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RCEP:ASEAN-led regional comprehensive economic partnership

Post time:2021-03-01 14:19:19
On November 15th, 2020, during the fourth RCEP Leaders’ Meeting synchronized with the East Asian Leaders’ Meeting, under the witness of the leaders of 15 member states including Premier Li Keqiang, the ten ASEAN countries, China, Japan, South Korea, Australia and New Zealand formally signed the Regional Comprehensive Economic Partnership Agreement (RCEP). The article entitled "RCEP: ASEAN-led Regional Comprehensive Economic Partnership" written by Xu Ningning, Executive President of the China-ASEAN Business Council eight years ago, published in the 10th issue of Magazine "Around Southeast Asia" in 2012 is now reprinted, for people to review today.
 In August 2012, the meeting of economic ministers of the ten ASEAN countries, China, Japan, South Korea, Australia, New Zealand, and India passed a resolution to jointly launch RCEP at the leaders' meeting held in November 2012. RCEP will be the latest product of the development of regional economic integration. This open cooperation mechanism will directly affect future regional economic cooperation and development, and will also create new opportunities and challenges for enterprise development.
 
RCEP will be the world's largest free trade area
RCEP is the abbreviation of Regional Comprehensive Economic Partnership. It was proposed by the ASEAN countries in order to strengthen the regional economic integration cooperation which also will be led by ASEAN in recent years. It is an organizational form for member countries to open markets to each other and implement regional economic integration. RCEP’s major member plans include countries that have signed free trade agreements with ASEAN, namely China, Japan, South Korea, Australia, New Zealand, and India. The 10 ASEAN countries have signed 5 free agreements with these 6 countries, among which Australia and New Zealand have signed a free trade agreement with ASEAN together. The current plan for the formation of RCEP is for these 16 countries. The other two member states of the East Asia Summit (the United States and Russia) have not established free trade relations with ASEAN, so they are not within the scope of the RCEP membership plan.
The goal of RCEP is to eliminate internal trade barriers, create and improve a free investment environment, and expand service trade. It will also involve intellectual property protection, competition policy and other fields. The degree of liberalization will be higher than the current free trade agreement that had reached by the ASEAN countries with the other six countries. RCEP has a population that accounts for about half of the world's total population, and its GDP accounts for one-third of the global annual output value. It will be the world's largest free trade area.
On February 26, 2011, at the 18th ASEAN Economic Ministers' Meeting held in Nay Pyi Taw, the ministers first discussed how to reach a comprehensive free trade agreement with their economic partners. The result of the meeting was a draft for the establishment of a Regional Comprehensive Economic Partnership (RCEP). At the 2011 ASEAN Summit, the leaders of the ten ASEAN countries formally approved RCEP. The meeting of economic ministers of the ten ASEAN countries, China, Japan, South Korea, India, Australia and New Zealand held at the end of August 2012 agreed in principle to form RCEP. Secretary-General of ASEAN Surin described the resolution as "a major achievement." Although due to territorial issues and differences in the principles of trade liberalization, the pace of all parties in RCEP may not be fully coordinated, it has become the consensus of all parties to reach a free trade agreement as soon as possible to increase economic vitality. The RCEP Goods Trade Working Group is currently in operation, and a service working group and an investment working group will be established.
 
Groser Minister of Trade New Zealand recently stated: “RCEP is a bold move to deepen the integration of this most dynamic region in the world.” Japanese media commented that RCEP will be a lifeline for Japan whose trade policy has reached a deadlock. Some analysts in Japan estimate that RCEP will boost Japan’s economy (GDP) twice as much as TPP. After the meeting of economic ministers of the 16 countries, Japanese Minister Yukio Edano said: "At first, I thought there would be many obstacles. But in the past year, things have progressed very quickly."
 
