The trilateral talks for greater economic integration between the leaders of China, South Korea and Japan in November should wake up in Pakistan. In the words of Korean President Park Geun-Hye, the three leaders agreed to work together for the conclusion of the Regional Comprehensive Economic Partnership (RCEP).
RCEP is a proposed Free Tarde Agreement (FTA) among 16 countries - the 10 members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam) and the six countries with which ASEAN has existing FTAs - Australia, China, India, Japan, Korea, and New Zealand. The RCEP partners have a total population of over 3 billion and an estimated trade share of around 27 per cent of global trade (2012 WTO figures), covering GDP of around $21 trillion (2013 IMF figures). Pakistan can benefit from joining the agreement in a number of ways.
Firstly, by joining RCEP, Pakistan will be adopting a more regional approach, and regionalism is a more accepted norm of the international trade nowadays. The multilateral trading system is going through an unending bad patch since 2002, owing to a deadlock in the Doha Development Agenda (DDA). In fact, the very need to negotiate such mega-regionals has been felt after the countries realized that the ongoing stalemate in the DDA negotiations is not going to end anytime soon.
Two countries among the RCEP – China and India – are direct neighbours of Pakistan. With the former, Pakistan enjoys a long term political and economic relationship plus an already ongoing FTA. With the latter, although the relations are not that good, but there is a huge potential for trade with lesser costs involved, if and when the political and economic relationship improves. China and India are the biggest and the second biggest countries of the world by population. They offer an enormous market for Pakistani products, if the supply-side constraints in Pakistan are addressed coupled with a diversification of the export base. Both the countries enjoy a significant political and economic clout around the world, and being part of such a club would benefit Pakistan.
Secondly, many among the RCEP countries are already Pakistan’s major trading partners. According to the Observatory of Economic Complexity (OEC), China is the biggest trade partner of Pakistan with Islamabad exporting 11% of its total share of exports to Beijing and importing 16% of its total imports from it. Pakistan’s exports to and imports from South Korea and Japan stood at 1.9% and 2.2%, and 1.7% and 3.8%, of the total trade respectively. With India and Malaysia, Pakistan’s exports and imports share is 1.4% and 4.5%, and 0.81% and 4.2% respectively. Apart from bilateral trade figures, Pakistan’s imports from Indonesia, Singapore and Thailand account for 2.8%, 1.7% and 1.8% of its total imports.
Thirdly, joining RCEP may give Pakistan an opportunity to join other mega-regionals and revitalize the already dormant trading agreements. For instance, of the 12 countries of the Trans-Pacific Partnership (TPP), seven are members of the RCEP as well. So, once Pakistan is the member of RCEP, it may be easier to become the part of the TPP and reap further benefits in terms of merchandise trade, services and investment. As, illustrated earlier, the friendly relations between Pakistan and China can provide a strong push for the inclusion of Pakistan in the RCEP, and then Pakistan may lobby with China to become part of the TPP, which Beijing is already considering joining.
As India is also an RCEP member, Pakistan’s inclusion in the agreement may pressure the two countries to improve their political and economic ties. The two countries are already part of South Asia Free Trade Agreement (SAFTA), which has failed to deliver over the years. Their inclusion in a bigger trading arrangement would strengthen a desire for mutual cooperation. India, Bhutan, Nepal, Maldives, Sri Lanka and Bangladesh have already made their own economic integration arrangement – the South Asian Sub-regional Economic Cooperation (SASEC). In a way, Pakistan has been cornered. Our inclusion in RCEP may rejuvenate SAFTA as well.
Lastly, by joining RCEP, Pakistan would be able to reap greater benefits out of the $46 billion China Pakistan Economic Corridor (CPEC) and its scope would expand. Pakistan should follow a multipronged approach with CPEC, giving maritime access to landlocked Central Asian countries, improving bilateral trade with China, using China as a bargaining counter to be included in RCEP, and then using RCEP to be a part of TPP and other mega-regional trade and investment agreements.
