the TPP, while Japan is known to be interested in joining it.

When the RCEP is established, it will encompass an area populated by 3.4 billion people, with a total GDP of US$19.7 trillion as of last year. It will represent US$10.1 trillion in trade, comprise half of the world market and contribute one-third of global economic output.

The 44th ASEAN Economic Ministers Meeting, which was held in the Cambodian city of Siem Reap in August, approved the Guiding Principles and Objectives for Negotiating the RCEP. According to these guidelines, the RCEP will allow other economic partners in the region to join the agreement, and the document expresses the hope that economic exchanges and opportunities among the member states will be strengthened through economic and technological cooperation.

US President Barack Obama paid his first-ever visit to Cambodia last month to attend the Fourth ASEAN-US Leaders’ Meeting. On Nov. 19, the day before the ASEAN meeting, Obama called for a meeting of TPP member countries attending the ASEAN event. The TPP meeting was held on Nov. 20 and attended by government leaders from member states Brunei, Malaysia, Singapore, Vietnam, Australia and New Zealand. By rushing to hold the meeting just before ASEAN sat down to discuss the RCEP, the US showed its intention to outmaneuver the proposed partnership.

Obama is hoping that the TPP’s basic members can be decided upon this year, with the 15th round of TPP talks scheduled to held in New Zealand from Monday to Wednesday next week. Thailand once expressed its wish to take part in TPP meetings, but later said it needed more time to think about it.

The TPP is a trade agreement that is being discussed by the US and 10 countries and areas in Asia and the Western hemisphere. The US is trying to rival the influence the RCEP would wield by getting countries in the Western Pacific region to join the TPP. The US proposal for expanded economic exchanges between the US and ASEAN has become a way for Washington to lobby Southeast Asian countries to join the TPP. Four ASEAN member states have joined the TPP, but there was no clear indication at the ASEAN-US Leaders’ Meeting whether more are thinking of following suit.

ASEAN is the US’s fourth-biggest export market and fifth-biggest trading partner, so the group’s continued rapid development represents opportunities for the US. If the US wants to get more ASEAN countries to join the TPP, it will have to consider such measures as simplifying its customs procedures and think about issues like joint investor protection and business conduct standards; otherwise it will not be able to attract them.

ASEAN has signed separate free-trade agreements (FTA) with China, South Korea, Japan, Australia, New Zealand and India. ASEAN would like to use these bilateral FTAs to expand its area of integration and set up the RCEP. However, for bilateral FTAs like these to be expanded into a comprehensive FTA, obstacles to horizontal integration must be overcome.

For example, negotiations on a trilateral FTA between China, Japan and South Korea are still ongoing, and the same is true of a proposed regional trade arrangement between China and India. In other words, if China, Japan, South Korea, Australia, New Zealand and India could not reach agreements on these proposed free-trade pacts, the RCEP will remain elusive.

The US has proposed at previous APEC meetings that an Asia-Pacific free-trade area be set up, but the proposal met with resistance from ASEAN, so Washington started promoting the TPP instead. The key issue is the TPP calls for a full and unreserved opening of markets, requiring a higher degree of openness than that of the RCEP and which ASEAN countries see as a stumbling block.

The only way for ASEAN to contend with the impact of the TPP is to consolidate its own organization. However, ASEAN cannot prevent its member states from joining the TPP, so it is hoping to expand its territory by establishing an RCEP, which it wants to be the region’s leading free-trade organization.

For ASEAN, the road to establishing an RCEP is beset with difficulties. Aside from waiting for FTAs to be signed between China, Japan, South Korea, Australia, New Zealand and India, it has to deal with competition and harassment from the TPP.

Chen Hurng-yu is a professor in the Graduate Institute of Asian Studies at Tamkang University.

Translated by Julian Clegg