RCEP negotiations: “Change is coming and business had better get ready for it”

ASEAN_RCEP

Reflections on the 19th round of RCEP negotiations

Even the most casual observer of the Regional Comprehensive Economic Partnership (RCEP) will recognise that there are member economies at very different stages of economic development. This is part of the challenge in concluding the agreement.

For the uninitiated, it is an agreement between ASEAN and their FTA partners, Australia, NZ, China, Japan, Korea and India. The last time I was in Tokyo I didn’t see customers browsing a range of broken and second hand mobile phones, as I did when in Yangon, Myanmar.

However, at the Stakeholder Business Forum held in the margins of the of the 19th round of negotiations in Hyderabad there were many moments that caused me to reflect on the cultural disconnect in the region.

It started with the head of the local chapter of our hosts, the Confederation of Indian Industry, opening the session with the exclamation, “I love Asia, I used to live and work in Asia.”

As I consider myself part of Asia, though I acknowledge many other Australians would not, it had not occurred to me that there are Indians who didn’t consider themselves as part of Asia. Later in the afternoon the 12th Indian speaker in the Goods Session got to the podium and declared “As the 12th man I should not be speaking, but don’t worry, I’ll start to serve drinks soon.” I looked over at a very confused Japanese delegate who was checking the agenda: there was no afternoon tea scheduled. “It’s a cricket reference,” I whispered.

It is this economic and cultural disconnect that creates such a challenging environment for negotiators. As a comprehensive agreement, it is setting regional rules on trade in goods, services and investment, in an environment with very different domestic settings and capabilities. Many of the inputs from industry members are often local complaints.

A significant development in negotiations is that at this round there were formal working groups on Government Procurement and Trade Remedies. We have been pushing for the inclusion of Government Procurement for quite a while. With so many state-owned enterprises in the region there are many opportunities currently closed to Australian companies due to lack of transparency and access.

RCEP may not completely solve the access issue, however it should improve transparency. Our constant advice to Australian negotiators in all our FTAs is that we don’t want any imagination or innovation in Trade Remedies. In such a hotly contested policy space we want to remain within the WTO framework that Australian producers and importers are accustomed to.

The perceived advantage of a trade surplus is increasingly becoming a political issue in the region. At the last East Asia Business Council (EABC) Working Group on RCEP meeting there was great excitement as the Trump Administration had just released its list of 16 economies with a trade surplus with the US, with the White House calling for a report exploring how to address the issue. More than half of the 16 are in Asia and many of the ASEAN countries are seeing it as proof that they are “winning” against the US, and putting them in the same league as China. I attempted to address this issue head-on in my opening remarks, explaining that Australia’s trade deficit with the US wasn’t a loss for Australia as it enabled us to grow our economy and exports in other areas. It didn’t appear to change anyone’s point of view.

One of the issues for India in negotiating the RCEP is that they have a trade deficit with China and are extremely sensitive about protecting local industries. India also relies on import tariffs to contribute about 15% of the national budget and has traditionally been extremely hesitant to reduce tariffs at all. However, the recent successful introduction of the GST in India may be changing Government attitudes.

At the end of the day when we all presented our findings to the Lead Negotiators, and some key Indian industries had had the opportunity to express their concerns about removing protection, the Indian negotiator said: “The Indian consumer deserves to have access to cheap products. Change is coming and business had better get ready for it.”

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Louise McGrath
Having joined Ai Group in 2000, Louise has managed a number of trade-related projects including trade missions, business matching and the development of export-related training programs. Since 2009 she has led Ai Group's service delivery to our smaller associations, providing governance, policy and business development support, and is Executive Officer of the Australia Saudi Business Council and the Australian Russian Dialogue.

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