The leaders of the 16 countries that signed up to a China-led trade pact sought to make progress on the deal during an Asean business summit in the Philippines capital Manila on Tuesday.
The Regional Comprehensive Economic Partnership (RCEP) is a regional free-trade agreement supported by the 10 members of the Association of Southeast Asian Nations, along with China, India, Japan, South Korea, Australia and New Zealand. However, after 20 rounds of negotiations, the details of the deal remain under discussion.
The talks in Manila come just days after the 11 nations still allied to the Trans-Pacific Partnership (TPP) agreed to rename and push on with their pact, which the United States abandoned in January.
Following talks on the sidelines of the Asia-Pacific Economic Cooperation summit in Da Nang, Vietnam, the countries on Saturday said they would proceed with the deal under the new name, the Comprehensive Progressive Trans-Pacific Partnership (CPTPP).
For economic reasons alone, ensuring RCEP becomes the dominant trade agreement in the region is a priority for Beijing.
According to a 2016 study by researchers at Nankai University, a RCEP “win” would be worth about US$88 billion a year to China, while a CPTPP victory would cost it US$22 billion a year. If both deals succeeded, China would gain US$72 billion a year.
Chinese Premier Li Keqiang said in March 2016 that he hoped to complete the talks on RCEP before the end of that year.
In his speech on Tuesday in Manila, he did not set any specific targets, but said the countries involved should push ahead with their talks “in a more proactive manner”.
The problem for China is that the seven countries that are aligned to both deals – Australia, New Zealand, Japan, Singapore, Brunei, Malaysia and Vietnam – might, after the progress made on the sidelines of the Apec summit, now favour the CPTPP over the RCEP.
Malaysia’s Trade Minister Mustapa Mohamed acknowledged the shift in a speech last week in Vietnam.
“RCEP was a priority after the TPP almost collapsed without the US,” he said. “RCEP was a priority when we thought the TPP was not going anywhere, but in the past few months, there has been some pick up in momentum for the TPP.”
In contrast, consensus on the RCEP still seems a long way off. During talks on the issue in South Korea last month, the ministerial representatives agreed only on what subjects the 16 countries should discuss.
Zhang Jun, director general of the Department of International Economic Affairs under China’s foreign ministry, said on Tuesday that although the revival of the CPTPP was not a setback for the RCEP, the China-led pact was “facing challenges”.
Jose Cuisia Jnr, a former governor of the central bank of the Philippines, told the South China Morning Post on the sidelines of the Asean Business and Investment Summit, that the RCEP had the potential to be a “more successful trade agreement” than the CPTPP because of the presence of China and India.
But there were still plenty of difficulties that needed to be tackled, he said.
“There are different standards and regulations. They have to come to an agreement on how to standardise [them]. Those are the barriers,” he said.
Huo Jianguo, vice-chairman of the China Society for WTO Studies under China’s commerce ministry, said it was important for the leaders of the RCEP nations to get together as negotiations were in need of a boost.
“The trade deal is more than just a matter of economic opening up,” he said. “There are lots of geopolitical considerations involved.”
China was trying to be proactive in pushing forward the RCEP but other major economies, like Japan, were less enthusiastic and appeared to favour the CPTPP, he said.
Zhou Shijian, a senior researcher at the Institute for International Relations at Tsinghua University, said, however, that the biggest stumbling block for the RCEP came from India.
Huo agreed, saying China’s giant neighbour was concerned about opening up its service industries, and was reluctant to accept foreign investment in its manufacturing sector.
Preeti Saran, India’s top diplomat for Asia, said earlier that the country remained committed to the RCEP, but wanted a “balanced” outcome.
Additional reporting by Bloomberg
This article China-led regional trade pact tries to make ground as restyled TPP pushes on without US first appeared on South China Morning Post