On the heels of Vietnam’s newly signed free-trade agreement (FTA) with the European Union (EU), the RCEP could pave the way for Asean to integrate further with the EU, said Termsak Chalermpalanupap, senior fellow at ISEAS-Yusof Ishak Institute in Singapore.

Explained: Regional Comprehensive Economic Partnership (RCEP)

The negotiations face a moment of truth this year, as the Asean nations have set their sights on concluding the agreement this November at the Asean Summit in Bangkok.

But with only seven of a proposed 20 chapters agreed as of now, this may be easier said than done.

Experts say success would be major evidence that Asian nations are ready to take a leadership role in world trade.

All the talk may come to nothing if negotiators cannot overcome long-standing disagreements on the details. “Political statements about the urgency for a successful conclusion have become frankly worthless if not backed up with negotiating flexibility,” said Wendy Cutler, former US trade negotiator and vice-president of the Asia Society Policy Institute.

RCEP VS CPTPP

The RCEP should not be confused with the CPTPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

The RCEP was first proposed in 2011 and, backed by China, was seen initially as a competing and more inclusive agreement than the US-backed TPP. Cutler and other trade experts in a recent Asia Society Policy Institute paper said that while the RCEP did not quite meet the high standards of the CPTPP, it would go a long way to lowering trade barriers in Asia – especially among those nations that might struggle to meet the CPTPP’s ideals.

Explained: the CPTPP trade deal

The RCEP could grow the global economy by more than US$285 billion annually – almost twice as much as the CPTPP – if it is in place by 2030, according to economists Peter Petri at The Brookings Institution and Michael Plummer at Johns Hopkins.

While progress on the RCEP has been slow, Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, said the great scope of the agreement – it includes both China and India – was what made it so important.

WHAT’S IN IT FOR ASEAN?

The RCEP could provide calm amid the storm of trade tensions between the US and China, and reduce Asean nations’ economic reliance on the US.

“It is in the fundamental interest of Asean nations to cope with risks through regional economic cooperation,” said Nie Wenjuan, assistant professor at China Foreign Affairs University in Beijing.

In the light of the Trump administration’s protectionist approach to trade, it was “inevitable” nations would look within their region for economic support, said Matteo Vidiri, economist at Mekong Economics in Hanoi.

Experts say bringing big players like China and India to the negotiating table on such a wide-ranging agreement shows Asean is ready to step into a leadership role on global trade issues.

Vietnam signed a free-trade deal with Europe nine years in the making late last month, and Singapore has an FTA with the US. Negotiations are ongoing for FTAs between the EU and Indonesia as well as the Philippines. Closing the deal on RCEP could help individual Asean member states expand their own free-trade options.

Closer economic integration also helps the bloc’s ambition to achieve a single economic market – to be known as the Asean Economic Community (AEC) – by 2025.

WHAT’S IN IT FOR CHINA?

Beijing has long backed the RCEP as a chance to shape the rules of multilateral trade – without the participation of the US.

Pulling off a deal this year would underscore China’s support for multilateralism in the face of growing protectionism, especially on the part of the US, said Nie at China Foreign Affairs University.

Is Asean’s RCEP trade pact going the way of the TPP?

Promoting rules-based free trade was part of China’s role as a major economic power, she said, and opening China’s economy to regional integration would increase “political, social and cultural cooperation with China”.

WHAT’S THE HOLD-UP?

To get the deal done this year, the parties need to agree on rules for trade in goods and services, investment and financing, and e-commerce. They will also need to tackle controversial issues on intellectual property and dispute settlement. Disagreement on such areas has been enough to derail smaller trade agreements for years.

India has been the biggest holdout, reluctant to lower its barriers to free trade over concerns about competition with Chinese imports.

While some participants have suggested India could commit to a less aggressive opening of its market, in April Beijing proposed moving forward on an agreement without India altogether. If India missed out on the RCEP, it would “miss the bus” on economic cooperation in the Asia-Pacific, Nie warned.

Termsak said it was not in the bloc’s nature to exclude a party just for political expediency: “Asean has a mantra not to leave anyone behind.” ■