Illustration: Luo Xuan/GT
The Regional Comprehensive Economic Partnership (RCEP) could guide the way for global trade rule making, contributing its experience to upgrading trade clauses. The route taken by the RCEP could give light to WTO reforms down the road.
RCEP rules are created and improved based on WTO treaties. Therefore, certain rules and clauses of the RCEP are better than those of the WTO. For example, most WTO member countries maintain decent quantities of tariffs while the RCEP has zero tariffs over 90 percent of traded products.
Additionally, trade facilitation measures and the services trade will be more open than expected. Intellectual property rights will be better protected under the RCEP than the WTO. Since Asian countries headed by China have well-developed e-commerce sectors, the RCEP has more advanced rules in this regard.
Multiple countries reaching a trade pact under the RCEP has contributed to world trade rule-making in two ways.
First, the RCEP has proven that countries differing in size, economic development stage and even political system can achieve consensus in trade agreements. As long as all parties maintain the determination to promote economic globalization and push through trade dialogue, any disagreements will eventually be solved.
The RCEP includes both developed and developing countries with different levels. Often, when countries engage in trade talks and fail to reach a deal, excuses such as having too many members or a development gap too large to coordinate will be given. But the RCEP has demonstrated that these excuses are not justifiable.
There is also another lesson to learn: a trade pact does not have to set the bar too high. Trade rule making has to leave some room for certain members to make gradual progress. The Trans-Pacific Partnership Agreement (TPP), for example, set a very high threshold for participants.
Though the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) lowered its requirements, the resultant trade treaties and rules are still hard for most WTO members to accept.
Rule creation for the TPP or CPTPP is dominated by developed countries such as the US, Japan, Australia and Canada, and Latin American countries including Mexico and Chile that already have free trade agreements with them. Therefore, trade pacts emphasize coordinating member countries' domestic policies, particularly concerning issues of investment restrictions.
In contrast, the majority of RCEP countries are developing countries. There is still much to be done in terms of market access.
Unlike the CPTPP, the RCEP's main focus is opening up the market, and enhancing and facilitating free trade. These aims could be easily accepted by most WTO members.
For Asian countries, the RCEP and CPTPP both have value. Higher-level market accession, which benefits goods and services trade as well as trade facilitation measures, is still the priority for RCEP members. These countries can better integrate their markets in this way.
The RCEP does not include India as it is too hesitant. The CPTPP missed out on the US as it is too radical. These examples show that countries need to compromise to make deals.
The future Asia-Pacific free trade area will probably be the product of eclectic moves by countries. The RCEP plus the CPTPP could be the future of regional trade.
The RCEP, to some extent, can provide guidance for global trade rule making, bring differing countries together to facilitate free trade and prepare for further upgrades.
As a fledging regional partnership, it is in no position to replace the WTO which has 164 members. But the RCEP, based on WTO rules, can be seen as a pilot area for the WTO to provide experience and a global trading system.The author is dean of the China Institute for WTO Studies at the University of International Business and Economics. [email protected]