RCEP negotiations move ahead, challenges remain

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Substantial progress in negotiations for the Regional Comprehensive Economic Partnership (RCEP) has been made, with seven chapters out of the 18 concluded, Singapore's Prime Minister Lee Hsien Loong said on Wednesday.

The RCEP is a free trade agreement between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and the six Asia-Pacific states including China, Japan, South Korea, India, Australia, and New Zealand.

Lee made the statement at the annual summit to advance the RCEP negotiations, noting that they are poised to conclude by 2019.

“Negotiation for the RCEP has taken much longer than usual due to the unique challenges of negotiating a mega FTA,” said Lee.

He added that ASEAN and its trading partners play an important role in negotiating the RCEP, and that a substantial outcome for the deal is important amid rising protectionism and anti-globalization sentiments.

“They are close to finishing, but it will take more time to resolve some of the toughest challenges. It would have been nice if leaders could have summoned the political will now to get this done,” said Deborah Elms, founder and director of Asian Trade Centre (ATC).

Among the biggest obstacles the RCEP members are struggling with are the extent and size of tariff cuts, the specific rules of origin that apply to firms to get benefits, the extent of the services market opening, and the type of investor protections.

RCEP: a neutral economic bloc

The 16-member RCEP deal, once finalized, would marshal a combined GDP of approximately 21.3 trillion US dollars. It also accounts for one third of the global trade.

Analysts say RCEP represents a neutral economic bloc. This makes it a vanguard in promoting trade amid growing sentiments of protectionism.

“RCEP is a multilateral trade cooperation, it is neither a Sino-centric nor Japan-centric trade order, which means its structure is truly meant to benefit all participating countries because all will be governed under the same trade rules,” said Phidel Vineles, a senior analyst at RSIS, a think tank in Singapore.

He added that the trade pact is instrumental in subverting creeping unilateralism because it pulls all bilateral free trade agreements (FTA) into one economic sphere, under one blanket trade ruling.

"Early conclusion of RCEP would reaffirm Asia's support of a liberal, rules-based regional trading order, consolidate regional production networks, and enable members to leverage internal and regional demand for growth as the US turns inward and protectionist under President Trump,” Dr Rana said.

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ASEAN has been pushing for stronger economic integration in and outside of Southeast Asia. With the conclusion of RCEP, members of the regional bloc can better shape its evolving economy with the inclusion of powerhouse economies like China and Japan.

Singapore Prime Minister Lee, in his opening remarks at the ASEAN-China Summit, lauded the trade pact as an important milestone towards strategic partnership and economic growth in the region.

“I'm pleased that tremendous progress has been made this year towards completing the RCEP negotiations. We are now close to the finishing line, although further work remains to finalize the details,” he said.

However, there may be more hoops to jump through on the road toward a full conclusion of the trade agreement. Compared to 2018, RCEP negotiators wanting to finalize the deal may find 2019 even more challenging, according to Elms. Thailand, India, and Indonesia will be holding their elections next year.

“Each country needs to make some tough calls in the RCEP talks and the election cycle does not raise expectations that these will happen easily next year,” she said.