By Catherine N. Pillas & Cai U. Ordinario
Disagreement among the six trading partners of Southeast Asian countries concerning key provisions in the Regional Comprehensive Economic Partnership (RCEP) made it difficult to conclude the mega trade deal under the Asean chairmanship of the Philippines this year.
Asean Economic Ministers Chairman and Philippine Trade Secretary Ramon M. Lopez said the “substantial conclusion of the RCEP still remains a goal.” His statement was read by Philippine Lead and Trade Undersecretary Ceferino S. Rodolfo in a news briefing held in Pasay City on Tuesday.
“Talks were not at a standstill; there was progress. We just couldn’t conclude it,” Rodolfo told reporters.
He noted that the Association of Southeast Asian Nations’ six dialogue partners—China, South Korea, Japan, Australia, New Zealand and India—could not find a common ground on “contentious issues” in the mega trade deal.
“Within the RCEP, we can see that developed countries are willing to open their markets to sectors of interest to Asean. The issue lies among themselves and we’re [Asean member-countries] are being affected by those issues,” Rodolfo said.
Some of the hurdles, according to him, are those that relate to trade in goods, specifically the formula for cutting tariffs and other parameters related to tariff elimination.
There was already agreement among the parties regarding the common concession basis, or those concessions given to all parties equally, and common flexibilities, which pertain to a lower level of tariff reduction on certain goods that will be applied to all parties.
Disagreements on “deviations” in tariff elimination, or those that will have to be negotiated between two parties, have slowed down talks on the RCEP.
Rodolfo said the negotiating parties have already found a solution to this “deviation” problem, but this cannot be disclosed yet. Asean member-countries are asking their six trading partners to eliminate duties on 92-percent of the covered tariff lines.
The six trading partners are also dragging their feet on the so-called “value-adding mechanisms,” which would effectively require them to ensure that RCEP partners would not be “unduly disadvantaged” by their trade deals with other non-RCEP members.
Under the investments chapter of the proposed trade deal, some trading partners are not keen on provisions pertaining to the investor settlement-dispute mechanism and those that would affect state-owned enterprises. Another sticking point concerns the movement of natural persons.
Despite these roadblocks, the completed sections of the RCEP hold promise for small businesses. These are the rules of origin section, which promises a more business-friendly treatment on goods, from small and medium enterprises (SMEs), as well as the electronic-commerce sector.
“We can resolve all [hurdles] as long as we stick to an Asean-centrality mindset,” Rodolfo said.
During the inaugural RCEP summit at the leaders’ level, President Duterte called on ministers and negotiators to “intensify efforts in 2018 to bring RCEP to conclusion and ensure we have the necessary support to achieve this outcome.”
Parties to the RCEP are conducting negotiations on the trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce and SMEs.
‘Not surprising’
Local economists were not surprised that the RCEP was not forged under the Philippines’s chairmanship of the Asean, but they are more optimistic that the mega trade deal will be completed in Singapore next year.
Former Tariff Commissioner George Manzano told the BusinessMirror that he had an inkling the agreement
will not come through this year because of how the negotiations have been progressing.
“At the rate the negotiations had been going, everyone [knew] that [it won’t come through this year]. It’s not something surprising,” Manzano said in a phone interview on Tuesday.
This view was shared by University of the Philippines School of Economics Professor Ramon Clarete, who expressed confidence that the RCEP will be forged next year.
Clarete also said the Philippines should continue with its reforms, particularly in helping micro, small and medium enterprises to prepare for the changes that will come with
the RCEP.
Manzano added that, while the RCEP is not as “ambitious” as the Trans-Pacific Partnership in terms of scope, the Philippines and other Asean countries should still continue to roll out reforms to cope with the changes it may bring.
In particular, he said RCEP countries must continue efforts to reduce nontariff barriers, which make intraregional trade “less transparent.”
For the Philippines, Manzano said the government and private sector must pursue efforts that will increase market access of businessmen, which means addressing supply bottlenecks and capacity issues.
On Monday ADB Economic Research and Regional Cooperation Department Principal Economist Jong Woo Kang said that, if Asean leaders are experiencing a difficult time in arriving at a consensus for RCEP, the leaders should focus on “practical goals” and common interests.
Kang added this means accommodating flexibilities and “longer-term liberalization plans” that will allow members to adapt to the agreements in installments, depending on their government’s priorities.
The RCEP negotiations were launched by the 10-member Asean and China, India, Japan, South Korea and New Zealand
during the 21st Asean Summit and Related Summits in Phnom Penh, Cambodia, in November 2012.
The 16 RCEP participating countries account for almost half of the world’s population, contribute about 30 percent of global GDP and over a quarter of world exports.