Recently, the Regional Comprehensive Economic Partnership (RCEP) is in Vietnam for the latest negotiations. All parties are expected to reach remarkable progress in tariff concession, which marks a more in-depth economic and trade cooperation between China and its major trading partners in the Asia-Pacific region. China has taken a critical step in countering the adverse impact of China-US trade frictions by expanding its circle of economic and trade friends.
RCEP negotiations pushing forward
ASEAN initiated RCEP in 2012, and its members include 10 ASEAN countries, China, Japan, South Korea, India, Australia and New Zealand. As the largest and most important free trade agreement in the Asia-Pacific region, the FTA will cover nearly half of the world's population and nearly one-third of the world's trade volume.
By the end of September 2019, RCEP had completed 28 negotiations and held seven ministerial meetings. Overall, RCEP has made substantial progress. It completed negotiations on terms such as small and medium-sized enterprises and economic and technological cooperation. Although there are still differences in some areas, most of the articles have substantial progress and reached a preliminary consensus. Since the first round of negotiations in May 2013, the negotiations have failed to conclude as expected in 2015 due to vast differences among member states on trade in goods and services. Subsequently, with the joint efforts of the RCEP member states, the RCEP negotiations continued to move forward.
An agreement cannot be reached overnight
This round of negotiations in Vietnam shows that the RCEP negotiations have made substantial progress and are entering the final sprint. All parties have shown an intense willingness to reach an agreement. In terms of topics, RCEP covers not only trade in goods, dispute settlement, trade in services and investment, but also new issues such as intellectual property rights, digital trade, finance and telecommunications. RCEP negotiations will not only liberalize tariff and non-tariff barriers in trade in goods and ultimately achieve trade liberalization, but also plan to significantly reduce restrictions on trade in services and enhance trade liberalization in services based on the existing general agreement on trade in services (GATS) and ASEAN +1 free trade agreement.
At the same time, since most of its members are developing countries, RCEP has some characteristic of "south-south cooperation." It means that RCEP cannot blindly pursue high standards and must take into full consideration the level of economic development and tolerance of trade liberalization of its member states. Therefore, the success of RCEP cannot be without special arrangements or provisions such as economic and technical cooperation, capacity building, early harvest, transition or differential treatment. The "balance" of interests in free trade agreements is also a critical factor in the success or failure of the negotiations.
Both China and India are essential powers in the Asia. In recent years, while the cooperative relationship between the two countries has become closer, the antagonistic relationship has become increasingly fierce. Indian steel, dairy and other industries are openly opposed to India joining RCEP, fearing the impact on their industries, Indian media reported.
However, India's commerce minister said that India's refusal to join RCEP would put "the export sector at a disadvantage." the national interest must be valued as a whole rather than held hostage by individual industries. It means that India will sign up to RCEP in the foreseeable future. All parties in India are aware that even without this FTA, China has market advantages in many areas. After signing RCEP, India may gradually reduce tariffs on 80% of Chinese imports, which is smaller than that of other countries.
China has worked hard to open a new chapter of regional cooperation
After World War II, it was mainly the multilateral mechanism (GATT/WTO) that promoted the opening of world markets. In reality, however, it is increasingly difficult to push for deep liberalization of world markets at the multilateral level, including the administrative building, as in the Doha Round, which failed. Today, despite the United States pursuing unilateralism, challenging the WTO and replacing the region with a bilateral one, the trend of regional opening continues unabated. For example, negotiations on some large-scale free trade zones have been completed recently, including the EU-Japan close partnership agreement, the EU-Vietnam free trade area agreement, the EU-Mercosur agreement and the African free trade area.
China's role in advancing RCEP's negotiations is noteworthy. As the world's largest trading country and the second-largest economy, China will play a leading role in coordinating its interests with India and other major countries. It will significantly advance the negotiation process of RCEP. At present, trade frictions between China and the United States are continuing, and the two sides are engaged in tough trade negotiations. The prospects of China's foreign trade are not optimistic. Through RCEP, an open regional platform, China can better integrate into the Asia-Pacific economic integration and withstand adverse external shocks by expanding its circle of economic and trade friends. If China can come up with a high-level open list for RCEP, it will not only play a leading role but also help resolve China-US trade frictions and disputes, to develop an export-oriented economy better and share the benefits of economic globalization.
Wang Xiaosong, Research Fellow at National Academe of Development and Strategy and a professor at the School of Economics, Renmin University of China.
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