What Is the Regional Comprehensive Economic Partnership?

What Is the Regional Comprehensive Economic Partnership?

January 6, 2016
What Is the Regional Comprehensive Economic Partnership?
This In Focus provides answers to a number of frequently
Proponents of both RCEP and TPP state that the
asked questions (FAQs) about the proposed Regional
agreements will be comprehensive, dealing with wide
Comprehensive Economic Partnership, or RCEP, and its
ranging trade issues that extend beyond tariff liberalization.
possible implications for U.S. foreign policy and trade
Both are to include provisions on intellectual property
relations with Asia. Questions about RCEP can be directed
rights (IPR), e-commerce, and other issues. At present,
to the CRS analysts listed at the end of the report.
RCEP reportedly does not include labor and environmental
chapters as does TPP, but some members are reportedly
What is the Regional Comprehensive Economic
pushing for their inclusion in the agreement. Both
Partnership, or RCEP?
agreements are open to new members and to the addition of
RCEP is a proposed regional trade agreement (RTA) being
new chapters and provisions in the future.
negotiated by 16 Asian nations, including the 10 members
of the Association of Southeast Asian Nations (ASEAN)—
Figure 1. Map of Asian Nations Involved in RCEP and
Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos,
TPP Negotiations
Malaysia, the Philippines, Singapore, Thailand, and
Vietnam—and Australia, China, India, Japan, New
Zealand, and South Korea.
What is the status of RCEP negotiations?
Formal RCEP negotiations began in November 2012, with
the stated goal of completing the terms of the proposed
agreement by the end of 2015. Over the next three years,
the 16 negotiating nations held 10 rounds of talks. In
November 2015, on the sidelines of the Asia-Pacific
Economic Cooperation (APEC) Leaders Meeting, the 16
nations agreed to continue their negotiations “to conclude
and achieve a mutually beneficial and high quality
agreement in 2016.”
Why isn’t the United States participating in the
RCEP negotiations?
The current RCEP parties include the six nations with
which ASEAN has a trade agreement, and the United States

does not have a trade agreement with ASEAN. In addition,
Source: Graphic created by CRS. Map boundaries and information
the Obama Administration has indicated that it is focusing
generated by Hannah Fischer using data from the Department of
its trade efforts in the region on the proposed Trans-Pacific
State (2015) and Esri (2014).
Partnership, or TPP.
TPP may be closer to completion than RCEP. RCEP is still
How is RCEP different from TPP?
being negotiated, so its scope and provisions are uncertain.
RCEP and TPP are different geographically. RCEP includes
According to RCEP’s Guiding Principles and Objectives,
16 Asian nations; TPP includes 12 countries located around
adopted in August 2012, the agreement “will have broader
the periphery of the Pacific Ocean, including Central and
and deeper engagement with significant improvements over
South America. Seven nations – Australia, Brunei, Japan,
the existing ASEAN+1” trade agreements. RCEP will also
Malaysia, New Zealand, Singapore, and Vietnam – are
“aim at progressively eliminating tariff and non-tariff
potentially parties to both agreements. Other RCEP nations,
barriers on substantially all trade in goods,” and
such as Indonesia, South Korea, and Thailand, have
“substantially eliminate restrictions and/or discriminatory
expressed interest in joining the TPP.
measures with respect to trade in services.”
RCEP and TPP are both large in terms of merchandise
TPP’s members agreed on a text in October 2015, which
trade. According to the International Monetary Fund, the 16
awaits approval by each member nation. The terms of the
potential RCEP members exported $5.5 trillion in goods in
proposed TPP are largely consistent with existing U.S. trade
2014, while the 12 possible TPP members in 2014 exported
agreements, but include topics not previously covered, such
$4.3 trillion, representing 30.4% and 24.1% of global
as state-owned enterprises and regulatory coherence. (See
merchandise exports, respectively. Merchandise import
CRS Report R44278, The Trans-Pacific Partnership (TPP):
volumes for both proposed agreements are about the same;
In Brief, by Ian F. Fergusson, Mark A. McMinimy, and
$5.3 trillion for RCEP and $5.2 trillion for TPP.
Brock R. Williams.)
https://crsreports.congress.gov

