Politics of regional trade liberalisation
As multilateral trade negotiations have become unworkable, regional and bilateral alternatives are on the rise. In Thailand's neighbourhood, the most consequential of these trade vehicles is the Regional Comprehensive Economic Partnership (RCEP). As it missed the boat on the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), Thailand as Asean chair this year should finalise the RCEP expeditiously and find a way to accede to the CPTPP in the near future. Although the Thai political situation remains murky and contentious, there is enough domestic policy consensus on low-hanging fruits, such as regional and bilateral trade liberalisation, that should be reaped without further delay.
When it was official launched in 2012, RCEP was an exemplary case of what and how Asean does best by navigating and brokering a way forward among the major powers. China had earlier proposed an ASEAN Plus Three trade vehicle among Asean, China, Japan and South Korea. Concerned that such a scheme would be dominated by China, Japan suggested an Asean Plus Six to include Australia, India, and New Zealand. Asean filled in the gap by making the 16-member trade scheme an "Asean process" under Asean centrality.
During the intervening years, RCEP lost momentum while the Trans-Pacific Partnership made accelerated headway during the Barack Obama administration.
Under the Obama administration, the United States initially drove the TPP negotiations towards a high-quality agreement that was intended to be both substantial and comprehensive, especially on non-tariff barriers and behind-the-border liberalisation.
But after the TPP was finalised, the administration of President Donald Trump balked and withdrew as soon as he entered office. Without the US, the TPP has regrouped and relaunched as the CPTPP. It now covers 11% of global GDP, whereas this proportion would have been more than a third of the world economy had the US remained. Without the US, the CPTPP extends to 14% of the global population. It is now facing ratification hurdles in several countries.
As it includes only Brunei, Malaysia, Singapore, and Vietnam among Asean member states, there are concerns that the CPTPP may create internal divisions and zero-sum trade diversions for those who are in and the rest. Vietnam, for example, stands to gain in the long term from market access and non-tariff liberalisation in key sectors, such as autos, which have been Thailand's mainstay. While the CPTPP is not what it used to be without the US, the RCEP is immense because it includes China, India, and Japan. RCEP covers 39% of world GDP and nearly half of the global population. Its extent of liberalisation is not as substantial and comprehensive as the CPTPP but the RCEP can be seen as the "first floor" of a trade-liberalisation multi-storey building. While it is not as far-reaching on labour and environmental standards and intellectual property rights compared to the CPTPP, the RCEP still faces sticky issues on market access, rules of origin, services trade, and stakeholder consultation. Some RCEP partners are also concerned their trade deficits may exacerbate markedly with a regional free-trade deal.
Nevertheless, the RCEP would enable Asean to streamline its free-trade agreements with the other six external partners. The RCEP also benefits from the ongoing China-Japan realignment. Unlike the recent past, China-Japan relations have become more workable following a strategic rethink by both sides. China has a lot of issues and challenges on its plate, ranging from the US pushback against the Belt and Road Initiative with the Free and Open Indo-Pacific (FOIP) to the Taiwan Strait and Hong Kong protests. Japan also has found a new volatile geopolitical environment where the US, its security guarantor, is less reliable under Mr Trump.
This led to Prime Minister Shinzo Abe's visit to Beijing in October 2018, and the signing of a slew of bilateral cooperative agreements between the two countries, including a "smart city" project in Chonburi province. President Xi Jinping, apart from joining the G-20 summit in Osaka last June, is slated for a bilateral visit to Japan in the spring of 2020.
That China and Japan are on good terms provides goodwill for the RCEP negotiations to succeed. India, too, needs the RCEP in order to be connected to the Asian side of the Pacific Rim. And Asean needs the RCEP to reinforce its Asean Economic Community. The RCEP provides different benefits for different member economies but, in the adverse external environment where the world trading system is broken, the 16-member vehicle is imperative. There is enough momentum after the launch of the Asean Outlook on the Indo-Pacific (AOIP) last June for RCEP talks to conclude this year and be ready for signing when Vietnam chairs Asean in 2020.
For Thailand, shepherding the AOIP through as a response to the US-led FOIP has been an achievement. Thailand now has to re-evaluate and regain its footing on trade liberalisation. Trade policy has been so politicised in recent years that it has bogged down. The last major Thai bilateral FTA was with Japan more than a decade ago, and Thailand did not have its act together to join the TPP when it began. Now is the time to take necessary steps to consider joining the CPTPP and to look at bilateral FTAs as second- and third-best approach towards trade liberalisation, including the deal being negotiated with the European Union. After so much conflict and turmoil since 2005, there appears to be enough consensus among all sides of the Thai divide that trade policy-making needs to get going again.
A PROFESSOR AT CHULALONGKORN UNIVERSITY
A professor and director of the Institute of Security and International Studies at Chulalongkorn University’s Faculty of Political Science, he earned a PhD from the London School of Economics with a top dissertation prize in 2002. Recognised for excellence in opinion writing from Society of Publishers in Asia, his views and articles have been published widely by local and international media.