Regional Comprehensive Economic Partnership (RCEP)

RCEP has been projected as a better alternative to the TPP (Trans-Pacific Partnership), especially given the withdrawal of a major power from the latter. The TPP’s original twelve signatories do not include China and India, while the RCEP includes both powers and fourteen other states. It is commonly referred to as the ‘ASEAN + 6’ agreement – the ten states in ASEAN, China, Japan, South Korea, India, Australia and New Zealand. There is a general misperception that RCEP is a China-led initiative. It is important to have an appreciation and understanding of the fact that this is an initiative led by ASEAN. There have been 23 rounds of negotiations to date and more are expected in the near future. RCEP could not be concluded at the 33rdASEAN Summit held in Singapore last month (November). It is expected to come into force sometime in 2019. If RCEP succeeds, it will be the world’s largest trading bloc, accounting for 25% of global GDP, 30% of global trade and about 3.5 billion people. 

RCEP claims to be a ‘vehicle for economic integration and inclusive development’. Components of this agreement are as follow:

  1. Trade in Goods
  2. Rules of Origin (ROO)
  3. Customs Procedures and Trade Facilitation (CPTF)
  4. Sanitary and Phytosanitary (SPS) Measures 
  5. Standards, Technical Regulations and Conformity Assessment Procedures (STRACAP)
  6. Trade Remedies
  7. Trade in Services
  8. Financial Services
  9. Telecommunications Services
  10. Movement of Natural Persons (MNP)
  11. Investment
  12. Competition
  13. Intellectual Property (IP)
  14. Electronic Commerce (E-commerce)
  15. Small and Medium Enterprises (SMEs)
  16. Economic and Technical Cooperation (ECOTECH)
  17. Government Procurement (GP)
  18. Dispute Settlement (DS)

Upon closer examination of RCEP, it appears to prioritise capital-intensive initiatives over labour-intensive initiatives. Meaning, the trade of goods is prioritised over the trade of services and the MNP. The movement of natural persons would include commitments ‘regarding the temporary entry and temporary stay of natural persons from one Participating Country into another Participating Country for the purposes of facilitating trade and investment’. It also covers transparency and immigration formalities for categories of natural persons included in the Participating Country’s commitments. The MNP could directly impact the frequency and intensity of migrant flow within the potential RCEP region. Negotiation on the MNP is ongoing and it appears to be a secondary issue.

We have learnt from Markusen’s economic models that ‘gains from trade can be maximised if the liberalisation of trade and migration go hand in hand’. Trade and migration are complements, not substitutes. Gains from trade depend on labour mobility.  The EU model could be used as a reference point for RCEP’s negotiations on trade liberalisation, together with the MNP. It provides evidence that liberalised trade causes only a modest increase in migration. This should remove the unfounded fear of a surge in migration. These are some effective EU instruments:

  1. Guarantee free movement of workers.
  2. Implement policies to overcome obstacles to migration among member countries.
  3. Facilitate the movement of workers of any skill level.
  4. Bureaucratic and institutional procedures match the policies they are meant to operationalise (e.g. mutual recognition of common forms of documentation and the relative streamlining of entry processes).
  5. Portability across EU member countries of social rights and entitlements (e.g. access to health care, social welfare, pensions and child allowances).
  6. Intra-EU migrants are subject to the same taxation regimes as host country nationals.
  7. A common currency among many EU member countries and a shared job-search infrastructure have significantly reduced migration costs.

Liberalisation of trade in services and the MNP could maximise the benefits of the AEC (ASEAN Economic Community) and the RCEP simultaneously. Countries that receive more migrants with trade integration are likely to receive even more migrants with reduced labour mobility costs. This would mean a far more effective economic contribution to both sending and receiving states.

A potential danger to trade liberalisation is the agricultural sector in developing states. Hundreds of thousands of poverty-stricken farmers stand to lose their only source of income if tariffs are removed and they are unable to make any profit. It has been reported that thousands of farmers in India commit suicide every year due to this. Moreover, civil society groups, activists and NGOs in RCEP’s developing states (e.g. Philippines, Cambodia, India, Vietnam, Laos and Myanmar) have been vehemently protesting to RCEP negotiations. Their concerns are genuine and justified. Such concerns should be addressed.

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