On 15th November 2020, the Heads of State/ Government of the parties of the Regional Comprehensive Economic Partnership (RCEP) Agreement met virtually on the occasion of the 4th RCEP Summit. They witnessed the signing of the RCEP Agreement, a mega-regional free trading arrangement that comprises 30% of the world’s population, a combined GDP of US$26.2 trillion (30% of global GDP), and nearly 28% of global trade.
The entry into force of the Agreement can only take place when at least six of the ASEAN Member States and three non-ASEAN signatories deposit their instruments of ratification, acceptance or approval with the Agreement’s Depository. Member states have tasked their officials to expedite their domestic ratification procedures for the agreement’s early entry into force.
The Leaders Statement released in tandem with the signing of the agreement referred to RCEP as ‘the most ambitious free trade agreement initiated by ASEAN’, helping contribute towards ‘enhancing ASEAN centrality in regional frameworks and strengthening ASEAN cooperation with regional partners.’ The RCEP Agreement includes areas and disciplines not previously covered in existing free trade agreements between ASEAN and non-ASEAN countries participating in RCEP. These include chapters on intellectual property, electronic commerce, competition, small and medium enterprises (SMEs), economic and technical cooperation and government procurement.
The RCEP Agreement remains open to India to rejoin at a later date. This is embedded in the ‘Ministers’ Declaration on India’s participation in the Regional Comprehensive Economic Partnership (RCEP)’ affirmed by the RCEP Ministers and attached to the Leaders’ Statement.
Key Features of the RCEP Agreement
The RCEP Agreement contains 20 Chapters, with several Annexes attached to the RCEP Agreement or Chapters thereof.
Chapter 1: Initial Provisions and General Definitions
Chapter 1 sets out the objectives of the RCEP Agreement, which is to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that aims to facilitate the expansion of regional trade and investment and thereby contributing to global economic growth and development, taking into account the varying stages of development of signatory states. This Chapter also includes general definitions.
Chapter 2: Trade in Goods
Chapter 2 contains key elements that govern the implementation of goods-related commitments to facilitate greater trade liberalisation among the Parties. This Chapter also sets out rules for determining the applicable tariff treatment in cases of different tariff preferences applied by a Party. In addition, this Chapter contains provisions on non-tariff measures that complement tariff liberalisation outcomes. Finally, this Chapter also sets out a process for Parties to conduct technical consultations on non-tariff measures that adversely affect trade between them.
Chapter 3: Rules of Origin (ROO)
Chapter 3 determines which goods originate under the RCEP Agreement and therefore eligible for preferential tariff treatment. The ROO Chapter has two Sections:
- (i) Section A: Rules of Origin. Articles on Originating Goods and Goods Wholly Obtained or Produced and the Annex on Product-Specific Rules (PSR) set out the requirements for determining originating status of goods.
- (ii) Section B: Operational Certification Procedures. Operational Certification Procedures provide detailed procedures for applying the RCEP proof of origin, claiming preferential tariff treatment, and verifying the originating status of a good.
Chapter 4: Customs Procedures and Trade Facilitation (CPTF)
Chapter 4 aims to ensure predictability, consistency, and transparency in the application of customs laws and regulations, and promote the efficient administration of customs procedures and expeditious clearance of goods. The objectives of the chapter include simplification of customs procedures and harmonisation of customs procedures with international standards. It recognizes that the Parties are at different levels of readiness to implement some commitments, and thus allows these Countries to stage implementation.
Chapter 5: Sanitary and Phytosanitary Measures (SPS)
Chapter 5 sets out the basic framework for developing, adopting and applying SPS measures to protect human, animal or plant life or health as well as for facilitating trade by minimising the negative effects of SPS measures on trade.
Chapter 6: Standards, Technical Regulations, and Conformity Assessment Procedures (STRACAP)
Chapter 6 includes provisions to enhance transparency in the development of technical barriers to trade (TBT) measures in the RCEP region and promote greater regulatory cooperation and good regulatory practice. The chapter also has provisions to minimise the adverse effects regulations can have on trade by reducing transaction costs for businesses and to provide mechanisms for RCEP parties to address specific trade issues to reduce or eliminate unnecessary TBTs.
