Struggling to understand RCEP by Brett McGuire
Maybe like a lot of people, when news hits about agreements like the RCEP (which I honestly had to Google), IA-CEPA or Indonesia’s new Omnibus Law, I struggle to figure out their relevance and real-world impact.
I spend time online looking for different perspectives. But most commentators tend to echo the same socio-political points that don’t really mean much for business.
It doesn’t help that these agreements mean different things to different member countries.
From a Kiwi perspective, because New Zealand already has free-trade agreements with everyone else in the agreement, there’s not a lot in RCEP in terms of market access.
According to the New Zealand Trade Minister, being part of the process is as important (if not more so) than the outcome:
“It shores up support for international trade rules which small countries like New Zealand rely on, at a time when we’re seeing increasing protectionism. If we weren’t at the table, then these people would be making rules that we didn’t have a chance to have a say in. ***When we’re not at the table as a small country, we always lose.***” —Trade minister Damian O’Connor
What’s in it for Indonesia?
For Indonesia, it is an opportunity to become a competitive production base for labour-intensive manufacturers.
But it will also cause concern because Indonesia’s economy is less competitive against other member economies in attracting foreign investors.
Indonesia will need to improve the investment climate in order to take full advantage of what RCEP has to offer.
So what does it mean?
While these two perspectives are extremely relevant to exporters and importers alike, RCEP wont mean much to business until governments in each member country take steps to implement the agreeed principles domestically. And that’s no small feat when you consider that much of this will require drafting and passing new legislation.
So while it’s important to keep up to date with these developments, they are just the first step in what can be a long drawn out process.
Agreements like RCEP provide, at best, a legal framework. They don’t change the underlying principles, or what is required to succeed in Asia.