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11. The Investment Chapter in the Regional Comprehensive Economic Partnership: Enhanced Rules without Enforcement Mechanism

Author:
Henry Gao
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper examines the legal rules in the investment chapter in the Regional Comprehensive Economic Partnership (RCEP). It starts with an overview and summary of the main provisions in the chapter, followed by an assessment of the rules by comparing established free trade agreements (FTAs), especially the Comprehensive and Progressive Trans-Pacific Partnership. In particular, it notes that the chapter, whilst largely following the established approaches to investment in other FTAs, also includes important twists to the common rules to favour the host states. The last part discusses the conspicuous absence of an investor–state dispute settlement mechanism, its pros and cons, and wider implications on regional integration, then concludes with some thoughts on future developments.
Topic:
Economics, Regional Cooperation, Economic Cooperation, and Strategic Interests
Political Geography:
Asia and ASEAN

12. How Preferential are RCEP Tariffs?

Author:
Kazunobu Hayakawa
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study discusses the extent to which the tariffs provided in the Regional Comprehensive Economic Partnership (RCEP) are preferential. RCEP does not necessarily adopt a common concession rule in tariffs, and the speed and depth of tariff reduction/elimination also differ by country. We show that RCEP tariffs become the best choice in trading some specific products with some specific countries in some specific years. Furthermore, there are some specific cases where the use of RCEP tariffs becomes beneficial even if RCEP tariffs are not lower. Therefore, we demonstrate that RCEP tariffs are beneficial in specific types of supply chains. In short, this study aims to enhance our comprehensive understanding of how preferential RCEP tariffs are compared with other types of available tariffs.
Topic:
Diplomacy, Regional Cooperation, Tariffs, and Economic Cooperation
Political Geography:
Asia and ASEAN

13. The Regional Comprehensive Economic Partnership Agreement and Europe: Impact and Implications

Author:
Haans Gunther Hilpert
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
In the first 2 decades of the millennium, European Union (EU) trade policy underwent historic changes, amongst them an explicit pivot to Asia. Along with continued firm support of the rules-based World Trade Organization (WTO)-centred multilateral trading system, important new directions in the EU’s trade policy included a turn to competitive bilateralism, a strong focus on values, an ambition to protect and to promote European trade standards as well as the politicisation of trade policy. Asia’s outwards looking economic growth, the increasing trade interdependence in Asia as well as the various bilateral and multilateral trade agreements in the region, notably amongst them the Regional Comprehensive Economic Partnership (RCEP), attracted the EU’s attention, and have helped cause and drive these changes. There was no particular Asian influence on the EU’s own regionalisation, however. Meanwhile, trade and investment relations between Europe and Asia have intensified greatly over this period. But the EU has been slow and late to formulate a comprehensive strategy for the Indo-Pacific region. In spite of some notable successes, the EU’s trade policy remains fragmented with differentiated approaches for each trading partner. Opinions on the RCEP’s relevance and importance for Europe are divided. RCEP sceptics point to the overall shallow nature of the agreement. RCEP optimists emphasise the future potential of trade and investment integration within the newly established RCEP economic area and warn of the discriminatory effects for Europe’s economy and businesses. So, Europe’s business will have to invest in the new RCEP free trade zone to overcome trade diversion risks and to benefit from the RCEP market integration. More worrying from Europe’s perspective is RCEP’s potentially negative policy impacts: a relative loss in the EU’s trading power, the risk of Europe being sidelined in the make-up of future trade rules, and RCEP’s future impact on rules based multilateralism and the WTO. The EU has various trade policy options with regard to the Indo-Pacific trade area and RCEP in particular. The most promising options include the conclusion of free trade agreements with as many RCEP member countries as possible, with the Association of Southeast Asian Nations as a group (as a region-to-region agreement), with other trading partners (from the Indo-Pacific or from other world regions), or with the Comprehensive and Progressive Agreement for Transpacific Partnership area.
Topic:
Diplomacy, Economics, Regional Cooperation, and Economic Cooperation
Political Geography:
Asia and ASEAN

14. The Story of RCEP: History, Negotiations, Structure, and Future Directions

Author:
Aladdin D. Rillo, Anna Maria Rosario D. Robeniol, and Salvador Buban
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper is about the story of the Regional Comprehensive Economic Partnership (RCEP), including the history, dynamics of negotiations, and structure of this multilateral framework. Issues related to ASEAN centrality, sensitivities of negotiations, and other challenges are also highlighted and analysed. Nearly a decade in the making, RCEP represents a significant achievement for the region. As an ASEAN-led process, RCEP supports not only the region’s market integration but as well as ASEAN’s economic relations with the rest of the world, particularly with the 5 RCEP FTA Partners. Beyond the impact of RCEP in supporting the multilateral trading system, it is also intended to address the current challenges in the region, including the COVID-19 pandemic crisis. Thus, the narrative of RCEP provides a comprehensive overview of, and considers the potential implications for, trade in the region; for economic integration, and for the future of trade policy.
Topic:
Diplomacy, Economics, Regional Cooperation, Regionalism, and Economic Cooperation
Political Geography:
Asia and ASEAN