Chapter 7: Trade Remedies
Chapter 7 consists of two Sections:
- (i) RCEP Safeguard Measures; and
- (ii) Anti-Dumping and Countervailing Duties.
The Safeguard Measures Section provides the Parties with a transitional mechanism to address serious injury or threat of serious injury to the domestic industry caused by Parties’ commitments under the RCEP Agreement, subject to well-defined conditions and requirements. It also confirms that WTO rules will apply to the application of global safeguards and to the administration of antidumping and countervailing duties on trade between RCEP parties. The chapter also sets out non-binding guidance on best practices to enhance transparency and due process in anti-dumping and countervailing duty proceedings.
Chapter 8: Trade in Services
Chapter 8 aims to open up avenues for greater services trade among the Parties through substantial removal of restrictive and discriminatory measures restricting the trade in services. This Chapter contains modern and comprehensive provisions including rules on market access, national treatment, most-favoured-nation treatment, and local presence, as well as additional commitments. Under this Chapter, the Parties are to schedule their services commitments using the negative list approach. This Chapter also includes provisions on the reasonability, objectivity, and impartiality of domestic regulations affecting trade in services.
Under the Services Chapter are three sector-specific annexes.
- Annex on Financial Services
The Annex on Financial Services promotes the liberalisation of financial services while providing a robust prudential safeguard to allow financial regulators to apply measures to preserve the integrity and stability of the financial system. In addition to the obligations established in the Trade in Services Chapter, the Annex prescribes specific obligations on the supply of financial services, such as obligations which commit Parties to ensure transparency of financial regulations, encourage Parties to permit the supply of new financial services, and commit Parties to refrain from preventing transfers of information and processing of information necessary for the conduct of ordinary business.
- Annex on Telecommunications Services
The Annex on Telecommunications Services creates a framework of rules pertinent to trade in public telecommunications services. Additional obligations included in the RCEP Agreement pertain to:
- (i) approaches to regulation,
- (ii) international submarine cable systems,
- (iii) unbundling of network elements,
- (iv) access to poles, ducts and conduits,
- (v) international mobile roaming, and
- (vi) flexibility in the choice of technology, among others.
- Annex on Professional Services
The Annex on Professional Services facilitates the establishment of arrangements for the mutual recognition of qualifications, licensing regimes and registration procedures for professional services between RCEP parties. The Annex aims to help facilitate the ability of professional services suppliers to be able to deliver their services across RCEP parties.
Chapter 9: Temporary Movement of Natural Persons
Chapter 9 provides rights for business persons from signatory Parties engaged in international trade to temporarily enter the markets of other RCEP parties to conduct trade in goods, supply services or undertake investment activities. The chapter provides for the transparent and expeditious processing of applications for temporary entry.
Chapter 10: Investment
Chapter 10 aims to create an enabling investment environment in the region. This Chapter contains provisions covering the four pillars of investments – protection, liberalisation, promotion, and facilitation. This Chapter includes a most-favoured-nation treatment clause and commitments on the prohibition of performance requirements that go beyond obligations under the WTO Trade Related Investment Measures (TRIMS) Agreement. This Chapter also includes a Schedule of Reservations and Non-Conforming Measures which provides for the Parties’ investment commitments using the negative list approach with standstill and ratchet mechanism. Lastly, this Chapter provides for improved investment facilitation provisions which also address investor aftercare, such as assistance in the resolution of complaints and grievances that may arise.
Chapter 11: Intellectual Property
Chapter 11 provides a balanced and inclusive approach to the protection and enforcement of intellectual property rights in the region. Aside from featuring provisions relating to harmonising the protections for the standard suite of intellectual property rights, this Chapter provides for the protection of intellectual property rights beyond the level of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), including provisions relating to technological protection measures and enforcement in the digital environment, as well as appropriate criminal procedures and penalties against the unauthorised copying of a cinematographic work on a commercial scale. To support intellectual property right holders, provisions to streamline and align procedures for the establishment of certain intellectual property rights such as those relating to electronic filing of applications and making relevant information available online are included.
