The joint media statement of the recently concluded meeting of ministers of the Regional Comprehensive Economic Partnership (
RCEP) Agreement, held in Singapore on August 30-31, 2018, concluded with the following:
The Ministers underscored the significance of establishing the world’s largest free trade-area among 16 diverse participating countries under RCEP amidst the escalating trade frictions, and took it as a collective responsibility to uphold a global trade environment that is open, rules-based, and inclusive. To this end, the Ministers reaffirmed the commitment to see RCEP through its conclusion and achieve a comprehensive, high-quality and mutually beneficial economic partnership agreement, notwithstanding rising uncertainties in the global trade environment.
Coming close on the heels of President Trump’s threat to withdraw from the WTO, this is perhaps the vote of confidence that the world of trade really needs today.
Why RCEP Matters
The RCEP is the agreement between the 10 Members of the ASEAN (Singapore, Malaysia, Indonesia, Thailand, Philippines, Cambodia, Vietnam, Brunei Darussalam, Laos and Myanmar) and India, China, Australia, New Zealand, Japan and South Korea. Of these, India has bilateral free trade agreements with the ASEAN, as well as standalone FTAs with two ASEAN members- Singapore and Malaysia. India also has FTAs with two of the five non-ASEAN members- Japan and Korea. This only leaves Australia, New Zealand and China as the countries with which India does not have a FTA. Indeed, the China factor has been a key issue of concern, not just for India, but for other RCEP participating countries (
RPCs) as well. Concerns regarding this, arguably, can be addressed through carefully crafted market access commitments and tariff concessions in the agreement itself.
Against the background of the worldwide trend of increasing protectionism, India and all other RPCs putting their faith in the RCEP, is an act that is high in symbolism. The content of actual commitments is something that remains to be seen, given that it is arguably easier to have higher degree of ambition in smaller bilateral deals, rather than in larger multi-party deals.This is true about the Trans-Pacific Partnership Agreement (
TPP) as well, which after the U.S. abandonment, became the Comprehensive and Progressive Agreement for the TPP, or CP-TPP. In substance, the scope of commitments in respect of goods, services and investments, represents a lower level of ambition, in comparison with agreements that have been achieved at the bilateral level by several of the CP-TPP parties. But where the CP-TPP (and its earlier TPP avatar), scored high, was on the symbolism scale. This was in respect of:
The large geographical spread involving 11 countries across four continents- Australia, New Zealand, Japan, South Korea, Canada, Singapore, Malaysia, Vietnam, Brunei, Chile and Peru;
Coverage of “Investment” as part of the agreement- an aspect which the WTO does not include so far;
Disciplines on fisheries subsidies- an aspect which has eluded the WTO so far;
Inclusion of e-commerce, as well as non-trade matters such as environment and labour. Though each of these remains an area where there is much debate on the pros and cons of inclusion in a trade agreement, their incorporation into the CP-TPP enabled the overall projection of the agreement as a significant step over the WTO.
Trade agreements matter because they signal an affirmation to businesses regarding a rules-based predictable framework that will not be exposed to the uncertainties and risks of whimsical actions of a country. As India and the other RPCs move forward into the RCEP, the signalling they have made is of an agreement with the largest geographical spread, just next to the CP-TPP. Seen against the background of escalating trade tensions worldwide, this is a powerful signal that rules of trade matter and the economies representing approximately 39 percent of the world GDP at $49.5 trillion, have given such rules a vote of confidence.
R.V. Anuradha is a partner at Clarus Law Associates, and specialises in international trade and investment laws.