Thread by @DavidKleimann

RCEP makes the headlines today, creating much furor as ‘historic, ‘the largest existing FTA’ and ‘China-led’.

RCEPs signature is historic, but for reasons other than one may think. In essence: RCEP should be welcomed, not feared by competitors in Europe and Asia.

A thread. 1/n

https://twitter.com/CoppetainPU/status/1327913326056263680

A little known fact, RCEP is built on 5 ASEAN centred FTAs.

Their analysis tells us much about the limits and potential of RCEP itself. Those FTAs are:

ASEAN
ASEAN – China
ASEAN – Korea
ASEAN – Japan
ASEAN – Australia / New Zealand

2/n

A couple of facts drawn from this analysis, which you find here: bit.ly/3py71ZO

ASEAN integration in itself and with its six partner countries is limited by two main factors: structural diversity and the plurilateral negotiation setting (inter se obligations)

3/n

Huge differences in implementation capacities combined with mutual commitments among 15 implicates that the ‘lowest common denominator’ principle has a particularly strong impact, e.g. as LDC signatories slow down integration and implementation speed considerably.

4/n

That’s why ASEAN centred FTAs have made some good progress on market access for goods trade and investment rules but little or no progress at all on trade rules for IPR, digital trade, services, competition and government procurement.

5/n

Moreover, Indonesia and – externally – India retain strong protectionist agendas, fearful of Chinese competition, which limits market access potential of ASEAN based FTAs. India dropped out of RCEP- a good sign for the level of market access commitment among RCEP signatories. 6/n

However, RCEP has been preceded by not only by four ASEAN+1 FTAs but also FTAs among other main participants, e.g. China and NZ/Australia, meaning that the potential for new market access commitments remains quite limited.

Conclusions: RCEP largely consolidates an already existing network of FTAs among its signatories. The potential for new market access is very limited. The potential for new trade rules is very modest, too, as implementation capacities among signatories vary considerably. 8/n

There is notable product & rules specific progress, eg in IPR and e-commerce, but overall structure determines content, which remains solid in terms of goods market access & shallow in terms of trade rules, especially for competition and GP. Sust dev. provisions do not exist. 9/n

Conclusions: RCEPs main benefit is the extension of 1 set of market access rules to all 15 RCEP signatories, consolidating the complex existing Asian noodle bowel of rules, which created much uncertainty about applicable preferences & led to low preference utilization rates. 10/n

This is particularly important for rules of origin. RoO harmonization may well create the single largest commercial benefit derived from RCEP.

11/11

end

*competitors in Europe and the US