The Regional Comprehensive Economic Partnership (RCEP) – Opportunities and Challenges for Viet Nam
The Regional Comprehensive Economic Partnership (RCEP) is a regional free trade agreement that will complement and build upon Viet Nam’s existing free trade agreements (FTAs) together with other 14 Indo-Pacific countries. As the name suggests, the RCEP is comprehensive in its coverage, attempting to regulate trade and investment liberalization. It exceeds the minimum standards prescribed by the World Trade Organization (WTO)2. RCEP negotiations were launched in 2012 between the Association of Southeast Asian Nations (ASEAN) and ASEAN’s free trade agreement partners (Australia, China, India, Japan, New Zealand and Republic of Korea). On 15 November 2020, ministers from 15 countries, at the 4thRCEP Leaders Summit excluding India signed the Agreement.
The RCEP Agreement is an unprecedented mega regional trading arrangement that comprises a diverse mix of developed, developing and least developed economies of the region. As an agreement that would cover a market of 2.2 billion people, or almost 30% of the world’s population, with a combined GDP of US$ 26.2 trillion or about 30% of global GDP, and accounts for nearly 28% of global trade, the RCEP as the world’s largest free trade arrangement, represents an important step forward towards an ideal framework of global trade and investment rules.
The RCEP is the most ambitious free trade agreement initiated by ASEAN, which contributes to enhancing ASEAN centrality in regional frameworks and strengthening ASEAN cooperation with regional partners. ASEAN is at the centre of the RCEP, and the 15-member FTA is as much about further integrating ASEAN as a group, as it is about deepening and broadening economic integration amongst ASEAN and those five non-ASEAN countries. The objective of launching RCEP negotiations was to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN Member States and ASEAN’s FTA partners.
The RCEP covers traditional trade issues including trade in goods, services and agriculture, customs, investment, economic and technical cooperation, competition, dispute-settlement mechanisms, tariffs, and trade subsidies – but this represents only a small portion of the agreement. The agreement even goes far beyond trade and seeks to impose an entire regulatory framework on member states that could dictate the extent to which governments can regulate every part of the economy in which the private sector operates. It may also give wealthy countries and large corporations the authority to reach across borders to impose constraints on a vast array of domestic non-trade policies. These would impact among other things: environment, agriculture, telecommunications, labour, and intellectual property.
Before negotiations began, all countries had agreed on the goal of achieving a comprehensive, high-quality free trade agreement that benefits all parties. In comparison with the WTO rules, the RCEP incorporates a balanced mix of WTO-plus commitments to further lower at-the-border trade barriers and WTO-extra provisions aimed at addressing behind-the-border regulatory issues. Going forward more significantly, the RCEP has the potential to serve as regional trade standard setter as the rules it settles on will probably become benchmarks and legal precedents for future trade deals in Asia and beyond. This is especially the case when the RCEP opens up for new member applications from across the globe.
Overall, the RCEP will create the most populous trade area in the world, and it joins together several of the largest economies in the world, like China, Japan, and South Korea. It provides a major signal to investors that the region is still committed to multilateral trade integration.
Among partners, there are those that have signed FTAs with each other, meaning that they have committed to opening their market for goods and services to a certain extent. All 15 countries achieving a common level of market opening is quite difficult. In addition to the large scale of the agreement, levels of economic development among member countries are also different, even among ASEAN countries while competition policy, investment, and intellectual property rights also differ. Therefore, during the negotiations, all parties sought to find solutions and at the same time harmonized the interests of all.
The 20 chapters under negotiation extended to intellectual property, standards and labelling, telecommunications, competition policies, financial services, e-commerce governance and more recently, government procurement. Included in the agreement are also issues which have not been included in WTO which is the only global international organization dealing with the rules of trade between nations, largely because developing countries have argued that the proposals for the inclusion of these areas are detrimental to their interests. Thus, the RCEP has been the most expensive and complicated regional trade agreement that developing countries have ever negotiated, more than any previously proposed trade agreement.
Author: Vu Ngoc Binh