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Talking Trade blog

RCEP’s under-the-radar round 15


Published 18 October 2016

TIANJIN--From the 1920s until the 1980s, the world championship in professional boxing was decided in a 15 round matchup between fighters.

In Tianjin, China, officials from across the 16 countries of the Regional Comprehensive Economic Partnership (RCEP) have not been engaged in the same kind of knock-down battles.  But this week, they have reached the same Round 15 milestone and almost no one knows about it.  This is troubling.

In a sprawling new hotel and convention centre complex, government officials are huddled together to continue to push forward draft texts and commitments on a trade agreement that will link up Asian economies in new ways.  The agreement was supposed to conclude this year.  It will not. 

Getting a deal done with ten countries of ASEAN, China, Japan, South Korea, India, Australia and New Zealand is not easy.  It will certainly be finished, but not this year.  Had leaders chosen to close prematurely, the agreement would have been much too shallow to be worth the significant investment of time and resources to draft it at all.

Instead, officials are grappling with rules and texts and commitments in a wide range of areas—development and technical assistance; e-commerce; goods; services; investment; intellectual property rights; financial services; telecommunications; rules of origin; legal and institutional issues; and trade facilitation.  Additional discussions are taking place on trade remedies and government procurement.

A comprehensive agreement like RCEP, completed between countries with wide gaps in developmental levels, is challenging.  But officials must aim for the highest possible ambition.  Without high ambition, the final agreement will have limited impact.

Take just trade in goods.  As we have noted before, given the concentration of trade between most RCEP partners, if RCEP members exclude a significant percentage of tariff lines from coverage in the agreement, most actual trade is also excluded.  The complete liberalization of snow removal equipment will be a hollow victory indeed for most RCEP economies. 

RCEP already comes with flexibilities, especially for the least developed economies, which gives members policy space.  Thus crafting commitments that are less than fully ambitious at the outset means that the final commercial impact, after flexibilities are taken, could be extremely modest or non-existent. 

The agreement would be considerably strengthened if the process of negotiation were improved by allowing stakeholders greater input.  After 15 rounds of talks, officials are still largely talking to themselves with limited input from anyone else. 

While many believe that consultations have taken place at the domestic level in various RCEP economies, this communication has been either lacking or woeful in most.  This leaves government officials drafting rules for business in many cases with no practical input or experience in business. 

How would an official actually know, for instance, what are the ingredients in yogurt?  How many of these items are currently traded?  How many might be traded if tariff rates or standards or licensing or investment rules were different?  What are the most helpful rules of origin for a yogurt maker in RCEP?  Or what are the biggest barriers to trade for the same yogurt maker?  How could RCEP make it easier for the yogurt maker to do business in RCEP?

The same kind of questions could be asked for every single good or service.  In most cases, officials would likely struggle to provide decent answers.  This is likely to be true even in countries with a long track record of negotiating free trade agreements.  Just because a country has done deals in the past does not mean that the situation in RCEP is automatically the same for companies. 

The yogurt maker—just to pick on one product that happens to be sitting near the computer today—might not have been bothered about an existing bilateral.  But the same yogurt marker may care deeply about the prospects of yogurt trade in and across RCEP.  Or about the potential for trade in ingredients in the region.  

The point is—unless someone asks—no one will know what the yogurt maker or any other company wants or needs or does not want or need from RCEP. 

Officials might be going 15 rounds together with one another on a point that is utterly irrelevant to companies while ignoring the real issues of concern.

Many RCEP officials are spooked at the idea of opening up meetings to stakeholder engagement.  Stakeholders are not there to negotiate, but to provide valuable information.  This is very important and should be encouraged wherever and whenever possible.

While the next round, in December in Jakarta, may have either formal or sideline slots for stakeholders, there is also a practical limit to how many people can be put in front of officials. RCEP must do two additional things.

First, RCEP should open up a formal comment process to allow companies and other stakeholders to submit information directly to officials.  This comment process should not be complicated.  It should not involve forms that run to 8 pages of dense text that must be downloaded, filled out by legal experts and returned by mail.  Instead they should encourage stakeholders to submit information directly to officials through a clearly defined portal.

Second, RCEP officials must do a better job of engaging with the media.  Thus far, RCEP rounds have happened with almost no information in the wider world at all.  This is deeply troubling.  At the end of the negotiations, RCEP will impact nearly 3 billion citizens in 16 countries. 

Such a negotiation should not take place in a vacuum or in a hotel completely cut off from input from anyone else. 

What happens here does matter.  Officials must ask for input. 

And when they do so, companies will have to respond.

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Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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