Beyond the promising prognosis of RCEP

Tan Sri Ong Tee Keat

After about 17 months into the inauguration of RCEP, perhaps it’s still premature to appraise its success in elevating the respective signatory countries’ GDP. But certainly, it is pertinent for all stakeholders to identify the teething problems and the various concerns along the way of implementation. RCEP, the biggest ever free trade area encompassing the 10-member state ASEAN and its 5 dialog partners, namely China, Japan, Korea, Australia and New Zealand, currently accounts for one-third of the global GDP. It is projected that by 2050, the RCEP will account for nearly half of the global GDP.

Even prior to the RCEP inception, the grouping has already had a total GDP of USD 25.84 trillion in 2019, surpassing USD24.37tr posted by the United States-Mexico-Canada Agreement ( USMCA ) and USD18.85tr by the European Economic Area ( EEA ) — the EU single market including EU countries , Iceland, Liechtenstein and Norway.

Indeed, it’s no easy feat to integrate the 15 economies, sprawling across Asia Pacific, of diverse sizes, cultures, polity and level of development into a single, huge market of 2.2 billion people. It is expected to generate significant premiums for the world economy. Statistically, the prognosis has been optimistic, anticipating that the RCEP could add USD209 billion annually to the world revenue and USD500 billion to the world trade by 2030.

Be that as it may, level of cognizance in most of the signatory countries of the RCEP remains relatively low. Many entrepreneurs have yet to get conversant with the newly-minted RCEP regulations, one of which is the much lauded harmonised Rules of Origin ( ROO ).

Like many other multilateral trade agreements, tariff reduction has always been the focus of attention. RCEP is of no exception. In the case of RCEP, as the tariff elimination is taking effect progressively to cover over 90% of the goods in the next 20 years, the zero-tariff advantage appears somewhat less impressive. Besides, the inconsistency of tariff codes under the present RCEP framework and the long standing ASEAN+1 tariff further complicates the matter. In this respect, confusion is anticipated to exacerbate if the RCEP tariff code is yet to be ready to go consistent with the outcome of the ongoing ACFTA ( ASEAN China Free Trade Area ) 3.0 negotiation.

Nonetheless, none of these shortcomings could ever eclipse the significance of RCEP in taking the regional economic integration to a higher plane. This brain-child of ASEAN has transformed the economic landscape worldwide by positioning the Asia-Pacific region as the new centre of gravity of global trade. Parallel to this, what took the world by storm is that the impasse of the inconclusive tripartite Free Trade Agreements ( FTA ) between China, Japan and Korea was finally brought to an end with the RCEP coming into fruition.

To the business community in most of the emerging economies within the region, the mega trade deal is a real game-changer. Aside from exposing the entrepreneurs to the vast investment opportunities and greater market access, the benefits gained from trade liberalisation are well poised to immerse them in the contemporary global trading ecosystem. These include the removal of non-tariff barriers, increased trade facilitation and enhancement of business environment through regulations relating to intellectual property protection, government procurement practices and e-commerce.

Yet the naysayers remain consistently critical of the inadequacies of RCEP by benchmarking it against the CPTPP. One of the frequently raised concerns is the deficit in labour standard deemed acceptable to the West.

However, ASEAN as the initiator of RCEP has to stay true to its original vision and mission of founding such a mega FTA. The RCEP is not intended to function on the template of a ” Rich Nations Club” . But rather it’s an instrument dedicated to narrowing economic disparity within ASEAN, in addition to advancing regional economic integration. The provision of differential treatment accorded to the three least-developed member states of ASEAN, namely Laos, Myanmar and Cambodia, is a testament to such a cognizance.

In pursuit of equitable development under the framework of RCEP, the least-developed trio is anticipated to initiate the necessary domestic legislative adjustments to keep in compliance with the RCEP regulations within specific time frame. At the same time, upskilling of their respective workforce is absolutely necessary to meet the new market demands in the changing paradigm.

While the world focus of attention is generally glued to ” who will benefit the most in RCEP”, perhaps one of the key challenges to the signatories, albeit not in the hot spot of hogging international limelight, is still related to the level of commitment to translating the objective of ” economic and technical cooperation ” into deeds.

The aspiration, as is elaborated in Chapter 15 of the RCEP Agreement, is likely to be a real litmus test to the inclusivity and symbiosis underpinning the mega trade deal. And all eyes will naturally turn to China and the other 4 developed economies, namely Japan, Korea, Australia and New Zealand, in the fold as they have the economic might and technical capacities to do so.

To the emerging economies in ASEAN, the most pressing need is none other than ” technical empowerment ” through capacity-building under the framework of technical cooperation. While “economic cooperation” has always been an euphemism for the export-led economies to gain market access into the import-dependent countries.

In the case of RCEP, ASEAN provides a huge ready market for a wide gamut of products , ranging from agricultural produce to industrial innovations and digital gadgets, to the major export-led economies. The industrial powerhouse in the Northeastern Asia, comprising China, Japan and Korea, constitutes the major source of supply chain to the consumer market in Southeast Asia. But this could hardly meet the increasing innovation-driven demands in the latter.

Having been disappointed time and again by the unfulfilled pledge of ” technology transfer” in the past decades, the only viable solution now lies in the development of homegrown innovations through capacity building, preferably aided by the Northeastern Asia trio. And this can only be made possible through genuine ” economic and technical cooperation ” under the RCEP framework.

All in all, RCEP is not designed as a platform to enrich only the privileged few well equipped with competitive edges. Neither should it be gauged solely by the GDP statistics. In essence, it is an inclusive mega free trade deal that seeks to share the dividends of economic development in pursuit of common prosperity across the region. After all, it is a milestone of hard earned triumph for multilateral cooperation
and free trade amid escalating economic


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