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Issue #1945      14th December, 2020

An examination of the RCEP Agreement

The Regional Comprehensive Economic Partnership (RCEP) was signed 15th November by fifteen countries: the ten members of the Association of Southeast Asian Nations (ASEAN) plus Australia, New Zealand, China, South Korea, and Japan. RCEP is the world’s largest free trade agreement (FTA), comprising approximately thirty per cent of the world by both GDP and population.

The signing of this agreement was an achievement following eight years of discussions among the sixteen countries of “ASEAN Plus Six,” consisting of ASEAN and its six pre-existing FTA partners – the aforementioned countries, plus India. India pulled out of the discussions in late 2019, but the same day as signing the RCEP agreement, the other fifteen countries signed a joint statement “recognising that India is not in a position to sign the RCEP Agreement in 2020” but also expressing that the deal is open for India to rejoin at a later date.

The RCEP negotiations overlapped with the later years of negotiations for a different FTA, the Trans-Pacific Partnership (TPP), which was signed in early 2016 but shortly afterwards rendered defunct by the sudden exit of the US following Donald Trump’s accession to the presidency. The terms of the TPP required the US’ participation for the agreement to be valid. Thus, the other eleven countries party to the deal were forced to spend another two years renegotiating it under a new name – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – finally signing it in 2018.

The differences between the TPP and the modified CPTPP, as well as RCEP, are instructive. The TPP included dangerous features common to US-backed FTAs, including extremely broad investor-state dispute settlement (ISDS) clauses giving corporations wide scope to sue governments for lost profits, including due to laws passed for public health or environmental purposes, thus disincentivising governments from pursuing such laws; extensive protections for pharmaceutical monopolies, permitting the outrageous and deadly price gouging on life-saving medicines that US pharmaceutical corporations are notorious for; and heavy restrictions on the operation of state-owned enterprises in international markets.

These features were fought against to varying degrees by some of the countries taking part in the TPP negotiations, but the US refused to budge on them, and it was only with the US’ sudden exit and the refashioning of the deal into the CPTPP that some of these worst features were toned down, albeit to a limited extent. The CPTPP was still designed with courting the US in mind and permits for the original conditions to return should the US rejoin the deal.

The RCEP negotiations took place in secret, which was criticised by some and led to much speculation on its contents. As ISDS clauses have become the norm for FTAs in recent times, many suspected that it would be a component of RCEP, and prepared to denounce the deal. But thankfully, in part due to the absence of the US as well as the opposition to such policies of many of the countries involved, RCEP has no ISDS clause whatsoever and also lacks other problematic features like those mentioned above.

The main concrete outcomes which RCEP can hope to achieve – provided it is implemented effectively – will be simpler and consistent trade rules across the region, tariff reductions across the board, and new mechanisms for trade dispute resolution between governments. These measures, which consolidate and homogenise the tangled web of bilateral and other agreements woven across the region in recent decades, will give a powerful impetus to economic growth and development across the region.

There is little controversy about any specific contents of RCEP, as unlike the TPP which was extremely complex and wide-ranging in its prescriptions, demanding a great deal of its signatories, many have been surprised at the seemingly narrow scope of RCEP. Most criticism has been confined to that of its omissions. However, this impression reveals the different approach and priorities taken by the governments leading the development of RCEP as compared to US-led deals. While the US approaches such negotiations with the intention to impose their views and interests upon the rest of the world, RCEP is a healthy symbol of multilateralism and cooperation.

Both ASEAN and China have been vocal and consistent advocates of multilateralism in international relations, and this approach has been confirmed in this deal. Some Western commentators, viewing through the lens of Cold War mentality where everything is only the manoeuvrings of “superpowers,” have treated this deal as though China is its main driver and (so the consequent assumption goes) its main beneficiary. In reality, ASEAN has been the main leader and has demonstrated the growing effectiveness of the organisation in promoting multilateralism and peaceful cooperation.

This commitment to finding multilateral and peaceful solutions to disputes, shared by ASEAN countries and China, puts the US to shame. In particular, it shows that US efforts to drive a wedge between these countries and even drum up support for war have not been successful.

Australia also stands to benefit greatly from the deal, although the continued Australian participation in the US trade war against China will put some aspects of its effectiveness to the test. Australia’s future economic success will depend upon successful engagement with our neighbours, who will be the main engine of economic development this century.

Although there are meaningful criticisms of RCEP, such as the secrecy of its negotiations as well as the absence of any measures relating to labour rights or environmental protection, this is primarily a result of the extremely diverse characteristics of the countries involved. It is hard to imagine every one of the signatories (for instance consider a random subset such as Myanmar, South Korea, Indonesia and New Zealand) coming to an open consensus on practical approaches to these topics, even given eight years. In the end, the fact that such a diverse collection of countries has succeeded in finalising this deal, even with its limitations, is a win for multilateralism and a valuable counterweight to US designs in the region.

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