15. Comparison of the Regional Comprehensive Economic Partnership (RCEP) and Other Free Trade Agreements (FTAs)

Author:
Innwon Park
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study evaluates the desirability of RCEP by comparing it with other mega-lateral FTAs. Evaluating the member-specific scale effects of the FTAs, we find that RCEP will generate significantly larger gains compared with the CPTPP. Evaluation of the provision-specific depth effects of RCEP suggests the possibility of positive gains but these gains may not be significant compared with those derived from the CPTPP. The existing CGE model analyses reveal that RCEP will generate greater gains than the CPTPP. RCEP will be more desirable for China, Japan, and the Republic of Korea and the estimated gains for ASEAN will notably increase as the model explicitly specifies the diagonal ROO cumulation scheme. Considering the sequence of implementing FTAs, we find that the CPTPP will generate greater gains for dual members, but the marginal gains enjoyed by RCEP members will not be substantial.
Topic:
Diplomacy, International Trade and Finance, Regional Cooperation, Free Trade, and Economic Cooperation
Political Geography:
Asia and ASEAN

16. The Post COVID-19 and RCEP: Pandemic Recovery in East Asia

Author:
Shandre Mugan Thangavelu, Shujiro Urata, and Dionisius Narjoko
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The paper examines the impact of the Regional Comprehensive Economic Partnership (RCEP) on the COVID-19 pandemic recovery of the East Asian countries. Recent studies highlight the positive gains from the RCEP agreement for all 15 of its member countries (Itakura, 2022, Petri and Plummer, 2020; Park, 2022). However, the recovery will be not even across East Asia. The East Asian countries of China, Japan, and the Republic of Korea (CJK) are likely to have the largest gains, as these countries dominate the regional global value chain (GVC) activities. The ASEAN least developed countries of Cambodia, the Lao People’s Democratic Republic (Lao PDR), and Myanmar also experience positive gains from RCEP, but need to undertake deeper structural reforms to fully benefit from the agreement. The RCEP framework has elements that will be crucial for the post-pandemic recovery and regional transformation: (i) accelerating and enhancing GVC activities through the single rule-of-origin framework for the 15 RCEP member countries and CJK (China, Japan, and Korea) effects; (ii) services liberalisation and digital transformation in the key services trade of e-commerce, financial, professional, and telecommunications services; (iii) economic cooperation amongst the 15 RCEP member countries to address key contingency issues such as mass vaccination and health infrastructure, protocols for the movement of people, and trade capacity building for ASEAN least developed countries; and (iv) the ‘living’ nature of the RCEP agreement will be able to create a wider regional integration agenda to address key contemporary issues such as environment and climate change, skills development, green transformation, and developing digital and smart urban centres. ASEAN centrality, as highlighted by the RCEP framework, is critical for the post-pandemic recovery and structural transformation of the region.
Topic:
Regional Cooperation, Recovery, Pandemic, and COVID-19
Political Geography:
Asia and ASEAN

17. Australia’s Interests in East Asia’s Regional Comprehensive Economic Partnership

Author:
Shiro Armstrong
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The Regional Comprehensive Economic Partnership (RCEP) agreement was seen as important for Australia economically and politically from its inception. RCEP economies account for roughly two-thirds of Australia’s total trade and being part of an Association of Southeast Asian Nations (ASEAN)-led initiative that progressed broader East Asian economic integration was consistent with the structure of Australia’s trade interests and with Australia’s support for the multilateral trading system. Australia has a track record of pursuing regional cooperation that supports multilateral trade and for supporting regional integration that is outward oriented. RCEP became more important economically, politically, and strategically throughout its negotiations. It furthered East Asian economic integration that avoided fragmentation but also to entrench the ASEAN Economic Community project. Concluding RCEP took on greater importance and urgency as a ballast against the rising protectionism globally in the latter half of 2010. The ASEAN–Australia–New Zealand Free Trade Area (AANZFTA) included an economic cooperation agenda focused on capacity building that was seen as a success for its members and shaped Australia’s approach and support towards economic cooperation being a pillar of RCEP. Negotiations for RCEP were chaired and led by Indonesia and ASEAN. Australia played a proactive role in pushing for high standards – credible market access commitments and new rules – in negotiations. Australia was one of the RCEP member countries that was also negotiating the Trans-Pacific Partnership (TPP) in parallel. The interest in the TPP was to keep the United States productively engaged in the region and to further rule-making and liberalisation amongst the TPP members. Having overlapping membership between the TPP and RCEP would mean that there was less chance of significant divergence or inconsistencies between them, although the approach differed. The deterioration of Australia’s economic and political relationship with China makes the RCEP framework potentially more important for facilitating the rebuilding of trust and confidence.
Topic:
Diplomacy, International Trade and Finance, Regional Cooperation, and Economic Cooperation
Political Geography:
Asia, Australia, and ASEAN

