China-led Asia trade pact gains traction in Jakarta talks

JAKARTA — The United States’ imminent exit from the massive Trans-Pacific Partnership (TPP) has renewed urgency among nations huddled in Indonesia to hammer out a separate trade pact championed by China.

The 16 nations seeking the Regional Comprehensive Economic Partnership (RCEP) accelerated their efforts during talks this week, as rising protectionism worldwide threatens a system that has lifted hundreds of millions of Asians out of poverty.

Negotiators said they neared agreement on protections and assistance related to small-and-medium-sized enterprises, and also made progress on competition policy. Matters such as intellectual property rights, as well as trade in goods and services, remain unresolved. The next round of talks will be held in Japan in February.

“The Asian region generally appreciates that trade and engagement with the world is crucial to higher living standards in the future. That is a point of contrast in some respects to other parts of the world, where they have adopted a more protectionist approach,” said Australian Trade Minister Steve Ciobo in the Indonesian capital.

Focus on the RCEP, which was launched four years ago and could potentially create the world’s biggest free trade bloc, has sharpened as US President-elect Donald Trump prepares to quit the TPP.

Mr Trump’s elevation has seen China become an unlikely champion of trade liberalisation at a time other protectionist headwinds are blowing: The World Trade Organisation (WTO) projects the slowest growth in trade since the global financial crisis, while the United Kingdom’s decision to leave the European Union has added to the uncertainty.

The TPP was the economic component of the Obama administration’s effort to assert US influence in the region amid China’s military and economic rise. For China, which is a party to the RCEP but not the TPP, Mr Trump’s election has created an opportunity to push ahead with an Asia-focused agreement that the US is not involved in.

Chinese President Xi Jinping cited the deal last month among the measures needed to integrate his country into the global economy. A Ministry of Commerce spokesman said last month that China wanted to seal the RCEP deal as soon as possible.

“This is an opportunity for RCEP members to drive the process. If TPP doesn’t go through, they can try to cover that hole,” said Mr Carlos Kuriyama, a senior trade analyst with the Asia-Pacific Economic Cooperation secretariat, giving his personnel view.

The RCEP aims to levy tariffs and set rules on the region’s supply chains, liberalise investment and introduce dispute-resolution mechanisms. Unlike the TPP, it would not require members to take steps to protect labour rights or improve environmental standards. The deal, which includes the Association of South-east Asian Nations (Asean), Australia, China, India, Japan, South Korea and New Zealand, will cover almost half the world’s population and 30 per cent of the global economy.

Indonesian Trade Minister Enggartiasto Lukita told China’s official Xinhua News Agency on the sidelines of the RCEP talks that negotiations on goods, services and investment sectors are intensifying, although major disagreements persist.

The renewed push to get the RCEP across the line comes in the wake of the WTO’s downgrade of this year’s global trade growth forecast to 1.7 per cent from 2.8 per cent. Next year’s expansion is seen as ranging from 1.8 to 3.1 per cent.

RCEP negotiators will meet next in Kobe, where they hope to achieve progress simplifying the current “noodle bowl” of overlapping free trade agreements between Asean and individual countries. One risk would be that countries decide they want to incorporate some elements of the TPP into the talks, slowing progress, said Mr Kuriyama.

The Jakarta talks are “building a foundation to enter the next step to the finish line”, said Mr Iman Pambagyo, director-general for international trade negotiation at Indonesia’s Trade Ministry. All parties must be prepared to “put something on the table” for the talks to move forward, he said. BLOOMBERG

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