ASEAN and its five partners signed the world’s largest agreement. As a symbol of multilateral trade, the Regional Comprehensive Economic Partnership (RCEP) poses an uneasy situation.
By
Kompas Team
·5 minutes read
NHAC NGUYEN/AFP
Vietnam\'s Prime Minister Nguyen Xuan Phuc (R) is pictured on a TV monitor clapping next to other country signatories during the signing ceremony for the Regional Comprehensive Economic Partnership (RCEP) trade pact at the ASEAN summit that is being held online in Hanoi on November 15, 2020.
ASEAN and its five partners signed the world’s largest agreement. As a symbol of multilateral trade, the Regional Comprehensive Economic Partnership (RCEP) poses an uneasy situation.
JAKARTA, KOMPAS —The 37th ASEAN Summit wrapped up on Sunday (15/11/2020) with a historical event. Ten ASEAN country members, as well as five partnering countries signed the largest trade agreement in the world, which is the Regional Comprehensive Economic Partnership (RCEP).
Indonesia plays an important role in the negotiation process of the partnership. Not only as the initiator when the country chaired ASEAN in 2011, Indonesia has also been the coordinator of the negotiations since March 2013. President Joko “Jokowi” Widodo dubbed Sunday a “historical day”.
“This signing is only the beginning. We will see a long and steep road in front of us as we try to implement it [the RCEP]. This requires political commitment at the highest level,” said the President, who attended the virtual summit from Bogor Palace, as stated by Foreign Minister Retno LP Marsudi.
Besides opportunity, the RCEP poses a challenge for Indonesia. Besides 10 ASEAN country members, the RCEP was also signed by China, Japan, South Korea, Australia and New Zealand. With a market of 2.2 billion people — nearly 30 percent of the world\'s population — and a combined US$26.2 trillion, 30 percent of the world\'s gross domestic product (GDP), RCEP is the world\'s largest trade partnership.
BPMI SEKRETARIAT PRESIDEN
Foreign Minister Retno LP Marsudi.
The RCEP deal will improve market access as the tariffs and quotas of more than 65 percent of traded goods will be eliminated. “In addition to a specific section on the goods and services trade and investment, RCEP also includes chapters on intellectual property, electronic commerce. Competition, small and medium enterprises, economic and technical cooperation and government spending,” leaders of RCEP signatory countries stated.
Through the RCEP, three giant South Asian economic rivals, namely China, Japan and South Korea, are joined in a trade partnership for the first time. “This [agreement] is an important part of the region’s commitment to realize ASEAN centrality in the Indo-Pacific region,” President Jokowi said.
“The results of the RCEP negotiations send a strong message that emphasizes ASEAN’s main role in supporting the multilateral trading system, creating a new trade structure in the region, enabling sustainable trade facilitation, revitalizing the supply chain disrupted by the COVID-19 pandemic and helping the post-COVID pandemic economic recovery,” said Vietnamese Prime Minister Nguyen Xuan Phuc.
However, the RCEP also poses challenges, including for Indonesia. The Trade Ministry\'s director general for international trade negotiations, Iman Pambagyo, who was involved in the RCEP negotiations, said that Indonesia would experience a tighter competition in several sectors, including the telecommunication, information technology, textile, footwear and automotive sectors.
AFP/NHAC NGUYEN
Japan\'s Foreign Minister Toshimitsu Motegi addresses counterparts from ASEAN, China and South Korea through a live video conference during the 21st Association of Southeast Asian Nations (ASEAN) Plus Three Foreign Ministers\' Meeting, held online due to the COVID-19 novel coronavirus pandemic, in Hanoi on September 9, 2020. (Photo by Nhac NGUYEN / AFP)
Pandemic recovery
For ASEAN country members, the RCEP agreement is expected to help them recover from the pressure caused by the COVID-19 pandemic. The pandemic has caused ASEAN members, including Indonesia, to fall into recession.
It is hoped that the signing of the partnership will help reduce the economic cost of the recovery, “COVID-19 has reminded the region of why trade matters and governments are more eager than ever to have positive economic growth," said Deborah Elms, executive director of the Asian Trade Centre, a Singapore-based consultancy.
The RCEP is expected to encourage companies to invest more in the region, including in building supply chains and services as well as creating more jobs.
Regardless, a number of observers said the RCEP would strengthen China’s position in expanding its geopolitical influence of drafting its trade regulations in the region. “[The RCEP] solidifies China\'s broader regional geopolitical ambitions around the Belt and Road initiative", said Alexander Capri, a trade expert at the National University of Singapore Business School, referring to Beijing\'s signature investment project that envisions Chinese infrastructure and influence spanning the globe. "It\'s sort of a complementary element," Capri continued.
Iris Pang, ING chief economist for Greater China, added that the RCEP could help Beijing cut its dependence on overseas markets and technology. Gareth Leather, senior Asian economist for Capital Economics, said in a report that the trade partnership would cast China – by far the biggest market in the region with more than 1.3 billion people – as a “champion of globalization and multilateral cooperation” and give the country greater influence over rules governing regional trade.
China\'s Xinhua News Agency quoted Chinese Premier Li Keqiang as he lauded the RCEP as victory over protectionism. “The signing of the RCEP is not only a landmark achievement of East Asian regional cooperation, but also a victory of multilateralism and free trade," Li said in his speech.
Another Chinese state broadcaster CGTN, in its latest editorial stated that China put more emphasis on diplomacy and dialogue than confrontation. The RCEP, and other similar trade deals, is the testament of the country’s commitment. It is said that the RCEP was a large step forward for economic integration in Asia.
AFP/NHAC NGUYEN
Artists perform on stage at the end of the opening ceremony of the Association of Southeast Asian Nations (ASEAN) Summit, held online due to the COVID-19 coronavirus pandemic, in Hanoi on June 26, 2020.
The United States and China’s rivalry in several fields including trade, is singled out from the RCEP. Under President Donald Trump’s leadership, the US withdrew from another trade partnership, the Trans-Pacific Partnership (TPP).
India was originally part of the partnership but withdrew last year over concerns about cheap Chinese goods entering the country.
Regardless, ASEAN country members have left the door open for India should it choose to join. The RCEP will take effect once the signatory countries ratify it within the next two years.
