RCEP Gives Positive Signal, Needed by World
The RCEP was finally established after the conclusion of negotiations on the 20 chapters in the free trade agreement.
Finally - eight years after it was brought up for the first time at the 2011 ASEAN Summit meeting under Indonesian leadership, and six years after negotiations began in 2013 - the East Asia Regional Comprehensive Economic Partnership agreement (RCEP) was born.
The RCEP was finally established after the conclusion of negotiations on the 20 chapters in the free trade agreement. The RCEP negotiations involved 16 countries including 10 ASEAN countries and ASEAN trade partners namely China, Japan, South Korea, Australia-New Zealand, and India.
Although India has not yet joined, the conclusion of the agreements and negotiations for the other 15 members remains very important for the world, the Asian region and Indonesia for several reasons.
First, the conclusion of the negotiations gave a strong and positive signal amid the uncertainty caused by the trade war between the United States and China. The trade war increases risks for the global economy because it slows global economic growth to 3 percent by 2019; reduces world trade growth to 2.6 percent compared to 4.6 percent in 2017; and leads to the decline in investment flows by 72 percent.
Positive signal
In a joint statement issued by the head of the RCEP member states, the conclusion of the RCEP negotiations gave a positive signal to the world about leadership and "joint commitment to an open trade and investment climate in the region".
Second, the conclusion of the 20 chapters of the RCEP agreement will provide a comprehensive, quality and quality agreement. Those who do not understand the process, enthusiasm, and evolution of RCEP may focus on aspects of the weakness rather than the strengths.
The first shortcoming that was highlighted was that India is still reluctant to join it. However, without India, RCEP remains the world\'s largest regional agreement, which contributes 30 percent of the world\'s population, shares 29 percent of the world\'s total gross domestic product (GDP), 27 percent of world trade, and 29 percent of foreign investment destinations.
The Comprehensive Progressive Trans-Pacific Partnership (CPTPP) group, with 11 countries after the US left, only contributes 7 percent of the world\'s population, 13 percent of GDP, 15 percent of trade, and 20 percent of FDI destinations.
The impact of India\'s reluctance to join the RCEP is quite different from the US\'s withdrawal from CPTPP, in terms of its influence on members, agreements and impacts. However, there is a possibility that India will join, if the problems it faces - especially related its concerns about competition with the China can be overcome, besides political commitment to reform amid slowing Indian economy.
Less than two years later it can be resolved. Thailand formally joined the ASEAN-Korea FTA.
ASEAN have already adhered to the “minus x” principle. Even though it is rarely used, it was indeed created so that it can continue a process or negotiation if most can agree. One case of the “minus x” that ever happened was the 2008 ASEAN-Korea Free Trade Agreement in which when it was signed it did not include Thailand because of sensitive issues related to rice issues between the two countries. Less than two years later it can be resolved. Thailand formally joined the ASEAN-Korea FTA.
Another shortcoming which is often highlighted is that RCEP\'s ambition and standard is often considered "lower" than CPTPP. Such criticism is indeed common, but does not take into account or understand that RCEP is a strategic framework for countries in East Asia to "start" consolidating the process of economic integration with comprehensive coverage consisting of 20 chapters, including traditional issues such as trade in goods, services and investment, and new issues such as electronic commerce.
RCEP formation was based on an agreement among ASEAN heads of states that it can continue to evolve to broader and deeper cooperation with the RCEP principle as the basis to further improve the agreements, introduce new issues, a gradual process, and open accession or not to close the opportunity for new members.
Gradually
ASEAN\'s history shows the benefits of a gradual and evolving process as each country\'s confidence builds. The ASEAN Free Trade Area (AFTA), in 1991, only included goods and reduced import duties, but it eventually accelerated the reduction of import duties to zero percent from 15 percent in 10 years.
In 2003, with the Indonesian leadership, the concept of the trade agreement between ASEAN was expanded into the ASEAN Economic Community. Third, the main key for ASEAN and RCEP is Indonesian leadership.
It is inseparable from Indonesia\'s leadership in a long and complicated negotiation process to maintain ASEAN consistency and centrality.
The seeds of consolidation of all FTAs, into one integrated region in East Asia under RCEP, were born when Indonesia led ASEAN in 2011. It is inseparable from Indonesia\'s leadership in a long and complicated negotiation process to maintain ASEAN consistency and centrality.
We must recognize the main role of the Director General of International Trade Negotiations, the Trade Ministry and his team, as the chair of the RCEP (Chair Trade Negotiating Council), which continued to oversee negotiations until RCEP was finally established.
It is not easy, but it has been greatly helped in the past three years with political support from President Joko “Jokowi” Widodo and the Trade Minister, who escorted him. What’s next?
Looking ahead, especially in 2020, good news and signals resulting from the conclusion of the negotiation process needs to be followed up with resolving various issues that have not yet been completed including those related to legal process for the text documents. We hope it can be signed by the 15 RCEP members in 2020.
Regarding India, its participation is a process and the country is also expected to join the RCEP in 2020. Certainly it is hoped that there will be political commitment from India to support what has been agreed and to use the RCEP process opportunity for the country’s reform program.
RCEP will be become the first mega-regional trade grouping if India participates, and like the experience of Indonesia and other ASEAN countries, participation in ASEAN and then in ASEAN-plus-one FTAs helped to provide a framework for the reform process and also the benefits for each country.
Certainly the important thing that needs to be finalized is a program of economic and technical cooperation that is designed to help countries with lower levels of development to pursue more advanced ones, and for India, responding to their concerns about competition with the China.
With the establishment of RCEP and become an evolving strategic base, it will become a strategic platform for the China-Japan-Korea to work together and handle economic issues in the East Asia Summit and the Indo Pacific, where ASEAN\'s role will remain central.
These developments will certainly be meaningful for our region. The important thing is to continue to show leadership in maintaining a trading and investment system based on clear rules of the game, and continuing the process of economic integration between us, but with benefits for the world.
Finally, Indonesia, the main task is to increase competitiveness and it becomes a priority so that it can benefit and becomes an important part of the value added chain that will develop under RCEP.
Mari Pangestu, The writer is a professor of international economics at the School of Economics and Business, University of Indonesia