Finance internationale

Trans-Pacific Partnership (TPP) vs Regional Comprehensive Economic Partnership (RCEP)

In February 2016, twelve countries that border the Pacific Ocean signed the Trans-Pacific Partnership. These countries represent approximatively 40% of the global GDP. The countries were Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States. The trade agreement was signed on 4 February 2016. Less than one year later, on 23 January 2017, US President Trump withdrew the United States from the agreement. The agreement was designed that it will eventually create a new single market, comparable to the EU. The collective population of the TPP is about 800 million. It’s almost double of the European Union. Initially, the TPP contained measures to lower both non-tariff and tariff barriers to trade and establish an investor-state dispute settlement mechanism. It contained 30 chapters on goods, services, investments, e-commerce, trade remedies, intellectual property, government procurement, regulatory coherence, competition policy, environment, labor, legal etc. The TPP has not become into force, because it requires at least 6 countries that make up to 85% of the economies involved. With the withdraw of the United States this requirement is not respected.

The Regional Comprehensive Economic Partnership (RCEP) is composed of the 10 members of the Association of Southeast Asian Nations (ASEAN) and 6 ASEAN foreign partners. The 10 members of ASEAN are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. The other countries are Australia, China, India, Japan, New Zealand and South Korea. This deal does not include the United States. If this agreement is approved, it would create one of the largest free-trade zones. The members of the RCEP make up 46% of the global population which is 3.4 billion people. This deal is worth 39% of the global gross domestic product. The scope of this deal is goods, services, investments, e-commerce, intellectual property, development and legal. This trade agreement is scheduled to be signed in November 2018 during the ASEAN Summit.

What is the difference between the TPP and RCEP? First of all, the RCEP contains way more people than the TPP. The RCEP potentially includes more than 4 times the population of the TPP 3.4 billion vs 800 million). 7 of the 16 countries negotiating the RCEP are signatories to the TPP. RCEP and TPP center on tariff reductions by liberalizing the international exchange of goods. Many economists believe increased competition will stimulate growth. The Trans-Pacific Partnership was aiming to remove tariffs on over 90% of traded goods. On the other hand, The Regional Comprehensive Economic Partnership attempts to only remove 80% of tariffs on traded goods. The RCEP does not reduce government-subsidized industrialization and implement environmental and labor regulations. Both agreements will benefit all the countries involved. Free trade agreements have been criticized for their potential harm to workers. Not only President Trump, but presidential candidate Bernie Sanders advocated for leaving the TPP. There are less gaps between the countries participating to the TPP than the RCEP. For example, within RCEP, Australia remains the richest country with a gross domestic product per capita of more than $55,000 while Cambodia is its poorest with just $1,300 for each person. People think that the RCEP will narrow these gaps. In conclusion, some people say that the RCEP will replace the TPP.

Asian Development