The RCEP Misconceptions and Way Forward

Regional Comprehensive Economic Partnership (RCEP) is an ongoing Free Trade Agreement (FTA) negotiation that involves ten ASEAN Member States (AMSs) and their partners namely Australia, China, India, Korea, Japan, and New Zealand. Despite the ongoing agreement finalisation, the negotiation has been attracting much attention from international societies and even raised some misconceptions along the way.

The most common misconception is RCEP as China’s initiative to enhance its trade relations with southeast asian countries. While China may be the largest RCEP economy, the idea was initially raised by ASEAN’s own concern. Indonesia that chairmanned ASEAN in 2011 proposed the concept of RCEP, to address the so-called “spaghetti bowl effect”. Over the last two decades, ASEAN has attracted many countries to be its FTA partners and this situation has led to complications in applying domestic policies related to FTA. Originally, RCEP was established to incorporate the six ASEAN+1 FTAs.

Indonesia has chaired RCEP Trade Negotiating Committee (TNC) since the negotiation began in 2013. As the initiator, Indonesia has also led the working group of Economic and Technical Cooperation (ECOTECH) who is responsible for capacity building initiatives and issues on Small and Medium Enterprises (SMEs). Since RCEP participating countries range from Least Developed Countries (LDCs) to members of the Organisation for Economic Co-operation and Development (OECD), ECOTECH and SMEs negotiations are to bridge the development gap. Under Indonesia’s Chairmanship, negotiations on both issues are concluded, hence secured future development initiatives.

Another misconception is the idea of RCEP as a competitor to Trans-Pacific Partnership (TPP). The two trade blocs are indeed the two largest FTA negotiations in the world, but they are completely different in nature. While TPP is set to achieve the highest liberalization commitment, RCEP works its way upward from its basic commitment, upon the existing FTAs with ASEAN’s partners. ASEAN is well aware of the economic development gap among RCEP members, hence level and targeted outcomes of negotiations may vary widely across countries. The more developed countries tend to aim on non-traditional issues that are still debatable in most developing countries, such as environment, labour policy, government procurement, and state-owned enterprises among others. To answer such advanced proposals, ASEAN maintains its centrality and makes sure that negotiation is going towards a mutually beneficial agreement.

Therefore, ASEAN regionalism is the engine as well as the policy direction of RCEP negotiations. Now that the US is leaving TPP, RCEP is expected to be the mega trade bloc on earth. The stake is getting higher, especially for Indonesia as the primary proponent. Domestic consultations are constantly needed to identify the negotiation strategy and work plan in getting the utmost benefits from future agreements. Therefore, this negotiation will not only verify ASEAN’s centrality and regionalism but also the unity and cooperation of related ministries in the Indonesian government.

One of the challenges that all governments have to face when conducting FTA negotiation is the constant tug of war between liberalists and protectionists. In reality however, economic development depends on international cooperation and Indonesia is no exception. According to the national statistics, Indonesian manufacturing sector still imports around 73-76% of its raw materials (Statistics Indonesia, 2011-2015). Failing to cooperate with other countries will not only disadvantage consumers in Indonesia but Indonesian manufacturers as well, which eventually will affect the performance of the economy as a whole. It is more beneficial to participate in FTA negotiations and anticipating the outcome, than isolating themselves from globalisation.

RCEP negotiation has concluded its 18th round, which has passed two years from the initially estimated conclusion time (2015). However, Indonesia is determined to form a modern economic cooperation, in which the benefits of economic liberalisation are equally distributed among its members. By pioneering RCEP negotiation, Indonesia has proven its ability in driving one of the largest regional economy as well as its leadership in achieving common interests of all countries.

 

Jakarta, May 2017

About Shirley Basauli Agustina 1 Article
Shirley is a junior diplomat at Directorate of ASEAN Economic Cooperation, Ministry of Foreign Affairs of Republic of Indonesia. She resides in eastern part of Jakarta and loves to play the piano in her spare time.

1 Comment

  1. The RCEP group is a large group of countries in terms of population, comprising two of the most populous countries in the world, namely China and India. Hence, a regional cooperation of this magnitude will be beneficial for these countries. What is more, China and India are the two vibrant countries in the latest decade, complemented by the old players as Japan, Korea, Australia. So Indonesia would have many benefits to be in the group. So the sources of technological advancement will be at the doorstep.

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