Congressional Testimony: Trade Policies in Asia

The trade and economic landscape in Asia is rapidly evolving. While there are many activities that I could mention, I will focus my testimony today on four regional trade arrangements: the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP); the Regional Comprehensive Economic Partnership (RCEP); a set of digital trade deals known as DEPA or DEAs; and the upcoming American-led Indo-Pacific Economic Framework (IPEF). I will attempt to explain how and why these agreements matter for Asia and describe some of the implications of this evolving regional architecture for the United States. I will conclude with a few brief suggestions about how craft an IPEF that best fits into a complex economic landscape. Let me begin with the CPTPP. The CPTPP came into force in late December 2018 and now has eight active members: Australia, Canada, Japan, Mexico, New Zealand, Peru, Singapore, and Vietnam. The UK is in the middle of accession talks and hopes to be part of the group by the end of this year. Three additional formal letters of application were received last fall, from China, Taiwan, and Ecuador. South Korea’s outgoing government pledged to submit an accession request this month. There are three important items on the CPTPP agenda for this year: members must review the agreement; conclude accession negotiations with the UK; and decide on a process for addressing pending applications.

Trade watchers have had two important pieces of news this week. First, Regional Comprehensive Economic Partnership (RCEP) has enough members on board to bring the agreement into force on January 1, 2022. Note that the initial membership includes 10 of the 15 signatories: Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand, and Vietnam. (The remaining members will become active participants 60 days after they have completed domestic level ratification procedures and submitted their letter to the ASEAN Secretariat.) Over all the years of negotiations and the time spent moving from substantial conclusion to signature to approval at the domestic level inside member governments, there has been repeated skepticism over whether or not RCEP would ever see the light of day. As a result, companies have been quite slow to get ready. With the actual launch less than 60 days away, it is time to focus. Firms should be rapidly preparing to use the agreement now. The second piece of trade news, however, was an even bigger bombshell. China officially asked to join the Digital Economy Partnership Agreement (DEPA). This agreement is only recently in force between the three members Chile, New Zealand and Singapore. DEPA was originally designed by these three small open economies as a way to build consistency in approaches to the digital economy. The idea was to create a series of “modules.” Each module covered a specific topic such as paperless trading or Artificial Intelligence (AI). Some modules, particularly those like paperless trading or non-discrimination against digital products, have become a more regular feature embedded in many different types of agreements, and have stronger, more legally binding language in DEPA. Other modules, especially those on new and evolving topics like AI or digital identities, were designed to encourage cooperation between members.