Propose the formation of RCEP
RCEP was proposed in response to the development of economic globalization and regional economic integration. Due to the hindrance of WTO negotiations to promote global free trade, in the face of some negative effects of economic globalization, in order to be invincible and have new development in the current world economy, it is necessary to strengthen regional economic integration. Countries implement "zero" tariffs, open markets to each other, and close cooperative relations to seek cooperative development. This phenomenon is manifested in East Asia:
——Ten ASEAN member countries made every effort to build the ASEAN Economic Community in 2015.
——ASEAN has established free trade zones with China, Japan, and South Korea, and has established free trade areas with Australia, New Zealand, and India.
——China-Singapore, Japan-Philippines and other countries have signed free trade agreements.
——Mainland China, Hong Kong and Macao Special Administrative Region governments have signed the " Closer Economic Partnership Arrangement " (CEPA) between the Mainland and Hong Kong and Macao respectively, and the Economic Cooperation Framework Agreement (ECFA) has been signed between the two sides of the Taiwan Strait.
——China and South Korea started negotiations on the establishment of a free trade area in 2012, and the negotiation of the free trade area composed of China, Japan and South Korea is planned to be launched in 2012.
——The TPP (Trans-Pacific Partnership) is an agreement led by the United States which includes four ASEAN countries——Singapore, Brunei Darussalam, Malaysia, and Vietnam. TPP covers a market with 800 million people and about 40% of the global economy. There are currently 12 countries participating in the negotiation.
——APEC's proposal in establishing an Asia-Pacific Free Trade Area lacks specific actions.
——Due to the negative effects of the European sovereign debt crisis and the general economic downturn in developed countries, in the past two years most of the imports and exports turnovers of ASEAN countries have been affected. Despite various challenges, the trade volume between ASEAN and China, Japan and South Korea is still growing rapidly. In 2011, it reached 678.2 billion US dollars, an increase of 26.2% over the previous year. The export and import volume of ASEAN countries with three countries above respectively increased 34.9% and 18%. In 2011, the total trade volume between ASEAN countries and China, Japan and South Korea accounted for 28.4% of their total trade volume. In 2011, China, Japan and South Korea’s direct investment in the ASEAN region continued to rise with a total investment of 41.2 billion U.S.D, an increase of 29.5% from 2010’s 31.8 billion U.S.D, accounting for nearly half of external direct investment in ASEAN in 2011 (46.2%) . In 2011, total trade volume of the 10 ASEAN countries was US$2.39 trillion, reached an increase of 16.8%. Industries, service industries, and infrastructure construction also experienced rapid growth. ASEAN expects economic growth in 2012 to be between 5.2% and 5.9%.
This is the background of proposing RCEP.
 
The main reasons for ASEAN to actively promoting the establishment of RCEP.
ASEAN's desire for establishing RCEP is mainly based on three reasons:
First is to consolidate and develop the leading role of ASEAN in regional cooperation. This leading role is related to the development and stability of ASEAN and also related to the promotion of ASEAN’s international status and to play a greater role in international affairs.
Second is to integrate and optimize the free trade agreements signed between ASEAN and China, Japan, and South Korea, and change the status quo of excessive rules and chaotic operations to build a high-quality free trade area.
The third one is to respond to the new changes that brought by the US-mandatory TPP and China, Japan and South Korea's plan to establish a free trade zone.
 
Can the ASEAN lead the establishment of RCEP?
Some people say that ASEAN is a " small horse-drawn big cart" in regional cooperation, and it won’t be able to move to a certain extent. Although the economic strength of ASEAN is not as good as that of countries such as China and Japan in RCEP, it is still possible for it to take the lead in building RCEP:
First, the six countries that have established free trade relations with ASEAN have all expressed their support for ASEAN to lead the establishment of RCEP. Those six countries are currently establishing free trade relations around ASEAN. This is one of the reasons why RCEP is easier to establish than TPP. The five "10+1" free trade area agreements and their implementation have laid the foundation for RCEP. And also established favorable basic conditions.
Second, China has supported ASEAN in playing a leading role in regional cooperation for many years, and the China-Japan-ROK Leaders' Meetings have also reached consensus on this in recent years. In the "Joint Declaration on the Enhancement of Trilateral Comprehensive Cooperative Partnership" adopted by the Fifth China-Japan-Korea Leaders' Meeting in May 2012, it stated: "Regarding ASEAN as an important partner in regional coopertation, we reaffirmed our support for ASEAN’s leading role in East Asia cooperation. We expressed our willingness to make joint efforts to help the development of ASEAN countries and community building of ASEAN..... With regard to advancing economic integration in East Asia, we reaffirmed that the ASEAN Plus Working Groups need to be established without delay to accelerate the discussion on a regional comprehensive economic partnership towards the commencement of negotiations, taking into account the initiatives of East Asia Free Trade Area and Comprehensive Economic Partnership for East Asia."
Third, although the degree of openness among RCEP members will be higher than that of the five free trade agreements that have been signed with ASEAN, they will still try to take into account the comfort and feasibility of each member state, and take into account the gradual and transitional nature. Unlike the TPP, which set the US-led excessive opening requirements when it came up and made the member states felt very difficult to follow.
 Fourth, in accordance with the estimated timetable for the formation of RCEP, negotiations will be initiated at the beginning of 2013 and completed at the end of 2015, before entering the implementation phase. The ASEAN Economic Community will be completed in 2015, which has created favorable conditions for the formation of RCEP.
 
