RCEP benefits are questionable


Over the weekend, 15th November 2020, 15 Asia Pacific economies signed the RCEP, the world’s largest free trade agreement (FTA) covering 30% of its global Gross Domestic Product. The aim is to lower tariffs, counter protectionism, boost investment and allow free movement of goods within the region. India opted out last year over concerns regarding cheap Chinese imports.

The RCEP can have devastating consequences for our agriculture, services and manufacturing, price of medicines etc,.

The RCEP mega trade deal preserves most of the terms that we were afraid about had the TPPA came into effect. It has reduced policy space in times of Covid-19. It also seeks stronger intellectual property rights for big pharma and the agro-chemical industry, sacrificing access to cheaper generic medicines sourced by Malaysians and the Health Ministry. It will also push governments to privatize essential services such as provision of education, healthcare, electricity, water and waste management and seeks to prohibit the regulation of these service providers.

It should not be confused with an amalgamation of regional FTA’s. These FTA’s are co-existing. Facilitation of trade and investment should be based on substantially all trade between the members. The RCEP does not benefit ASEAN members in the long term. Local players will not be able to grow exponentially in the global market without a solid reputation, funding, resilience, trade facilitation and coping mechanisms in place. Therefore, the Minister of International Trade and Industry, Dato’ Azmin Ali should not confuse the rakyat by claiming the RCEP is an amalgamation of the regional FTAs’ that are currently in place.

Civil society stakeholders and the New Zealand Trade Minister have also pointed out that the talks have lacked transparency and public engagement, while big businesses have been allowed ample access to the content of the agreement. It is not possible to access any details about the RCEP deal except through leaks.

PSM reiterates that “RCEP focuses heavily on cutting tariffs and increasing market access but is seen as less comprehensive than the CPTPP. It also requires fewer political or economic concessions and has less emphasis on labour rights, environmental and intellectual property protections and dispute resolution mechanisms”. This quote is from a report by James Pearson (Reuters).

In as much as the core ASEAN principle of “special and differential treatment” appears in RCEP, certain rules and obligations will not be fully applied to certain members. For example, duties on roughly 39% of ASEAN’s food exports will not be removed. With respect to Japan’s agricultural market, tariffs will remain in place for rice, wheat, beef, pork, dairy, and sugar. Therefore, Minister Azmin Ali’s comment that enjoyment will come in the form of Rules of Origin (ROO) involving 15 parties and preferential treatment tariffs with 15 other countries is clearly at odds with Malaysia’s intention to expand trade and penetrate global markets.

RCEP’s geopolitical influence through trade with China should not be understated in the absence of the United States. The geostrategic overtones can be seen as China will solidify its presence in the region. Even if RCEP is ASEAN driven, not all economies are subjected to the same rules and obligations.

However, RCEP is not a game-changer and will not go on to drive regional trade forward, simply due to the fact that the deal does not contain new trade issue such as digital trade, e-commerce etc. that have been sidelined at the WTO level. Therefore, Minister Azmin Ali’s focus on the RCEP and the intention to endorse the ASEAN Comprehensive 2 Recovery Framework to combat Covid-19 collectively will not intensify intra-ASEAN trade and accelerate the ‘digital economy’ transformation.

The RCEP comes into force (for those who have ratified it) 60 days after 6 ASEAN + 3 non-ASEAN countries have ratified it, [Art 20.6]. Therefore, we urge the Ministry of International Trade and Industry to immediately halt Malaysia’s participation in the RCEP and reevaluate the impact of such an agreement and its costs and benefits to the rakyat and the economy.

Darmashakthini Arujunan
Parti Sosialis Malaysia

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