25th January 2017
One of the earliest casualties of the new Trump administration in the US is the Trans-Pacific Partnership, a proposed trade deal whose presence elicited passions among those for and against it. The deal, now requiring significant restructuring if not outright cancellation, represented the most ambitious attempt to standardise trade relations among the major economies on both sides of the Pacific Ocean, while also introducing a universal system of administrative procedures to settle trade-related disputes among the member countries.
The likely death of the TPP, however, does not necessarily mean that its spirit will disappear as well. An alternative treaty, already several years in the making, has experienced an understandable boost in recent days, as its chances of being ratified are greatly increased thanks to the TPP’s major setback.
The Regional Comprehensive Economic Partnership (RCEP) may well guide Asia through the coming decades, bringing a more localised focus than the inter-continental TPP had set out to do. Whereas five of the TPP nations were located in the Americas, RCEP countries bring together only the ASEAN nations and the major economic forces nearby, such as Japan, Korea, China, India, New Zealand and Australia.
These countries (16 in total) bring together 3.4 billion people, or 45% of the global population. They also account for a combined GDP of $21.4 trillion, or 30% of the world’s total production. It is commonly accepted within the business community that large trade deals are necessary to standardise production and trade in an increasingly interconnected world.
While the specific details of such deals are likely to be a subject of continuous debate, resulting in a compromise that inspires mixed feelings from all sides, large companies on the whole are likely to welcome the low tariffs and intellectual property controls that are expected to characterise the final result.
Besides making life just generally simpler for exporters and importers, a unified set of Asian economic rules will put its member states in a better bargaining position than they would be if they were to individually negotiate separate trade deals with European and American economies. Solidarity increases leverage when seeking advantageous trade partnerships, a lesson that Britain may learn to its cost in a post-Brexit world.
While the RCEP’s final text (and implementation) is still potentially a long way away, the time is certainly right for Asian economies to move toward unified controls and standards when dealing internally as well as with the outside world. With Europe’s future looking much more fragile than in the past, Asia (along with Australia and New Zealand, of course) could soon become more central to the world’s economy than it has been in centuries, thanks to RCEP.