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ASEAN concludes RCEP negotiation, expects signing by weekend
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The flags of ASEAN member states. (Shutterstock.com/Thapakorn Hemgo)
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SEAN states, along with five partners from the wider Indo-Pacific region, concluded on Wednesday negotiations for the Regional Comprehensive Economic Partnership (RCEP), with the mega trade pact expected to be signed on the coming weekend.
The negotiation conclusion ends a series of trade talks that lasted for around eight years, involving the ASEAN member states, with Australia, China, Japan, South Korea and New Zealand. The countries are expected to sign the deal at the upcoming fourth RCEP summit on Sunday.
“Today, we have certainty. Fifteen countries have completed the negotiation. So it is done,” said Indonesian Trade Minister Agus Suparmanto in a virtual presser on Wednesday.
“All countries expect to move forward to implement the RCEP,” Agus added. “In a few days state leaders will sign it and we welcome it positively.”
The trade pact, which is expected to be the world’s largest free trade agreement (FTA), represents 30.2 percent of the global economy and 27.4 percent of global trade, according to the Indonesian Trade Ministry, quoting data from the International Monetary Fund and the World Bank.
Experts have said it will be the second-most-important trade agreement after the World Trade Organization and a crucial one for the economies of the Indo-Pacific as they seek to rebuild regional connections severed by the ongoing COVID-19 health crisis.
However, the RCEP implementation will still hinge on the ratification by six ASEAN member states and three partners, according to Netty Muharni, the deputy assistant for regional and subregional economic cooperation at the Office of the Coordinating Economic Affairs Minister earlier on Oct. 26.
The ratification process is expected to take up to two years, Netty said at the time.
Read also: Indonesia signs ASEAN agreement to reduce non-tariff barriers for essential goods
Despite seeing trade deficits with the 14 countries collectively since 2012, Indonesia delivered 61.6 percent of its overall exports last year to RCEP countries, according to a Trade Ministry official, quoting data from Statistics Indonesia (BPS). Indonesia also sourced 71.3 percent of its total imports in 2019 from these countries.
The Indonesian government is expecting the RCEP to add 0.05 percent to the country’s gross domestic product (GDP) between 2021 and 2032, according to Minister Agus, quoting a study by the Fiscal Policy Agency (BKF).
“There are some benefits that we will get, one of which is building our economic capacity and developing our [small businesses] in the region,” said Agus.
“It also recognizes professional services, provides protection of intellectual property rights and expands market access for Indonesian exports,” added the minister.
The trade deal also came as Indonesia officially entered its first recession since the 1998 Asian financial crisis, with the economy shrinking 3.49 percent on an annual basis in the third quarter this year. It was the second consecutive drop after GDP fell 5.32 percent in the second quarter, impacted by the COVID-19 crisis.
The benefit of the trade pact is smaller than initially expected as the negotiation was concluded without India, which withdrew from the trade talks in November last year due to concerns about its trade ties with China. With India, the RCEP represents one-third of global GDP.
However, the 15 signatories of the RCEP are open to the possibility of India re-joining the trade pact in the future, according to Minister Agus.
Read also: RCEP not China-led initiative
The conclusion of RCEP negotiations also took place amid the Indonesian government’s effort to pursue trade deals with non-traditional markets, such as with Latin American trade bloc Mercosur, Colombia, Ecuador and Peru.
The government is also in talks with the Gulf Cooperation Council, exploring the possibility of negotiating a trade deal.
Ahead of the fourth RCEP Summit, ASEAN member states adopted a draft declaration on the travel corridor arrangement framework that Indonesia proposed.
“The momentum of this agreement is very timely because it coincides with the signing of the RCEP, which is part of the efforts to quickly recover the regional economy after the pandemic,” said Indonesian Foreign Affairs Minister Retno Marsudi during a virtual press briefing on Tuesday.
--Dian Septiari contributed to this story
