The sixth ministerial meeting of the Regional Comprehensive Economic Partnership (RCEP) held on August 30-31 culminated with greater anticipation to finalize the deal by November at the ASEAN Leaders Summit.

After the sixth ministerial meeting, the Ministry of Trade and Industry of Singapore stated in its press release that two additional chapters were concluded in the meeting, one on customs procedures and trade facilitation and the other on government procurement. The first two (on economic and technical cooperation and on small and medium enterprises) had already been finalized in previous meetings.

The concept of the RCEP came into the picture in 2012 when the leaders of Association of Southeast Asian Nation (ASEAN) resolved to forge a wide-ranging trade deal with six of their FTA partners – namely Japan, South Korea, China, India, Australia, and New Zealand. Since then, twenty-two rounds of negations and six ministerial-level talks have unfolded.

The major objective of the RCEP is a mutually beneficial economic partnership agreement covering a wide range of areas such as goods, services, investments, economic and technical cooperation, intellectual property rights, ecommerce, and investor-state-dispute settlement. This would ensure that every participating nation would gain improved access to each other’s growing markets.

The RCEP negotiations took a strategic move when U.S. President Donald Trump pulled out of the Trans-Pacific Partnership (TPP), which didn’t include major economies such as China and India. If finalized, this agreement will be the world’s largest trade deal. The RCEP member countries account for a quarter of the world’s GDP (equivalent to $23.8 trillion), nearly half of the world population, and one-third of global trade. Additionally, it attracts approximately 26% of foreign direct investments.

 

China’s advantage

China’s hunt for alternative and diversified markets has accelerated with the escalating trade war with the U.S., and this agreement could well provide the much-needed boost for its domestic business. Amidst the rising raw material prices and trade uncertainties, the Chinese manufacturing industry is expected to benefit the most from the deal. Chinese products which are now routed to countries like India through third nations would get a direct destination through the open market promised under RCEP.      

 

India’s apprehension 

RCEP members want India to eliminate or significantly reduce duties on most of its goods, to which India objected and has suggested a differential tariff regime for different country groups such as China, a major threat to its domestic textile and steel industries. India has demanded that tariffs on certain sensitive products would only be phased out in a twenty year timeframe after the implementation of the agreement. India also wants to negotiate free trade agreements with Australia, New Zealand, and China – its non-FTA partners in RCEP – under a “Bilateral Pairing Mechanism.”

 

A win-win situation for ASEAN

At present, ASEAN has an FTA with each of the six participating nations of the RCEP. Once implemented, the application of various tariff rates and domestic rules of origin would be streamlined, thereby reducing the trade barriers. This would not only simplify the rules and procedures of each FTA but also enhance regional connectivity.

 

The next step ahead

RCEP trade officials are scheduled to meet in Auckland, New Zealand between October 17-21, 2018, to continue discussing the implementation of the agreement. Two more rounds of ministerial meetings are likely to be conducted before the final RCEP Summit scheduled in November 2018.

For more on RCEP, visit the First Post and ASEAN Briefing.