While TPP Looms, RCEP Sidelined

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Cambodia still enjoys a comparative advantage when it comes to manufacturing and this augurs well for trade with the United States. Supplied

The Regional Comprehensive Economic Partnership (RCEP) should also be given priority as the Kingdom eyes to join the US-led Trans-Pacific Partnership (TPP) to promote economic growth, trade and investment in the Asia-Pacific region and the Pacific Rim countries.
 
Newly appointed Minister of Public Works and Transport and former Minister of Commerce, Sun Chanthol, was quoted in the Tokyo-based Nikkei Asian Review last week as saying: “I feel that the RCEP encompasses the whole of East Asia and is thus extremely important. I’m not saying the TPP is not important. It is important and should be inclusive as well.
 
“But the RCEP would facilitate the expansion of regional trade and investment and contribute to global economic growth and development,” he added.
 
The RCEP was officially launched on November 20, 2012 during the 21st Asean Summit in Phnom Penh. Leaders of the 10 Asean member countries, along with the leaders of Japan, India, China, South Korea, Australia and New Zealand, issued a joint declaration to begin RCEP negotiations in order to pave the way to boosting trade and investment under the Free Trade Agreements (FTAs). The negotiations for RCEP began in early 2013 and are still ongoing.
 
“It is only through combined efforts of the East Asia community that we can maintain sustainable [economic] growth,” he said. “The completion of the RCEP is paramount to achieving this goal,” said Mr. Chanthol.
 
The US Under Secretary of State for Economic Growth, Energy and the Environment, Catherine Novelli, in her visit to Phnom Penh last week said that the United States was happy to work with Cambodia on its intention to join the TPP.
 
“Cambodia has an open trade policy and I think it’s much easier for it to agree to the terms of the TPP that are already in the agreement,” she told journalists.
 
 The TPP is a trade agreement among 12 Pacific Rim countries signed this February in New Zealand, after seven years of negotiations. Implementing the TPP is one of the goals of US President Barack Obama before he leaves office at the end of the year.
 
One of the prerequisites for Cambodia to join the TPP is that it must first have a bilateral investment agreement with the United States. Cambodia and the United States began exploratory discussions for a potential bilateral investment treaty in 2012.
 
Ms. Novelli said the United States was happy to negotiate with Cambodia on the TPP as soon as the country was ready, first, for the bilateral investment treaty.
 
But negotiations for the conclusion of the RCEP by leaders of the 16 countries seems to be dragging, said Chheang Vannarith, chairman of the Cambodian Institute for Strategic Studies. He wants it to move faster and said Cambodia has to be open-minded to all trade deals.
 
 “The RCEP negotiations are much slower than expected. The TPP is facing certain political hurdles. Whether the US Congress will ratify the TPP is still unknown,” said Mr. Vannarith.
 
“Cambodia should be open to all mega-regional trade arrangements. The RCEP and TPP are the main drivers of regional trade liberalization [in the Asia-Pacific] and Cambodia needs to conduct a serious study on both initiatives,” he stressed.
 
Meanwhile Ear Sophal, an associate professor of diplomacy and world affairs at Occidental College in Los Angeles and author of ‘Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy ’, told Khmer Times last week that trade agreements depended on which countries participated in them and what comparative advantage they had, relative to one another.
 
“If all members made the same things and were also competitors, it wouldn’t make much sense. If they complement one another, it makes more sense,” he said.
 
“If the RCEP created new markets for Asean members to export to – China for example – then it would make sense. But China now is focusing on domestic consumption and cutting down on imports,” Mr. Sophal pointed out.
 
The associate professor put it bluntly: “I wonder what Cambodia can sell to China. What can Cambodia do better than China? If you asked the same question about the United States, you would see that Cambodia sells a lot to America, and it can make a lot of things more cheaply than the US.
 
“Are these [RCEP and TPP] about China’s sphere of influence and money from China for investment and development?” asked Mr. Sophal.
 
According to statistics, the RCEP could potentially transform the region into an integrated market comprising more than three billion people with a combined GDP of about $19.78 trillion.

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