Facilitating Asean trade in the digital age: RCEP's contributions to accelerating growth

THE Regional Comprehensive Economic Partnership (RCEP) is a proposed agreement between Asean member states and its free trade agreement (FTA) partners.

This agreement aims to encompass various aspects such as trade in goods and services, intellectual property rights and more.

The RCEP was initially introduced during the 19th Asean meeting in November 2011, with negotiations commencing during the 21st Asean Summit in Cambodia, in November 2012.

The Asean member states and their FTA partners consist of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, India, South Korea, Australia and New Zealand. Together, these 16 countries account for approximately one-third of the world's gross domestic product (GDP) and nearly half of the global population.

Notably, the combined GDPs of China and India alone make up over half of this total.

By 2050, RCEP's share of the world economy could represent as much as half of the estimated US$0.5 quadrillion global GDP, based on purchasing power parity (PPP).

The impetus behind the RCEP can be traced back to Beijing's push in 2012 to counter the Trans-Pacific Partnership (TPP), which at the time excluded China.

However, following the withdrawal of the United States from the TPP in 2016 under its former president Donald Trump, the RCEP has emerged as a significant tool for China to counter US efforts to hinder trade with Beijing.

The primary objective of RCEP is to facilitate an increase in cross-border trade between Asean and its dialogue partners by focusing on the reform of customs procedures within member states.

RCEP mandates that member states ensure the consistent implementation and application of customs laws and regulations across all sectors of trade. Member states are required to make publicly available online the procedures for all trade item movements, including tariff rates, rules and regulations, and all the necessary documentation.

While member states have a certain level of discretion, each country is expected to adhere to the standards and recommendations set by the World Customs Organisation, with the ultimate aim of simplifying and harmonising procedures. Furthermore, RCEP aims to strengthen the implementation of the Technical Barriers to Trade (TBT) Agreement of the World Trade Organisation.

This effort ensures that standards, technical regulations and conformity assessment procedures do not create unnecessary obstacles to trade.

Only two Asean countries, namely Malaysia and Singapore, have achieved the RCEP's goal of completing customs clearance of goods and lodging necessary information within a 48-hour timeframe.

While some member states were able to fully implement Chapter 4 on trade facilitation from the beginning, other countries with less efficient trade facilitation systems and regulations have committed to enforcing these provisions at a later date.

Cambodia, for example, has been granted a five-year extension to implement provisions, such as the use of digital technology in customs processes and new regulations for managing express shipments.

Additionally, Indonesia has postponed the implementation of provisions related to advance rulings and risk management until February 2022.

The potential for significant growth and recovery resulting from RCEP is primarily associated with e-commerce and digital trade.

This is particularly relevant for small and medium-sized enterprises, as the digital economy offers them quick and accessible opportunities to connect with suppliers, consumers and partner firms. Throughout the six years of negotiations, member nations have encountered challenges in reaching a comprehensive agreement on clauses related to digital trade.

As exemplified by China's involvement in Asian Global Value Chains, Asia stands out for its high level of integration compared to other regions.

However, this integration also poses a dilemma of being "too close for comfort".

To harness new growth opportunities for its members, the region requires well-designed economic policies.

Consequently, Asean has identified e-commerce as a crucial priority for further RCEP negotiations.

Chapters 11 and 12 of the RCEP focus on key aspects of the digital economy and intellectual property rights.

Chapter 11 centres on intellectual property, going beyond the provisions of the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights.

It highlights the importance of protecting intellectual property rights in the digital realm, including technological protection measures and enforcement against copyright and commercial infringements.

The chapter also emphasizes streamlining procedures through electronic filing and online access to relevant information.

Chapter 12 emphasizes on e-commerce and aims to promote its use and cooperation among member states.

It encourages the improvement of trade processes through electronic means, the adoption of legal frameworks for regulation and the protection of personal information and cross-border data transfer.

Member states have agreed not to impose customs duties on electronic transmissions.

These chapters recognise the significant potential of the digital economy and its impact on trade within the RCEP region.

They aim to harness this potential by promoting e-commerce, protecting intellectual property and facilitating the development of robust legal frameworks.

The reciprocal relationship between the digital economy and RCEP is acknowledged, with the signing of the agreement expected to support the growth of digitalisation.

However, challenges in regulating online spaces are recognised due to the dynamic nature of the digital landscape, calling for regional frameworks to effectively address these challenges.

RCEP is a significant trade agreement for Asean, particularly amidst the global Covid-19 pandemic and economic recession.

It offers the potential for an integrated region, leveraging technology, communication and natural resources to enhance trade.

China's involvement strengthens the deal and promotes regional cooperation with Japan and South Korea.

The growing integration presents opportunities for emerging markets, attracting investment and boosting intra-regional trade.

The digitalisation of the economy and provisions for e-commerce holds promise for growth, but policymakers must carefully manage potential risks and avoid widening regional inequality.

Dr Lin Woon Leong is an Associate Professor at Taylor's University, Malaysia. The views expressed here are entirely the writer's own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the Southeast Asia Research Centre for Humanities and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.