KUALA LUMPUR: The Regional Comprehensive Economic Partnership (RCEP) is the most viable and best alternative for Asean countries now with the uncertainties surrounding the fate of the Trans-Pacific Partnership trade deal.
The 12 countries in the TPP are the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.
RCEP, a regional trade pact involving Asean nations and its six key partners including China, would be beneficial especially to those which were not in the TPP in the first place, says Susan Teck Kin of UOB Bank.
“For instance, Indonesia would be able to more than recover its ‘loss’ for not being in TPP (a loss of US$2.2 billion from baseline), to a gain of US$17.7 billion in RCEP and more than doubling that amount if the FTAAP (Free Trade Area of the Asia-Pacific) is in place.
“Similarly for Thailand, RCEP and FTAAP would more than offset the loss of not being in TPP,” she said in a report today.
President-elect Donald Trump wants the US to withdraw from the TPP.
For countries in TPP deal such as Malaysia, Vietnam, Singapore, and Japan, gains would be smaller in RCEP, but the alliance is now mooted considering the fact TPP is currently in limbo.
“China would be the major beneficiary in terms of quantum among all the members in FTAAP (involving 21 members of APEC) given the size of its economy at the start and diversity of its economy.”
While some members of TPP have said that they would push forward without the US, Susan said the remaining group would be a shadow of its former self in terms of GDP and size of total trade.
This, in turn, would reduce the grouping’s impact and influence.
“For instance, a TPP minus the US is just about half the size of RCEP in global GDP and trade share.”
She said the best course of action at this point for Asian economies is to focus their resources to accelerate the process towards FTAAP via the RCEP pathway and to offset the loss of the TPP.
Regional integration, she added, brings about greater efficiency/productivity and lower costs, hence welfare gains for the participants.
Studies have shown that the benefits of the Asia-Pacific integration are significant with gains estimated at US$1.9 trillion, or nearly 2 per cent of world GDP by 2025 under the broad FTAAP with Hong Kong, Taiwan and Russia on board.
“The demise of TPP could mean a diminished role for the US and this vacuum in the trade and economic space would certainly be filled by China, being the largest economy in the RCEP bloc and second largest economy in the world.
“This also means that China’s One Belt One Road initiative would play an even larger role especially in the ASEAN region as integration and connectivity is strengthened.”