The outbreak of Covid-19 and the need for social distancing might delay the finalisation of RCEP talks.

The RCEP in 2020: Covid-19 and Another Casualty?

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The formation of Regional Comprehensive Economic Partnership (RCEP) is a lengthy process. Signing the RCEP in 2020 is not impossible although it can be undermined by the persistent spread of Covid-19.

The formation of free trade agreements (FTAs) is a lengthy process, and the Regional Comprehensive Economic Partnership (RCEP) is no exception. At the 3rd RCEP Summit in Bangkok on 4 November 2019, leaders from ASEAN-10 countries and ASEAN’s FTA partners (Australia, China, Japan, New Zealand and Republic of Korea) announced the conclusion of all 20 chapters of the agreement, with complete market access commitments on goods, services and investments. The negotiations lasted seven years from 2012 to 2019. Will the RCEP be signed in 2020, one year after the conclusion of negotiations?

There is a high chance of this happening, but this could be affected by the spread of Covid-19 pandemic. The RCEP is a regional agreement that aims to liberalise trade and investment, and to strengthen economic cooperation among Asia-Pacific economies. As the biggest FTA in the world, it has a huge market value of US$24.8 trillion involving 2.3 billion people

The timeline for signing the RCEP Agreement is determined by two factors: political will and the efficiency of the FTA-related legal review of RCEP partners. Since the 3rd RCEP Summit in Bangkok, it has gained strong political support from leaders of the RCEP-15 countries announcing their intention to sign the agreement in 2020. This commitment was further reaffirmed by the RCEP’s negotiating committee via a video conference in April this year. 

The RCEP-15 partners have gradually improved the efficiency of FTA-related legal review, which is likely to take less than one year. Before signing the RCEP Agreement, all RCEP-related documents need to go through a highly technical legal review, which aims to ensure that the RCEP is consistent with what was agreed on and intended during the negotiations as well as with domestic laws and regulations. The process takes time depending on its coverage (i.e. trade in goods and services) and depth (i.e. non-tariff barriers, intellectual property rights). Although the main text of the agreement may be less than a hundred pages, its annexes could run into thousands of pages. 

Table 1: Relevant dates of the processes of RCEP and ASEAN+1 FTAs

Regional agreement

Commencement of negotiations

Conclusion of negotiations

Signature

Time lag (months) between conclusion and signature

Goods

Services

Goods

Services

Goods

Services

(1) RCEP

09-May-2013

04-Nov-2019

04-Nov-2019

On-going

On-going

NA

NA

(2) ASEAN+1 FTA:

             

 (2.1) ASEAN-China

Nov-2001

06-Oct-2003a

29-Nov-2004

14-Jan-2007

13

 (2.2) ASEAN-Japan

01-Apr-2005

Dec-2007

NA

26-Mar-2008

NA

3

NA

 (2.3) ASEAN-Korea

30-Nov-2004

13-Dec-2005b

24-Aug-2006

21-Nov-2008

8

 (2.4) ASEAN-ANZ

20-Mar-2005

28-Aug-2008

28-Aug-2008

27-Feb-2009

27-Feb-2009

6

6

Note: “NA” refers to “not applicable”; ASEAN-Japan FTA notified to the WTO did not cover trade in services. “–” refers to the unavailability of public information on the relevant dates of FTA processes. “ANZ” refers to Australia-New Zealand.  

Source: Author’s compilation from various sources, namely World Trade Organization’s Regional Trade Agreement Database, Asia Regional Integration Center of the Asian Development Bank’s Free Trade Agreements Database, ASEAN Secretariat’s Statement & Communiques Database, Ministry of International Trade and Industry of Malaysia’s Free Trade Agreement Database, and other media website such as bilaterals.org. The relevant dates of FTA processes contain specific links to these data sources.

A comparative analysis of the relevant dates of ASEAN+1 FTA processes reveals that ASEAN and its FTA partners (except China) completed the legal review of the agreements within a year. This bodes well for the progress of the RCEP. As per Table 1, the analysis of time lags (between the dates of conclusion and signing of ASEAN+1 FTAs) reveals that ASEAN and its FTA partners spent less time in signing recent ASEAN+1 FTAs than the ASEAN-China FTA inked in 2007. The ASEAN-China FTA was signed in November 2004, about 13 months after the conclusion of its negotiations. But subsequent ASEAN+1 FTAs were relatively quicker in putting pen to paper. For example, the ASEAN-Australia-New Zealand FTA was signed six months after the conclusion of negotiations in August 2008. This suggests the improved efficiency of ASEAN and its FTA partners in dealing with the FTA-related legal review.

Since the 3rd RCEP Summit in Bangkok, it has gained strong political support from leaders of the RCEP-15 countries announcing their intention to sign the agreement in 2020.

However, the persistent spread of Covid-19 could either increase or reduce the chance of signing the RCEP this year. On the plus side, the RCEP-15 partners may use this opportunity to show their strong commitments in promoting trade, investment and economic cooperation. On the flip side, stakeholder consultations across ministries (i.e. trade, agriculture, justice) via video conferences (against face-to-face meetings) may not be an effective means in addressing trade issues potentially identified in the legal review such as testing and certification procedures, quota or minimum prices of imported products. 

Regardless of the date of signing the agreement, the implementation of RCEP will pave the way for ASEAN to strengthen the economic integration with its five FTA partners. In 2018, ASEAN’s total trade in goods – i.e. imports plus exports – was recorded at US$2.8 trillion, 34 per cent of which was accounted by the bilateral trade between ASEAN and five FTA partners and 23 per cent was accounted by the intra-ASEAN trade. Total inflows of foreign direct investment in ASEAN recorded at US$152.8 billion, 25 per cent of which was sourced from five FTA partners and 15 per cent was sourced from ASEAN countries.

In conclusion, the strong political will and the history of signing ASEAN+1 FTAs reveal that there is a high possibility that RCEP will be signed by the end of 2020. But the Covid-19 outbreak might well delay what will be a highlight in the year for regional economic integration.

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