TPP and RCEP likely determine the global balance of economic power for years to come

Two strategic agreements currently being negotiated by the world’s trading giants will likely determine the global balance of economic power for years to come: 

• Trans-Pacific Partnership (TPP) and
• Regional Comprehensive Economic Partnership (RCEP). 

The TPP and RCEP are not radically different instruments — they are both Free Trade Agreements (FTAs) designed to lower tariff and non-tariff barriers to trade between countries that conduct the bulk of Global Commerce. 

The TPP negotiations are led by the U.S. and involve 11 other nations that share a Pacific Ocean coastline. Seven of those countries — Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam — are also party to RCEP negotiations.

TPP seeks to frame a new agenda for global trade, requiring countries to commit beyond their existing multilateral obligations under the WTO as well as the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TPP negotiations broke down earlier this month, after countries were unable to find common ground over IPR protections the U.S. sought to introduce, especially in cyberspace.  

The Trans-Pacific Partnership has become the centrepiece of U.S.’s Asia policy, with the Barack Obama-led administration investing considerable political and diplomatic capital in it.

 RCEP comprises the ASEAN nations and six others: India, China, Japan, Korea, Australia and New Zealand. 

In contrast, RCEP negotiations have seen progress, albeit haltingly. The Press Trust of India reported last week that ministerial delegations from RCEP member countries will meet in Malaysia in August to “finalise modalities”. RCEP is an important agreement for India, as it involves many, if not all, of the country’s major trading partners

RCEP is not a China-led process, but involves Beijing as a key player. China is acutely conscious of RCEP’s political significance — earlier this year, Commerce Minister Gao Hucheng suggested China will “continue to unswervingly push forward and quicken the pace of China’s free-trade agreement strategy”. If such a comprehensive regional agreement were to be inked ahead of the TPP regime, it would be a shot in the arm for China. 

In addition to trade in goods and services, both agreements cover the critical area of intellectual property rights. RCEP is the more modest of the two, seeking to implement and build on World Trade Organization (WTO) commitments incrementally.