Going above and beyond RCEP’s negotiated agreement20/04/2022 30
East Asia’s Regional Comprehensive Economic Partnership (RCEP) came into force in 2022 as the world’s largest free trade agreement. It was ratified in the face of major international trade and political uncertainties and is a significant boost to the global trading system. That’s just the start. Its greatest potential lies in its economic cooperation agenda that could transform RCEP beyond a negotiated agreement into a dynamic regional partnership.
RCEP brings Australia, China, Japan, South Korea and New Zealand into an agreement centred on the 10-member ASEAN and accounts for about 31 per cent of global GDP and population and 27 per cent global merchandise trade. The agreement keeps markets open and updates trade and investment rules in East Asia, a major centre of global economic activity, at a time of rising protectionism and a threatened WTO.
One of the pillars of RCEP is an economic cooperation agenda which has its antecedents in ASEAN’s approach to bringing along its least developed members. The agenda builds on the experience of capacity building in APEC and technical cooperation under the ASEAN Australia–New Zealand Free Trade Agreement. At a minimum, the economic cooperation agenda will assist members to implement RCEP’s commitments.
But there is opportunity to go well beyond capacity building and technical cooperation. RCEP could create a framework that facilitates deeper economic cooperation involving experience sharing and the creation of a framework for extending rules and membership and political cooperation.
RCEP extends ASEAN’s modes of cooperation and strengthens its institutional ecosystem with an RCEP secretariat, regular ministers’ meetings and an annual leaders’ summit around the ASEAN-led East Asia Summit. The political track opens the door for a broad and ambitious conception of economic cooperation and the ASEAN-based secretariat. The scope and structure of the secretariat is yet to be defined but it will provide the locus for coordination among members. It can become a platform from which Asia-wide liberalisation and integration is managed.
In addition to the political track, there will be joint committees of senior officials and subsidiary committees. Business and expert involvement can be institutionalised to achieve specific objectives. These processes are important to help build trust and confidence in a geopolitical landscape where it is evaporating.
RCEP’s new disciplines extend to e-commerce and digital trade, trade facilitation, rules of origin, investment and intellectual property. The liberalisation in goods and services and the common ‘rules of origin’ mean global value chains will continue to deepen. Unlike the Trans-Pacific Partnership agreement and its successor the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to which it is often compared, RCEP does not include disciplines on state-owned enterprises and environment and labour standards. As new rules are developed in other agreements, they can be considered for adoption in RCEP through the economic cooperation process.
Not everything that affects the flow of international commerce can or should be negotiated and legally bound in agreements. ASEAN’s consensus-building voluntary approach to deeper economic integration, requires a flexible agenda of economic cooperation that allows working groups to report to ministers on pressing issues that sit beyond RCEP’s negotiated outcomes. These issues include infrastructure investment principles and standards, dispute mediation, energy transition, digital economy, supply chain resilience, sovereign debt management and COVID-19 pandemic recovery and travel protocols. The agenda and mode of cooperation will be distinctly ASEAN in character and differentiated from cooperation in APEC.
The economic cooperation process can help socialise potential members and facilitate membership. A flexible approach combined with the ASEAN philosophy of inclusiveness that has shaped the thinking behind RCEP gives immediate priority to opportunities for embracing non-members where there is interest in RCEP’s work. This interest is most prominent with respect to India, to which the door of membership has been left open. Eventual Indian membership would be more likely if India were engaged in cooperation on issues of common interest, such as pandemic recovery.
Bangladesh has also indicated interest in joining RCEP and further South Asian participation will help expand East Asian global value chains and allow for finer specialisation in comparative advantage for ASEAN countries. With China rapidly vacating its low-cost manufacturing advantage, there are ample alternatives that need to be developed and integrated into value chains.
Region-wide arrangements in East Asia have been voluntary and have not come at the expense of non-members. That kind of non-binding cooperation in ASEAN and APEC has been a model for the G20. RCEP changes that but its economic cooperation agenda is still a natural champion of open regionalism that could promote global objectives. Open and flexible structures can engage external interests and new initiatives and, given RCEP’s economic weight, strengthen global systems.
Just as ASEAN has done over time, RCEP can multilateralise its market access and other provisions. If the framework is used creatively, the economic cooperation agenda will provide the platform to achieve consensus and support concerted unilateral action towards that goal.
These opportunities could be left begging. Getting the framework right will not be automatic or happen overnight, but its scope and ambition can be defined and agreed to before ministers and leaders meet in late 2022. RCEP coming into force is a significant beginning — the next step is action to set its strategic direction.
Source: East Asia Forum