Beijing’s struggles to finalise the trade bloc may illustrate worries in the region about becoming too dependent on China

by BLOOMBERG

SINGAPORE • Asian nations gave up hopes of completing a 16-nation trade bloc this year, with Chinese and Australian officials now looking to finalise the deal in 2019.

Singapore, which is chairing the 10-member Asean this year, had pushed for a substantial conclusion to the agreement this year. Known as the Regional Comprehensive Economic Partnership, or RCEP, the trade deal would cover almost half the world’s population.

“It will take a little bit longer to ensure that we get the type of substantial, meaningful, commercially meaningful market access decisions that Australia expects in a trade agreement,” Australian Trade Minister Simon Birmingham told reporters yesterday in Singapore. That’s despite ministers from RCEP nations meeting until late on Monday night and making substantial progress, he said.

Chinese Premier Li Keqiang echoed those sentiments in a speech in Singapore yesterday, saying he hoped the RCEP talks would be completed next year. China has pushed to diversify its export markets amid a trade war with US President Donald Trump, adding fresh urgency to the negotiations.

“With the headwind of trade protectionism, free trade is facing some difficulties,” Li said.

RCEP is often seen as a rival to the Trans-Pacific Partnership (TPP), a vast regional pact once led by the US that Trump withdrew from early in his presidency. Together with the Belt and Road Initiative (BRI) to build investment and trade links with countries along the old Silk Road to Europe, the pact is a key element in China’s efforts to seize the geopolitical advantage following what many in the region see as a US retreat.

Beijing’s struggles to finalise the trade bloc may illustrate worries in the region about becoming too economically dependent on China.

And in a speech to an Asean business and investment conference yesterday, Prime Minister Tun Dr Mahathir Mohammad said the bloc must not accept trade and investment measures that may be unfair to member countries.

“RCEP must facilitate not only the interest of big firms but also the small and medium enterprises (SMEs) in the region,” Dr Mahathir said. “RCEP must see an enhanced role for SMEs to leverage and move towards becoming middle-sized and large-sized companies.”

While negotiations to reach an agreement on RCEP have stalled, a negotiator for the pact is confident it will get across the line. “It cannot be signed this year,” Iman Pambagyo, RCEP’s trade negotiating committee chairman, said on Nov 6. “We are aiming for some time next year, perhaps the second part of 2019.”

India has dragged its feet as RCEP doesn’t provide for free movement of skilled labour, a key concern for New Delhi given its large pool of tech workers, even as it opens its market to a clutch of nations known for their manufacturing prowess. It is facing pressure from member nations — including Japan, China, Australia, New Zealand and South Korea — to conclude talks.

Elections Looming

The stalemate appears unlikely to be unwound any time soon as RCEP member countries like Australia, India and Indonesia go into elections next year. That raises questions about the longer-term prospects for RCEP, which began life as an effort by the 10-country Asean to bring its individual trade deals with China, India, Japan, South Korea, Australia and New Zealand under one umbrella.

Unlike the TPP — initially conceived in part as a way for Asia-Pacific nations to lessen economic dependence on China — which goes beyond traditional trade issues to address intellectual property, labour rights and state-owned enterprises, RCEP is more limited with a focus on goods and services. It faces the added challenge of bridging the interests of developed economies such as Australia and Japan with emerging markets like Cambodia and Laos.

“We, of course, have to resolve the different goods and services offers, investment offers, between each nation at a bilateral level, as well as the coordinated text in key areas,” Birmingham said. — Bloomberg