The process of integrating key economies in the Asia Pacific region is well underway. The conclusion of the Trans Pacific Partnership (TPP) negotiations was a big step forward. Another set of negotiations making progress but with a lower public profile is the Regional Comprehensive Economic Partnership (RCEP).
RCEP involves some TPP economies, including New Zealand, Australia, Malaysia and Viet Nam plus all the other members of ASEAN and the giant economies of China, Japan, South Korea and India. Collectively these 16 economies encompass over 3 billion people and GDP of US$21 trillion; and they already take 60% of New Zealand’s goods exports.
Clearly RCEP has the potential to be a very significant trade agreement if it lives up to its goal of being a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement. RCEP seeks to build on ASEAN’s network of bilateral free trade agreements (FTAs). The trouble is that some of these FTAs weren’t all that ambitious to start with. At the half way stage of the RCEP talks, there are signs that the market access provisions will be less exciting than TPP, cutting tariffs on 65% of goods at the start and rising to 80% by the time the deal is fully implemented in 10 years. That would leave 20% of tariff lines untouched which is hardly ideal.
To live up to its potential, RCEP’s market access provisions must cover all items of export interest to New Zealand and the other participating economies. The business community also needs liberal and workable rules of origin in order to take advantage of any new market access opportunities. The RCEP also needs to address the plethora of non-tariff barriers that impede access to markets in many sectors.
There is still time to achieve these outcomes. RCEP’s timeframe was recently extended into 2016. The next negotiating round will take place on 15th-19th February in Brunei. The next few months would be an excellent time for the business community to advocate to the governments involved in RCEP to lift their sights and push harder for liberalization of goods and services trade in the region. Otherwise there is a risk that RCEP won’t live up to its tremendous potential as a building block towards a free trade area of the Asia Pacific.
This blog was prepared by Fiona Cooper Clarke, Associate Director of the NZ International Business Forum.