VINACHEM

The next round of negotiations for the Regional Comprehensive Economic Partnership (RCEP), a proposed 16-nation free-trade area that would be the world's largest such bloc, takes place June 12-18 in Auckland, New Zealand.

The RCEP, largely being spearheaded by China and India, encompassing 3.4 billion people, is the huge Asian wide equivalent of the now stalled Trans Pacific Partnership (TPP) trade pact.

The RCEP encompasses all 10 ASEAN member countries plus China, Japan, the ROK, Australia, New Zealand and India. The 10 members of ASEAN are – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

RCEP negotiations were officially launched in May 2013. The population of its member countries account for 50% of the total world population, with the GDP, trade volume and foreign direct investment utilization of the member countries estimated at about one third of the global total.

The impact of RCEP on ASEAN

Experts at a conference organized by the Foreign Trade University on May 21 in Hanoi to discuss the pros and cons of the RCEP said the trade pact carries with it many economic benefits for ASEAN and Vietnam.

“Most importantly it would unify trade standards across ASEAN,” said Ta Kim Ngoc, an associate professor at the Vietnam Academy of Social Sciences, which would be a boon to local companies.

Mr Ngoc said the TPP is divisive with respect to ASEAN. Currently the TPP talks include only the four ASEAN member states of Brunei, Malaysia, Singapore, and Vietnam.

The lack of the other six members poses a serious threat to internal economic integration of the ASEAN region, said Mr Ngoc, citing the issue of regulatory coordination of intellectual property rights as just one example.

Harmonizing intellectual property rights as defined by the TPP with the remaining six non TPP member countries would be virtually impossible. However, RCEP would allow all ASEAN members to implement compatible laws with respect to these rights.

Moreover, Dao Ngoc Tien, an associate professor from the Hanoi Foreign Trade University, put forth the proposition that the welfare effects of the TPP on ASEAN as a whole are unduly complex and unpredictable.

Most importantly, said Mr Tien, they have a destabilizing effect on ASEAN.

Recent studies show the TPP deal favours the four ASEAN members as trade partners such as the US and Japan divert some of their trade to countries such as Vietnam and Malaysia for preferable tariff treatment.

By contrast, the RCEP does not carry with it this unsettling negative effect to ASEAN, he said.

It is also likely, said Mr Tien, that the TPP will detrimentally influence the global value chain of some specific industries and segments of the economy away from ASEAN.

For example, he said, Cambodia and Laos, two of the fastest-growing economies in Asia, may miss chances to improve manufacturing productivity and advance sustainable development by participating in global supply chains as US and Japanese companies move their assembly lines to TPP member countries in Latin America.

In substance, he said, ASEAN already has FTAs with the six partners – China, India, Japan, the Republic of Korea and Australia, and New Zealand. RCEP is therefore simply a logical expansion of a trade relationship that is already in existence.

RCEP, would therefore act as a stable platform for cooperation as opposed to the TPP, which is characterized on the precept of competition and set the stage allowing for RCEP to emerge as Asia’s next economic growth frontier.