SINGAPORE: Negotiations for the Regional Comprehensive Economic Partnership (RCEP) trade agreement covering ASEAN and six other economies (notably China, India, Japan, Korea, Australia and New Zealand), were launched in November 2012.
The proposed regional pact offers an integrated market of 3.6 billion people that contributes to a third of the global GDP, 29 per cent of global trade and 26 per cent of the world’s foreign direct investment flows.
Covering 18 chapters, negotiations over the last six years have managed to reach an accord for seven chapters, five of which were only concluded last year, despite efforts to wind up negotiations in 2018.
Nevertheless, in recognition of the RCEP’s potential to boost regional growth, especially under the pressure of heightened global uncertainties due to the ongoing trade war between the US and China, Thailand as the ASEAN chair for 2019 has listed the conclusion of the RCEP talks as one of its economic deliverables for the year.
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However, Thailand faces a severe time constraint as upcoming national elections in the country itself in March, as well as in India (over April to May), Indonesia (April) and the Philippines (May), is likely to lead to a slower pace of negotiations in the first half of the year due to the potential involvement of new ministers post-elections.
Thailand, as the ASEAN Chair, thus faces a Herculean task of pulling together a consensus on outstanding yet highly sensitive issues, which includes the scrapping of tariffs on agricultural products, the facilitation of cross-border movement of labour and the establishment of common rules for e-commerce.
Reaching a higher possibility of concluding the RCEP negotiations will therefore require the 16 member countries to reconsider the single undertaking approach taken thus far.
In this approach, the RCEP can only be concluded when an accord is reached in all 18 chapters and concurrently implemented among these 16 countries.
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TWO OTHER APPROACHES
The history of negotiations in ASEAN shows the use of two other approaches to move cooperation and liberalisation forward. The first is the “minus X approach”.
Within ASEAN, using the case of the ASEAN Single Window (ASW) as an example, five ready ASEAN member states have proceeded to implement the ASEAN Trade in Goods Agreement first in 2018.
Likewise, the ASEAN-Korea Trade in Goods Agreement was signed in August 2006 by all ASEAN member states, except Thailand. Thailand subsequently acceded to the ASEAN-Korea Free Trade Agreement (AKFTA) in October 2009.
The second approach used is the “sequential approach”. The Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea was signed by the leaders at the ASEAN-Korea Summit in December 2005 in Kuala Lumpur and came into force in July 2006.
But it is important to note that the main elements of the agreement were not achieved at one go.
Instead, the ASEAN-Korea Trade in Goods Agreement was signed in August 2006 and took effect in 2007; while the ASEAN-ROK Trade in Services Agreement was signed in November 2007 and took effect in May 2009. The ASEAN-ROK Investment Agreement was signed in June 2009 and took effect in September 2009.
While both of these alternative approaches are imperfect, they serve as a pragmatic response to cater to the diversity among ASEAN economies and their varying abilities to commit to lower trade barriers and higher levels of cooperation.
This diversity has widened with the inclusion of the six other economies, thereby making it even harder to reach a consensus within the 16 RCEP member countries.
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The choice facing policymakers is therefore between concluding the RCEP agreement, albeit on a smaller scale, or dragging on negotiations for an indefinite period and risking the RCEP losing all credibility as a potential regional pact.
Tham Siew Yean is Senior Fellow at ISEAS-Yusof Ishak Institute.