The writer is a civil servant. The views expressed are his own, and not of the Government of Pakistan.
Email: umerbhatti83@gmail.com
RCEP is a proposed Free Tarde Agreement (FTA) among 16 countries - the 10 members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam) and the six countries with which ASEAN has existing FTAs - Australia, China, India, Japan, Korea, and New Zealand. The RCEP partners have a total population of over 3 billion and an estimated trade share of around 27 per cent of global trade (2012 WTO figures), covering GDP of around $21 trillion (2013 IMF figures). Pakistan can benefit from joining the agreement in a number of ways.
Firstly, by joining RCEP, Pakistan will be adopting a more regional approach, and regionalism is a more accepted norm of the international trade nowadays. The multilateral trading system is going through an unending bad patch since 2002, owing to a deadlock in the Doha Development Agenda (DDA). In fact, the very need to negotiate such mega-regionals has been felt after the countries realized that the ongoing stalemate in the DDA negotiations is not going to end anytime soon.
Two countries among the RCEP – China and India – are direct neighbours of Pakistan. With the former, Pakistan enjoys a long term political and economic relationship plus an already ongoing FTA. With the latter, although the relations are not that good, but there is a huge potential for trade with lesser costs involved, if and when the political and economic relationship improves. China and India are the biggest and the second biggest countries of the world by population. They offer an enormous market for Pakistani products, if the supply-side constraints in Pakistan are addressed coupled with a diversification of the export base. Both the countries enjoy a significant political and economic clout around the world, and being part of such a club would benefit Pakistan.
SAFTA has failed to deliver
Secondly, many among the RCEP countries are already Pakistan’s major trading partners. According to the Observatory of Economic Complexity (OEC), China is the biggest trade partner of Pakistan with Islamabad exporting 11% of its total share of exports to Beijing and importing 16% of its total imports from it. Pakistan’s exports to and imports from South Korea and Japan stood at 1.9% and 2.2%, and 1.7% and 3.8%, of the total trade respectively. With India and Malaysia, Pakistan’s exports and imports share is 1.4% and 4.5%, and 0.81% and 4.2% respectively. Apart from bilateral trade figures, Pakistan’s imports from Indonesia, Singapore and Thailand account for 2.8%, 1.7% and 1.8% of its total imports.
Thirdly, joining RCEP may give Pakistan an opportunity to join other mega-regionals and revitalize the already dormant trading agreements. For instance, of the 12 countries of the Trans-Pacific Partnership (TPP), seven are members of the RCEP as well. So, once Pakistan is the member of RCEP, it may be easier to become the part of the TPP and reap further benefits in terms of merchandise trade, services and investment. As, illustrated earlier, the friendly relations between Pakistan and China can provide a strong push for the inclusion of Pakistan in the RCEP, and then Pakistan may lobby with China to become part of the TPP, which Beijing is already considering joining.
As India is also an RCEP member, Pakistan’s inclusion in the agreement may pressure the two countries to improve their political and economic ties. The two countries are already part of South Asia Free Trade Agreement (SAFTA), which has failed to deliver over the years. Their inclusion in a bigger trading arrangement would strengthen a desire for mutual cooperation. India, Bhutan, Nepal, Maldives, Sri Lanka and Bangladesh have already made their own economic integration arrangement – the South Asian Sub-regional Economic Cooperation (SASEC). In a way, Pakistan has been cornered. Our inclusion in RCEP may rejuvenate SAFTA as well.
Lastly, by joining RCEP, Pakistan would be able to reap greater benefits out of the $46 billion China Pakistan Economic Corridor (CPEC) and its scope would expand. Pakistan should follow a multipronged approach with CPEC, giving maritime access to landlocked Central Asian countries, improving bilateral trade with China, using China as a bargaining counter to be included in RCEP, and then using RCEP to be a part of TPP and other mega-regional trade and investment agreements.
The writer is a civil servant. The views expressed are his own, and not of the Government of Pakistan.
Email: umerbhatti83@gmail.com