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Talking Trade blog

RCEP shifts into a new gear?

Published 06 August 2015

Nay Pyi Taw, Myanmar— The ninth round of negotiations is wrapping up in Myanmar for the Regional Comprehensive Economic Partnership (RCEP). The unbelievably massive convention centre (and Nay Pyi Taw has two convention centres!) is full of serious looking delegates sporting various colored country badges.

Talks are ongoing in a wide variety of working groups, sub working groups, expert groups and the main negotiating committee.  Some sessions meet with just ASEAN officials, others with the ASEAN Foreign Partners (AFPs: Australia, China, Japan, India, New Zealand, and South Korea), and others with all 16 parties in the room.  Topics include goods, services, investment, rules of origin, customs, intellectual property, competition, legal affairs, and economic and technical cooperation. 

I’m even delighted to report that e-commerce has finally moved beyond discussions into a negotiating phase!  We attended two previous rounds to promote the inclusion of this agenda item into RCEP. 

The mood overall appears to be mixed.  Many delegates expected to be attending this round in the wake of provisional agreement of the Trans-Pacific Partnership (TPP) negotiations.  Seven countries are involved in both negotiations: Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. 

The closure of the TPP would have put considerable pressure on RCEP negotiations.  At the moment, talks here remain at a relatively early stage, despite having been underway for more than 2 years. 

The original intention was to complete the agreement by the end of this year.  The timing had been chosen to link up RCEP with the introduction of the ASEAN Economic Community (AEC).  However, when RCEP ministers met in Kuala Lumpur last month, they finally agreed that closure in 2015 was not possible.  No new deadline has been announced (which is frankly an excellent idea, given the problems attached to “missing” a deadline). 

Instead, ministers suggested that they should redouble their efforts in an attempt to move talks along.  Offers have now been exchanged in services and investment. 

But this forward progress is partly obscured by difficulties in negotiating market access for goods.  These discussions are still stuck in a dispute over modalities.  This is trade-speak for the procedures or process under which members will conduct the talks—in other words, at the end of the RCEP negotiations, are the members ready and willing to have one offer that is extended to everyone else or can members offer up different types of commitments for different parties? 

At the start of discussions this week, India was pushing for a three-part offer in goods with differing levels of market access or openness to different members.  China, Australia and New Zealand, for instance, would have the worst amount of access to the Indian goods markets as members of India’s third tier.  Some of ASEAN, by contrast, would enjoy improved access.

The difficulties in locking down the procedures for negotiating in goods is somewhat ironic, given the origination story for RCEP.  This megaregional trade agreement got underway as a mechanism to improve supply chain integration in Asia by stitching together the five existing ASEAN+1 agreements (that brought ASEAN together with Japan, South Korea, China, India and Australia/New Zealand).  While not all five of these agreements have commitments on services and investment, all did include market access for goods.  Thus, the goods negotiations in RCEP should have been the easiest to get underway (even if getting closure could be difficult). 

But a multi-part schedule for market access in goods does not provide the kind of seamless integration benefits that make the most sense for companies.

As it stands now, a company that wishes to use either ASEAN agreements or (some) of the ASEAN+1 agreements will struggle to find specific market access schedules.  While most goods between ASEAN members can be shipped duty free now, there are some deviations.  These exceptions are hard to find. 

When it gets to determining market access commitments for services and investment within ASEAN, the situation is even worse.  (If you think I am making this up, try to see if your favorite service like chiropractic care or tour guides or opening a 4 star hotel is listed as opened to investment/services access on the ASEAN website or member state websites.  The only good news about the lack of clarity is that it leads to a surge of services activities for consultant firms trying to sort these things out for firms.)

But I digress a bit.  The general point is that RCEP was intended to make integration easier by linking up 16 important markets in Asia.  As we get close to the end of Round 9, the jury is still out on whether this is more or less likely in RCEP. 

One thing that has become quite apparent from this meeting, however, is that officials have dramatically expanded the scope of coverage for the negotiations.  Working groups are now underway in important areas like sanitary and phytosanitary (SPS) to help (potentially) sort out inconsistent rules around food and food safety standards, and another group is examining standards, technical regulations and conformity assessment procedures.  Officials are discussing trade remedies and members even held an experts meeting to start a conversation about government procurement issues. 

All of this activity is, I would argue, excellent news.  It means that the final agreement is more likely to contain provisions that address the issues on the ground for firms in the region.  For instance, companies frequently run into problems with testing procedures for products that vary from country to country and from even entry port to entry port.  A product that qualifies as safe in one country may have to undergo expensive and lengthy qualification procedures again in another country.  Not all of these tests are strictly necessary and RCEP efforts to streamline and remove duplicative testing procedures could be more important for many firms than cuts in tariff levels.

However, increasing the complexity of the final agreement could make it more difficult to conclude negotiations.  With 16 members at very diverse levels of economic development, these talks have already proven challenging to manage.  Expanding the agenda sometimes makes it easier to find win-win outcomes than more narrowly focused agreements.  But adding more topics can also increase the risks of collapse.

One of the best pieces of news from negotiations this week was the inclusion of a discussion on stakeholder engagement to the leader agenda.  In a complex environment with multiple parallel sessions, I think it is more critical than ever to get feedback from participants on the ground.  There is no point in flying officials all around Asia to various hot spots like Nay Pyi Taw for a week or more at a time if the deal under discussion does not meet the needs of stakeholders. 

In Asia, the connections and formal feedback loops between government and business are weak and often inconsistent.  Thus it is not automatic that officials here have a clear sense of what issue areas ought to be top of the agenda and which can be safely discarded or at least minimized. 

Finally, as the hiccup in the TPP negotiations have just clearly shown again, failure to line up stakeholder support in advance of closure can lead to disaster.  At the end of the day, even countries with varying degrees of responsiveness to constituents will struggle to approve and properly implement an agreement that runs contrary to sentiments on the ground. 

If the stakeholder consultation process gets approved, it will fall to companies to step up their own engagements with officials in future negotiating rounds.  Otherwise, if the final agreement fails to deliver sufficient benefits to companies and consumers across Asia, firms may share part of the blame.

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Dr. 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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