Substantial conclusion of RCEP this year unlikely

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Mechanisms that TPP members want brought into RCEP create a one-way street to ever-increasing levels of liberalization.

Manila Bulletin | 3 September 2017

Substantial conclusion of RCEP this year unlikely

As TPP members push new hurdles in negotiations

By Bernie Cahiles-Magkilat

Efforts to achieve substantial conclusion of the Regional Comprehensive Economic Partnership (RCEP) negotiations by end of this year appear headed for rough waters as members of the defunct Trans Pacific Partnership (TPP) have been pushing for steep hurdles in investment and services agreements that are difficult to comply for non-TPP members, like the Philippines.

The Philippines, this year’s chair of ASEAN and of the 50th ASEAN celebration, has been pushing for a substantial conclusion of the RCEP by end of this year as part of the 50th ASEAN milestone.

But a senior RCEP official said TPP member countries have proposed the inclusion of ratchet and automatic MFN clause in the agreement. They also would like to introduce another TPP deal concept on state-owned enterprises (SOEs).

Non-TPP members, however, have expressed objection to these new concepts.

The ratchet clause means that future liberalizations become automatically locked in and therefore contains a strong tendency towards increasing liberalization. The measure can only be revised toward increasing levels of liberalization. As a consequence, a new government is unable to undo liberalizations of a previous government and the only policy choice is the status quo or further liberalization. Thereby, these mechanisms create a one-way street to ever-increasing levels of liberalization.

In the case of automatic MFN status, if a country for example Thailand will offer to RCEP to liberalize up to 70 percent of its tariff lines, but in its ongoing negotiation with EU for a free trade agreement it grants up to 90 percent, then it is automatic that it will also extend the same 90 percent to RCEP.

Some TPP members would like to include a chapter on state-owned enterprises (SOEs) to ensure that businesses, regardless of ownership, compete fairly through enforceable rules to ensure that foreign-owned SOEs compete on the basis of quality and price, not on the basis of discriminatory regulation, subsidies, or favoritism.

“These are contentious because non-TPP members do not have this kind of concepts,” the official said. Since TPP did not prosper, some TPP members would like to bring these hurdles to RCEP, but RCEP members are careful not to tie their hands.

The official did not identify these TPP members. The TPP members are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, US, and Vietnam.

Meantime, Trade and Industry Undersecretary Ceferino S. Rodolfo said that RCEP economic ministers will hold their last meeting on September 10 as one of the meetings on the sidelines of the 49th ASEAN Economic Ministers Meeting here.

From there, the RCEP technical network committee will meet in Korea in October to come up with an implementation paper, which sets the significant outcome of the negotiations by end of 2017 taking into consideration the results of the economic ministers meeting here and the previous decisions reached during the intercessional meeting in Hanoi.

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source: Manila Bulletin