Two and a half cheers for RCEP !

Image: NZ Embassy in Beijing gets a Ministerial visitor this week

Ministers – including Hon Damien O’Connor from New Zealand – meet in Beijing this week to try to crunch a little known but very big trade deal.

Is it still possible to conclude big new trade agreements? 

The EU has recently concluded a new agreement with the South American members of MERCOSUR. And in Asia negotiators have been working over six years and 27rounds of negotiations to conclude the Regional Comprehensive Economic Partnership (RCEP).  If Ministers are successful in Beijing, RCEP may soon be coming to a TV screen near you.

The biggest trade deal you never heard of

Contrary to popular misconception, RCEP is not a Chinese initiative but an ASEAN (Association of South East Asian Nations) one. The parties to RCEP are the ten-member ASEAN, plus Australia, China, Japan, India, New Zealand and South Korea.  This group makes up 39% of global GDP and covers nearly half the world’s population, so this is a very big deal indeed and much larger than CPTPP.

New Zealand already has FTAs with all the members of RCEP, bar one:  the fact that RCEP includes India is a major opportunity for us.

Why negotiate new FTAs when we already have them?

There are really two answers for this – first to expand the quality of the agreement by including new commitments and disciplines and second to expand the coverage by including new partners.  RCEP is an opportunity to bring a number of our other trade agreements together and to get India on board.

Good things take time

When launched six years ago, RCEP was styled as “modern, comprehensive, high-quality and mutually beneficial economic partnership”.  Unfortunately negotiators have struggled to live up to that ambition.

Some economies including India are reluctant to cut tariffs especially in what they consider to be “sensitive” industries like agriculture.  Rule-making has also proved difficult in areas like services, rules of origin, investment and intellectual property rights.  Non-tariff barriers will likely be a continuing problem.

End in sight?

Ministers have earlier committed to concluding the negotiation by the end of this year.

That would be a considerable achievement but if it weredone at the expense of the substance of the agreement that could prove difficult for New Zealand in other negotiations underway including with the European Union.

There seems little likelihood of opening up the Indian market without RCEP, so we have a lot riding on a successful outcome.  So it’s two and a half cheers for now, and let’s hope we can soon make it three.

This post was prepared by Stephen Jacobi, Executive Director of the International Business Forum. Associate Director Fiona Cooper has participated actively in the negotiating process over recent years. Watch Fiona explain RCEP here.