Thailand's tough choice: TPP or RCEP

opinion October 27, 2015 01:00

By Achara Deboonme

7,284 Viewed

Believe it or not, google "TPP" and you get over 82 million hits.

Though the Trans-Pacific Partnership is merely one form of free-trade agreement, its scores an even higher number of hits than does a search for “FTA” (about 53 million results).
Type in “RCEP” (the Regional Comprehensive Economic Partnership) and you get fewer than 80,000 results.
What are the numbers telling us?
It could be the fact that this is the first mega-FTA the world has witnessed in two decades.
The numbers could also be reflecting the magnitude of the deal, which involves 12 Pacific Rim nations that comprise fewer than one billion in population but control 40 per cent of global trade.
It could also be because of the nations involved in the deal, led by the United States, which despite threats from China remains the world’s largest economy.
That third reason seems to be the most probable answer, particularly in light of ongoing tussles between the US and China over various issues. Political analysts and economists need to know about the TPP, as the US has decided to exclude China from the deal despite the latter’s strengthening economic power and determination to become a new global superpower. To win early support, there is also a clause that future applicants to the TPP need to be endorsed by all 12 members and must also negotiate their terms of participation with each member-country.
In response, China is working hard to conclude the RCEP, which involves 10 Asean nations and five other countries in the Asean+6 group. China, in turn, intends to exclude the US from its trade deal.
Everybody knows that while the US wants to maintain supreme economic power in the Pacific Rim, China wants to strengthen its clout in Asia. Next month in Kuala Lumpur will see the latest meeting on the RECEP, after negotiations were officially launched in 2012, seven years after the TPP.
As soon as TPP negotiations were concluded earlier this month, people in Thailand wanted to know more about the deal. Thai policymakers were asked if Thailand would join. Studies on the pros and cons resurfaced. In this regard it was unfortunate that, while the Thailand Development Research Institute’s TPP research focuses on the consequences for trade and investment, the Cabinet TPP meeting last week centred on trade only, with papers presented from the Commerce Ministry.
More trade-related issues should resurface in the next few days, when the ministries of Commerce, Health and Agriculture compare the pros and cons of the TPP and RCEP. This is because Thailand currently has no FTA with the US and thus will not enjoy the zero tariffs afforded to four of its Asean nations, chiefly Malaysia and Vietnam. This is also because, among the more than 20 areas covered by the TPP is intellectual property. 
If Thailand is to join TPP, it has to improve IP-protection measures for medicines, which may increase the operating cost for local pharmaceutical companies.
The Labour Ministry has not yet been instructed to study this, though labour standards are part of the TPP. There has been no instruction to the ministries involved in foreign investment either.
Speaking at the TDRI briefing, Kiat Sittheeamorn revealed that during his time as Thai Trade Representative, Thailand had an intention to join the TPP, pending a clearer framework for negotiations. In November 2013, the Yingluck government also announced an intention to join the trade deal. Well, if Prime Minister Prayut Chan-o-cha has done the same, he must have agitated several prominent figures, including FTA Watch’s Kannikar Kijtiwatchakul. At the TDRI briefing, she expressed fears over potential negative impacts of the TPP on users of medicines and farmers. Research by the Office of Industrial Economics released a few years ago suggested that if Thailand were to choose a trade deal, it should opt for the RCEP as this would further strengthen Asean economics.
Singapore-based trade expert Deborah Elms said: “With only some Asean countries poised to enjoy the benefits of TPP [currently Brunei, Malaysia, Singapore and Vietnam]; and RCEP poised to link Asean’s dialogue partners – including China and India – for the first time, it is more important than ever for Asean to complete its goals under the AEC (Asean Economic Community”.
Fearing that Thailand would fail to catch the train, Thai National Shippers Council chairman Nopporn Thepsithar said the government should at least publicly announce its intention to join the TPP.
Backing his call is the fact that China’s economy is cooling down and bringing Asean down with it. Thailand’s exports have been in the negative territory this year chiefly because of China’s slowdown and a fall in purchasing power within Asean. Foreign companies may also forget about Thailand as a location for their investment projects and opt for Asean’s TPP members, which are bound to improve intellectual property protection and labour standards. That will only weaken the Thai manufacturing sector and overall competitiveness.
Prayut said last week that Thailand had until 2017 to decide whether to join the TPP or not. He is correct, as new member countries will be welcomed only after all 12 nations ratify the deal, which is expected to take a full year.
However, with TPP negotiations already concluded, China is now expected to speed up on RCEP negotiations. What if they are concluded next year?
If Thailand goes ahead with the RCEP and later applies to join the TPP, it may face some form of retaliation from the US and its allies.
When two giants fight, a small nation like Thailand cannot afford to stay still. The best we can do now is to study the impacts of both deals in the most extensive manner and reveal as much information as possible to the public. Public sentiment will help tell us which will be the zero-sum and which the win-win game.