18. China and the Regional Comprehensive Economic Partnership: An Economic and Political Perspective

Author:
Zhang Yunling
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper studies China’s policies and participation in East Asian economic integration and cooperation. The progress of the Regional Comprehensive Economic Partnership (RCEP) is remarkable in the time when global as well as regional economies are facing so many challenges. China as the largest economy in East Asia plays a key role in sustaining regional dynamism. China is active and constructive in initiating the Association of Southeast Asian Nations (ASEAN+1) free trade agreements (FTAs) and an integrated framework of FTAs in East Asia. As RCEP was initiated by ASEAN and supported strongly by China it is essential to keep East Asian economic dynamism: the conclusion of the RCEP negotiations and the implementation has great effects. China’s gains from RCEP are not just economic, but also political. Whilst this paper focuses on economic gains for China, it also analyses the political gains for China, for example, against ‘decoupling’ and political division, which is harmful to East Asian integration and cooperation. The novel coronavirus disease (COVID-19) pandemic is still ongoing, so the timely enforcement of RCEP is important as it gives confidence to the region to keep the region open and to work together to make East Asia dynamic in facing the challenges. Some challenges for East Asia are (i) how to rebuild the supply chains that are either weakened or broken by the pandemic; (ii) how to overcome the new barriers created by government policies in the name of ‘national security’ both in trade and investment areas; and (iii) how to overcome the new divisions created by the United States’ policy under its comprehensive strategic competition with China that leads to the exclusive arrangements in East Asia. East Asian economic integration and cooperation are based on two basic principles: openness and inclusiveness. As a region with great diversity, it is crucial to provide opportunities for all parties with difference. China will continue its open policy and actively participate in multilateral and regional arrangements, and as the largest economy in East Asia it serves as a key pillar to be a centre of the global economy. China will take RCEP as an essential framework to enhance its interest and role in East Asia, as well as in the Asia-Pacific against a politically oriented Indo-Pacific initiative.
Topic:
Regional Cooperation, Geopolitics, Regionalism, and Economic Cooperation
Political Geography:
China, Asia, and ASEAN

19. Heyday of Asian Regionalism? The Implications of the Regional Comprehensive Economic Partnership for the United States

Author:
Mireya Solís
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper analyses the implications of the entry into force of the Regional Comprehensive Economic Partnership (RCEP) for the United States (US). Traditionally, trade policy has been central to the United States’ aim to position itself as a Pacific power and architect of the evolving regional economic architecture. Over the years, however, US trade strategy has evolved in distinct ways: from an emphasis on bilateral trade negotiations and open regionalism (in the Asia-Pacific Economic Cooperation [APEC] forum) to the pursuit of a high-standard transregional trade agreement (in the Trans-Pacific Partnership [TPP]); and more recently under the Trump administration the pursuit of unilateralism and the resort to tariffs as a form of leverage vis-à-vis competitors (China) and partners (allies in Europe and Asia) alike. When the RCEP negotiations launched, there was little concern in US policymaking circles that the emerging trade grouping in Asia could be disadvantageous for the US given that the TPP project was an effective vehicle to advance the US vision for quality economic integration and to cement its position in the dynamic Asian region. However, the US withdrawal from the TPP and the successful conclusion of the RCEP talks (even with the absence of India) have changed that calculus. This paper identifies three main implications of RCEP for the United States at this juncture: growing marginalisation from intra-Asian trade, diminished rulemaking capabilities as alternative standards disseminate widely in the region, and lessened diplomatic clout as the United States struggles to incorporate trade liberalisation into its Asia policy. A fourth possible consequence – a renewed interest in joining the Comprehensive and Progressive for Trans-Pacific Partnership – has not materialised. Instead, the Biden administration is developing an Indo-Pacific Economic Framework that will not include market access negotiations but will focus instead on issues such as supply chain resilience, infrastructure, and the digital economy. The ability of the United States to offer a compelling plan of economic engagement with the region is in question, raising the spectre of marginalisation whilst Asian regionalism makes strides.
Topic:
Diplomacy, Regional Cooperation, Regionalism, and Economic Cooperation
Political Geography:
Asia, North America, United States of America, and ASEAN

20. Changes in Trade and Investment Policies in Thailand and the Implications for Medium-term Growth

Author:
Archanun Kohpaiboon and Juthatip Jongwanich
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
his paper addresses the noticeable changes in trade and investment policies in Thailand in the new millennium and assesses their impact. These changes began with trade policy changes from the World Trade Organization to free trade agreement (FTA)-induced liberalisation, followed by changes in investment policies, all of which are to boost firms’ productivity and medium-term growth. Our results suggest that the policy changes are yet to produce the output the government expects. The signed FTAs’ impact on trade has been limited so far and has occurred selectively on certain product lines, as did the FTA-induced direct investment. Similarly, changes in investment policies had the impact of enticing direct investment but this varied across investors’ nationalities. The impact on firm productivity is also limited and found only for investment promotion policies. Our analysis highlights the role of traditional tools, i.e. trade openness, research and development, and skills upgrading, in fostering firm productivity. Whilst FTAs and investment promotion could be used as a catalyst for firms to enhance productivity, other supporting factors are also needed.
Topic:
International Trade and Finance, Regional Cooperation, Investment, Free Trade, and Economic Cooperation
Political Geography:
Asia and ASEAN