The Regional Comprehensive Economic Partnership (RCEP) that was signed today among 15 Asian nations is more of a brand than a major trade deal.
Amidst all the hype about the pact covering 30% of the global economy and 30% of the global population, there has been little attention to the pact’s limited terms. Unlike the Trans-Pacific Partnership (TPP), a deal that had 30 chapters with only six actually focused on trade, the RCEP is about trade, although with limits:
- RCEP’s actual trade terms are limited in that it does not cover all goods or zero out tariffs and excludes most agricultural goods.
- RCEP’s coverage of the service sector is not comprehensive.
- RCEP does not include the controversial Investor-State Dispute Settlement (ISDS) regime.
- RCEP does not set uniform product standards.
- RCEP does not have a procurement chapter.
- RCEP does not address state-owned enterprises.
- RCEP does not have enforceable “digital trade” rules.
Just as the U.S. Congress rejected the overreaching TPP, many countries involved in the decade of RCEP negotiations rejected the old corporate-favored trade-pact model. India exited the process altogether. Although some of the remaining countries aspired to a TPP-style deal, it became apparent that either there would be a much more limited agreement or no agreement.
India’s exit is one reason the pact will have little effect on the global or U.S. economy. Optimistic projections are for 2/100s of a percent in growth gains. The pact’s impact also is limited by the fact that most of the nations involved already have trade deals among themselves. Some RCEP proponents hope it could somehow magically unjam various configurations of China, Japan and Korea trade talks that have dragged on for years. But that a decade of RCEP negotiations resulted in more of a brand than a trade deal suggests otherwise. RCEP’s main benefit probably is its rules of origin (ROO), which will replace the ROOs of the various bilateral and plurilateral pacts among the RCEP signatories.
And no, RCEP is not “China writing the rules.” RCEP is not a Chinese initiative, but rather came from the Association of Southeast Asian Nations (ASEAN*). The RCEP final text, which connects the ten ASEAN nations with Australia, China, Japan, New Zealand, and South Korea, is based on ASEAN terms.
The RCEP will not go into effect until its signatories conduct domestic approval processes. But because of its relatively “shallow” terms, approval is not expected to be controversial. This contrasts with the TPP’s fate. It remained scores of votes short of approval in the U.S. House of Representatives from when it was signed in February 2016 until the end of the lame-duck session of Congress in December 2016. In 2017, shortly after being sworn in, President Trump formally pulled the plug with a notification that the United States would not be ratifying the TPP.
*ASEAN members include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.