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All eyes on RCEP pact to light the way for global trade
THE multilateral trading system is facing mounting challenges in recent times as countries grow increasingly inward-looking and protectionist, with some blaming free trade for exacerbating domestic problems.
Distrust and perceptions of unfair trade practices have spiralled to greater global uncertainty, with the ongoing US-China trade war a prime example of what could go wrong as the world's two largest economies imposed tariffs on billions of dollars' worth of each other's imports.
But amid the gloom, one ambitious regional deal that offers to show the way for the rest of the world is the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade agreement (FTA) between the member states of the Association of Southeast Asian Nations (ASEAN) and six key partners which the bloc has existing free trade agreements with.
These six partners are China, South Korea, Japan, India, Australia and New Zealand.
Together with ASEAN's 10 member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), they account for almost half of the world's population, contributing about 30 per cent of global gross domestic product, and over a quarter of world exports.
RCEP talks have dragged on for five years as countries are still unable to pin down certain points such as the movement of labour and treatment of services.
But expectations are high for the culmination of the negotiations when the 16 leaders meet at this week's 33rd ASEAN Summit in Singapore.
When concluded, it will be the world's largest free trade area.
At the recent 6th RCEP Inter-sessional Ministerial Meeting in Singapore, trade ministers from the grouping had pledged to substantially conclude talks on the RCEP and reaffirmed the completion of the package by year-end as an important milestone.
With uncertainties in global trade threatening to derail growth, this has taken on greater importance and urgency.
This follows an announcement back in October, where ASEAN leaders had also said they remained committed to upholding the open and rules-based multilateral trading system that has long buttressed the region's economic growth, vowing to work together to ensure that no one is left behind in the march for progress.
It is a message that has been emphasised often. At the World Economic Forum in September, ASEAN leaders again stressed that openness to trade must remain a key priority and strategy for economic growth.
At the forum, Singapore Prime Minister Lee Hsien Loong said that further economic integration in ASEAN is an important condition for the Fourth Industrial Revolution "because it is about building networks, creating new synergies and staying connected".
The Fourth Industrial Revolution, or Industry 4.0, refers to the current phase of global growth in which disruptive technologies and trends, such as robotics and artificial intelligence, are changing the way we live and work.
ASEAN members are working towards an economic blueprint that will let businesses operate more seamlessly across the region, he added.
ASEAN, which Singapore chairs this year, is working with like-minded partners to strengthen the open and rules-based multilateral trading system. "It is a system that has underpinned our growth and stability, but is under pressure, and even threat," said Mr Lee.
As such, ASEAN is doing its utmost to make progress on the RCEP trade deal with six of its key partners.
"We hope to achieve a substantial conclusion by the end of the year, although this is not yet assured," he said.
The RCEP has often been referred to as an alternative to the previously US-led Trans-Pacific Partnership (TPP), which began partly to counter the US' economic might and influence in the region.
Separately, the US under President Donald Trump had rejected the TPP, but the other 11 countries (including Singapore) have rallied together to come up with a slimmed-down version of the earlier pact, set to enter into force by the end of December this year.
Regardless, the ASEAN-led RCEP was established to broaden and deepen engagement among the 16 participating countries and to enhance involvement in the economic development of the region.
This comes in the form of strengthening economic linkages and boosting trade and investment-related activities, in addition to efforts to minimise the development gap among parties.
Back in August 2012, the guiding principles and objectives for negotiating the RCEP were endorsed by the 16 economic ministers at the time.
Negotiations were formally launched in November 2012 during the 21st ASEAN Summit held in Phnom Penh, Cambodia, before commencing in early-2013.
RANGE OF ISSUES
A wide range of issues are being covered in the RCEP negotiation, namely: trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, small and medium-sized enterprises (SMEs) and more.
Businesses from the participating countries stand to reap significant gains through the RCEP, which aims to provide a framework to lower trade barriers and secure improved market access for goods and services for enterprises in the region.
This is by first recognising ASEAN centrality in the emerging regional economic architecture and the interests of ASEAN's FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries.
Next, the RCEP will facilitate trade and investment by enhancing transparency in relations between the signatories in those areas, as well as assisting SMEs' engagements in global and regional supply chains.
Finally, the RCEP seeks to broaden and deepen ASEAN's economic engagements with its FTA partners.
The trade deal recognises that SMEs, in particular, make up the backbone of the region, making up more than 90 per cent of business establishments across all RCEP participating countries and are important to every country's endogenous development of their respective economy.
The trade deal aims to enable SMEs to leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. At the same time, RCEP is committed to provide fair regional economic policies that will benefit all parties.
With so much at stake, all eyes will now be on whether the RCEP will come into fruition by the end of the year.
At the 50th ASEAN Economic Ministers' Meeting and Related Meetings in Singapore, Mr Lee said that the RCEP "will be an important signal to the world that ASEAN members, and our partners, place high value on free trade, regional integration and economic cooperation".
"Of course, given the diversity of RCEP's members, we all have to make trade-offs and compromises," Mr Lee said. "But we should weigh these against the significant strategic and economic value of the RCEP."
He noted that while each ASEAN Member State is subjected to different pulls and pressures from bigger powers, it is even more crucial for members to "stay united and strive to maintain our cohesion and effectiveness".
AT A GLANCE
The 16 participating countries in RCEP include the 10 Asean Member States and six key partners.
- ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam
- Key partners: Australia, China, India, Japan, New Zealand and South Korea
Together, they account for almost half of the world's total population, contributing about 30 per cent of global gross domestic product, and over a quarter of world exports.
What is the RCEP?
The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and six key partners which ASEAN has existing free trade agreements with.
The RCEP was established to broaden and deepen engagement among the 16 participating countries and to enhance involvement in the economic development of the region.
This comes in the form of strengthening economic linkages and boosting trade and investment-related activities, in addition to efforts to minimise the development gap among parties. When concluded, it will be the world's largest free trade area.