Event at Brookings Institute about TPP vs RCEP

On Tuesday, I was lucky to attend an event at the Brookings Institute which is one of the most recognized think tanks US wide. The events hosted by Brookings are usually free, it only requires registration, and on-the-record.
I am very happy that I attended this event because I have learned so much about both trade negotiations in only two hours.
Simply summarized one can say that the TPP (Trans-Pacific Partnership) is U.S.-led, and the RCEP (Regional Comprehensive Economic Partnership) is China-led.
One of the main questions was why China is not intending on joining the TPP, and the answer was because China already has several free trade agreements with most of the members of the TPP.
I actually realized at that point that China is extremely smart in focusing mainly on the RCEP members since it does not have a free trade agreement with Australia, India, South Korea and Japan. India and South Korea do not have a dual membership meaning they are not members of the TPP. Therefore, it makes sense that China's interest lies mainly in the larger and more experienced markets of the four ones, I previously mentioned, in order to expand its own economic market. Nevertheless, these are only my assumptions and this has nothing to do with actually knowing what is going on there.
I had to write a report about the event which will be published on our website (see below). However, I obviously had to leave out my own opinion, and I only reported what I heard and saw.
This is how it is if one is working for an organization whose key principles are: neutrality and objectivity.

(Here the link to the Brookings website where you can watch the video of the event online.
http://www.brookings.edu/events/2014/02/11-asia-pacific-economic-integration)

02/13/14; “TPP and RCEP: Competing or Complementary Models of Economic Integration?”

TPP and RCEP: Competing or Complementary Models of Economic Integration?

The Center for East Asia Policy Studies – The Brookings Institution

By Valerie Marie Brockman

On February 11^th, the Center for East Asia Policy Studies, department of the Brookings Institution, hosted a public seminar to discuss the multifaceted set of economic, political, and security implications generated by the coexistence of TPP and RCEP in the Asia-Pacific region. Facilitated by Mireya Solis, Senior Fellow & Philip Knight Chair in Japan Studies of the East Asia Policy Initiative, the expert panel including Kenichiro Sasae, Ambassador of Japan, Sanchita Basu Das, ISEAS Fellow, Takashi Terada, Professor in Japan, Yungling Zhang, Professor in China, and Claude Barfield, Resident Scholar, explored the extent to which these two trade blocs differ.

TPP and RCEP overview

The Trans-Pacific Partnership (TPP), starting in 2005, is a free-trade agreement incorporating the United States, Australia, New Zealand, Canada, Japan, Singapore, Malaysia, Vietnam, Brunai Darussalam, Chile, Mexico, and Peru. The goal is to create jobs, promote economic growth by removing trade barriers, and strengthening the multilateral trading system. These countries are the U.S.’ largest trade partners, accounting for $ 1.5 trillion worth of traded goods in 2012, and are responsible for 40 percent of global GDP and 26 percent of global trade.

The Regional Comprehensive Economic Partnership (RCEP), starting in 2001, is a free-trade agreement including all 10 members of the Association of Southeast Asian Nations (ASEAN) and 6 other countries – China, India, Japan, South Korea, Australia, and New Zealand – which already have free-trade agreements with ASEAN nations. The goal is to promote greater regional economic integration, to eliminate tariff and non-tariff barriers, and to maintain the WTO’s existing rules. The partnership incorporates more than 3 billion people, has a combined GDP of about $ 17 trillion being about 30 % of world’s GDP, and accounts for about 40 percent of world trade.

TPP vs RCEP: Convergence or rivalry? Positive-sum dynamics or zero-sum dynamics?

The panel discussed if the just explained FTA blocs interfere with one another, or if they are able to adjust to, and even merge, with one another.

Kenichiro Sasae, the Ambassador of Japan, expressed optimism about Japan’s adjustment to the TPP regulations, and openness to include China and South Korea. He also emphasized that he hopes both, the TPP and RCEP, will be able to find a friendly solution to co-exist in the future.

Following the Ambassador, the expert panel presentations showed different viewpoints additionally to Japan, from Singapore, China and the U.S.

Sanchita Basu Das, ISEAS Singapore, pointed out that Singapore belongs to both trading blocs in order to stay neutral and to benefit from both FTA advantages. She emphasized that the TPP is very detailed, whereas the RCEP is broader due to lower regulations within the domestic politics of the developing members. The discussion of a Free Trade Area of the Asia-Pacific (FTAAP), incorporating eventually both the TPP and RCEP members, which has already been discussed within the Asia Pacific Economic Cooperation (APEC) forum, will most likely never happen due to political conflicts, said Basu Das.

Takashi Terada, Professor at Doshisha University in Japan, emphasized his concerns about an agricultural liberalization within a TPP regulation, and sees the TPP as a rule-making cutting-edge mechanism. Regarding RCEP he explained that the ASEAN centrality might not be feasible. However, he stressed the RCEP’s multilateral approach is user friendly.

Yunling Zhang, Professor and Director at the Chinese Academy of Social Sciences, indicated that the TPP is a response to the RCEP. He emphasized that the RCEP’s goals and strategies are well structured and planned. He also stressed that the RCEP is mainly ASEAN led, and not China led. He pointed out that China has already approached different regions worldwide, and has established bilateral investment treaties (BITs) with both the U.S. and the EU. In both situations China adopted certain principles on the negative list. Nevertheless, he expressed that China views the TPP as a U.S. strategy against them, but he emphasized that China tries to stay open but cautious.

Lastly, Claude Barfield, Resident Scholar at the American Enterprise Institute, commented briefly and precisely on the TPP and RCEP discussion by pointing out that the TPP will only be finalized as long as the Trade Promotion Authority (TPA) will be approved. However, at this point of time he is not able to give any opinion on a positive, or negative, outcome of the TPA bill. Regarding the TPP he emphasized that everything needs to be on the table including the agricultural issues with Japan, as well as the discussion about the Intellectual Property Rights (IPRs). Barfield is not entirely optimistic that the RCEP will be completed in 2015, such as hoped from earlier panelists.

The concluding roundtable discussion enabled spectators to ask questions to the panelists. Curiosity included a currency-manipulation clause, RCEP leadership, and China’s absence in TPP. It was confirmed by Singapore that the RCEP will not have a currency-manipulation clause, and China emphasized again that RCEP is ASEAN led. The reason why China will most likely not join the TPP was explained by having had already established FTA’s with several TPP members. Therefore, it is rather looking for countries with which it does not have any agreement yet, including most of the RCEP members.