The ministers of 16 Asia-Pacific countries in the last week of August agreed to reinvigorate the mega-trade deal titled Regional Comprehensive Economic Partnership (RCEP). They expressed their willingness to conclude some of the key elements of the prolonged negotiation by the end of this year. The full trade negotiation will continue into 2019 and even go beyond.
The detail of the key elements, however, is not available. Media reports indicated that the members have reached a kind of consensus on four areas of 18 chapters of the proposed bloc. These are: economic and technical cooperation, Small and Medium Enterprises (SMEs), trade facilitation and government procurement. Nevertheless, they have to spend some more time to consolidate the consensus and make it effective. The members also decided that the head of the states of the bloc will meet at the RCEP summit in November this year to endorse the consensus.
The remaining 14 areas include trade in goods and services, competition, investment, intellectual property, e-commerce and standards. Indian trade minister, however, asserted that the members have agreed to liberalise their services market and allowed movement of skilled professionals in the Singapore meeting. The members will send their offers in service trade by the first week of October.
It is to be noted that RCEP is a proposed comprehensive trade pact between 10 ASEAN countries and their six partners of the Free Trade Agreements (FTAs). ASEAN members are: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. The ASEAN's FTA partners are: Australia, China, India, Japan, South Korea and New Zealand. The bloc comprises 27 per cent of the world economy, 30 per cent of global trade, 26 per cent of foreign direct investment (FDI) flows and 45 per cent of the population. Once approved, it would create one of the largest free-trade zones in the world.
Interestingly, the news of the RCEP coincides with the US President's threat to pull out from the World Trade Organisation (WTO). On August 31, in an interview with the Bloomberg News, President Donald Trump blasted the WTO. "If they don't shape up, I would withdraw from the WTO," Trump said in the interview and termed the agreement establishing the body "the single worst trade deal ever made."
On the first day of his office on January 17, 2017, Trump pulled out his country from the Trans-Pacific Partnership (TPP) deal. It was the first mega-regional trade agreement negotiated by 12 countries. While the future of TPP became uncertain, another proposed mega-deal tiled Transatlantic Trade and Investment Partnership (TTIP) also got shelved. It was meant to create a mega-partnership among the US and the European Union.
After two mega-regional trade deals were shelved, it is the RCEP which is still prevailing as members are still negotiating the deal. The negotiation process has gained momentum during the last couple of months. Politically sensitive areas like agricultural goods and intellectual property are among the issues where consensus will be difficult to reach. Again, Japan and other advanced economies are in favour of high level of trade liberalisation while the emerging economies seek protections for their less-competitive domestic industries.
ASEAN has initiated the RCEP process on the basis of 'ASEAN plus One FTAs'. The economic and trade ministers of the 16 countries formally started the RCEP negotiation in 2012. Though initiated by the ASEAN, the deal is labelled as China-driven or China-backed to counter the US-backed TPP.
China is not one of the parties of TPP while seven among 16 members of RCEP are also the members of TPP. These are: Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. The other members of the TPP are: Canada, Chile, Mexico, Peru and USA. After the withdrawal of USA, the rest of the members have decided to continue the deal as TPP-11. They are even trying to include five more countries: South Korea, the Philippines, Indonesia, Taiwan and Thailand. All except Taiwan are members of RCEP. But many opine that without the US, TPP will not bring any gain as desired by the other members. Against the backdrop, moving ahead with RCEP appears more viable for the common members of both the mega-regional deals. The scope of RCEP is not as extensive as like TPP.
The negotiators claim that they are trying to move on 'package by package' to finalise the deal. The flexibility is critical to make the deal effective in the long run. Unlike TPP, the deal doesn't include any provision on labour, human rights and environmental protection-- keeping the bloc less ambitious.
However, one of the most problematic areas of the RCEP negotiation is the lack of transparency. While secrecy in trade negotiation is a common practice, many allege that too much secrecy in the negotiation process makes the deal contentious. Experts and civil society organisations in a large number of member countries termed the deal devastating. They argued that secretly negotiated deal would bring damaging consequences for standards in agriculture, services and manufacturing sectors. They also added that only the big businesses would tap the benefit of the deal at the cost of billions of people. Some even pointed out that secrecy in RCEP negotiation is mainly lead by China. Chinese trade and economic policies are generally known as less transparent and largely unpredictable.
The reinvigoration of RCEP has some implications for Bangladesh. The country's bilateral trade with the bloc stood at $33.57 billion in 2015 with trade balance heavily tilted against Bangladesh. The combined trade deficit with RCEP countries stood at $ 26.13 billion in 2015. It is not surprising as two major import sources, China and India, are the members of the bloc.
Three years back, two Bangladeshi economists (Dr Mohammad Masudur Rahman and Laila Arjuman Ara) carried out an exercise to determine the impact of RCEP deal on Bangladesh economy. Their findings were unveiled at an article published in South Asia Economic Journal. Their estimate showed that the RCEP FTA deal could have more negative effect on Bangladesh economy than both the TPP and TTIP. Country's exports may decline by about 0.06 per cent and the welfare loss may stand at US$ 80 million. They also showed that Bangladesh would experience a fall in real GDP by 0.67 per cent if the deal becomes realised.
Of course, these are a set of presumptions. The RCEP bloc is the source of the country's 70 per cent of total annual merchandise import. Once emerged as a mega free trade bloc, imports from the bloc may become challenging. At the same time, RCEP is the destination of 10 per cent of the country's merchandise export. Bangladesh needs to extensively review the progress of the RCEP negotiation. A detailed analysis is required to understand the possible impact on the country's international trade as well as the overall economy.
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