RCEP: 4 questions you should know about it. The RCEP, the Regional Comprehensive Economic Partnership is the latest multilateral Free Trade Agreement that is being negotiated between most of the major Asian economies. Right now the RCEP has received much less attention than other agreements such as TTIP, CETA or TiSA in spite of the importance for the future of the global economy.

What countries are dealing on RCEP?

The RCEP is an agreement between Australia, Brunei, Cambodia, South Korea, China, The Philippines, India, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Singapore, Thailand, Vietnam. It is important to remark that RCEP is an ASEAN initiative but right now it is China who is more interested in it.

RCEP: 4 questions you should know about it

However after the defeat of the Trans Pacific Partnership Mexico, Peru and Chile seem to be interested in participating in the negotiations.

The figures of the RCEP are awesome: 40% of the world GPD and about 3 billion people live in those countries. A population that is younger than in Europe or the North America.

The Regional Comprehensive Economic Partnership’s negotiations were launched in the East Asia Summit in Phnom Penh, Cambodia on 20 November 2012 and started on 09 May 2013 in in Bandar Seri Begawan, Brunei. The objective is to include in a regional free trade agreement the ASEAN countries and ASEAN’s free trade agreement (FTA) partners. The core of the negotiations and objectives are in the Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership.

There have been 17 Rounds of Negotiations. The Eighteenth is scheduled from 2 to 12 May 2017 in the Philippines.

How are rolling the Negotiations?

 

The RCEP is not a simple negotiation. It involves 16 countries at wildly diverging levels of economic development. The agreement has 12 chapters whose subjects cover market access for goods, investment and services, among them which we can find competition, financial services, telecommunications or intellectual property. Issues where the divergence between countries can be strong.

But despite those contents, the agreement is focused on tariffs and pure trade more than in economic regulation (as the TTIP and CETA did and was a source of difficulties). Besides, the negotiations of the RCEP have been focused on the more traditional matter of reducing tariff barriers: they have the objective to eliminate 80% of them. In addition, it is not possible to harmonize standards between countries with that such an economic difference in so many aspects. Australia, New Zealand, Japan and South Korea are the only ones that are brokering this type of contents.

The progress of the negotiations is sluggish.  But ASEAN wants to reach a final deal this year, to coincide with the 50th anniversary of that organization. There are two important points for it: China needs the RCEP and ASEAN has a global position that helps to conduct the negotiations.

Where are the difficulties to with reaching an agreement?

From my point of view there are three major issues right now to with reaching the agreement:

All the questions about investments protection provoke some kinds of problems. For instance, India is demanding to relax the responsibility of the state for the right to regulate.

Second, we can notice the influence of the TPP in the position of Japan and South Korea regarding intellectual property. Both of them want to extend those rights especially in pharmaceutical products. That can be a big problem because there is are a lot of people infected by HIV in some countries of that region.

Likewise, Australia and New Zealand want to have an agreement with high standards. But they do not have anything to offer because tariffs will be 0% in 2020.

In spite of those considerations, we can not say that the RCEP is a low-standard agreement. It is a long term agreement whose objectives in standards can reach in the future more than now.

The third one is the use of genetically modified organism (GMO) which is controversial because at this moment only 4 countries allow its use.

The political value of the RCEP

Originally, the RCEP was the solution of China and India to the isolation in Free Trade because they were not in the TPP. The TTIP is a big risk for them. Now things are different.

For every country involved in RCEP, that agreement is a big opportunity. RCEP can be the platform for delineating the basis of free trade in this century. 40% of GPD and a population of 3 billion serve for that objective.

But it is also the solution to the kind of the free trade they are interested in. The TPP included a standard in social conditions of workers and environmental Protection that more of those countries wanted to accept. They are focused on developing its their economies and right now they are not very conscious about that those issues. Only China starts to think about green issues. That is the reason why the main objective is free trade and not economic regulation.

For China, the RCEP can be its big deal to be the first economic power in the world. The presentation of Mr. XI, President of China, in Davos as the Champion of the Economic Globalization and Free Trade can be applied to the negotiations of the RCEP. Recently, the Chinese Premier Li Keqiang said that “China is willing to work with other countries to improve the global governance system,”

In comparison, China is a poor and most important, is one of the most unequal economies in the world. Government of China thinks that the RCEP (as well as the FTA) is the easiest way to reduce the inequality of its economy. There is a big Chinese policy on this topic.

Now China is involved in many Free trade Agreements with other countries such as the Gulf Cooperation Council or Pakistan or Israel.

China is the first one brokering this agreement. And perhaps that is why, his its behavior in the negotiations is not very hard: China needs the RCEP. It is also the first time for China to broker that kind of role in the international economy.

And it is also a big opportunity for India. It is the first time participating in this kind of negotiations than can help to solve some type of isolation of its economy and improve its role in the world economy. Actually, RCEP can move the Asian economy from an Asia-Pacific to an Indo-Pacific regional economic order.