by Chong Zi Liang
December 11, 2016
from StraitsTimes Website

 

Leaders of the TPP member countries

meeting on the sidelines of the Apec Summit

in Lima, Peru, last month.

ST PHOTO: CAROLINE CHIA



Some might see TPP

as rivaling RCEP,

but the reality

is more complicated,

Insight finds.

In one corner, there is the United States; in the other, China.

The sole superpower trying to maintain its top position versus a dormant giant now increasingly ready to assume what it deems its rightful place in the world.

Or so the popular narrative goes. It sees both nations vying for influence in the region by binding other countries to them through trade deals:

• the Trans-Pacific Partnership (TPP), which the US is a part of

• the Regional Comprehensive Economic Partnership (RCEP), which China is in

This impression has been reinforced by rhetoric from both sides.

US President Barack Obama, in championing the TPP, argued that if the US did not take the lead in setting trade rules, other countries would have a chance to set less stringent standards.

When it was signed by its 12 member countries:

• Australia

• Brunei

• Canada

• Chile

• Japan

• Malaysia

• Mexico

• New Zealand

• Peru

• Singapore

• the US

• Vietnam,

...the TPP was hailed as a landmark trade deal setting high standards in labour and environmental regulations.

It began life in 2005 as a smaller agreement between some like-minded partners - the Pacific-4 (P4), comprising Singapore, Brunei, New Zealand and Chile - with a view to growing it into a larger agreement.

The US declared its intention to join the deal in 2008, and other members came on board, with the first round of talks starting in 2010.
 

COSTLY FOR AMERICA TO PULL OUT
If the Trump administration follows through,

as seems likely now,

with backing out from the TPP,

it will be a very costly move

in terms of the US' reputation

as a reliable broker

in the Asia-Pacific.
DR DAVIN CHOR,

NATIONAL UNIVERSITY OF SINGAPORE

ECONOMICS PROFESSOR,

on how such a move could allow China

to assume a greater leadership role.

Negotiations concluded last year, and the deal was signed in February this year.

But the TPP can come into force only if it is approved by six countries that account for at least 85 per cent of the group's economic output - which means ratification by both the US and Japan is needed because of the size of their economies.

Approval by the US Congress is now unlikely as President-elect Donald Trump has said that he will withdraw the country from the treaty on his first day in office.

With the TPP hanging in the balance and the world jittery about US commitment to free trade, Chinese President Xi Jinping sent out a reassuring message at last month's Asia-Pacific Economic Cooperation (Apec) Summit.

"China's door will never be shut, and will only be opened wider," he said as he pledged to see negotiations through for the RCEP.

At the end of the summit, Chinese officials said that more countries were looking to join the RCEP.
 

THE FULL PICTURE

While there is some rivalry, the full picture is also more nuanced.

For one thing, the RCEP is Asean-led, and involves the 10 Asean members and the six countries that the bloc has free-trade agreements with,

• Australia

• New Zealand

• China

• Japan

• South Korea

• India

Seen in this light, RCEP is an Asean initiative that is focused on trade, and not so much a "tool" of China to spread its influence.

The initial idea for the RCEP came in the 2000s as China, Japan and South Korea began exploring free-trade agreements with Asean. It was expanded to include the other three partners, and talks on a wider pact started in 2012.

In the latest round of RCEP negotiations, which took place in Indonesia last week, Indonesian Trade Minister Enggartiasto Lukita urged members to conclude the negotiations by next year, in time for Asean's golden jubilee.

"We cannot afford to drag the negotiations further at a time when the global trade outlook continues to be bleak, coupled with rising protectionism in both advanced and developing countries," he said at the opening of the 16th round of negotiations.

On Thursday, Malaysia's International Trade and Industry Minister, Datuk Seri Mustapa Mohamed, noted that the RCEP,

"negotiations will be substantially completed by the end of next year".

Asked if there is more urgency now that Mr. Trump has said that the US will not be ratifying the TPP, he said:

"You can say that."

The US and China have also cooperated on the Free Trade Area of the Asia-Pacific (FTAAP), which has been Apec's long-term goal.

Over the past two years, both countries have co-chaired the feasibility study on the FTAAP, which was presented at the Apec Summit last month and accepted by all the member economies.

Both the TPP and RCEP were recognized as possible pathways towards the FTAAP.

Still, with the TPP hanging in the balance and the possibility of an insular US over the next few years, there is an opening for China to step into a greater leadership role.

"If the Trump administration follows through, as seems likely now, with backing out from the TPP, it will be a very costly move in terms of the US' reputation as a reliable broker in the Asia-Pacific," said Dr Davin Chor, an associate professor of economics at the National University of Singapore.

There is a possibility that the US will move quickly with counter-proposals to engage Asia-Pacific economies, he added.

But if that does not happen,

"it is hard to see how the Asia-Pacific countries would not gravitate more towards the Chinese economy, especially if RCEP negotiations quickly gain momentum".

"It is a safe assumption that China can be expected to be more assertive in the Asia-Pacific region.

 

In fact, depending on how elections in France and Germany unfold over the next year or so, China could ironically end up being the staunchest defender of free trade in the world," he said.

Indeed, when New Zealand Prime Minister John Key was asked at the Apec Summit if the world would turn towards China for economic leadership if the TPP fell through, he said:

"If the US is not there, that void has to be filled, and it will be filled by China."

But Dr Malcolm Cook, a senior fellow at the ISEAS - Yusof Ishak Institute, noted that, even if China's gravitational pull grows stronger, the US would remain top dog for the foreseeable future.

• First, he pointed out, Chinese leaders have consistently stated that they do not want the mantle of global leader, possibly because they do not see that as being in their interests.
   

• Second, while the US will have Mr. Trump as its leader for the next four years at least, it remains to be seen if there will be a continued decision by the US to withdraw from the world.
   

• Third, anywhere between 30 and 50 countries - including Britain, Japan, South Korea and Australia - willingly align themselves with the US because they feel it is in their national interests to do so.

China, in contrast, has not exactly endeared itself to its neighbors, thanks to its increasingly assertive posture in the South China Sea and East Asia Sea.

"If you look at the US global alliance system," said Dr Cook, "that is not a hegemonic system where countries are forced to join the US or face some type of punitive reaction."

He added:

"The US is in an extraordinary leadership position that's never been seen before, so nobody can replace it."