What Is the Regional Comprehensive Economic Partnership?
Is RCEP complementary or competitive with TPP?
How might RCEP affect U.S. trade and investment
Opinions vary on the extent to which the two proposed
in Asia?
RTAs are complements or competitors. According to some
It is not possible to fully answer this question without
analysts, RCEP and TPP offer alternative visions for the
knowing the provisions of the ultimate agreement.
rules and norms by which trade and investment relations
Economic models of RCEP’s economic and trade effects
will be conducted in Asia and the Asia-Pacific region.
have generally shown that the United States would
Some observers maintain that the Chinese government
experience a small decrease in trade and economic growth
seeks to foster regional economic integration in Asia that is
if RCEP is completed. However, some sectors of the U.S.
beneficial to China and Chinese companies via RCEP and
economy may experience an increase in trade and
other initiatives such as the Asian Infrastructure Investment
production. Additionally, U.S. companies with
Bank (AIIB), and the “One Belt, One Road” initiative. (For
manufacturing or supply-chain operations within RCEP’s
more about AIIB, see CRS In Focus IF10154, Asian
member nations could benefit from lower tariff rates and
Infrastructure Investment Bank, by Martin A. Weiss. For
other provisions within the proposed agreement.
more about “One Belt, One Road,” see CRS In Focus
IF10273, China’s “One Belt, One Road”, by Susan V.
How does RCEP relate to other efforts to integrate
Lawrence and Gabriel M. Nelson). Other observers assert
Asia’s economies, such as FTAAP?
that the Obama Administration is similarly using the TPP to
Since the 1990s, policymakers have explored the question
establish a regional trade and investment environment that
of how to create a broad Asia-Pacific trade bloc that
is beneficial to U.S. companies and reinforces a leading role
integrates the region’s diverse economies. In 2004, leaders
for the United States in regional affairs.
of the Asia Pacific Economic Cooperation (APEC) forum
discussed possible visions for the creation of a Free Trade
Some scholars see RCEP and TPP as complementing each
Area of the Asia-Pacific (FTAAP) along these lines.
other by creating a form of “competitive liberalization” in
Proponents of both RCEP and TPP argue that the two
which the negotiating nations attempt to maximize the
proposed agreements could become pathways or “building
attractiveness of the respective agreements to new members
blocks” for an ultimate FTAAP.
by greater trade and investment liberalization. Other
analysts, however, see the two as parts of what some
What impact would RCEP have on U.S. foreign
analysts call the “noodle bowl” of trade agreements in the
policy in Asia?
region. According to this view, RCEP and TPP would add
This would depend in part on the context in which RCEP
more complexity for companies seeking to trade or invest in
was established. Because the TPP is widely seen as the
the Asia-Pacific region, as they try to determine how best to
signature U.S. economic initiative in Asia, RCEP’s impact
conduct business given the interrelated and sometimes
on overall U.S. foreign policy in the region would depend
overlapping trade agreements.
on the TPP’s status.
What impact would RCEP have on international
For example, if RCEP was created and the TPP were not
trade and investment?
finalized, some analysts maintain that the United States
Broadly, RCEP’s impact on trade and investment flows will
could experience a general decline in its influence in Asia,
depend on its geographic scope and the ultimate terms of
and that China would be a major beneficiary. Failure to
the agreement, if one is reached. It is difficult to estimate
finalize TPP, the argument holds, would be interpreted by
the potential economic impact of any proposed trade
many in Asia—correctly or not—as a failure by the United
agreement until the specific terms are known. In addition,
States to follow up on its own initiatives. This could create
economic models that estimate the potential trade and
pressure on the U.S. government to seek new vehicles to
investment effects of a trade agreement are highly
reassert its role in the region, focusing on other economic
dependent on the assumptions used in constructing the
and trade initiatives, or deepening other regional diplomatic
models, so any estimates should be viewed as more
or security relations.
indicative of the general direction of change than predictive
in value. Finally, according to a 2011 Asian Development
Alternatively, if RCEP were established after the
Bank Institute (ADBI) study, companies often do not utilize
finalization of TPP, some scholars see the U.S. government
the trade preferences created by RTAs, which reduces the
facing less pressure to demonstrate U.S. importance to the
actual trade effects of such agreements.
region. Instead, many argue that the next challenge for U.S.
policymakers would be to broaden TPP’s geographic scope
It is assumed that most of the economic and trade benefits
by convincing non-members—including those nations that
from RCEP would accumulate to the 16 member nations,
are part of RCEP—that joining TPP is also in their interest.
and less to non-member countries, including the United
States. The presence of large economies, such as China and

India, means it could have implications for intra-Asian
trade flows that the TPP would not, while the presence of

the United States, Canada, Mexico, and other Western
hemisphere nations in TPP means it could have

implications for trade flows spanning the Pacific that RCEP
would not.

https://crsreports.congress.gov

What Is the Regional Comprehensive Economic Partnership?

Michael F. Martin, Specialist in Asian Affairs
Ben Dolven, Specialist in Asian Affairs

Ian F. Fergusson, Specialist in International Trade and
Finance

Wayne M. Morrison, Specialist in Asian Trade and

Finance
Bruce Vaughn, Specialist in Asian Affairs

Brock R. Williams, Analyst in International Trade and
Finance

IF10342

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https://crsreports.congress.gov | IF10342 · VERSION 2 · NEW