Emeritus Professor Dr Zakariah Abdul Rashid Executive Director Malaysian Institute of Economic Research
LAUNCHING THE RCEP NEGOTIATION Negotiation was launched during 21 st ASEAN Summit, November 2012 Target for substantial conclusion by end of 2015. Important documents: ASEAN Framework on RCEP Joint Declaration on the Launch of RCEP Negotiation Guiding Principles of RCEP Negotiation
Australia ASEAN Involving 16 countries where ASEAN has existing FTAs N. Zealand China Japan South Korea India
OBECTIVES OF RCEP The RCEP aims to: Streamline and consolidate the existing ASEAN+1 FTAs with China, Japan, Korea, India, Australia, New Zealand; Improve commitments and reduce the gaps in the ASEAN+1 FTAs to create a highly competitive economic area; and Provide for the strengthening of the regional production and supply network, and integration into the global economy. RCEP evolved from studies recommendation to established ASEAN+3 and ASEAN+6 FTA. Taking into consideration of these studies and its impact to the economy of the region, RCEP negotiation was launched with an important characteristic of ASEAN Driven Process.
Why RCEP? More than 3 billion people (almost 50% of world population Combined GDP of more than US$17 trillion Over 40% of world trade
SCOPE AND COVERAGE OF RCEP The scope and coverage of RCEP goes beyond the ASEAN+1 FTAs: Trade in Goods, Trade in Services and Investments Comprehensive market access Trade and business facilitation Trade remedies Economic and technical cooperation Competition policy and Intellectual property rights Dispute settlement mechanism E-commerce and SME
SCOPE AND COVERAGE OF RCEP Government procurement, labour and environment are not covered but there are requests from some RCEP countries to include these elements. RCEP is not an exclusive regional grouping. Other countries can participate after the existing 16 countries have completed the negotiations.
NEGOTIATING GROUPS 5 rounds of negotiations have been held. The 6 th round will be held in New Delhi, India (December 2014). List of Working Groups/Sub-Working Groups: WG on Trade in Goods WG on Trade in Services WG on Investment WG on IPR WG on Competition WG on Economic and Technical Cooperation WG on Legal and Institutional Issues SWG on Rules of Origin SWG on Customs Procedures and Trade Facilitation SWG on Sanitary and Phytosanitary Measures SWG on Standards, Technical Regulations and Conformity Assessment Procedures
PROGRESS All negotiating groups met. Overall discussions focused on elements. Elements are agreed on without prejudice basis subject to actual text. Moving towards text based discussions Incremental progress. Main challenges : modality for tariff liberalisation for Goods; methodology of liberalisation for Investment and Services; level of protection to investors; high ambitions for IPR and Competition Chapters; and broadening the scope of RCEP
SIGNIFICANCE OF RCEP TO MALAYSIA Strengthening existing trade and investment linkages. Currently Malaysia s trade with RCEP countries accounts more than 50% of Malaysia s external trade; Expanding and facilitating market access to all RCEP participating countries under one FTA - market access to almost 50% of global population; Sources of raw materials and minerals, knowledge sharing, technology and other economic cooperation- leveraging on the advantages and strength of regionalism; Wider choices for business and consumers - reduce cost of doing business through harmonisation of rules; and RCEP is a deliverable for Malaysia during its chairmanship on ASEAN in 2015.
SCOPE 21 WGs, covering 29 Chapters Negotiations cover two main components: Text covering rules, disciplines, dispute settlement, institutional arrangements; Market access for goods, services, procurement and investment Trade & Non-Trade Issues GOODS RULES OF ORIGIN SANITARY & PHYTOSANITARY TECHNICAL BARRIERS TO TRADE CUSTOMS TRADE REMEDIES SERVICES NON-CONFORMING MEASURES FINANCIAL SERVICES TELECOMMUNICATIONS E-COMMERCE TEMPORARY ENTRY INVESTMENT GOVERNMENT PROCUREMENT COMPETITION (SOE) INTELLECTUAL PROPERTY RIGHTS LABOUR ENVIRONMENT CAPACITY BUILDING HORIZONTAL ISSUES SME Development Regulatory Coherence Competiveness and Business Facilitation LEGAL AND INSTITUTIONAL
PROCESS OF NEGOTIATIONS Chief Negotiator Working Groups Ministerial Level Leaders Level Thorough Briefing to Cabinet x 2 times
PROGRESS 29 Chapters Chapters that are finalised: Development; Regulatory Coherence; Competitiveness and Business Facilitation; SMEs; Temporary Entry: Cooperation and Capacity Building; Administrative and Institutional Arrangements; and Competition Policy (Section A) All other 21 Chapters have outstanding issues that are still being negotiated
WHY IS MALAYSIA IN TPP? To take part in shaping global trade agenda and draft future trade rules Facilitate economic transformation programmes and make Malaysia competitive Create market access opportunities, draw investments and build capacity Duty free access to TPP markets Elimination of import duties by TPP countries on Malaysian exports Integrating SMEs into the global supply chain dedicated SME Chapter on capacity building and facilitating participation of SMEs in the supply chain First mover advantage To compete with other trade initiatives Transatlantic Partnership, Pacific Alliance in Latin America
CHALLENGES Modern, High Quality Agreement Maintaining policy space for national development goals Bumiputera agenda SMEs Federal-state Obligations Possible amendments to laws IPR, Labour, Customs
CHALLENGES Cost Benefit Studies National Interest Analysis Impact Analysis on Bumiputera and SMEs Parliament Debate National Sovereignty may be compromised Some industries may be affected: imports from TPP Countries
WHAT IF MALAYSIA DOES NOT JOIN THE TPPA What will happen if Malaysia miss the boat? Scenario in future, we have to subscribe to rules and regulations set by others China acceded to WTO in 2001 had to make substantive concessions Less attractive investment destination and existing investors may reconsider expansion plans (US and Japanese companies) Loss of trade and investment opportunities in TPP markets Affect participation in the regional supply chain Loss of first mover advantage in the FTAAP price of later entry is high Miss opportunity to craft future trade rules. More countries indicated strong interest of joining TPP (i.e. South Korea, Philippines, China)
MAJOR ISSUES IPR SOEs Remains the most complex and sensitive Chapter with 13 broad outstanding issues Areas of concern are in pharmaceuticals (patents, patent linkage, data exclusivity), copyrights, enforcement and geographical indications Parties discussing definitions and basic disciplines on SOEs Malaysia pressing for flexibilities required and negotiating on the basis of a country specific approach
MAJOR ISSUES Investment Primary concern is related to Investor-State Dispute Settlement (ISDS) Malaysia negotiating for carve outs in areas we have concerns Government Procurement Malaysia s offer takes into account Bumiputera policy and development of SMEs Malaysia will maintain carve-outs for bumiputera preference and SMEs
RED LINES/ PARAMETERS Federal Constitution Federal State Relation Core Policies Process 1. Negotiations Cost-Benefit Analysis Parliament Government to Decide