Agreeing on China’s Favorite Trade Deal Set to Drag Into 2018

By: | at 04:00 PM | International Trade  

After talks aimed at wrapping up a giant Pacific trade deal almost collapsed in acrimony in Vietnam last week, ministers are now warning that a rival Asian pact should also focus on quality over speed.

That doesn’t mean the 16-nation Regional Comprehensive Economic Partnership won’t get done. But the fraught negotiations in Danang over the Trans-Pacific Partnership showed that nations aren’t going to rush trade deals just to defend globalization against the rising protectionist mood since Donald Trump entered the White House.

The RCEP, which includes China and India but not the U.S., is on the agenda for discussions at regional summits this week in Manila. Most officials acknowledge the deal will miss a year-end deadline, though they hope to have a framework agreement in early 2018.

Several RCEP nations are also in the TPP, which was reduced to 11 members when Trump withdrew the U.S. on his first day in office, citing a perceived risk to U.S. jobs. Moving ahead on the TPP since then has proven difficult, and talks were almost scuttled entirely in Vietnam after Canada refused to sign a framework agreement without changes, demanding a “high-quality” outcome.

After two days of wrangling, a framework agreement on the TPP was signed, but months of potentially painful work remain to get an actual deal. That preoccupation with finalizing the TPP has seen the focus shift from the RCEP.

“RCEP has been a priority after TPP almost collapsed without the U.S., but in the last few months there has been some pick up in momentum for TPP,” Malaysian Trade Minister Mustapa Mohamed said last week in an interview in Vietnam. “RCEP was a priority when we knew that TPP was not going anywhere.”

Differences remain on the RCEP, Mustapa added. “We have to have a good agreement, we can’t be pushing just for the sake of meeting deadlines,” he said. “We need to have quality.”

Both the RCEP and TPP have been tugged back and forth for years amid strategic jockeying between the U.S. and China. President Xi Jinping attempted to accelerate RCEP talks after Trump’s election upended the TPP negotiations.

The deals take different approaches to integrating Asia-Pacific trade. The TPP goes beyond traditional trade issues to address intellectual property, labor rights and state-owned enterprises. It would have covered 40 percent of the global economy, if the U.S. had stayed in.

While the RCEP focuses on tariffs on goods, it also extends to services, wading into the contentious issue of worker migration. And its biggest economies have disputes over history and territory—China and Japan, and China and India—that are hindering discussions.

The RCEP must also bridge the interests of mature, developed economies such as Australia and Japan with emerging markets like Cambodia and Laos.

High Ambition

Australian Trade Minister Steve Ciobo said in an interview in Vietnam that he was seeking a high-quality RCEP deal. “Concluding these deals is not about doing it as quickly as possible,” Ciobo said.

“I don’t think we’ll be able to conclude by the end of the year; I think we will move into next year,” he added. “But I think that also reflects a high level of ambition for RCEP, as well. We need to be pragmatic, but we still need to make sure we have as much as we can.”

Preeti Saran, India’s top diplomat for Asia, said the country remained committed to the RCEP, but wanted a “balanced” outcome.

Some ministers said momentum for the RCEP wasn’t slowing, even as they agreed the end-year deadline will slip.

“The RCEP is moving on just fine,” Philippine Trade Secretary Ramon Lopez said in an interview in Vietnam. “The actual signing I think we can probably expect the year after next.”

Thai Commerce Minister Apiradi Tantraporn said ministers hoped to at least report some progress while in Manila.

“Of course we still have differences, in level of ambition for one thing and we are working very hard,” she said in an interview in Vietnam. The parties want “to finalize it hopefully by the early part of next year, so we can go on and do the legal scrubbing,” she said.

China for one said the ongoing TPP negotiations wouldn’t be a factor for the RCEP.

“I don’t think the TPP negotiations will be a set back towards RCEP,” Zhang Jun, an economic affairs official at China’s foreign ministry, said in a briefing in Vietnam last week. “There indeed are some challenges in the RCEP negotiations, but we have achieved steady progress over the years and are confident about the future of RCEP negotiations.”


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