The concept of Regional Comprehensive Economic Partnership (RECP) agreement in the Asia-Pacific region has emerged recently following the new US administration's decision to withdraw from the Trans-Pacific Partnership (TPP) deal.
Former US President Barack Obama had worked hard for years to make the TPP deal. The new US President Donald Trump is, instead, pursuing a policy of protectionism, anti-globalisation and anti-immigration. He has threatened unilateral trade sanctions against the closest US trading partners and slammed multilateral trade deals and organisations. He is championing his campaign slogan of "America first" through the much touted "buy America" and "hire American" concept.
The TPP would have spanned the Pacific rim from the US to Australia, Japan and some Asean member-countries including Vietnam but excluding China. The RECP's agenda is to build on the existing trade deals between the 10 ASEAN countries and six other including Japan, China, South Korea, Australia, New Zealand and India.
After Washington's unilateral decision to dump the TPP deal, China took the initiative to organise the proposed RECP with the regional countries. However, Tokyo, the world's third biggest economic powerhouse, is now vying for the control of Asian trade in the absence of the US and, in the process, creating some problems for the group's smooth emergence in league with another pro-US ally Australia. The concept of RECEP still appears to be in its infancy.
ATTEMPTS TO SAVE THE DEAL SANS US: Chilean Foreign Minister Heraldo Munos hosted a two-day ministerial meeting of the Asia-Pacific countries in the Pacific resort town of Vinda del Mar on March 15 seeking to put together a trade agreement similar to TPP. The high-level meeting in Chile was attended by ministers and senior officials from 11 TPP member-countries plus China and South Korea decided not to allow the painstakingly formulated deal go in vain and form a new grouping. The US was represented by its local ambassador. However, it was an initial meeting and no concrete shape was given to any new outfit.
Mexican Foreign Minister Luis Videgaray told the media: "We have decided to move forward together, in particular with the Asia-Pacific countries" without specifying anything in details. He pointed out that "the withdrawal of a very important member of TPP opens up new opportunities."
President Trump decided to kill TPP on the plea that the free-trade deals were responsible for shipping American jobs abroad. Without directly pointing his accusing finger to Trump, the Chilean Foreign Minister said that, the meeting was to float an idea to "generate more certainty" at a time of rising "protectionist tendencies in some parts of the world." The concept of RECP is not known to have been mentioned at any stage.
IMF WARNING: Interestingly, day before the Chile meeting of the Asia-Pacific leaders, Christine Legarde, chief of the International Monetary Fund (IMF), in a message to the Group of 20 finance ministers on the eve of its meeting last weekend in Baden-Baden, Germany, warned the world's largest economies to avoid damaging the incipient global recovery with policies that would derail trade and immigration. US Treasury Secretary Steven Mnuchin attended the meeting for the first time.
Without mentioning about the new protective US policy initiatives, Legarde said: "Such measures would hurt the productivity, incomes, and living standards of all citizens." The IMF in January forecast a pickup in global growth to 3.4 per cent this year and 3.6 per cent in 2018, compared to 3.1 per cent last year.
LACK OF LEADERSHIP AND CHINA PHOBIA: Whether one likes it or not, China has, willy-nilly, emerged as the defender of global free trade since the arrival of President Donald Trump in the global scene with his retrogressive policies. Thanks to Trump, Washington has emerged as the biggest protectionist and anti-globalisation protagonist. In the present world of globalisation, any void created by circumstances is filled up systemically and Beijing with its timely initiative has become a strong contender for leadership in the Asia-Pacific region.
Japan and Australia, the two close US allies, have closed ranks and is seemingly trying to delay the finalisation of the proposed RECP deal because of their reluctance in accepting China's leadership. Tokyo and Canberra have taken a stand on concluding a high-quality deal that is likely to prolong the deliberations which may be difficult for many others to agree. Once the deal is successfully done, it is likely to reshape the global trade, economically integrating the world's most populous regions and making its supply chains more competitive. This will, obviously, affect the US business in the region.
Tokyo and Canberra are perhaps hoping against hope that if they manage to prolong the negotiation cycle in the name of reaching a high-quality deal, it may give time to Washington to rethink its strategy and may even revoke the latest decision. The Trans-Pacific Partnership (TPP) deal took years to conclude. However, there appears to be one disadvantage they are up against. Most Asean member-countries and some others, including some Latin American countries, want a quicker decision to overcome the global economic uncertainties they are facing now and may tilt the decision.
Vietnam, which does not always see eye to eye with China, does not seem to have any problem in joining the grouping with China leading, a Financial Times reported on March 14. Quoting UK-based academic Nghia Trong Pham, who was TPP negotiator for Hanoi, it said: "Because RCEP is a multilateral agreement, China cannot play a monopoly role and impose their rule on other partners, particularly India, Japan and South Korea." It means it has a built-in safety clause.