Trade
ASEAN’s RCEP and sustainability challenges and achievements
Author: Kaewkamol Pitakdumrongkit, RSIS
As the end of 2019 drew near, Thailand hosted two ASEAN summits under the theme ‘Advancing Partnership for Sustainability’. Looking at how the meetings unfolded, one may ask: what were ASEAN’s major economic achievements in 2019? And what key challenges remain for 2020?
Last year ASEAN made important economic gains in trade and sustainable development. The biggest trade accomplishment was the conclusion of negotiations for the Regional Comprehensive Economic Partnership (RCEP) in November by 15 nations — 10 ASEAN member states and five ASEAN dialogue partners (Australia, China, Japan, New Zealand and South Korea). According to the Joint Leaders’ Statement at the third RCEP Summit, the 15 members ‘concluded text-based negotiations for all 20 chapters and essentially all their market access issues; and tasked legal scrubbing by them to commence for signing in 2020’.
Although faced with some criticism, the conclusion of RCEP was a success.
First, while critics assert that RCEP is not as ambitious as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the former is a ‘living document’ whose details and quality can improve over time. The deal will provide firms with greater market access, enhancing transnational production networks and thereby enabling consumers to enjoy a broader range of goods.
Second, India’s absence from the agreement should not be seen as a failure because the door has been left ajar to join in future. Even without India, the agreement is set to be signed this year, making RCEP the world’s biggest trading bloc by both population and economic weight. Still, the pact will be smaller than envisaged — it will create a combined market of 2.2 billion people (down from 3.6 billion) and will account for 29 per cent (down from 33 per cent) of the world’s GDP.
Third, the conclusion of RCEP will restore market confidence to its 15 signatory countries, including the 10 ASEAN members. It showed the market that these economies will band together against the backdrop of rising uncertainties and escalating US–China tensions.
Fourth, RCEP enables ASEAN to inch closer to completing the ASEAN Economic Community 2025 (AEC 2025) — an economic integration project among 10 Southeast Asian countries. RCEP will help these states better integrate into the world’s economy and achieve a ‘Global ASEAN’. This is one of AEC 2025’s objectives.
ASEAN’s also made great strides in promoting sustainable development in 2019. Last year, ASEAN members agreed to launch the ASEAN Centre for Sustainable Development Studies and Dialogue (ACSDSD), aimed at facilitating collaboration on sustainable development between ASEAN and its development partners. ACSDSD can augment ASEAN leadership in promoting international collaboration on sustainable development by providing a platform for ASEAN to bring together various stakeholders to exchange their views on the issue. The Centre will help ASEAN to meet the United Nations’ Sustainable Development Goals by 2030.
Despite these accomplishments, ASEAN still has challenges to face in 2020. The first concerns India’s participation in RCEP. Indian involvement in RCEP would not only expand the combined regional market but also strengthen regional transnational services supply chains. In short, as services increasingly take up a greater share of the global economy, the bloc would grant Indian services firms access to larger markets. This will enable businesses in other RCEP countries to work with Indian firms to bolster their region’s competitiveness in services trade.
Strong domestic opposition in India means this is easier said than done. Many fear that the agreement will lead to import surges, which they argue could exacerbate India’s US$105 billion trade deficit, undermine domestic farmers and industries and crush the ‘Make in India’ initiative.
Second, RCEP will not render ASEAN states immune from the impacts of US–China rivalry. On 15 January, Washington and Beijing inked the ‘phase one’ agreement, in which the former would not impose or reduce tariffs on still swathes of Chinese products while the latter would selectively eliminate tariffs on some US products to meet purchase requirements of US goods. However, this arrangement does not address Chinese government subsidies given to state-owned enterprises and increased US restrictions on Chinese investment. As a result, 2020 may witness continued clashing between these states emerging from these issues. The two…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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