Globalisation Has A New Powerhouse – Asia

Economy

Globalisation Has A New Powerhouse – Asia

From the ashes of the Trans-Pacific Partnership, a new free trade champion is emerging.

The so-called anti-globalisation wave has become one of the most popular themes for panel discussions, articles, television programmes and the like. Don't take it too seriously. Globalisation cannot be stopped. The volumes of goods, services and capital crossing borders continue to increase, and so do the numbers of people working outside their home countries. Anti-globalisation sentiments are spreading in America and Europe, but definitely not in Asia, the continent that is leading global economic growth. In the vast majority of Asian countries, there is a strong desire in the political establishment and the business community to speed up globalisation and further liberalise international trade and investment, in particular. The ultimate goal is to build stronger national economies and raise living standards.

In fact, Asia is already benefitting from an array of bilateral and multilateral free-trade agreements, including the large-scale free-trade agreement (FTA) recently concluded by Asean (the Association of Southeast Asian Nations) with China, Japan, South Korea & India. The US withdrawal from the Trans-Pacific Partnership (TPP) and growing pressures inside the European Union and the North American Free Trade Agreement (Nafta) will further amplify Asia's role as the world's major globalisation and economic integration engine.

Asian nations are, likewise, preparing for a big pro-globalisation drive, led by the Regional Comprehensive Economic Partnership (RCEP). The RCEP's participants include the 10 member states of Asean (Singapore, Malaysia, Thailand, Indonesia, the Philippines, Brunei, Vietnam, Cambodia, Laos, and Myanmar), China, Japan, South Korea, India, Australia and New Zealand. These 16 nations account for about half of the world population and 30% of the global gross domestic product (GDP). With the TPP effectively stalled, the number of RCEP participants may grow. Chinese officials have mentioned including South American countries such as Chile and Peru, while emphasising Beijing's intention to keep the scheme open for everyone.

Until recently, the RCEP was in the shadow of TPP talks, where the US played a leading role. Now that Washington has switched gears, RCEP can emerge as the world's major new mega-FTA. It is important and somewhat symbolic that, contrary to the TPP, it will include two of Asia's emerging economic giants: China and India. The number of participants in the RCEP process is larger - 16 instead of 12 - than that of the TPP, and more diverse, including the poorest (though rapidly growing) economies of Southeast Asia such as Cambodia, Laos and Myanmar.

Not surprisingly, compared to the TPP, the RCEP comes out with a different integration paradigm. It seeks to balance the interests of its diverse participants, rather than impose key common principles and rules in advance. Asia's message is clear: if you want a workable mega-FTA, be pragmatic. After all, a trade pact is a deal, a compromise rather than a set of self-imposed tough rules which the participants themselves may find difficult to follow, including those who were passionately pushing for those rules in the first place.

RCEP talks began at the end of 2012 in Cambodia. Having held 16 rounds of negotiations and six ministerial meetings, the participants did not meet their initial December 2016 deadline and have pledged to finish by the end of this year. The next round was held last week in Kobe, Japan. The 16 nations are discussing a full range of trade issues - on the table in Kobe were common rules on investment, e-commerce and the elimination or reduction of trade tariffs - but unlike the TPP, the RCEP will not touch labour, environmental issues or state-owned enterprises. Two chapters of the final agreement - on economic and technical cooperation and on small- and medium-sized enterprises - have been completed.

Balancing interests is not an easy task. While China sought a speedy liberalisation of trade in goods, India convinced its counterparts to discuss goods, services and investment as one package, since it has an edge with services and foreign investment. Also, India is concerned about a massive inflow of Chinese products once import tariffs are eliminated or significantly reduced. Reportedly, it may seek longer deviation periods for reduction or elimination of duties on goods imported from the countries with which it has large trade deficits. It may also offer a system allowing different tariff concessions for goods from specific RCEP member countries.

One of the remaining major tasks is to finalise a Mutual Recognition Agreement that will obligate members to accept the authority of each other's professional regulatory bodies in such fields as engineering, architecture & accountancy. It is still difficult to predict whether negotiators will meet their deadline this year. Yet, there is little doubt that within several years, Asia's mega-trade and economic partnership arrangement will be in place.

In the longer term, this may pave the way for the next historical step: the creation of the institutionalised East Asian Community, whose members closely cooperate and coordinate policies in a wide range of fields. Asia-led globalisation is marching on.