Slow go­ing in trade talks

The Press - - Business -

Sev­eral coun­tries in­volved in the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP) have in­di­cated a de­sire to wrap up ne­go­ti­a­tions by end of 2017.

If this hap­pens, it will be a record time for a mul­ti­lat­eral agree­ment of this size – the RCEP was launched only back in Novem­ber 2012.

In com­par­i­son, ne­go­ti­a­tions for New Zealand’s bi­lat­eral agree­ment with China 10 years ago were of a sim­i­lar du­ra­tion.

But given the rate at which the RCEP ne­go­ti­a­tions are go­ing ahead, a speedy res­o­lu­tion seems un­likely.

Back in 2012, the 10-coun­try As­so­ci­a­tion of South­east Asian Na­tions (Asean) ini­ti­ated the RCEP in an at­tempt to deepen its eco­nomic co­op­er­a­tion with China, In­dia, Ja­pan, South Korea, Aus­tralia, and New Zealand.

As op­posed to the TPP, the RCEP is a more tra­di­tional trade deal, which sup­pos­edly should make it eas­ier to ne­go­ti­ate as the coun­tries in­volved have enough wisdom around trade deals.

But sev­eral is­sues are cast­ing doubts on how RCEP will ever be con­cluded.

Since the US’ de­par­ture from the TPP, the re­main­ing 11 coun­tries have been grap­pling to fig­ure out the next steps in the process.

Should they pro­ceed as TPP-11 with­out the US? Should China be in­vited and would it even come to the party given the com­pre­hen­sive na­ture of the agree­ment?

With­out the US, the TPP-11 is only about one-third of the orig­i­nal TPP.

Some coun­tries have lost in­ter­est in the pro­posal as a re­sult.

Ac­cess to the US mar­ket was al­ways go­ing to be a ma­jor at­trac­tion of be­ing part of TPP.

Seven TPP coun­tries are also rep­re­sented in the RCEP ne­go­ti­a­tions, and thus it can be seen as a fall-back plan if the TPP does not pro­ceed.

If you can’t deepen your re­la­tion­ship with the largest econ­omy in the world (US), there’s no harm in work­ing closer with the sec­ond-largest (China).

The only prob­lem is that the TPP is a high-qual­ity agree­ment and so there’s a ten­dency to think that maybe some of these as­pects should be in­tro­duced into the RCEP as well.

This won’t go down well with the likes of China and In­dia.

Some bi­lat­eral re­la­tion­ships be­tween RCEP na­tions are stronger than others. If bi­lat­eral re­la­tion­ships are hard to man­age, then land­ing a mul­ti­lat­eral agree­ment is even trick­ier.

The di­ver­sity of the stages of de­vel­op­ment is huge in RCEP. Big­ger mar­kets that are un­der­de­vel­oped and smaller mar­kets that are de­vel­oped need to meet half­way for things to hap­pen.

In the most re­cent ne­go­ti­a­tions, In­dia was sin­gled out as a bot­tle­neck, such that there has been spec­u­la­tion about RCEP-16 go­ing ahead as RCEP-15.

Asean is hav­ing its 50th an­niver­sary this year and the Asean Eco­nomic Com­mu­nity (AEC) was been es­tab­lished in 2015.

How will the AEC fa­cil­i­tate RCEP?

From ob­ser­va­tions so far, RCEP ne­go­ti­a­tions have made the Asean group work closer to­gether.

While it will be dif­fi­cult to set­tle the RCEP soon, at least from an Asean stand­point there is a good spillover ef­fect.

The RCEP may ap­pear more likely to suc­ceed in the trade arena, but in re­al­ity there is every chance it could re­sult in a stale­mate like the TPP.

Many coun­tries are cur­rently fac­ing growth chal­lenges at dif­fer­ent lev­els. This is the time when so-called pro­tec­tion­ism sets in and makes trade ne­go­ti­a­tions harder.

There is noth­ing un­usual about this sce­nario, how­ever.

While coun­tries are cry­ing out for a glob­alised world, many of them con­cep­tu­alise this as hav­ing ac­cess to for­eign mar­kets. Then they tend to for­get about the other side of the coin, which grants other par­ties ac­cess to their own mar­kets.

Many coun­tries are now dis­cov­er­ing that they are not re­ally ready for a glob­alised world, es­pe­cially not in terms of open­ing ac­cess to their own mar­kets. ❚ Siah Hwee Ang is the BNZ chair in busi­ness in Asia and also chairs the en­abling our Asia-Pa­cific trad­ing na­tion dis­tinc­tive­ness theme at Vic­to­ria Univer­sity.

Cam­bo­dia is one of 16 coun­tries in­volved in the RCEP free trade talks, which are pro­ceed­ing slowly.


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