What future is there for brewing regional trade arrangements when striking a winning formula is akin to making sense of alphabet soup? Andrew Godwin explains
The withdrawal of the US from the Trans-Pacific Partnership (TPP) means that the TPP cannot proceed in its current form. Some markets such as Australia have expressed the hope that the trade agreement will be salvaged by the remaining signatory countries, or that the US will support the initiative in a revamped form – a hope that appears to be fading in the wake of recent comments by the US president that the country will focus its attention on bilateral trade agreements instead.
One of the consequences of the US withdrawal is that certain countries in the Asia-Pacific region will pin greater hopes on the proposed mega-regional trade agreement known as the Regional Comprehensive Economic Partnership (RCEP). The RCEP is currently being negotiated between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and the six states with which ASEAN has existing free trade agreements: Australia, China, India, Japan, South Korea and New Zealand.
The RCEP is considered to have profound geopolitical implications, in addition to having significant potential to promote trade liberalization in Asia. So what are the key differences between the RCEP and the now abandoned TPP agreements, and in what ways can countries in the Asia-Pacific region maintain momentum towards freer and fairer trade? And what obstacles remain in terms of achieving the objectives of these agreements?
TPP and RCEP
In the area of financial services, the role of regional trade agreements such as the TPP and the RCEP needs to be viewed in the context of calls for greater regional financial integration. Financial integration complements trade integration, a point that has been recognized by many countries within the region. The importance of financial integration is reflected in ASEAN’s Financial Integration Framework, the objectives of which include removing restrictions on the provision of financial services by ASEAN financial institutions and increasing the integration of regional capital markets.
We have already begun to see cautious moves towards financial integration between certain ASEAN members in the areas of banking, insurance and capital markets. One noteworthy development in this regard is the ASEAN Collective Investment Scheme Framework, which was launched in 2014 by Singapore, Thailand and Malaysia, and which provides a framework for the mutual recognition of investment funds.
This is interesting given the parallel establishment of a similar arrangement between mainland China and Hong Kong, which commenced in 2015, and also the plans to establish the Asia Region Funds Passport between Australia, Japan, South Korea, New Zealand and Thailand. Although these three initiatives are complementary in nature and have the potential – at least in theory – to be rolled into one framework at some point in the future, they nonetheless reveal the different geopolitical alignments within the Asia-Pacific.
This article is based on a paper that the author delivered at the recent 9th ASEAN-Australia-New Zealand Dialogue in Kuala Lumpur. Andrew Godwin teaches law at Melbourne Law School in Australia, where he is associate director of its Asian Law Centre. Andrew’s book, China Lexicon: Defining and translating legal terms, is a compilation of articles from the popular Lexicon series published by China Business Law Journal. The book is published by Vantage Asia and available at law.asia.