RCEP, CPTPP and IPEF coexist, where does Asia-Pacific economic cooperation go from here?
By Zhang Weiwei, Deputy Director and Associate Researcher, Institute of International Strategic Studies, China Academy of International Studies
With the launch of negotiations on the Indo-Pacific Economic Framework (IPEF), Asia-Pacific regional economic cooperation is once again facing new variables. The Asia-Pacific region currently has two comprehensive economic cooperation mechanisms, the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). If the IPEF does take shape by the end of next year as planned, it will become the third economic cooperation mechanism in the region. These three mechanisms are distinctly different, reflecting the two forces currently shaping economic cooperation in the Asia-Pacific region.
Firstly, the origins of the mechanism are different: RCEP is distinctly endogenous, while CPTPP and IPEF have a strong US imprint; RCEP originated from the endogenous demand of East Asian countries to join forces and strengthen themselves after the 1997 Asian financial crisis. Based on the series of 10+3 and 10+1 cooperation, ASEAN formally proposed in 2011 to promote RCEP negotiations on the basis of 10+6, i.e. 10 ASEAN countries plus China, Japan, Korea, Australia, New Zealand and India. Progress in the negotiations was slow due to the large number of member countries and the vast differences in economic size and development levels, and has accelerated significantly since 2017 as the political will to reach an agreement has increased. The CPTPP was born out of the Trans-Pacific Partnership (TPP), which was led by the US and Japan in succession. It is modelled on the Trans-Pacific Partnership FTA signed by Brunei, Chile, New Zealand and Singapore in 2005, and includes provisions on intellectual property protection, state-owned enterprises, labour rights and other issues of concern to the US. In 2017, Trump announced his withdrawal from the TPP negotiations after taking office. The IPEF, on the other hand, is a framework introduced after the Biden administration took office to fill the gap in the US economic strategy for the Indo-Pacific region, which has not been in place for long and its content is not yet clear.
Secondly, the nature and objectives of the mechanism are different.The RCEP is a traditional trade liberalisation agreement that aims to lower all forms of trade barriers and create more trade and investment opportunities between member countries. The CPTPP is described as a "high level" FTA that aims to reduce traditional trade barriers such as tariffs, but also sets high standards on issues such as digital trade, intellectual property protection, labour rights and environmental protection, with the aim of achieving a higher degree of liberalisation within a specific circle. The IPEF, on the other hand, is mainly focused on setting standards and is not concerned with trade liberalisation. The US intends to use the so-called "high standards" of the IPEF to further open up the Asia-Pacific market in some areas and to reshape the supply chain system of specific industries. A number of US officials have bluntly stated that counteracting China's influence is the main consideration in launching the IPEF.
Thirdly, the focus of the mechanism is different: the RCEP focuses on creating a more inclusive and open regional economic integration. The agreement provides for member countries to achieve zero tariffs on more than 90% of their trade in goods, either by reducing tariffs to zero immediately or gradually over 10 years, and allows for a certain degree of agricultural quotas to exist. The agreement simplifies customs clearance procedures, reduces technical barriers to standards, technical regulations and conformity assessment procedures, consolidates and upgrades the investment rules of the five original 10+1 FTAs, and increases certainty of market access. Particularly notable is the "Regional Cumulative Rules of Origin", which provides that materials of origin from other member countries used by member companies in the production process can be considered as originating materials, thereby cumulatively increasing the proportion of originating value components. As long as 40% of a product is produced in an RCEP member country, it will enjoy preferential tariff treatment. This liberal approach greatly enhances intra-regional trade facilitation and facilitates the strengthening of intra-regional supply chain cooperation. the CPTPP focuses on higher levels of liberalisation and stricter rules, mainly reflecting the interests of developed economies. The average number of trade categories in which member countries have achieved zero tariffs is over 99%, and the transition period is short, with more than 85% of products immediately implementing zero tariffs. On digital trade, the CPTPP establishes the basic principles of free cross-border data transmission, removal of localised storage restrictions and protection of source code. In terms of intellectual property protection, the protection of patents, trademarks and trade secrets has been increased. In relation to state-owned enterprises, a broader definition of "state-owned enterprise" was developed, requiring that production and operation be based on "commercial considerations" and that the subsidies received must not harm the interests of other member states. In relation to environmental protection, specific obligations in a number of environmental areas. The CPTPP also imposes stricter labour standards and more complex and stringent rules for defining the origin of products, while the IPEF, in line with the Biden administration's economic policy objectives, focuses on four main areas of so-called "high standards". The "connected economy", "resilient economy", "clean economy" and "fair economy" are the four pillars of the IPEF. The four pillars of the IPEF are digital trade, supply chain security, renewable energy, taxation and anti-corruption policies, which also include "high standards" in the areas of labour and the environment. Without ceding the US market, the IPEF will help US companies to more fully mobilise the resources of Asia-Pacific countries and gain an advantage in competitive markets.
The RCEP, CPTPP and IPEF represent a contest between two strands of power in Asia-Pacific regional economic cooperation. One is the demand of the countries in the region, especially developing countries, to strengthen economic integration and achieve common development, while the other is the "high standard" cooperation model strongly implanted by the US. The CPTPP, which originated from the US TPP initiative, was made more balanced after the US withdrew, freezing 22 provisions in the original TPP text that the US insisted on and others opposed, reflecting the pursuit of higher levels of trade liberalisation by the more economically advanced members of the Asia-Pacific region. In contrast, the IPEF has the strongest 'American flavour'. Official US documents make no secret of the benefits that the framework will bring to US households, but the benefits to Asia-Pacific countries are so far unclear.