US
faces hard battle to secure Asia
pact By Parameswaran Ponnudura
Which free trade agreement will dominate
the Asia-Pacific in the next four years: the
China-led Regional Comprehensive Economic
Partnership (RCEP) or the US-led Trans-Pacific
Partnership (TPP)?
The RCEP was the
obvious choice when the question was posed to
delegates at a "Asia-Pacific Forecast 2013"
conference hosted by the Washington-based Center
for Strategic and International Studies (CSIS)
last week.
The random poll result
underscores the difficulties facing the United
States in marketing its TPP model and the intense
competition between the world's two largest
economies to garner greater market share in the
rapidly expanding Asian region.
The
challenge for the US to forge the TPP pact by its
self-imposed October deadline is all the more
important because of
President Barack Obama's
"pivot to Asia" strategy seen as a US bid to clip
China's growing military and economic influence in
the region, prompting Chinese anxiety about US
containment.
The RCEP is an Association of
Southeast Asian Nations (ASEAN)-led trade
agreement linking the economies of 16 Asia-Pacific
countries, with the notable absence of the United
States.
They comprise all 10 ASEAN nations
- Brunei, Myanmar, Cambodia, Indonesia, Laos,
Malaysia, the Philippines, Singapore, Thailand and
Vietnam - and six other countries with which the
group has free-trade agreements - China, India,
Japan, South Korea, Australia, and New Zealand.
The TPP, on the other hand, consists of an
initial group of 11 negotiating countries led by
the United States but excluding China. Others
included are Brunei, Chile, Singapore, and New
Zealand, Australia, Peru, Vietnam, Malaysia,
Mexico, and Canada.
There is an overlap in
participation, with six of the 16 RCEP members
also involved in the TPP. Three other RCEP
participants - Indonesia, Philippines, and
Thailand - have also expressed initial interest in
participating in the TPP.
Head
start With the RCEP members expected to
launch negotiations this year for the pact with a
view to wrapping them up by 2015, the United
States wants to have a head start with the planned
October launch of the TPP.
But after 15
rounds of talks, analysts say skepticism over the
TPP remains a major stumbling block, as reflected
by the poll last week which showed 45.2% of of the
106 voting delegates supporting the RCEP compared
to 24.5% backing the US-led initiative.
"My guess is that some of this
[skepticism] reflects the difficulties that the
TPP is inevitably going through because it is so
ambitious and the US has not yet been able to put
its political cards on the table," said Matthew
Goodman, a former White House official overseeing
US policy development in key Asia-Pacific forums.
"On the other hand, trade negotiations
sometimes look darkest before the dawn," he said,
adding that the current US Congress appears more
receptive to trade deals than forging compromises
on sensitive fiscal issues.
"It is tough
slogging, and it is not a foregone conclusion it
is going to work," Goodman said. "If it doesn't
work, I think it would be very, very damaging to
the pivot [to Asia]. So, it has to work and I
think the Obama administration knows that and it
will double their efforts to try to get this
done."
Negotiators call the TPP
"comprehensive and high-standard" as it will
liberalize trade in nearly all goods and services
and include commitments beyond those currently
established in the World Trade Organization (WTO).
Critics of the TPP however argue that its
high standards are a disincentive for developing
countries that see the RCEP as an attractive
alternative because it protects sensitive
industries from exposure to enhanced competition
and makes fewer demands for economic policy
changes.
The TPP negotiating dynamic
itself is complex: decisions on key market access
issues such as dairy, sugar, and textiles and
apparel may be dependent on the outcome of
controversial rules negotiations such as
intellectual property rights or state-owned
enterprises, according to the latest report on the
issue prepared by the Congressional Research
Service, the think tank of the US Congress for
lawmakers.
Target The 16th round
of negotiations for the Pacific pact will be held
in Singapore next month and three negotiating
rounds are scheduled this year prior to the
October 2013 Asia-Pacific Economic Cooperation
(APEC) forum summit in Indonesia, the current
target for reaching an agreement.
"For
this deadline to be achieved, outstanding
negotiating positions may need to be tabled soon
in order for political decisions to be made," the
Congressional Research Service said in a January
report.
Washington is hoping that Japan,
Asia's second-largest economy after China, will
join the TPP to give it a shot in the arm, but new
Prime Minister Shinzo Abe in unlikely to make any
decision ahead of July elections for parliament's
upper house.
Some members of Abe's Liberal
Democratic Party (LDP) fear any decision to
embrace the TPP will upset the powerful farm
lobby. Japan is already the world's biggest net
importer of agricultural products, valued at US
$66 billion a year.
"A strong backlash ...
is expected from some LDP members who are
concerned the party will lose votes from
agriculture-related sectors if Abe announces
Japan's bid to join the talks," the Japan Times
said last week.
But some analysts think
the United States may have to show greater
commitment to trade and be more realistic if if
wants to attract particularly the Southeast Asian
economies.
"We need to articulate much
better the path for countries that are not ready
to make it to the premium level agreement or we
are opening up to a strategic loophole that can be
exploited by our competitors, like Beijing," said
Ernest Bower, senior adviser for Southeast Asian
studies at CSIS.
Eligibility While Washington
considers ASEAN the fulcrum of America's Asia
strategy, not all ASEAN members are eligible to
join the TPP, he said. Laos, Cambodia and Burma
cannot participate in the TPP because they don't
meet the basic criteria - membership in the APEC
forum. Bower said the US also has to realize that
it cannot push for a trade liberalization model
that excludes China.
"It doesn't make any
sense because China is the number one or two
trading partner" of the Southeast Asian nations,
he said. "The TPP is important but we need to have
a better look at our economic, trade policies and
add some political 'oomph' to make Asia believe
that we are going to sustain our focus in the
region.
"It is clear to me that Beijing is
willing to say, 'Look, the Americans are pivoting
back but this is very security heavy. What are
they doing for you in terms of economic
engagement?'"
The economic stakes of the
RCEP are also high as the 16-member group
represents 40% of world trade. The major players
in the region view RCEP favorably as a "vehicle to
achieve important goals," said Mireya Solํs, an
expert on Japan's foreign economic policies at the
Washington-based Brookings Institution. For
ASEAN, the RCEP is mostly about maintaining the
organization's centrality in the Asian regional
integration process and for China, it is a "good
counterpoint" to the American-led TPP, she said.
And for Japan, RCEP's membership
configuration dovetails exactly with its
long-standing proposal for an "ASEAN+6" trade
grouping, thereby endorsing a more expansive
definition of the East Asian region, Solis said.
She also cited ASEAN's ambitious objective
for the RCEP - a "comprehensive agreement"
covering goods, services, investment, economic
cooperation, intellectual property, competition,
and dispute settlement.
"But there are
many questions as to whether RCEP can deliver
major results in economic integration," she said,
citing for example the flexibility approach to
trade negotiations which could compromise the
overall quality of the RCEP if governments have an
easy way out to shelter sensitive sectors. "[T]he
risk is that the agreement could only yield a low
common denominator."
(Copyright 1998-2013
Radio Free
Asia. All rights reserved. Republished with
permission.)
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