The TPP vs RCEP: Washington chooses RCEP

 

By: Gwen Yucong Shi, 18′

When Trump withdrew from the TPP amid a flurry of other decisions in January, his withdrawal was met with minimal protest. After all, opponents of the TPP were bipartisan, with concerns ranging from a lack of environmental protection provisions and workers’ rights, to allowance for corporations to sue governments, and a depletion of American manufacturing jobs.

While the withdrawal from the TPP was predicted to have an impact on the Regional Comprehensive Economic Partnership (RCEP), which has been called the alternative to the TPP, the reality of RCEP replacing the TPP is now taking shape, as member countries seek to conclude RCEP negotiations by 2017.

RCEP is a free trade agreement involving 16 countries in Asia, 10 of which are part of ASEAN, and 6 of which are free trade partners with ASEAN. Viewed as an alternative to the TPP, RCEP has one major difference in its makeup: the TPP member countries included the US, but not China, and the RCEP member countries include China, but not the US. Supposedly, this inclusion/exclusion of the world’s two major superpowers was not intentional – things just happened that way.

The current target for RCEP is for negotiations to finish by 2017 – which was most likely spurred on and encouraged by the withdrawal of the US from the TPP. President Barack Obama, in pushing for the passage of the TPP, recognized the risk of RCEP replacing the TPP while in office and created a report documenting RCEP’s potential economic effects on the American economy. In the report, the passage of RCEP would be significant, primarily because of greater access China would have to Japanese markets. For example, 35 American industries which export to Japan would face competitive pressure from China, if the RCEP is passed. Additionally, because the U.S. is not a part of RCEP, the U.S. will essentially be left out of the conversation in bi-lateral and pluri-lateral trade agreements.Moreover, the passage of RCEP has geopolitical implications for Asia.  RCEP would unquestionably strengthen the ties between RCEP member countries and China, and as a result, give China more leverage in its territorial disputes in the South China Sea.

Moreover, the passage of RCEP has geopolitical implications for Asia.  RCEP would unquestionably strengthen the ties between RCEP member countries and China, and as a result, give China more leverage in its territorial disputes in the South China Sea.

As one of the largest consumers in the world, China could threaten to cut access to its markets and its demand if these other RCEP member countries are misaligned with China’s will.

Looking forward, the international spotlight will be on RCEP now that the TPP has been killed. The U.S. has already made its move with the TPP, and as a result, is no longer part of the global free trade conversation. Once RCEP is passed, most likely by the end of 2017, China will have increased its access to markets and economic allies.

Sources:

http://www.mckinsey.com/industries/public-sector/our-insights/understanding-asean-seven-things-you-need-to-know

https://www.bloomberg.com/news/articles/2016-11-22/china-s-free-trade-opening-in-a-world-without-tpp-quicktake-q-a

http://www.csmonitor.com/USA/Politics/monitor_breakfast/2015/0507/Why-Democrats-are-reluctant-to-support-the-Trans-Pacific-Partnership

http://www.scmp.com/week-asia/geopolitics/article/2060041/trump-kills-tpp-can-china-backed-rcep-fill-gap

http://www.cnn.com/2017/01/24/asia/tpp-rcep-nafta-explained/

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