The difference between RCEP and the ASEAN Plus Six Free Trade Area?
According to ASEAN, both RCEP and “10+6” are free trade areas composed of 16 countries, but they are different in nature. ASEAN believes that in the trend of regional economic integration in recent years, China has advocated the establishment of an ASEAN-China, Japan and Korea ("10+3") free trade area, and Japan has advocated the establishment of an ASEAN-China, Japan, South Korea, Australia, India and New Zealand free trade area which is also called “10+6” Free trade zone. ASEAN is very embarrassed about this, but now RCEP is a compromise. RCEP is based on the voluntary principle of the six countries that have signed free trade agreements with ASEAN. Joining in or not is based on the own consideration of those six countries. That is to say, RCEP may not have 16 member countries. The ten ASEAN countries had already included in the RCEP. China, Japan, South Korea, Australia, and New Zealand have all made it clear that they will join RCEP, while India may not join, mainly because of their concerns about the pressure on the Indian industry after the opening of the market. In July 2012, Prime Minister of Singapore Lee Hsien Loong encouraged India to join RCEP when he visited that country. Immediately after the meeting of economic ministers of ASEAN and the 6 countries held at the end of August, the Indian minister and other ministers also reached the " Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership". The number of member states that RCEP has depends on the specific negotiation results that enter the negotiation stage.
 
Why is China willing to join the RCEP?
China is willing to join RCEP mainly because three reasons:
First, the formation of RCEP conforms to China's foreign policy of "good neighborliness, peace and prosperity", and conforms to China's claim that ASEAN plays a leading role in regional cooperation.
Second, RCEP is conducive in improving the degree of economic integration in the region, and this integrated development is conducive to the stability and prosperity of the region.
 The third is that the formation of RCEP is feasible. There are already five "10+1" free trade area agreements. There is no such high standard as the TPP in terms of access. On September 9, 2012 ,at the (APEC) Leaders' Meeting, Chinese President Hu Jintao emphasized: "We should fully consider the differences and diversification of the economic development of each member state ... and advance the process of economic integration in the Asia-Pacific region step by step."
 
