RCEP Countries Conclude Auckland Round, Eye Next Steps

23 June 2016

Negotiators meeting in Auckland, New Zealand, last week continued their efforts to finalise talks this year for a Regional Comprehensive Economic Partnership (RCEP), a 16-country trade and investment deal in the Asia-Pacific region.

However, the pace of the talks to date have led some observers to speculate that this process could drag on past the end-2016 target.

The RCEP includes all 10 members of the Association of Southeast Asian Nations (ASEAN), along with six countries with whom ASEAN has an FTA – Australia, China, India, Japan, South Korea, and New Zealand. Proponents of the deal say that the final accord would make significant improvements on these existing “ASEAN+1” trade pacts.

The RCEP countries account for almost a third of world GDP, at US$23 trillion, and 20 percent of global services trade, while covering more than three billion people, according to New Zealand government statistics. (See Bridges Weekly, 3 March 2016)

Since negotiations were formally launched in November 2012, there have been 13 negotiating rounds as well as three meetings at the ministerial level and several intersessional meetings. Topics for discussion include goods, services, investment, competition, intellectual property, economic and technical cooperation, e-commerce, rules of origin, sanitary and phytosanitary (SPS) measures, and legal and institutional issues. (See Bridges Weekly, 21 November 2012)

The June round in New Zealand brought together over 500 delegates, and included a public session for civil society on the margins with New Zealand Minister of Trade Todd McClay and chief negotiator Mark Trainor, along with consultations with business representatives on topics such as the technical issues around non-tariff measures (NTM). Similar stakeholder events also took place alongside an April gathering in Perth, Australia.

Market access, draft texts

At the public session, New Zealand officials confirmed that all RCEP countries have now submitted initial offers both for goods and services trade, as well as initial lists of reservations for investment.

There have also been requests submitted relating to goods and services by most RCEP countries, along with some requests for initial reservations on investment, officials added.

On services, Trainor said last week that there is scope to improve market access conditions for services providers, given that existing commitments in ASEAN are relatively limited. Discussions over Mode 4 – those services commitments that involve the movement of natural persons – also continue, with some countries showing a strong interest and others presenting constraints given their immigration policies.

Meanwhile, talks on investment liberalisation are following a negative list approach, in which all industry sectors are open to investment unless specifically deemed as closed.

Whether government procurement will be included in a final RCEP deal is currently under discussion in a sub-working group, with a final decision not yet confirmed. While it was not listed in the original “guiding principles,” that document does have a section on “other issues,” where topics that some RCEP members have covered in other FTAs can be raised for possible discussion, and potentially agreement.

Regarding RCEP draft texts, officials reported progress in the latest round, though more remains to be done. Negotiators are also working to establish terms for a dispute settlement mechanism under the working group in charge of legal and institutional aspects.

Small and medium enterprises

Officials in Auckland said that RCEP will aim to address small and medium-sized enterprises (SMEs), with a view to facilitating these companies’ exports given their role in production and employment for many economies.

In this area, negotiations are considering transparency as well as facilitating customs procedures and enhancing trade facilitation, especially addressing NTMs and technical barriers to trade (TBT). There has also been a proposal for a dedicated chapter on trade facilitation.

According to Trainor, some provisions that are not addressed in the WTO’s Trade Facilitation Agreement (TFA) are still under negotiation in RCEP, including some aimed at making SMEs’ exports cross borders expeditiously. The TFA is currently in the ratification process and is not yet in force.

RCEP negotiations are also taking place on rules of origin and competition as other ways to facilitate SMEs’ participation in trade, along with e-commerce.

Coming up

Going forward, there are RCEP rounds scheduled for August, October, and December 2016, while a trade ministers’ meeting is slated for early August in Laos. Further negotiating rounds might be added, given the goal of clinching a deal by year’s end, though McClay told the public session that this would likely be the earliest for reaching a possible deal.

One complicating factor is that not all participating countries have an FTA with their RCEP partners. For example, there is no FTA between China and India, although both countries have been considering a potential agreement since 2003. There is also no FTA between China and Japan, although the China-Japan-Korea FTA is under negotiation. (See Bridges Weekly, 5 November 2015)

As a result, RCEP negotiations need not only to construct a large regional agreement but also build FTA relationships that currently do not exist. Participating countries also have different levels of economic development, which some say could further complicate the process.

Even so, Trainor said that there is “clear recognition on the part of the participating countries that this is a huge opportunity,” particularly given the large population that would be covered under a completed RCEP.

RCEP, TPP timing

Meanwhile, a separate effort to advance the ratification of the Trans-Pacific Partnership (TPP) Agreement continues, prompting questions as to how this timing will interact with the ongoing RCEP process. The 12-country TPP does include some RCEP members, but notably does not include China, India, and South Korea, among others.

The TPP does, however, include the United States, with the outgoing administration of US President Barack Obama making a concerted push for lawmakers to ratify the accord before he leaves office in early 2017. (See Bridges Weekly, 25 May 2016)

US Trade Representative Michael Froman, speaking at the Rand Corporation on 21 June, reiterated past calls for US lawmakers to ratify the TPP soon, despite the “tough political environment” given the ongoing election process. Both of the leading presidential candidates – Donald Trump of the Republican Party and Hillary Rodham Clinton of the Democratic Party – have publicly opposed the TPP in its current form.

Repeating earlier arguments on the need for the US to lead on trade, he warned about the geopolitical and economic implications should the 12-country pact be delayed – especially if RCEP does get finished in the interim.

“If RCEP moves forward and TPP doesn’t, that cannot be in the interest of American workers, farmers, ranchers, and businesses,” he said, stressing that Washington must be a rule-maker in the region, ahead of Beijing.

ICTSD reporting; “McClay says trade deal must deliver tangible benefits for New Zealand,” STUFF.CO.NZ, 14 June 2016.

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