Chapter 12: Electronic Commerce
Chapter 12 will allow businesses and consumers to transact online with confidence; protect the privacy and rights of consumers, and establish a framework for discussing fast-changing and emerging issues. The Chapter recognizes the increasing digitalization of trade and aims to promote e-commerce among the Parties and the wider use of e-commerce globally and enhance cooperation among the Parties.
Chapter 13: Competition
Chapter 13 will facilitate economic efficiency and consumer welfare through the promotion of open and competitive markets. The chapter requires RCEP parties to have in place competition laws and maintain independent competent authorities to enforce laws which prohibit anti-competitive conduct and promote consumer welfare,ensuring that competition laws are transparent and follow due process in enforcement, and establishes systems to facilitate cooperation between the Parties competition authorities.
Chapter 14: Small and Medium Enterprises (SMEs)
Chapter 14 requires RCEP parties to share complete information about RCEP online and include links to other information of relevance to SMEs doing business within the RCEP parties. This Chapter recognizes the major role played by SMEs amongst the Parties’ economies and therefore seeks to increase their ability to utilize and benefit from the opportunities created by the RCEP Agreement.
Chapter 15: Economic and Technical Cooperation (ECOTECH)
Chapter 15 provides a framework for realising the development dimension of the RCEP Agreement. It aims to enhance the benefits of economic growth and development through the RCEP Agreement. The Parties agreed that the economic and technical cooperation in the RCEP context aims to narrow the development gaps and maximise mutual benefits among the Parties. Economic and technical cooperation under this Chapter will support the inclusive, effective and efficient implementation and utilisation of the RCEP Agreement. In terms of economic and technical cooperation activities, priority will be given to activities that provide capacity building and technical assistance to developing country Parties and least-developed country Parties, that increase public awareness, and that enhance businesses’ access to information.
Chapter 16: Government Procurement
Chapter 16 promotes more transparent procurement processes. Cooperation provisions will also provide an avenue that can be used to enhance mutual understanding of RCEP parties’ respective government procurement laws, regulations and procedures, and a mechanism to facilitate consultation and exchange of information on such matters.
Chapter 17: General Provisions and Exceptions
Chapter 17 includes general provisions which apply across the RCEP Agreement. These general provisions include obligations regarding transparency concerning each Party’s laws, regulations, procedures and administrative rulings of general application with respect to matters covered by the RCEP Agreement. This Chapter also establishes the geographical scope of application of the RCEP Agreement; affirms Parties’ rights and responsibilities under the Convention on Biological Diversity; and commits Parties to take appropriate measures, in accordance with their laws and regulations, to prevent and combat corruption regarding matters covered by the RCEP Agreement.
Chapter 18: Institutional Provisions
Chapter 18 establishes the institutional arrangements for the RCEP Agreement and the structure for the meetings of the RCEP Ministers, the RCEP Joint Committee, four Committees, namely, on Goods; Services and Investment; Sustainable Growth; and the Business Environment, and other subsidiary bodies established by the RCEP Joint Committee.
Chapter 19: Dispute Settlement
Chapter 19 aims to provide effective, efficient, and transparent rules and procedures for the settlement of disputes arising under the RCEP Agreement. Salient features of the RCEP dispute settlement process include:
- (i) provisions allowing the Complainant Party to select the forum within which to address a dispute that concerns substantially equivalent rights and obligations in the RCEP Agreement and another international trade or investment agreement to which the Parties to the dispute are part;
- (ii) provisions requiring a Responding Party to first enter into consultations with a Complaining Party, if requested;
- (iii) provisions which allow Parties that are party to the dispute to voluntarily undertake alternative methods to settle their disputes;
- (iv) provisions which allow a Complaining Party to request the establishment of a panel to resolve a dispute in circumstances where the Responding Party does not reply to a request for consultations or does not enter into consultations within the stipulated time frame, or where consultations have failed to resolve the dispute within the stipulated time frame; and
- (v) provisions enabling interested third parties to participate in disputes and for their views to be taken into account during the panel process.
Chapter 20: Final Provisions
Chapter 20 sets out the relationship between the RCEP Agreement and other international agreements, a general review mechanism, procedures to amend the Agreement, and an accession provision.
Summarised by: Imran Shamsunahar, Research Associate, CARI
Editor: Eleen Ooi Yi Ling, Research Manager, CARI