The United States currently does not oppose the formation of RCEP by ASEAN
The TPP led by the United States and the RCEP led by ASEAN are different in the scope of openness, negotiation process, and degree of integration. A few days ago, the United States stated that TPP and RCEP are not contradictory, and America has not explicitly stated that it opposes or supports RCEP so far. US Trade Representative Ron Kirk, who attended the ASEAN and US Ministerial Meeting in August 2012, said that there is enough room for the two agreements to coexist in the Asia-Pacific region. Kirk said: "We think they are complementary, not necessarily competitive." In today's world, what kind of rules should be formulated to jointly sign multilateral free trade agreements, form economic communities, and open markets to each other in various forms.  Each country has its own choice whether to join and what to do.
The United States is ASEAN’s fourth largest trading partner and ASEAN’s third largest source of foreign capital; and ASEAN is the fifth largest trading partner of the United States in goods. On August 30, 2012, the first meeting of economic ministers of ASEAN and free trade area partners was held. ASEAN economic ministers and U.S. Trade Representatives convened a consultation meeting to discuss deepening the economic and trade relations between ASEAN and the United States. The "Joint Statement" issued at the meeting pointed out that ASEAN and the United States are discussing the establishment of close cooperation in the economic, trade and investment fields. ASEAN and the United States emphasized that close cooperation between the two sides is essential to safeguarding world and regional economic development.
Countries weigh the pros and cons in order to make choices whether to join the free trade organization
Opening up markets and intensifying economic cooperation are measures taken by countries to respond to unfavorable factors in the world economic situation and seek new development. They are measures taken by countries to develop and consolidate international relations and enhance their international influence. However, opening the market has advantages and disadvantages for the industries of various countries, and weighing the advantages and disadvantages is an inevitable requirement for opening the market. Countries need to both considering the reality of open markets and have a long term vision, weigh the affordability of open markets to the industry with the possibility of industrial upgrading, and combine open markets with industrial structure adjustments, otherwise it will be difficult to meet the expectations of open markets purpose.
When considering which free trade organization to join actually is to consider whether it is in the interests of one's own country, while taking into account the interests of other member states. It should be a consensual thing based on equal footing, and mutual benefit. Be forced to do something won’t bring success, and every country should follow the principle of "all for me, and for all". It is necessary to consider the feasibility of forming a free trade organization. If the degree of mutual openness is not enough, joining the free trade area will have little meaning. If the degree of openness is too high, or the conditions for joining are too complex, and it is divorced from reality, it will be difficult to implement.
Although signing a free trade agreement can promote economic cooperation and strengthen the political relations among member states, if the free trade agreement is too politically aimed, it will violate the economic laws of the free trade area and distort normal economic behavior.
How to establish RCEP?
1. ASEAN should continue to spare no effort to build the ASEAN Economic Community. RCEP is related to the future of ASEAN. The success or failure of RCEP largely depends on ASEAN's promotion of its own integration. Therefore, it is very important to establish the ASEAN Economic Community (AEC) in 2015. Up to now, about 73% of the cooperation agreements in the construction of the ASEAN Economic Community have been approved by the member states. The biggest problem at present is how to implement these agreements as soon as possible. The establishment of an economic community in the next two years is inseparable from the efforts of ASEAN countries and the help of various dialogue partners. ASEAN needs to seek the support of the six countries that have established free trade relations with ASEAN.
2. Formulate appropriate RCEP rules and processes to overcome difficulties. The difficulty of the integration of free trade agreements on the basis of five "10+1" FTAs is that there is no mutual open market for FTA countries in RCEP, such as: China-India, China-Japan, Japan-Korea, India-Australia, New Zealand. The area where RCEP can make changes and maximize its potential benefits is "service trade." Liberalization of the service industry is a very sensitive issue in every country. If RCEP adopts the process of broader industry liberalization and develops industries with great potential, it can produce faster results (for example, tourism). In addition, non-tariff barriers (NTB) are important issues that need to be resolved in trade integration.
3. Industrial cooperation should be the focal point. Strengthening industrial cooperation is the vitality of RCEP, the foundation for all countries to open up their markets to achieve a win-win situation, a measure to narrow the economic gap within RCEP, and the fundamental guarantee for the sustainable development of this wider FTA. RCEP countries all regard industrial structure adjustment and industrial upgrading as a major measure to develop their own economies. Opening the market to the outside world will not only bring opportunities for domestic industrial development, but also bring pressures and challenges to industrial development. With the help of preferential policies in the free trade zone, seek advantages and avoid disadvantages, maximize strengths and circumvent weaknesses, adjust industrial structure in a wider space, create an industrial chain with complementary advantages between countries, vigorously enhance the value of the industrial chain in RCEP and extend the industrial chain, and promote the opening of the industry Upgrading should become an important part of the RCEP.
4. While RCEP is being formed, five "10+1" FTAs should be further improved. They should promote each other and cannot be biased. Taking the China-ASEAN Free Trade Area as an example, there are a lot of work to be improved, such as industrial cooperation, interconnection cooperation, investment cooperation, trade facilitation cooperation, standards, intellectual property cooperation, sub-regional economic cooperation, and further opening of markets.
5. Strive for the support of relevant countries outside RCEP to reduce resistance. Outsiders should feel that the establishment of RCEP is not only conducive to the economic growth of internal countries, but also conducive to the growth of the world economy.
We should aware that forming the RCEP is not a simple thing. It needs the comprehensive strategic awareness of the member states, determination to cooperate, positive actions and working together to achieve a win-win situation.
Written on 17th September 2012. Published on the 10th issue of magazine "Around Southeast Asia".
 
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