Negotiating mega-regional trade deals is hard going but there are few other attractive trade diplomacy options now that the WTO is in a negotiating coma. This is particularly true for small, open, trade-dependent economies like New Zealand. Too small to lead negotiations, too open to have many horses to trade during negotiations, demanding of high standards, and able to be jettisoned without too much effect.
The long and winding road that has led us to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the tongue twisting CPTPP) is testament to this reality. However, if the CPTPP does come into force, it will be the first preferential trade agreement reached by New Zealand that includes Japan (New Zealand’s 5th largest trading partner) and Canada (14th largest trade partner). CPTPP would also be an upgrade on existing trade agreements that include Singapore (6th largest), Malaysia (10th largest) and Vietnam (16th largest).
2018 is seen as a crunch year for the current RCEP negotiations. Last year saw the first RCEP leaders meeting convened in which the assembled RCEP political masters committed to “substantially completing” RCEP by the end of 2018. Yet, private discussions with those involved in the RCEP negotiations from ASEAN member states and involved ASEAN dialogue partners suggest that this commitment will not realized in a meaningful manner. A quick look at the RCEP timeline provided in this presentation by a lead RCEP negotiator would appear to support this sobering prediction. Only 2 of 16 chapters have been concluded and disagreements over market access and rules of origin still prevail.
These same conversations suggest that next year ASEAN may shift its mega-regional trade deal interests to the ASEAN+3 process. When asked about RCEP-X options at the conclusion of the ASEAN Summit in Singapore in April, Singapore Prime Minister Lee Hsien Loong, his answer did not rule this out. He said,
"If you have fewer members it would be easier to make an agreement but there was a reason we entered into this agreement with this shape, because we wanted to bring all the participants together and to have the trade agreement reflect the regional architecture of cooperation," he added. "I cannot say that if there's no RCEP, no smaller groupings would emerge, but as far as effort is concerned we will work very hard to have an RCEP outcome with this present grouping of 16."
There are at least four reasons why ASEAN+3 trade negotiations, as a substitute or alternative to the current slow moving RCEP ones, may be an attractive option for many ASEAN member-states and China. First, it would keep the trade negotiations ASEAN-led, uphold ASEAN centrality, and help give new momentum to the economically-focussed ASEAN+3 process.
Second, the documentary origin of ASEAN’s interest in mega-regional trade deals was the 2001 East Asia Vision Group report that recommended an East Asia Free Trade Agreement among the ASEAN+3 members before 2020.
Third, the RCEP negotiating positions of India, New Zealand and Australia are depicted as key reasons for the lack of RCEP progress, albeit for very different reasons. The ASEAN-India FTA is the weakest among the ASEAN+ trade agreements while the ASEAN-Australia-New Zealand FTA is the strongest. In RCEP, India is often depicted as dragging too much on market access for goods and pushing too hard on services. Australia and New Zealand are depicted as main protagonists in the efforts to “TPPnize” RCEP.
Fourth, before RCEP started, China was the main non-ASEAN proponent for an East Asia Free Trade Agreement as called for in the East Asia Vision Group, while Japan was the main non-ASEAN proponent for the current broader ASEAN+6 format. In the years since then, China’s economic relations with Southeast Asian states and diplomatic influence have grown much faster than those of Japan.
If these RCEP rumblings are not just a negotiating tactic by ASEAN to press New Zealand, Australia and India to soften their current RCEP negotiating positions and are realized, the damage to New Zealand would not be too great. New Zealand already is part of signed plurilateral trade deals with 14 of the 15 other RCEP negotiating parties. India is the only exception. And in 2017, India only accounted for 2.4% of New Zealand exports.
These rumblings also suggest that the ratification and expansion of the CPTPP should be New Zealand (and Australia’s) top mega-regional trade deal priority. If ASEAN has multiple mega-regional trade deal options to pick and choose from, then so does New Zealand.
South Korea, Thailand and the Philippines have all expressed strong interest in joining the CPTPP, as did Indonesian vice president Jusuf Kalla just last week in Tokyo. CPTPP expansion to include more Southeast Asian states might present a problem for ASEAN centrality. But it would certainly be a benefit for New Zealand.
Malcolm Cook is a Senior Fellow at the ISEAS-Yusof Ishak Institute, Singapore
Image credit: 2017 RCEP Leaders Meeting in the Philippines, Photo by Rey Baniquet, Philippines, Presidential Communication Operations Office, used under Creative Commons License. https://pcoo.gov.ph/photos/?post_id=57768