On January 10th, 2017, the Munk School of Global Affairs hosted a discussion called “Victor by Default? The Regional Comprehensive Economic Partnership and the Demise of Mega-FTAs”, sponsored by the Asian Institute. The event featured a lecture and discussion with Dr. John Ravenhill, a professor at the University of Waterloo and Director of the Balsillie School of International Affairs. He is also an editor of the Review of International Political Economy. The event was moderated by Professor Lynette Ong, acting director of the Dr. David Chu program in Contemporary Asian Studies.
Ravenhill began by discussing Mega-Free Trade Agreements (Mega-FTAs), which are multilateral trade agreements that include a significant share of world trade. Mega-FTAs focus on more than one hub of global value chains and the World Trade Organization. Ravenhill focused on the Regional Comprehensive Economic Partnership (RCEP), a trade agreement that has not received much media attention. This was partially because the media largely focused on the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) agreements. Professor Ravenhill stated that the future of both agreements look dim in light of the election of President-elect Donald Trump. He believes that Asia’s alternative to these agreements will be the RCEP, an agreement that includes all nations in the Association of South East Nations (ASEAN), Japan, China, South Korea, India, New Zealand and Australia.
Ravenhill noted that in the era of Mega-FTA failures (TPP and TTIP), there is reason to believe that the RCEP trade agreement will be a successful one. To support this theory, Ravenhill highlighted the factors that led to the failures of other Mega-FTAs. TTIP was hindered by the domestic policy concerns raised by transnational civil societies. As for TPP, Ravenhill argued that its failure was due to the resistance of the Republican Party in the US, citing the belief that the US was giving away excessively in the agreement, particularly in pharmaceuticals.
In contrast, the RCEP will not have a significant impact on the Foreign Direct Investment (FDI) of involved countries, relative to the Gross Domestic Product (GDP). This results in different negotiations and politics. All in all, Ravenhill considers the RCEP a less influential agreement. He expects opposition to the agreement from small companies and tariffs. If RCEP materializes, Ravenhill argues, expectations for its impact should be modest. With the success of the RCEP, the “ASEAN plus one” trade agreements of the South Asian bloc with other trade partners (such as ASEAN-Japan or ASEAN-China) will lose dependence. This is because RCEP would transcend bilateral agreements to develop more flexible agreement, recognize differences between countries, and accommodates accordingly. Further, most of the countries involved in RCEP are already connected through previous trade agreements. The greatest change, Ravenhill said, would be the establishment of a trade network between Japan and China, which is currently nonexistent.
Ravenhill concluded that the demise of the TPP will make China more powerful in exerting its influence in Asia. RCEP is likely to materialize because it is the only alternative to the TPP and TTIP agreements, has fewer weaknesses, and faces less opposition than TPP and TTIP. ASEAN is likely to join the agreement since it has a history of “joining agreements for the sake of joining agreements,” or to “save face”.
After the conclusion of Ravenhill’s presentation, the floor was opened to questions from the audience. Ravenhill was asked why Canada should not join the RCEP, to which he replied that Canada would benefit more from bilateral trade agreements that cater to individual countries. The question of whether the agreement would be a single undertaking or a living agreement was also raised. Ravenhill explained that India would prefer a single undertaking of the agreement, as it suffers a large trade deficit with China and would prefer the significant concessions it could receive. However, ASEAN would prefer a living agreement because it wants to begin the agreement by trading goods and later adding services. Ravenhill stated the agreement is more likely to be a single undertaking. This is due to the tendency for trade agreement review to enact little change over time. Lastly, Ravenhill was asked about whether Japan will pivot to a new consumer market under RCEP. He responded by saying that the RCEP will ease historical tensions between Japan and China, as well as between Japan and Korea, since this will be the first trade agreement including all these countries.
Jerry Zhu is a 2nd Year student studying Political Science and Contemporary Asian Studies at the University of Toronto, Trinity College.