Trade Deal for Asia
Mar. 13, 2017
With the US pulling out of the Trans-Pacific Partnership free-trade agreement, attention in Asia is turning to an alternative deal under negotiation in the Asia-Pacific region.
The new US administration created quite a stir in the region when it came to power in January. It started with President Donald Trump's executive order to withdraw the United States from the Trans-Pacific Partnership.
"Great thing for the American worker, what we just did," Trump said.
The TPP is one of 2 major trade agreements in Asia that could have quite an impact on the region, if implemented. The TPP was led by the United States. Many Asian nations such as Japan are included, with one notable absence: China. But the pact has now stalled.
The other major agreement is RCEP, or the Regional Comprehensive Economic Partnership. It has 16 member nations, including all ASEAN countries, as well as Japan, China, South Korea, India, Australia and New Zealand. But the pact does not involve the US.
If RCEP comes into effect, it will represent about 30 percent of the world's GDP, and half of the world's population. In the wake of the US decision to withdraw from TPP talks, Southeast Asian experts voiced concerns at an ASEAN's Trade and Investment symposium in Bangkok.
"The consequence of Donald Trump's 'America first' policy must come to the conclusion that it can only end in sorrow for the other parties," said Deborah Elms, executive director at the Asian Trade Centre in Singapore.
"If the US imposes the border tax, that's going to have a huge impact on our economic growth," said Vo Tri Thanh, senior adviser at the Central Institute for Economic Management in Vietnam.
Malaysia is also a member country of TPP, and saw the US pullout as a major setback to its economy.
Malaysia had expected to boost exports of palm oil, which is used to make vegetable oil and soap. The commodity is a pillar of Malaysia's industry. The government saw tariff removals under TPP as a way to sharply increase exports to the US, adding to its relationship with its main trading partners -- China and India.
An association of palm oil producers now recognizes the need to make a change in direction.
"Initially we were excited about joining TPP but, then when we heard that the US backed out, so the lure or attraction of going there is not there anymore. But maybe we have to relook and re-strategize," says Makhdzir Mardan, chief executive of the Malaysian Palm Oil Association.
China, as the largest economic power among RCEP nations, sees opportunity in the turn of events. At the annual session of the National People's Congress, Chinese Premier Li Keqiang stressed the country's desire to continue pursuing global economic cooperation, even if protectionism intensifies in the US.
"China will work with other countries to fully implement agreements to enhance the regional free-trade network and conclude talks on the RCEP at an early date," said Chinese Premier Li Keqiang.
With the TPP's prospects dwindling, Thailand, which didn't join that agreement, is pinning its hopes on RCEP.
"We believe that the RCEP negotiations will end in success," said Thai Commerce Minister Apiradi Tantraporn. "We should see progress by the end of the year."
There are high expectations for RCEP in Thailand, where local industries are eager to gain access to China's huge market. One food-processing company uses locally-cultured shrimp. It fries them and exports the product to China and elsewhere.
The company sees its exports to China rocketing by 40 percent if RCEP comes into effect. It believes the framework will reduce duties and simplify export procedures.
The firm also hopes to make inroads into other countries, such as India and Japan.
"The RCEP will link us with such countries as China and India. When this market is united, we'll have more purchasing power," said Pong Lertchusakul, assistant to the senior director at the Thai Royal Frozen Food.
Asian nations still seem determined to form a new regional trade framework with or without the United States.
Professor Masahiro Kawai, an expert on international trade and the former head of regional economic integration at the Asian Development Bank, joins business anchor Yuko Fukushima in the studio. To see the full interview please watch the video above.