The Regional Comprehensive Economic Partnership (RCEP), originally conceived by 10-nation Association of South-east Asian Nations (ASEAN), is a Beijing-backed trade framework that has gained prominence as an alternative to the recently concluded 12-nation Trans-Pacific Partnership (TPP), which was backed by Washington.
The 16-nation RCEP comprises the ASEAN regional grouping plus six others — China, India, Japan, South Korea, Australia and New Zealand.
The largest regional trade agreement to date, the 12-nation TPP comprises the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The RCEP has the potential to cover around 3.4 billion people in the Asia-Pacific region, or 45% of the world’s population, with a combined Gross Domestic Product (GDP) of about US$17.23 trillion (S$24.36 trillion), or about a third of the world’s current annual GDP.
By comparison, the Pacific Rim TPP covers a region with a population of 800 million, and a combined GDP of around US$30 trillion, or about 40 per cent of global GDP.
TPP will influence the global value chain of some specific industries and sectors. For example, Vietnam and Malaysia are likely to benefit from new electronics supply chains under TPP. But these benefits may come at a cost to other ASEAN members. Electronics sectors in Cambodia and Laos are expected to experience slower growth, or even some losses, as American and Japanese companies move their assembly lines to TPP members in Asia and Latin America. Moreover, Cambodia and Laos, two of the fastest-growing economies in Asia, may miss some chances to improve manufacturing productivity and advance sustainable development by participating in global supply chains.
The RCEP seems more development-friendly than the TPP. It promises special and differential treatment for developing economies which may make it easier for them to join the bloc. This implies gradual tariff liberalization and longer transition times for impoverished countries like Cambodia and Myanmar. The pact also promises development assistance through economic and technical cooperation provisions. The TPP, meanwhile, applies the same high-standard trade rules for developed and developing countries.
While both agreements will generate notable income benefits, larger gains arise from the more ambitious TPP. Projections by the Asian Development Bank, generated from a multi-country, multi-sector computable general equilibrium model, indicate that the RCEP provides global income benefits of about $260 billion. Similar studies of the TPP project larger global income benefits of $320 billion to $400 billion.
Manufacturing, global value chains and services are likely beneficiaries while agriculture and mining may lose out.