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RCEP Helps to Accelerate Regional Economic Integration

In this issue, we have invited Dr. Julien Chaisse for an exclusive interview on the future development of RCEP. He is currently a professor at the School of Law of the City University of Hong Kong. His research interests focus on international economic law (trade, investment and taxation), cyber law and international dispute resolution. His recent works include Tariffs and Threats in US Trade Policy and Towards Unilateral Economic Law.

The successful signing of the RCEP has led to an important step forward in the process of trade integration in East Asia. However, how is RCEP different compared to previous trade agreements, and what opportunities and challenges will China see in it? In response to these questions, we interviewed to Dr. Julien Chaisse to get some insights on the impact of RECP on the global economy and on China and ASEAN countries.

Julien Chaisse:RCEP Helps to Accelerate Regional Economic Integration.

On 1st January 2022, Regional Comprehensive Economic Partnership (RCEP) came into force. Ratification by all the signatory countries, would make it the world's largest preferential trade pact by economic output, increasing trade and integration among East Asian nations. RCEP Agreement demonstrates Asia’s commitment to open markets, promote regional economic integration, and support an open, free, fair, inclusive, and rules-based multilateral trading system.

While RCEP will definitely increase the level of regional trade and investment liberalisation, but compared to other trade agreements in the Asia Pacific region such as The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), RCEP can be said to be a little glib. RCEP’s tariff, rules of origin and administrative procedures seem too complicated and can likely delay potential gains and dissuade enterprises from leveraging full advantage of RCEP’s trade advantage. To unlock the full potential of RCEP, according to me, more intergovernmental work and strong political will are needed. This will help overcome the implementation challenges, deepen its provisions, and expand its coverage in the future. The approval of a negative list in the services chapter, as well as other measures in level of regional trade and investment liberalisation, which includes trade in goods, service trade, intellectual property and so on, is encouraging. However, given the history of ASEAN trade in services, it remains to be seen if the RCEP's built-in possibilities for additional liberalisation will really lead to successful services liberalisation.

Greater research is required to identify the regions and industries where further liberalisation is required to make the RCEP more competitive than the existing FTA network and guarantee that newly created trade opportunities are entirely used.

RCEP is expected to benefit ASEAN countries a lot since China may relocate its supply chain to lower cost bases. RCEP also benefits e-commerce and industrial manufacturing. For ASEAN to take up the leading role in the RCEP and to obtain political and economic benefits, one way an be to use the ASEAN Economic Community (AEC) as a model for RCEP. It is via the AEC that the region's long-term aim of economic union has been achieved. To achieve this goal, it views ASEAN as an integrated part of the global economy that is highly competitive and characterised by equitable economic growth. The AEC is encouraging ASEAN member governments to undertake required reforms for the economic growth. AEC and its experience can provide critical insights for the RCEP. The best strategy for ensuring ASEAN's leadership in the emerging regional structure is to take steps which prioritises ASEAN integration while also strengthening ASEAN's foreign network.

China is one of the most major factors in trade not just in Asia, but in the whole world. With the onset of RCEP, some companies are bound to move their business from China to some countries who have who have cheaper labor. Some of these countries countries might be a part of RCEP such as Vietnam, but some like India who is not a part of RCEP still provide a very cheap labour force. After the pandemic, these business have suffered a major loss, and might take up the decision to move from China to such countries. While this decision will boost the economy and GDP of these countries, China can potentially suffer a loss. But an opportunist like China, can take up this opportunity to invite in more efficient business that will offer more high level jobs to the citizens. To counter the potential loss, China can take up new policies which can attract more businesses. However, due to its large domestic market, skilled labour, broad production supply networks, and significant R&D investment, China still harbours more advantage in the region than other countries.

All in all, in my view, While RCEP has a few gaps and barriers, its main goal to assist member countries cope with a worldwide economic slowdown and diminishing global market demand can help majorly to accelerate regional economic integration.

Interviewer: Li Yuxuan

Interview date: February 4, 2022

Organizer: Jiang Xingyu

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