Shaping robust policies for RCEP while navigating the digitalisation frontier

IN AN age when digitalisation is revolutionising economies and societies worldwide, the Regional Comprehensive Economic Partnership (RCEP) stands as a beacon of collaboration.

This landmark trade agreement, nurtured by Asean over three decades, evolved from the initial Asean Free Trade Area agreement of 1992.

With the creation of the Asean Economic Community (AEC) in 2015 and the adoption of the AEC Blueprint 2025, RCEP emerged as the culmination of the grouping's integration journey.

Within this dynamic alliance, two key players, Malaysia and China, have taken the lead in shaping digitalisation policies that hold the potential for profound economic development and cross-border prosperity.

This article will discuss the collaborative efforts of Malaysia and China within RCEP, highlighting their pivotal roles in crafting policies that harness the transformative power of digitalisation while exploring the implications for the Malaysia-China relationship.

The Historical Context: RCEP's Inception and Purpose

The roots of RCEP date back to the early 1990s when Asean laid the foundation with the Free Trade Area agreement. Over the years, Asean expanded its membership and deepened its commitment to regional integration, culminating in the establishment of the AEC.

The AEC Blueprint 2025 marked a significant milestone, setting the stage for deeper regional integration by 2025. This journey saw Asean engage in initiatives both among its member states and in collaboration with external partners.

Notably, it inked six free trade agreements with external partners, including Australia, New Zealand, the People’s Republic of China Hong Kong, India, Japan and South Korea.

The Global Impact of RCEP

As of 2020, the RCEP member countries collectively accounted for a staggering 31% of global GDP, representing an impressive US$26.1 trillion (RM121.9 trillion). In terms of population, these nations constituted 29.7% of the world's populace, totalling a substantial 2.3 billion people.

These figures underscore RCEP's status as a dominant force on the global economic stage.

In the realm of merchandise trade, RCEP countries accounted for approximately 29% of global trade, amounting to an impressive US$10 trillion (RM46.7 trillion).

These statistics affirm the immense potential unlocked by RCEP's trade liberalisation measures and its commitments to regulatory coherence.

Upon full implementation, the RCEP agreement is projected to elevate the income of member nations by 0.6%, contributing an estimated US$245bil (RM1.11 trillion) to regional income by 2030.

Furthermore, RCEP is anticipated to generate an additional 2.8 million jobs within the region, as projected by Park, Petri, and Plummer in 2021.

Comparing RCEP and CPTPP: Digitalisation Provisions

The digitalisation provisions within Chapter 12 of RCEP drew inspiration from the Trans-Pacific Partnership (TPP) and were subsequently replicated, with no alterations, in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Ecommerce and digital trade-related provisions were regarded as "the most transformative measures" within the TPP framework.

While many provisions overlap between RCEP and CPTPP, several critical differences warrant attention, especially in the realms of data flows and localisation.

Data flows: Both RCEP and CPTPP advocate for unrestricted data flows. However, RCEP introduces broader exceptions, permitting measures designed to achieve public policy objectives and protect essential security interests. Crucially, RCEP explicitly states that these measures cannot be contested by other member countries.

Data localisation: RCEP provides more flexibility concerning data localisation policies, allowing member countries to implement measures "necessary for the protection of essential security interests".

Importantly, it grants the implementing party sole authority to determine legitimate public policy objectives.

While RCEP's digital provisions exhibit some limitations, they represent a significant advancement for several RCEP countries, building upon corresponding articles in the Asean Agreement on Electronic Commerce and Asean+1 Free Trade Agreements.

Additional Differences between RCEP and CPTPP

Several other notable distinctions distinguishing RCEP from CPTPP, including:

Provisions on personal information protection: RCEP's provisions concerning personal information protection are less comprehensive compared to CPTPP. While RCEP mandates member countries to establish or maintain a legal framework for this purpose, it lacks essential clauses found in CPTPP, such as those promoting non-discriminatory practices in safeguarding ecommerce users and measures to foster compatibility among different regulatory regimes.

Source code concerns: Interestingly, RCEP does not address issues related to source code, whereas CPTPP prohibits the forced transfer of, or access to, source code of software owned by individuals from other member countries. This prohibition has ignited debates, with some countries advocating for it to safeguard their industries and promote innovation, while others, primarily developing countries, argue that this restriction could impede the transfer of technological know-how.

Dispute resolution mechanisms: Notably, within the RCEP framework, Chapter 19, Article 12.17 (1) and (2) mentions the consultation and reference to the Joint Committee, indicating the presence of dispute resolution procedures in this specific chapter. The agreement's general review will still assess whether or not additional dispute settlement mechanisms should be applied to this chapter.

In contrast, the dispute settlement provisions of CPTPP are already in place and are applicable to the corresponding Electronic Commerce chapter.

The Road Ahead for RCEP and Digital Trade

In envisioning the potential evolution of RCEP's provisions, it is pertinent to examine recent agreements involving various RCEP members. These agreements aim to expand market access and the benefits of digital trade, while situating electronic commerce, within a broader socioeconomic context.

The two agreements are the Digital Economy Partnership Agreement (Depa), which brings together New Zealand, Singapore and Chile; and the Digital Economy Agreement (DEA), an amendment to the Singapore–Australia Free Trade Agreement from 2015.

Both Depa and DEA, inked in 2020, encompass a broader array of subjects than RCEP and CPTPP. They address not only business interests, but also social issues, digital innovation, government procurement, competition and capacity building. These comprehensive agreements reflect a holistic approach to digital trade, considering wider socio-political objectives beyond economic interests.

Multilateral Agreements and the Way Forward

The Dialogue on Electronic Commerce serves as a pivotal forum for discussions on digital trade matters. It potentially paves the way for negotiations on the critical issues outlined above.

Furthermore, it aims to foster consensus among RCEP members regarding the ongoing Joint Statement Initiative (JSI) under the World Trade Organisation (WTO) umbrella. This initiative, which involves prominent RCEP countries, could potentially lead to a multilateral or plurilateral agreement on digital trade within the WTO.

In conclusion, the historical journey and purpose of RCEP, coupled with its remarkable impact on the global economy, underscore the pivotal roles played by Malaysia and China in shaping digitalisation policies within this monumental trade agreement.

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 South-East Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.