The 15 countries involved in the Regional Comprehensive Economic Partnership include the ten Association of Southeast Asian Nations member States as well as five of their free trade agreement partners – Australia, China, Japan, New Zealand, and the Republic of Korea.
One of the original RCEP negotiating countries, India, did not sign the deal.
Trade experts and commentators have asked whether having both the Regional Comprehensive Economic Partnership agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in place will lead to dueling approaches and rulebooks for trade in the Asia-Pacific region.
Leaders from 15 Asia-Pacific nations signed the Regional Comprehensive Economic Partnership (RCEP) agreement on 15 November 2020, nearly eight years to the day after negotiations began for the trade and investment accord.
The signing took place virtually during an RCEP Leaders’ Summit, timed to coincide with various other leaders’ and ministers’ meetings among Asia-Pacific economies. The 15 countries involved include the ten Association of Southeast Asian Nations (ASEAN) member States as well as five of their free trade agreement (FTA) partners – Australia, China, Japan, New Zealand, and the Republic of Korea.
In the Joint Leaders’ Statement, RCEP signatories “acknowledge that the RCEP Agreement is critical for [the] region’s response to the COVID-19 pandemic and will play an important role in building [its] resilience through inclusive and sustainable post-pandemic economic recovery process.”
Notably, one of the original RCEP negotiating countries, India, did not sign the deal. India had stepped aside from the process a year ago, with media reports quoting Prime Minister Narendra Modi as saying that the final text “does not fully reflect the basic spirit and the agreed guiding principles of RCEP.”
Given that context, ministers from the 15 remaining RCEP countries issued a statement alongside the signing ceremony on India’s future participation, citing the Asian economy’s “strategic importance” in ensuring better integrated and advanced regional value chains. They said India may negotiate to accede after the deal’s entry into force, instead of having to wait 18 months like other countries. Negotiations may already begin now should New Delhi ask beforehand.
The next stage in the RCEP process is ratification by the 15 signatory countries. The deal’s entry into force is contingent upon ratification by six ASEAN member States and three of the five FTA partners. Once that threshold is passed, RCEP will take effect for those countries after 60 days.
Scope of the deal
The agreement’s legal text and an associated summary were published in tandem with the signing ceremony, prompting trade watchers, legal analysts, and others in the policy arena to take a deep dive into its terms. Many have also considered how the RCEP’s scope compares to other major trade deals in the region, as well as with the latest trends in trade and investment policymaking.
The deal, from its outset, aimed to further liberalize goods and services trade, while making advances in areas such as competition policy, intellectual property rights (IPRs), investment, economic and technical cooperation, and government procurement.
Among the provisions that have already drawn notice are the omission of investor-state dispute settlement at this stage, as well as how the review process for future updates to the deal will be handled. The agreement does not have chapters on environment or labor either, which have become common in trade policymaking.
Trade roadmaps for the Asia-Pacific
The RCEP negotiations were launched in November 2012, back when the Trans-Pacific Partnership (TPP) Agreement was in the advanced negotiating stages, and while the US and Japan were in active consultations over Tokyo’s potential entry into the TPP negotiations. Japan’s entry into the TPP was confirmed the following year, significantly expanding the share of global gross domestic product (GDP) that would be covered by the deal.
The kick-off of the RCEP negotiations came with much fanfare, given the overlap in membership between the two agreements, as well as the economic heavyweights that were in one process but not the other. The US was in the TPP at the time, while China and India were among the RCEP’s founding members. Australia, Japan, and New Zealand were involved in both, as were some of the ASEAN member States. None of the South American countries involved in the TPP were part of RCEP.
The TPP has since become the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a name change that also came with the suspension of a few select provisions after the US exited the accord in early 2016. Whether the US will seek to rejoin the accord once President-elect Joe Biden takes office on January 20 remains to be seen, and whether the suspended provisions would be reactivated as a result is also unclear.
Out of the 11 signatories of the CPTPP, seven have since ratified the agreement, including Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Viet Nam, and the deal is now in force for those countries. The timeframe for the remaining four CPTPP signatories – Brunei Darussalam, Chile, Malaysia, and Peru – remains unclear.
Many trade experts and commentators have asked whether having the RCEP and CPTPP in place will lead to dueling approaches and rulebooks for trade in the Asia-Pacific region, and how these will interact with other FTAs and investment agreements that are already in place.
RCEP was negotiated on the premise that it would have the ASEAN framework at its core and would build on what was in the existing ASEAN+1 FTAs, while not replacing them. Experts have noted, however, that ASEAN+1 FTAs have significant differences between them, making an overarching deal across the RCEP countries difficult. Conversely, the CPTPP was an initiative that grew from a four-country Trans-Pacific Strategic Economic Partnership involving Brunei Darussalam, Chile, New Zealand, and Singapore into a sweeping accord that often went far beyond the provisions and subject matters treated in existing trade deals, notably in areas such as IPRs.
A key issue raised in both instances is that the economic strengths and challenges – as well as the development levels – of the countries involved in these agreements vary widely. Both accords have been floated as potential pathways for developing a sweeping free trade area known as the Free Trade Area of the Asia-Pacific (FTAAP) that would ostensibly include all 21 economies that are part of the Asia-Pacific Economic Cooperation (APEC) forum.
In the past, leaders and ministers have suggested that the RCEP and CPTPP could be complementary approaches in this effort, along with the myriad other trade negotiating initiatives underway in the region. For example, the ASEAN member States established an economic community in 2015, and are pursuing various efforts to develop their economic integration further, under the Blueprint 2025 that is currently in place.
“We will further advance the economic integration in the region, in a manner that is market-driven, including through the work on the Free Trade Area of the Asia-Pacific agenda, which will contribute to high quality and comprehensive regional undertakings,” said APEC leaders in their joint statement this month, with the section on trade referring to the need for “improving the narrative on trade and investment.”
How RCEP and CPTPP will ultimately interact remains to be seen; however, given their large memberships and notably different approaches to rule making, trade watchers and policymakers alike will need to look past the headlines to see where potential inconsistencies may arise, and how best to address them, especially if one or both of these deals is meant to be a model for a far larger region-wide accord.
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This policy brief was written by Sofía Baliño, Communications and Editorial Manager, Economic Law and Policy, IISD.