How far can the RCEP ship sail?

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Myanmar Times | 21 March 2017

How far can the RCEP ship sail?

Against the backdrop of the platinum-standard, 12-nation Trans-Pacific Partnership (TPP) trade agreement, the 16-nation Regional Comprehensive Economic Partnership (RCEP) has appeared, at least for those commentators outside the inner circle of the 10 member states of the Association of Southeast Asian Nations (Asean) and their 6 dialogue partners, to be more market-access oriented, less World Trade Organisation (WTO)-plus inclined and covertly China-driven.

Some of these assumptions are true, some are false, and some require qualification.

As a proposed trade partnership between the Asean nations and their six dialogue partners – Australia, China, India, Japan, South Korea and New Zealand – RCEP is seen as an alternative to the TPP.

Now, with the expected demise of the TPP, more attention has been directed to this Asean-led initiative that promises to grow into a pan-regional role that few would have ascribed to it before the TPP ran into trouble. Promises alone, however, are not sufficient, and concerted efforts must be made by negotiators and stake-holders to reach a trade-creating and substantively significant deal.

The RCEP is the only viable game in town. That is to say, the one regional integration pact formally left standing, albeit far from completion. While the legacy of the TPP is rich, the likelihood that it will ever come into force as it was meant to be is slim.

There remain, however, hopeful supporters who dare believe in a potentially Australian or Japanese-led TPP-11, fitted with revised enactment rules and re-balanced provisions that make up for the loss of US market access. For them, the example of the failed International Trade Organisation that organically morphed into the WTO as we know it today, all without US congressional approval, is a guiding light in a sea of global trade panic generated by U.S. President Donald Trump’s plan to pull out of the TPP.

Whatever its fate without the US buy-in, the trade deal has already impacted individual economies’ regulatory regimes and prompted changes in global economic governance to an extent that must move the RCEP to emulate its “platinum standard” to the greatest extent practicable.

The RCEP, as it stands, involves complex dynamics between the 10 Asean members and the Asean Economic Community (AEC) that binds them, the six dialogue partners and their Asean+1 free-trade agreements in their trade relationship with the world. This makes for a rather rich set of interactions based on an equally complex set of interests.

Tariff reductions, rules of origin, trade in services, and investment are areas that present some degree of difficulty to negotiators, as would be expected of an agreement that aims to include China and India on the one hand, and Japan, Australia and New Zealand on the other, all while evolving on the margins of the AEC.

Agreement on the RCEP should practically result in new free-trade agreements for the dialogue partners, deeper levels of tariff liberalisation, wider coverage of trade in services, an overall increase in WTO-plus content, and the streamlining and improvement of rules of origin.

So far, due to a lack of faster alternatives, some suggest that agreement should focus on less-sensitive, low-hanging types of concessions, to be further complemented with built-in agenda type of clauses. But for RCEP to be truly modern, labour, the environment, electronic commerce, state-owned enterprises and the like should be firmly covered before the deal is sealed.

The breadth, depth and solidity of the RCEP matter inasmuch as it has caught the attention lately of fora such as the Asia Pacific Economic Community (Apec), that aim to construct their own pan-regional initiatives (Free Trade Area of the Asia-Pacific) on the foundations of the RCEP. And for that to happen, the deal itself must be rendered appealing for partners such as Russia, Canada or Peru.

Little incremental pressure on the negotiating 16 states flows from Apec’s own vision for the RCEP; instead, the brunt of compulsion emerges from the magnitude of the occasion presented by Asean’s 50th anniversary, which will be celebrated in 2017 under the Philippines’ chairmanship. The associated theme is “Partnering for Change, Engaging the World”, and this is precisely what RCEP negotiators are tasked with. Whether they succeed by the end of 2017 is anyone’s guess but everyone’s wish.

 [1]

Footnotes:

[1Maura Ada Decosterd is senior trade law and policy officer of the Jakarta-based Economic Research Institute for Asean and East Asia (ERIA). The views expressed here are personal and do not reflect ERIA’s position.

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source: Myanmar Times